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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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(MARK ONE)
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/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE PERIOD ENDED SEPTEMBER 30, 1999
OR
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/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
</TABLE>
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COMMISSION FILE NUMBER
XOOM.COM, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 88-0361536
(State of incorporation) (I.R.S. Employer Identification No.)
</TABLE>
300 MONTGOMERY STREET, SUITE 300
SAN FRANCISCO, CALIFORNIA 94104
(415) 288-2500
(Address and telephone number of principal executive offices)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $0.0001 PAR VALUE
(Title of class)
------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
The number of shares outstanding of Registrant's Common Stock, $0.0001 par
value, were 20,461,673 at September 30, 1999.
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XOOM.COM, INC.
TABLE OF CONTENTS
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PAGE
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Part I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets--September 30, 1999
and December 31, 1998..................................... 1
Condensed Consolidated Statements of Operations for the
three and nine months ended September 30, 1999 and 1998... 2
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 1999 and 1998.................. 3
Notes to Condensed Consolidated Financial Statements........ 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 13
Item 3. Quantitative and Qualitative Disclosures about Market
Risk...................................................... 27
Part II OTHER INFORMATION
Item 1. Legal Proceedings........................................... 41
Item 2. Changes in Securities and Use of Proceeds................... 41
Item 3. Quantitative and Qualitative Disclosures about Market
Risk...................................................... 42
Item 6. Exhibits and Reports on Form 8-K............................ 43
Signature................................................... 44
</TABLE>
<PAGE>
XOOM.COM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
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<S> <C> <C>
ASSETS
Current assets:
Cash, cash equivalents and marketable securities.......... $198,925 $ 56,575
Accounts receivable, net.................................. 4,032 1,368
Inventories............................................... 518 322
Other current assets...................................... 3,747 308
-------- --------
Total current assets.................................... 207,222 58,573
Fixed assets, net........................................... 7,643 2,071
Investments................................................. 69,780 --
Intangible assets, net...................................... 95,537 5,517
Other assets, including a restricted balance of $4,500 at
September 30, 1999........................................ 8,890 713
-------- --------
Total assets.......................................... $389,072 $ 66,874
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 5,115 $ 1,229
Accrued compensation and related expenses................. 1,355 497
Other accrued liabilities................................. 2,831 1,568
Notes payable............................................. 241 1,276
Deferred revenue.......................................... 2,409 443
Contingency accrual....................................... 1,000 1,000
-------- --------
Total current liabilities............................... 12,951 6,013
Deferred revenue, less current portion...................... 2,380 --
Other long-term liabilities................................. 456 528
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.0001 par value:
Authorized shares--5,000,000
Issued and outstanding shares--none in 1999 and 1998.... -- --
Common stock, $0.0001 par value:
Authorized shares--40,000,000
Issued and outstanding shares--20,461,673 and 13,699,555
in 1999 and 1998, respectively........................ 407,669 75,606
Notes receivable from stockholders........................ (995) --
Deferred compensation..................................... (409) (904)
Accumulated deficit....................................... (32,980) (14,369)
-------- --------
Total stockholders' equity.............................. 373,285 60,333
-------- --------
Total liabilities and stockholders' equity............ $389,072 $ 66,874
======== ========
</TABLE>
See accompanying notes.
1
<PAGE>
XOOM.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenue:
E-commerce........................................... $ 4,324 $ 1,532 $ 10,257 $ 3,366
Advertising.......................................... 4,552 598 9,527 953
Licensing............................................ 80 170 119 546
-------- ------- -------- -------
Total net revenue.................................. 8,956 2,300 19,903 4,865
Cost of net revenue:
Cost of e-commerce................................... 2,809 1,067 7,458 1,965
Cost of advertising.................................. 108 -- 183 --
Cost of licensing.................................... 4 7 4 35
-------- ------- -------- -------
Total cost of net revenue.......................... 2,921 1,074 7,645 2,000
-------- ------- -------- -------
Gross profit........................................... 6,035 1,226 12,258 2,865
Operating expenses:
Operating and development............................ 3,008 1,209 5,708 2,558
Sales and marketing.................................. 5,969 853 13,507 1,570
General and administrative........................... 3,180 1,059 6,846 2,158
Amortization of deferred compensation................ 90 304 495 1,111
Purchased in-process research and development........ -- 130 2,603 790
Amortization of intangible assets.................... 5,532 741 7,836 1,087
-------- ------- -------- -------
Total operating expenses........................... 17,779 4,296 36,995 9,274
-------- ------- -------- -------
Loss from operations................................... (11,744) (3,070) (24,737) (6,409)
Other income, net...................................... 3,180 17 6,123 17
-------- ------- -------- -------
Net loss............................................... $ (8,564) $(3,053) $(18,614) $(6,392)
======== ======= ======== =======
Net loss per share--basic and diluted.................. $ (0.44) $ (0.35) $ (1.11) $ (0.89)
======== ======= ======== =======
Number of shares used in per share calculation--basic
and diluted.......................................... 19,655 8,710 16,780 7,172
======== ======= ======== =======
</TABLE>
See accompanying notes.
2
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XOOM.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1999 1998
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CASH USED IN OPERATING ACTIVITIES:
Net loss.................................................. $ (18,614) $(6,392)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Purchased in-process research and development............... 2,603 790
Depreciation and amortization............................... 1,280 481
Amortization of intangible assets........................... 7,836 1,087
Amortization of deferred compensation....................... 495 1,111
Issuance of common stock in exchange for Classic Media
Holdings license rights................................... -- 100
Issuance of stock options to consultants.................... -- 189
Issuance of common stock to directors and consultants....... 638 87
Changes in operating assets and liabilities:
Accounts receivable................................... (2,517) (634)
Inventories........................................... (196) (379)
Other current assets.................................. (3,433) (116)
Intangible assets..................................... -- (24)
Other assets.......................................... (7,577) (1,426)
Accounts payable...................................... 3,886 1,047
Accrued compensation and related expenses............. 530 289
Other accrued liabilities............................. (729) 645
Deferred revenue...................................... 858 --
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NET CASH USED IN OPERATING ACTIVITIES....................... (14,940) (3,145)
CASH USED IN INVESTING ACTIVITIES:
Purchases of fixed assets................................. (6,169) (1,099)
Purchase of investments................................... (198,450) --
Maturities of investments................................. 18,500 --
Cash paid in connection with the purchase of certain
assets from Revolutionary Software, Inc................. -- (20)
Business combinations, net of cash acquired............... (901) (329)
--------- -------
NET CASH USED IN INVESTING ACTIVITIES....................... (187,020) (1,448)
CASH PROVIDED BY FINANCING ACTIVITIES:
Proceeds from issuance of common stock in secondary public
offering................................................ 166,597 --
Proceeds from issuance of common stock.................... 55,000 5,532
Proceeds from exercise of stock options................... 1,836 --
Proceeds from issuance of notes payable to stockholders... -- 335
Principal payments on capital lease obligations........... (31) (2)
Repayment of notes payable................................ (608) (311)
--------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES................... 222,794 5,554
--------- -------
Net increase in cash and cash equivalents................... 20,834 961
Cash and cash equivalents at beginning of period............ 54,575 6
--------- -------
Cash and cash equivalents at end of period.................. $ 75,409 $ 967
========= =======
SUPPLEMENTAL DISCLOSURES:
NON-CASH TRANSACTIONS:
Issuance of common stock in connection with business and
technology acquisitions................................. $ 101,055 $ 3,618
========= =======
Issuance of notes payable in conjunction with business and
technology acquisitions................................. $ -- $ 3,025
========= =======
Investment in a company in connection with a media
contract................................................ $ 5,000 $ --
========= =======
Issuance of common stock in exchange for stock
subscriptions receivable................................ $ 995 $ 261
========= =======
Issuance of common stock in exchange for cancellation of
notes payable to stockholder............................ $ -- $ 150
========= =======
Common stock issued to satisfy Paralogic Corporation legal
obligation.............................................. $ -- $ 165
========= =======
Deferred compensation resulting from grant of stock
options................................................. $ -- $ 2,002
========= =======
Fixed assets acquired under capital leases................ $ 125 $ 162
========= =======
Value of equity securities received in exchange for
entering into strategic alliances....................... $ 429 $ --
========= =======
Value of warrant received in connection with ValueVision
International, Inc. strategic alliance.................. $ 6,343 $ --
========= =======
Value of warrant issued in connection with ValueVision
International, Inc. strategic alliance.................. $ 6,937 $ --
========= =======
CASH FLOW INFORMATION:
Cash paid for interest.................................... $ 59 $ --
========= =======
</TABLE>
See accompanying notes.
3
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XOOM.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The condensed consolidated financial statements as of September 30, 1999 and
1998 and for the three and nine-month periods then ended are unaudited and
reflect all adjustments (consisting only of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair presentation of the
financial position and operating results for the interim periods. The condensed
consolidated financial statements as of September 30, 1999 should be read in
conjunction with the consolidated financial statements and notes thereto,
together with management's discussion and analysis of financial condition and
results of operations, contained in the Company's Annual Report to Stockholders
incorporated by reference in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998. The results of operations for the three and
nine months ended September 30, 1999 are not necessarily indicative of the
results for the entire fiscal year ending December 31, 1999.
2. BUSINESS COMBINATIONS AND TECHNOLOGY ACQUISITIONS
During the nine months ended September 30, 1999, the Company made business
acquisitions described in the paragraphs that follow, each of which has been
accounted for as a purchase. The condensed consolidated financial statements
include the operating results of each business from the date of acquisition.
PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT. The amounts allocated to
purchased research and development were determined through established valuation
techniques in the high-technology Internet industry and were expensed upon
acquisition, because technological feasibility had not been established and no
future alternative uses existed. The values assigned to purchased in-process
technology were determined by identifying the on-going research projects for
which technological feasibility had not been achieved and assessing the state of
completion of the research and development effort. The state of completion was
determined by estimating the costs and time incurred to date relative to those
costs and time to be incurred to develop the purchased in-process technology
into commercially viable products, estimating the resulting net cash flows only
from the percentage of research and development efforts complete at the date of
acquisition, and discounting the net cash flows back to their present value. The
discount rate included a factor that took into account the uncertainty
surrounding the successful development of the purchased in-process technology
projects.
PURCHASED TECHNOLOGY. To determine the values of purchased technology, the
expected future cash flows of the existing developed technologies were
discounted taking into account the characteristics and applications of the
product, the size of existing markets, growth rates of existing and future
markets as well as an evaluation of past and anticipated product lifecycles.
ACQUIRED WORKFORCE. To determine the values of the acquired workforce,
employees were identified who would require significant cost to replace and
train. Then each employee's fully-burdened cost (salary, benefits, overhead),
the cost to train the employee, and the recruiting costs (locating,
interviewing, hiring) were estimated. These costs were then summed up and tax
effected to estimate the value of the assembled workforce.
Amounts allocated to purchased technology, goodwill and other intangible
assets for the business acquisitions that follow are being amortized on a
straight-line basis over periods of three to four years.
4
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XOOM.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. BUSINESS COMBINATIONS AND TECHNOLOGY ACQUISITIONS (CONTINUED)
FOCUSED PRESENCE, INC.
On April 1, 1999, the Company acquired 100% of the outstanding shares
Focused Presence, Inc., a company that operates a global directory of small
businesses. The purchase consideration consisted of 21,894 shares of the
Company's common stock with an estimated fair value of $77.23 per share, and
acquisition costs of approximately $4,000. The Company accounted for this
acquisition as a purchase.
The purchase consideration was allocated to the acquired assets and assumed
liabilities based on fair values as follows (in thousands):
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Cash........................................................ $ 1
Other current assets........................................ 61
Fixed assets, net........................................... 3
Goodwill.................................................... 1,760
Liabilities assumed......................................... (130)
------
Total purchase consideration................................ $1,695
======
</TABLE>
MIGHTYMAIL NETWORKS, INC.
On May 3, 1999, the Company acquired 100% of the outstanding shares of
MightyMail Networks, Inc., a developer of an enhanced e-mail product that
enables customization of e-mail according to user preferences. The purchase
consideration consisted of 268,761 shares of the Company's common stock with an
estimated fair value of $72.10 per share, the assumption of 9,061 and 12,121
employee stock options at a price per share of $70.47 and $55.91, respectively,
and acquisition costs of approximately $300,000. In addition, 67,186 shares of
the Company's common stock were placed into an escrow account. Of the shares
held in escrow, 25% will be released in November 1999 and in May 2000, if
certain performance objectives are met, and the remaining 50% will be released
in May 2000, upon the expiration of certain indemnification obligations.
The purchase consideration was allocated to the acquired assets and assumed
liabilities based on fair values as follows (in thousands):
<TABLE>
<S> <C>
Accounts receivable......................................... $ 19
Net fixed assets............................................ 132
Other long-term assets...................................... 50
Notes receivable from stockholders.......................... 995
Purchased in-process research and development charged to
operations in the quarter ended June 30, 1999............. 1,082
Purchased technology........................................ 3,321
Acquired workforce.......................................... 176
Goodwill.................................................... 17,735
Liabilities assumed......................................... (396)
-------
Total purchase consideration................................ $23,114
=======
</TABLE>
5
<PAGE>
XOOM.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. BUSINESS COMBINATIONS AND TECHNOLOGY ACQUISITIONS (CONTINUED)
NET FLOPPY, INC.
On May 5, 1999, the Company acquired 100% of the outstanding shares of Net
Floppy, Inc., a provider of online file storage for web users. The purchase
consideration consisted of 7,528 shares of the Company's common stock with an
estimated fair value of $72.10 per share, approximately $560,000 in cash, and
approximately $57,000 of acquisition costs. In addition, 7,526 shares of the
Company's common stock were placed into an escrow account. Of the shares held in
escrow, 50% will be released if certain performance objectives are met in
November 1999 and 50% will be released in May 2000, upon the expiration of
certain indemnification obligations.
The purchase consideration was allocated to the acquired assets and assumed
liabilities based on fair values as follows (in thousands):
<TABLE>
<S> <C>
Accounts receivable and other current assets................ $ 2
Goodwill.................................................... 1,443
Liabilities assumed......................................... (5)
------
Total purchase consideration................................ $1,440
======
</TABLE>
PARALOGIC SOFTWARE CORPORATION
On June 16, 1999, the Company acquired 100% of the outstanding shares of
Paralogic Software Corporation, a provider of Java-based community products and
services, such as customizable chat rooms, discussion boards, guestbooks and
event calendars. The purchase consideration consisted of 654,018 shares of
common stock with an estimated fair value of $47.13 per share, the assumption of
82,733 and 12,001 employee stock options at a price per share of $46.67 and
$33.05, respectively, and acquisition costs of approximately $315,000.
The purchase consideration was allocated to the acquired assets and assumed
liabilities based on fair values as follows (in thousands):
<TABLE>
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Cash........................................................ $ 134
Accounts receivable and other current assets................ 21
Net fixed assets............................................ 43
Purchased in-process research and development charged to
operations in the quarter ended June 30, 1999............. 1,521
Purchased technology........................................ 4,986
Acquired workforce.......................................... 81
Goodwill.................................................... 28,639
Liabilities assumed......................................... (29)
-------
Total purchase consideration................................ $35,396
=======
</TABLE>
LIQUIDMARKET, INC.
On August 3, 1999, the Company acquired 100% of the outstanding shares of
LiquidMarket, Inc., the developer of a next-generation on-line comparison
shopping guide and purchasing service. The purchase
6
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XOOM.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. BUSINESS COMBINATIONS AND TECHNOLOGY ACQUISITIONS (CONTINUED)
consideration consisted of 718,224 shares of common stock with an estimated fair
value of $40.70 per share, the assumption of 54,490, 52,948, and 23,132 employee
stock options at a price per share of $40.29, $40.06, and $26.90, respectively,
and acquisition costs of approximately $300,000. In addition, 212,202 shares of
the Company's common stock were placed into an escrow account. Of the shares
held in escrow, 50% will be released on various milestone dates prior to
June 2000, upon the completion of certain performance objectives, and 50% will
be released in August 2000, upon the expiration of certain indemnification
obligations.
The purchase consideration was allocated to the acquired assets and assumed
liabilities based on fair values as follows (in thousands):
<TABLE>
<S> <C>
Cash........................................................ $ 378
Accounts receivable and other current assets................ 5
Net fixed assets............................................ 362
Purchased technology........................................ 16,700
Acquired workforce.......................................... 321
Goodwill.................................................... 21,116
Liabilities assumed......................................... (135)
-------
Total purchase consideration................................ $38,747
=======
</TABLE>
PRIVATE ONE, INC.
On August 3, 1999, the Company acquired 100% of the outstanding shares of
Private One, Inc., a designer and developer of a secure e-mail software service.
The purchase consideration consisted of 47,999 shares of common stock with an
estimated fair value of $40.70 per share and acquisition costs of approximately
$3,000. In addition, 12,000 shares of the Company's common stock will be placed
into an escrow account. Of the shares held in escrow, 25% will be released in
February 2000, and 25% in August 2000, or upon the completion of certain
milestones, whichever is earlier. The remaining 50% of the shares held in escrow
will be released in August 2000, upon the expiration of certain indemnification
obligations.
The purchase consideration was allocated to the acquired assets and assumed
liabilities based on fair values as follows (in thousands):
<TABLE>
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Cash........................................................ $ 1
Net fixed assets............................................ 16
Goodwill.................................................... 2,209
Liabilities assumed......................................... (25)
------
Total purchase consideration................................ $2,201
======
</TABLE>
7
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XOOM.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. BUSINESS COMBINATIONS AND TECHNOLOGY ACQUISITIONS (CONTINUED)
SUMMARY OF PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT, PURCHASED TECHNOLOGY
AND ACQUIRED WORKFORCE. The intangible assets, as of September 30, 1999,
including all acquisitions, are summarized as follows (in thousands):
<TABLE>
<S> <C>
Acquired workforce.......................................... $ 578
Purchased technology........................................ 27,362
Goodwill.................................................... 77,275
--------
Intangible assets........................................... 105,215
Accumulated amortization.................................... (9,678)
--------
Intangible assets, net...................................... $ 95,537
========
</TABLE>
The total purchased in-process research and development that had no
alternative future use, and as such was charged to operations in the nine months
ended September 30, 1999, is summarized below (in thousands):
<TABLE>
<S> <C>
MightyMail Networks, Inc.................................... $1,082
Paralogic Software Corporation.............................. 1,521
------
Total purchased in-process research and development......... $2,603
======
</TABLE>
The following unaudited pro forma summary represents the consolidated
results of operations as if all the acquisitions to date had occurred at the
beginning of the periods presented.
<TABLE>
<CAPTION>
PERIOD ENDED
SEPTEMBER 30,
-------------------
(IN THOUSANDS EXCEPT PER SHARE INFORMATION) 1999 1998
- ------------------------------------------- -------- --------
(UNAUDITED)
<S> <C> <C>
Pro forma net revenue................................... $ 20,318 $ 5,364
Pro forma loss from operations.......................... (47,368) (27,780)
Pro forma net loss...................................... (41,234) (27,763)
Pro forma net loss per share-basic and diluted.......... (2.10) (2.59)
Number of shares used in pro forma per share
calculation-basic and diluted......................... 19,655 10,727
</TABLE>
The pro forma results are not necessarily indicative of what actually would
have occurred if the acquisitions had been in effect for the entire period
presented and are not intended to be a projection of future results. In-process
research and development charges of $2,603,000 and $460,000 were excluded from
the pro forma net loss and pro forma net loss per share figures for the periods
ended September 30, 1999 and 1998, respectively.
NBC INTERNET, INC.
On May 9, 1999, the Company, certain subsidiaries of the Company, SNAP! LLC,
National Broadcasting Company, Inc., and certain of its affiliates and
CNET, Inc. entered into a series of definitive agreements relating to the
formation of a new company to be named NBC Internet, Inc. On each of
8
<PAGE>
XOOM.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. BUSINESS COMBINATIONS AND TECHNOLOGY ACQUISITIONS (CONTINUED)
June 11, 1999, and July 8, 1999, an amendment to one of each of the definitive
agreements was signed. The terms of the original agreement and each amendment
are filed with the Securities and Exchange Commission. On November 24, 1999 the
Company will be convening a meeting of the stockholders to ratify and approve
the NBC Internet, Inc. related agreements.
3. CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES
The Company has classified all marketable securities as available-for-sale.
Available-for-sale securities are carried at amounts that approximate fair
market value based on quoted market prices. Realized gains and losses and
declines in value judged to be other-than-temporary on available-for-sale
securities are included in interest income. Interest on securities classified as
available-for-sale is also included in interest income.
The following is a summary of available-for-sale securities (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
Demand and money market instrument accounts......... $ 75,825 $ 8,731
Corporate bonds and notes........................... 98,614 36,444
Market auction preferred stock...................... 24,300 11,400
Equity investments.................................. 186 --
-------- --------
Total available-for-sale securities............... 198,925 56,575
Less amounts included in cash and cash
equivalents....................................... (75,409) (54,575)
-------- --------
Marketable securities............................. $123,516 $ 2,000
======== ========
</TABLE>
The cost of securities sold is based on the specific identification method.
All available-for-sale securities at September 30, 1999 have maturity dates in
1999 and 2000. In addition the Company had long-term marketable securities of
$58.6 million as of September 30, 1999.
4. NOTES RECEIVABLE FROM STOCKHOLDERS
On June 16, 1999, in connection with its acquisition of MightyMail
Networks, Inc., the Company assumed stock subscriptions receivable from related
parties in exchange for shares of common stock. As of September 30, 1999,
outstanding stock subscriptions receivable amounted to approximately $995,000.
All amounts mature by April 2002 and bear interest at a rate of 5.28% per annum.
5. COMMITMENTS
In August 1999, the Company entered into a 10-year non-cancelable lease
agreement for approximately 187,000 square feet of office space located in San
Francisco, California. Minimum lease commitments for the years ended
December 31, 1999, 2000, 2001, 2002, 2003, and thereafter are approximately
$339,000, $4,707,000, $5,655,000 $5,655,000, $5,655,000, and $34,539,000,
respectively. In August 1999, in connection with the lease agreement, the
Company entered into an irrevocable letter of credit with a commercial bank in
the amount of $4,500,000 as a security deposit payable to the landlord, the
amount of which is included in other assets for the period ended September 30,
1999.
9
<PAGE>
XOOM.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY
SECONDARY PUBLIC OFFERING
On April 9, 1999, the Company completed a secondary public offering of its
common stock and issued 4,600,000 shares (including 600,000 shares issued in
connection with the exercise of the underwriter over-allotment option) at a
price of $66.00 per share. Of the 4,600,000 shares of common stock sold in the
offering, 2,659,800 were sold by the Company and 1,940,200 shares were sold by
existing stockholders. The Company received net proceeds from the offering of
approximately $167 million.
INVESTMENT FROM NATIONAL BROADCASTING COMPANY, INC.
On July 29, 1999, the Company issued 960,028 shares to National Broadcasting
Company, Inc. for $57.29 per share in connection with a Stock Purchase Agreement
dated June 11, 1999. The Company received proceeds of $55.0 million. The Stock
Purchase Agreement is filed on Form 8-K with the Securities and Exchange
Commission.
WARRANTS
On September 13, 1999, the Company entered into a strategic alliance with
SNAP! LLC and ValueVision International, Inc. whereby the parties entered into
re-branding and electronic commerce agreements, including television home
shopping, Internet shopping and direct e-commerce initiatives. Under the terms
of the agreements, SNAP granted ValueVision a ten-year, exclusive license to
SNAP's "SnapTV" trade-mark for the purpose of operating a television home
shopping service and a Website at www.snaptv.com. ValueVision
International, Inc.'s television home shopping network, currently called
ValueVision, will be re-branded as SnapTV. Xoom.com will become the direct
electronic commerce partner for SnapTV, managing the customer database, e-mail
marketing and other sales efforts. Direct online shopping offers will include
Xoom.com products and services, as well as SnapTV merchandise. ValueVision and
Xoom.com will share revenues from all such initiatives. As part of the
agreements, ValueVision and Xoom.com entered into a warrant purchase agreement
whereby Xoom.com agreed to purchase a warrant for 404,760 shares of ValueVision
common stock at an exercise price of $24.71 per share, and ValueVision agreed to
purchase a warrant for 244,004 shares of Xoom.com common stock at an exercise
price of $40.89 per share. The fair value of the warrant the Company received
from ValueVision was deemed to be $6.3 million, and the fair value of the
warrant the Company granted to ValueVision was deemed to be $6.9 million. The
value of the warrant received by Xoom.com was recorded as a long-term
investment. The value of the warrant granted by the Company was recorded as an
addition to stockholders' equity. The difference in value was recorded as a
deferred charge, which will be charged to sales and marketing expense over the
warrant's estimated life. The warrants may be exercised after the closing of the
proposed NBCi merger agreement until September 12, 2004. In the event the
transactions contemplated in the merger agreement do not occur by December 31,
1999, the warrants shall terminate. These rights and obligations of Xoom.com and
SNAP will be assigned to and assumed by NBC Internet, Inc. following
consummation of the transactions contemplated in the NBC Internet, Inc. merger
agreement.
1998 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1998 Employee Stock Purchase Plan was terminated by the Board
of Directors in May 1999.
10
<PAGE>
XOOM.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. NET LOSS PER SHARE
Basic and diluted net loss per share is calculated using the weighted
average number of common shares outstanding. Diluted net loss per share is
computed using the weighted average number of common shares outstanding and
dilutive common stock equivalents outstanding during the period. Common
equivalent shares from stock options (using the treasury stock method) are
excluded from the computation of net loss per share as their effect is
anti-dilutive.
8. COMPREHENSIVE INCOME (LOSS)
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130") which
establishes new rules for the reporting and display of comprehensive income
(loss) and its components. The adoption of this Statement had no impact on the
Company's net loss or stockholders' equity. SFAS 130 requires unrealized gains
and losses on the Company's available-for-sale securities to be included in
other comprehensive loss.
The components of the Company's comprehensive loss are as follows (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net loss................................ $(8,564) $(3,053) $(18,614) $(6,392)
Unrealized gain on investments.......... 421 -- 3 --
------- ------- -------- -------
Comprehensive loss...................... $(8,143) $(3,053) $(18,611) $(6,392)
======= ======= ======== =======
</TABLE>
9. LEGAL PROCEEDINGS
In January 1998, the Company became aware that Imageline, Inc. ("Imageline")
claimed to own the copyright in certain images that a third party, Sprint
Software Pty Ltd ("Sprint") had licensed to the Company. Some clip art images
that Imageline alleged infringed Imageline's copyright were included by the
Company in versions of the Company's Web Clip Empire product and licensed by the
Company to third parties, including other software clip publishers. The
Company's contracts with such publishers require the Company to indemnify the
publisher if copyrighted material licensed from the Company infringes a
copyright. Imageline claims that the Company's infringement of Imageline's
copyrights is ongoing. The Company and Imageline had engaged in discussions, but
were unable to reach any agreement regarding a resolution of this matter.
On August 27, 1998, the Company filed a lawsuit in the United States
District Court for the Eastern District of Virginia against Imageline, certain
parties affiliated with Imageline, and Sprint regarding the Company's and its
licensees' alleged infringement on Imageline's copyright in certain clip art
that the Company licensed from Sprint. The lawsuit seeks, among other relief,
disclosure of information from Imageline concerning the alleged copyright
infringement, a declaratory judgment concerning the validity and enforceability
of Imageline's copyrights and copyright registrations, a declaratory judgment
regarding damages, if any, owed by the Company to Imageline, and indemnification
from Sprint for damages, if any, owed by the Company to Imageline. There is no
contractual limitation on Sprint's indemnification. While the Company is seeking
indemnification from Sprint for damages, if any, there can be no assurance that
Sprint will be able to fulfill the indemnity obligations under its license
agreements with the Company. In addition, the Company may be subject to claims
by third parties seeking indemnification from the Company in connection with the
alleged infringement of the Imageline copyrights.
11
<PAGE>
XOOM.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. LEGAL PROCEEDINGS (CONTINUED)
On September 17, 1998, Imageline filed a counterclaim, which Imageline
amended in January 1999, seeking up to $60 million in damages. In March 1999,
the parties completed the discovery process and filed separate motions for
summary judgment.
On April 5, 1999, the Court granted one of the Company's motions for partial
summary judgment and stayed the case to allow Imageline to file all necessary
copyright registration applications to cover the clip art images.
Based on the discussions with Imageline, the Company believes the range of
liability related to this matter is from $0 up to $10,000,000; however, the
Company believes it is unlikely that the liability would exceed $1,000,000.
Accordingly, the Company reserved $1,000,000 for this potential liability in a
prior period. The Company believes that the $1,000,000 accrual represents a
reasonable estimate of the loss that could be incurred in the Imageline dispute.
Based on information available to date management does not believe that the
outcome of this matter will have a material effect on the Company's financial
position, results of operations and cash flows over and above the $1,000,000
accrued in the 1998 financial statements. If not successful in defending this
claim, the resulting outcome could have a material adverse impact on the
Company's business, results of operations, cash flows and financial condition in
a particular period.
Zoom Telephonics, Inc. filed a lawsuit against the Company in
September 1998 alleging trademark infringement and related statutory violations.
The Company was not served with Zoom Telephonics' complaint until January 1999.
Zoom Telephonics has demanded that the Company stop using the XOOM trademark and
has asked for an unspecified amount of money damages. The Company responded to
the complaint in February 1999. In April 1999, Zoom Telephonics filed a motion
for a preliminary injunction to stop the Company from using any mark containing
"Xoom." In June 1999 the Company filed an opposition to Zoom Telephonics' motion
for preliminary injunction. A hearing on the motion was held on September 30,
1999. On October 7, 1999 the court denied Zoom Telephonics' motion for a
preliminary injunction but allowed Zoom Telephonics to request the court to
reconsider the motion if the Xoom.com merger does not close by October 31, 1999.
On November 3, 1999 Zoom Telephonics filed a motion to renew their previous
motion for preliminary injunction. The Company intends to respond to Zoom
Telephonics' most recent motion. Although the Company believes that the claims
asserted by Zoom Telephonics are without merit, such litigation could have a
material adverse effect on the Company's business, results of operations and
financial condition, particularly if such litigation forces the Company to make
substantial changes to its name and trademark usage.
On October 4, 1999, John G. Balletto ("Balletto") filed a lawsuit against
Xoom.com in September 1999 in the San Francisco Superior Court alleging breach
of contract and specific performance. Balletto has alleged that in connection
with a loan which Xoom.com obtained from Sand Hill Capital LLC in 1998 and
pursuant to an oral contract with Xoom.com, Balletto is entitled to a finder's
fee. Balletto has sought specific performance of the alleged oral agreement by
having the court direct Xoom.com to issue 33,784 shares of Common Stock to
Balletto and such other relief that the Court may deem just and proper. Xoom.com
believes that this lawsuit is without merit and intends to defend the suit
vigorously. Xoom.com does not believe that the outcome of this matter will
materially adversely impact its results of operations, cash flows, or financial
position. However, depending on the amount and timing, an unfavorable resolution
could have a material adverse effect on Xoom.com's results of operations,
financial position or cash flows in a particular period.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE DISCUSSION IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" CONTAINS TREND ANALYSES AND OTHER
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934. ALL
STATEMENTS, TREND ANALYSES AND OTHER INFORMATION CONTAINED HEREIN RELATIVE TO
MARKETS FOR XOOM.COM's SERVICES AND PRODUCTS AND TRENDS IN REVENUE, AS WELL AS
OTHER STATEMENTS INCLUDING SUCH WORDS AS "ANTICIPATE," "BELIEVE," "PLAN,"
"ESTIMATE," "EXPECT," "GOAL," AND "INTEND" AND OTHER SIMILAR EXPRESSIONS
CONSTITUTE FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE
SUBJECT TO BUSINESS AND ECONOMIC RISKS, AND XOOM.COM'S ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENTS AS A
RESULT OF THE PROPOSED MERGER WITH SNAP! LLC AND NBC MULTIMEDIA CORPORATION,
WHICH IS EXPECTED TO CLOSE IN THE FOURTH QUARTER OF 1999, AND OTHER FACTORS SET
FORTH ELSEWHERE HEREIN, INCLUDING "CERTAIN RISK FACTORS WHICH MAY IMPACT FUTURE
OPERATING RESULTS," PAGE 28, AS WELL AS FACTORS SET FORTH IN XOOM.COM'S ANNUAL
REPORT ON FORM 10-K.
GENERAL
We were incorporated in April 1996 and commenced offering products for sale
on our Web site in March 1997. From inception through December 1996, we had no
sales and our operating activities related primarily to developing necessary
computer infrastructure, recruiting personnel, raising capital and initial
planning and development of the Xoom.com site. For the period beginning with the
operation of the Xoom.com site through December 31, 1997, we continued these
activities and focused on building sales momentum, establishing relationships
with manufacturers, marketing the Xoom.com brand and establishing customer
service and fulfillment operations.
From inception through September 30, 1999, we generated total net revenue of
approximately $29.1 million. Since January 1998, the number of members has grown
from 100,000 to 11.5 million as of November 10, 1999.
We have not achieved profitability on a quarterly or annual basis to date,
and anticipate that we will incur net losses for the foreseeable future. The
extent of these losses will depend, in part, on the amount and rates of growth
in our net revenue from e-commerce and advertising. We expect our operating
expenses to increase significantly, especially in the areas of sales and
marketing and brand promotion. As a result, we will need to increase our
quarterly net revenue to achieve profitability. We believe that period-to-period
comparisons of our operating results are not meaningful and that you should not
rely upon the results for any period as an indication of future performance. Our
business, results of operations and financial condition will be materially and
adversely affected if:
- net revenue does not grow at anticipated rates;
- increases in operating expenses are not offset by commensurate increases
in net revenue; or
- we are unable to adjust operating expense levels in light of net revenue.
We expect operating expenses will continue to increase in the future as we
continue to seek to expand our business. To the extent that these expenses are
not accompanied by an increase in net revenue, our business, results of
operations and financial condition could be materially adversely affected. Our
operating losses might increase in the future, and we cannot guarantee that we
will ever achieve or sustain profitability. See "Certain Risk Factors Which
Might Impact Future Operating Results -We cannot assure you that we will be
profitable because we have operated our business only for a short period of
time."
13
<PAGE>
Since January 1, 1999, we have entered into various business and technology
acquisitions, license arrangements and strategic alliances in order to build our
communities, provide community-specific content, generate additional traffic,
increase the number of members and establish additional sources of net revenue.
In April 1999, we acquired Focused Presence, Inc., a company that operates a
global directory of small businesses, for approximately $1.7 million. In
May 1999, we acquired Net Floppy, Inc, a provider of online file storage for Web
users for approximately $1.4 million, and we acquired MightyMail
Networks, Inc., a developer of an enhanced e-mail product that enables
customization of e-mail according to user preferences for approximately
$23.1 million. In June 1999, we acquired Paralogic Software Corporation, which
provides Web site authoring and community building tools, such as Java based
community products and services, including customizable chat rooms, discussion
boards, guestbooks and event calendars, for approximately $35.4 million. In
August 1999, we acquired LiquidMarket Inc., the developer of a next-generation
on-line comparison shopping guide and purchasing service, for approximately
$38.7 million, and we acquired Private One, Inc., a designer and developer of a
secure e-mail software service, for approximately $2.2 million.
Because most Internet business acquisitions involve the purchase of
significant amounts of intangible assets, acquisitions of such businesses also
result in the recording of goodwill, purchased technology, and acquired
workforce, and significant charges for purchased in-process research and
development. During the three months ended September 30, 1999, we expensed $0
for purchased in-process research and development and $5.5 million for the
amortization of goodwill, purchased technology, and acquired workforce. During
the same period ended September 30, 1998, we expensed $130,000 for purchased
in-process research and development and $741,000 for the amortization of
goodwill and purchased technology. During the nine months ended September 30,
1999, we expensed $2.6 million for purchased in-process research and development
and $7.8 million for the amortization of goodwill, purchased technology, and
acquired workforce. During the same period ended September 30, 1998, we expensed
$790,000 for purchased in-process research and development and $1.1 million for
the amortization of goodwill and purchased technology.
We intend to continue making acquisitions to increase online reach and
membership and to seek additional strategic alliances with content and
distribution partners, including alliances that create co-branded sites through
which we market our services. Acquisitions carry numerous risks and
uncertainties, including:
- difficulties in integrating operations, personnel, technologies, products
and the information systems of the acquired companies;
- diversion of management's attention from other business concerns;
- risks of entering geographic and business markets in which we have little
or no prior experience; and
- potential loss of key employees of acquired entities.
We cannot guarantee that we will be able to successfully integrate any
businesses, products, technologies or personnel that might be acquired in the
future. A failure to successfully integrate acquired entities or assets could
have a material adverse effect on our business, results of operations and
financial condition. In addition, we cannot guarantee that we will be successful
in identifying and closing transactions with potential acquisition candidates.
See "Certain Risk Factors Which Might Impact Future Operating Results--If we are
unable to successfully integrate future acquisitions into our operation, then
our business and results of operations could be adversely affected."
International sales comprised approximately 12% of total net revenue for the
three months ended September 30, 1999 and they represented 27% of total net
revenue for the same period ended September 30, 1998. This consisted of
$1.1 million in net revenue for the three months ended September 30, 1999 and
$618,000 in net revenue for the same period ended September 30, 1998.
International sales comprised
14
<PAGE>
approximately 14% of total net revenue for the nine months ended September 30,
1999 and 29% of total net revenue for the same period ended September 30, 1998.
This consisted of $2.8 million in net revenue during the nine months ended
September 30, 1999 and $1.4 million in net revenue during the same period ended
September 30, 1998. The decreases in the percentage of international revenue in
both periods are due to the overall increase in domestic revenue. See "Certain
Risk Factors Which Might Impact Future Operating Results--Our international
operations are subject to risks that could have a material adverse effect on our
results of operations."
We may need to increase our inventory levels in the future to support a
wider base of e-commerce products and to take advantage of volume purchase
discounts. We contract with a third party warehousing and order fulfillment
company to stock inventory and ship products directly to customers. We take
title to this inventory, have responsibility for this inventory, and record
inventory on our balance sheet until the final shipment to customers or other
disposition of the inventory. There are inherent risks and costs in stocking
inventory and coordinating with a third party warehousing and order fulfillment
company. These risks include, but are not limited to, product obsolescence,
excess inventory, and inventory shortages resulting in unfulfilled orders, which
could materially adversely affect operating results in the future. See "Certain
Risk Factors Which Might Impact Future Operating Results--Any failure of our
network infrastructure could have a material adverse effect on our results of
operations" and--"We depend on our vendors and suppliers."
As a strategic response to changes in the competitive environment, we might
from time to time make certain pricing, service or marketing decisions or pursue
business combinations that could have a material adverse effect on our business,
results of operations and financial condition. In order to accelerate the
promotion of our brands, we intend to significantly increase our marketing
budget, which could materially and adversely affect our business, results of
operations and financial condition. We expect to experience seasonality in our
business, with user traffic on the Xoom.com site potentially being lower during
the summer and year-end vacation and holiday periods when overall usage of the
Web is lower. Additionally, seasonality may significantly affect our advertising
revenue during the first and third calendar quarters, as advertisers
historically spend less during these periods. Because Web-based commerce and
advertising is an emerging market, additional seasonal and other patterns may
develop in the future as the market matures. Any seasonality is likely to cause
quarterly fluctuations in our operating results, and these patterns could have a
material adverse effect on our business, results of operations and financial
condition.
15
<PAGE>
RESULTS OF OPERATIONS
The following table presents certain consolidated statement of operations
data for the periods indicated as a percentage of total net revenue.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenue:
E-commerce.......................................... 48.3 % 66.6 % 51.5 % 69.2 %
Advertising......................................... 50.8 26.0 47.9 19.6
Licensing........................................... 0.9 7.4 0.6 11.2
------- ------- ------ ------
Total net revenue................................. 100.0 100.0 100.0 100.0
Cost of net revenue:
Cost of e-commerce.................................. 31.4 46.4 37.5 40.4
Cost of advertising revenue(1)...................... 1.2 -- 0.9 --
Cost of licensing................................... -- 0.3 -- 0.7
------- ------- ------ ------
Cost of net revenue............................... 32.6 46.7 38.4 41.1
------- ------- ------ ------
Gross profit.......................................... 67.4 53.3 61.6 58.9
Operating expenses:
Operating and development............................. 33.6 52.6 28.7 52.6
Sales and marketing................................. 66.6 37.1 67.9 32.3
General and administrative.......................... 35.5 46.0 34.4 44.4
Purchased in-process research and development....... -- 5.7 13.1 16.2
Amortization of deferred compensation............... 1.0 13.2 2.5 22.8
Amortization of intangible assets................... 61.8 32.2 39.4 22.3
------- ------- ------ ------
Total operating expenses.......................... 198.5 186.8 186.0 190.6
------- ------- ------ ------
Loss from operations.................................. (131.1) (133.5) (124.4) (131.7)
Other income, net..................................... 35.5 0.7 30.8 0.3
------- ------- ------ ------
Net loss.............................................. (95.6)% (132.8)% (93.6)% (131.4)%
------- ------- ------ ------
</TABLE>
- ------------------------
(1) There were no material costs of advertising revenue during 1998.
NET REVENUE
Total net revenue for the three months ended September 30, 1999 was
$9.0 million, an increase of approximately $6.7 million over revenues of
$2.3 million for the three months ended September 30, 1998. Total net revenue
for the nine months ended September 30, 1999 was $19.9 million, an increase of
approximately $15.0 million over revenues of $4.9 for the nine months ended
September 30, 1998. The increases in both the three-month and nine-month periods
were primarily due to the following three factors: (A) the expansion of our
membership base; (B) an increase in the frequency of e-mail offerings and
broader product offerings (which resulted in an increase in product sales
through e-commerce); and (C) an increase in Web-based advertising (our higher
Web site traffic increased our attractiveness to advertisers).
E-COMMERCE REVENUE
E-commerce revenue consists of on-line product sales (inclusive of shipping
and handling fees), as well as fees paid to Xoom.com for co-branded email-based
product offers and for customer referrals. E-commerce revenue increased to
$4.3 million in the three months ended September 30, 1999 from
16
<PAGE>
$1.5 million in the three months ended September 30, 1998. E-commerce revenue
increased to $10.3 million in the nine months ended September 30, 1999 from
$3.4 million in the nine months ended September 30, 1998. The increases in net
revenue in both periods are primarily due to the expansion of our membership
base, which resulted in an increase in product sales, as well as expansion of
the breadth of products offered. The percentage of our total net revenue
attributable to e-commerce revenue decreased to 48.3% in the three months ended
September 30, 1999 from 66.6% in the three months ended September 30, 1998. The
percentage of our total net revenue attributable to e-commerce revenue decreased
to 51.5% in the nine months ended September 30, 1999 from 69.2% in the nine
months ended September 30, 1998. The decreases in both periods were due to the
fact that advertising revenue grew at a more rapid rate than e-commerce revenue
during the three and nine months ended September 30, 1999 as compared to the
three and nine months ended September 30, 1998. We expect e-commerce revenue to
continue to account for a large percentage of net revenue as we expand our
product offerings and increase our direct e-commerce response rates through
better member demographic information and targeting of product offers.
We believe that offering our customers attractive prices is an essential
component of our business strategy. We may in the future increase the discounts
we offer our customers and may otherwise alter our pricing structures and
policies. We anticipate that any increase in discounts or price reductions will
reduce gross margins below those we experienced for the three and nine months
ended September 30, 1999 and 1998.
ADVERTISING REVENUE
Advertising revenue increased to $4.6 million in the three months ended
September 30, 1999 from $598,000 in the three months ended September 30, 1998.
Advertising revenue increased to $9.5 million in the nine months ended
September 30, 1999 from $953,000 in the nine months ended September 30, 1998. Of
these increases, approximately $400,000 is related to advertising inventory sold
to SNAP! LLC. The percentage of our total net revenue attributable to
advertising revenue increased to 50.8% in the three months ended September 30,
1999 from 26.0% in the three months ended September 30, 1998. The percentage of
our total net revenue attributable to advertising revenue increased to 47.9% in
the nine months ended September 30, 1999 from 19.6% in the nine months ended
September 30, 1998. The increases in advertising revenue in each period in both
absolute dollars and in percentage of net revenue are primarily a result of the
increase in our membership, increased site traffic, and expansion of our
advertising sales force. As our membership base continues to grow and the demand
for advertising on our Web-site remains strong, we can expect that our
advertising revenues will continue to represent a large percentage of our
overall net revenue.
LICENSING REVENUE
Licensing revenue decreased to $80,000 in the three months ended
September 30, 1999 from $170,000 in the three months ended September 30, 1998.
Licensing revenue decreased to $119,000 in the nine months ended September 30,
1999 from $546,000 in the three months ended September 30, 1998. As we expand
our e-commerce and advertising revenue, we can expect that licensing revenue
will continue to represent a small percentage of net revenue.
COST OF NET REVENUE
Gross margins increased to 67.4% in the three months ended September 30,
1999 from 53.3% in the three months ended September 30, 1998. Gross margins
increased to 61.6% in the nine months ended September 30, 1999 from 58.9% in the
nine months ended September 30, 1998. Both increases were a result of a change
in the revenue mix. In the three and nine months ended September 30, 1999,
advertising sales (which have higher margins than e-commerce sales) generated
more of our overall revenue than e-commerce sales, as compared to the three and
nine months ended September 30, 1998.
17
<PAGE>
COST OF E-COMMERCE REVENUE
Cost of e-commerce revenue consists primarily of the costs of merchandise
sold to customers, credit card commissions, product fulfillment, and outbound
shipping and handling costs. Cost of e-commerce was $2.8 million for the three
months ended September 30, 1999 and it was $1.1 million for the same period
ended September 30, 1998. Cost of e-commerce revenue was $7.5 million for the
nine months ended September 30, 1999 and it was $2.0 million for the same period
ended September 30, 1998. The increase in absolute dollars of the cost of
e-commerce revenue in the three and nine months ended September 30, 1999 as
compared to the same period ended September 30, 1998 was primarily due to the
overall growth in e-commerce revenue.
As a percentage of net revenue, the cost of e-commerce revenue was 31.4% for
the three months ended September 30, 1999 and it was 46.4% for the same period
ended September 30, 1998. As a percentage of net revenue, the cost of e-commerce
was 37.5% for the nine months ended September 30, 1999 and it was 40.4% for the
same period ended September 30, 1998. These decreases in percentages were
primarily due to the increase in sources of e-commerce revenue which have higher
margins, such as co-branded email-based product offers and customer referrals.
COST OF ADVERTISING REVENUE
Cost of advertising revenue consists primarily of revenue sharing amounts we
pay to our customers for advertising sold on co-branded sites. Cost of
advertising revenue was $108,000 in the three months ended September 30, 1999,
and it was $183,000 in the nine months ended September 30, 1999. Cost of
advertising revenue was $0 in the three and nine months ended September 30,
1998. These increases are primarily a result of an increased demand for
advertising on co-branded Web sites, and the expansion of our advertising and
business development sales forces.
As a percentage of net revenue, cost of advertising revenue was 1.2% in the
three months ended September 30, 1999 and it was 0.9% for the nine months ended
September 30, 1999. There was no material costs of advertising revenue in 1998.
We expect the cost of advertising revenue to continue to grow as a percentage of
net revenue.
COST OF LICENSING REVENUE
Cost of licensing revenue consists primarily of royalties on net revenue
from license fees. Cost of licensing revenue was $4,000 for the three months
ended September 30, 1999 and it was $7,000 for the same period ended
September 30, 1998. Cost of licensing revenue was $4,000 during the nine months
ended September 30, 1999 and it was $35,000 during the same period ended
September 30, 1998. We expect that the cost of licensing revenue should continue
to be a small percentage of the total cost of revenues as compared to the cost
of e-commerce revenues.
The mix of products we sell will impact our gross margins and the overall
mix of e-commerce revenue, advertising revenue and licensing revenue. We
typically recognize higher gross margins on advertising revenue and licensing
revenue. We expect that shifts in the mix of sales could adversely impact our
overall gross margin and could materially adversely impact our business, results
of operations and financial condition.
OPERATING AND DEVELOPMENT EXPENSES
Operating and development expenses consist primarily of payroll and related
expenses for development and network operations personnel and consultants, costs
related to systems infrastructure including Web site hosting, and costs of
acquired content to enhance our Web site. Operating and development expenses
increased to $3.0 million in the three months ended September 30, 1999 from $1.2
in the three months ended September 30, 1998. Operating and development expenses
increased to $5.7 million in the nine months ended September 30, 1999 from
$2.6 million in the nine months ended September 30, 1998.
18
<PAGE>
We believe operating and development expenses will increase significantly in the
future, especially in relation to Web site hosting costs, as our membership
grows, thus requiring additional bandwidth to support the many free services
offered to members. We believe that we will need to make significant investments
in our Web site to remain competitive. Therefore, we expect that our operating
and development expenses will continue to increase in absolute dollars for the
foreseeable future.
Operating and development costs decreased as a percentage of total net
revenue to 33.6% in the three months ended September 30, 1999 from 52.6% in the
three months ended September 30, 1998. Operating and development costs decreased
as a percentage of total net revenue to 28.7% in the nine months ended
September 30, 1999 from 52.6% in the nine months ended September 30, 1998. The
decreases in operating and development expense as a percentage of total net
revenue in both periods were due to the overall growth in net revenue.
SALES AND MARKETING EXPENSES
Sales and marketing expenses consist primarily of payroll and related
expenses for personnel engaged in sales, marketing, publishing and customer
support, as well as advertising and promotional expenditures. Sales and
marketing expenses increased to $6.0 million in the three months ended
September 30, 1999 from $853,000 in the three months ended September 30, 1998.
Sales and marketing expenses increased to $13.5 million in the nine months ended
September 30, 1999 from $1.6 million in the nine months ended September 30,
1998. The absolute dollar increases from period to period in sales and marketing
expenses were primarily attributable to increased personnel and related expenses
required to implement our sales and marketing strategy as well as increased
public relations and other promotional and advertising expenses. Additionally,
in connection with the proposed business combination of Xoom.com, SNAP! LLC and
certain Internet assets of NBC, we incurred a $424,000 charge related to the
cancellation of an advertising contract in the nine months ended September 30,
1999. We expect to continue hiring additional personnel and to pursue a branding
and marketing campaign. Therefore, we expect marketing and sales expenses to
continue to increase significantly in absolute dollars.
Sales and marketing expenses increased as a percentage of total net revenue
to 66.6% in the three months ended September 30, 1999 from 37.1% in the three
months ended September 30, 1998. Sales and marketing expenses increased as a
percentage of total net revenue to 67.9% in the nine months ended September 30,
1999 from 32.3% in the nine months ended September 30, 1998. The increases in
sales and marketing expenses as a percentage of total net revenue in both
periods were due to the hiring of new sales and marketing personnel and other
promotional and advertising expenses.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses consist primarily of payroll and related
costs for general corporate functions, including finance, legal, accounting,
business development, human resources, investor relations, facilities and
administration, as well as legal fees, insurance, and fees for professional
services and directors. General and administrative expenses increased to
$3.2 million in the three months ended September 30, 1999 from $1.1 million in
the three months ended September 30, 1998. General and administrative expenses
increased to $6.8 million in the nine months ended September 30, 1999 from
$2.2 million in the nine months ended September 30, 1998. The absolute dollar
increases from period to period in general and administrative expenses were
primarily due to increases in the number of general and administrative
personnel, as well as increases in professional services and facilities-related
expenses to support the growth of our operations. We expect general and
administrative expenses to increase in absolute dollars in future periods as we
expand our staff, and incur additional costs related the growth of our
operations.
General and administrative expenses decreased as a percentage of total net
revenue to 35.5% in the three months ended September 30, 1999 from 46.0% in the
three months ended September 30, 1998. General and administrative expenses
decreased as a percentage of total net revenue to 34.4% in the nine
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months ended September 30, 1999 from 44.4% in the nine months ended
September 30, 1998. The decreases in general and administrative expenses as a
percentage of total net revenue in both periods were due to the overall growth
in net revenue.
PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT
For the three months ended September 30, 1999 there were no charges for the
cost of purchased in-process research and development, and for the same period
ended September 30, 1998 we recognized $130,000 in connection with the
acquisition of Pagecount, Inc.. For the nine months ended September 30, 1999 we
recognized the cost of purchased in-process research and development of
$2,603,000 in connection with the acquisitions of MightyMail Networks, Inc. and
Paralogic Software Corporation, and for the same period ended September 30, 1998
we recognized $790,000 in connection with the acquisitions of Paralogic
Corporation, the purchase of certain assets of Revolutionary Software, Inc, and
the acquisition of Pagecount, Inc.
ACQUISITIONS DURING THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1999
Mightymail Networks, Inc.
In connection with the MightyMail Networks acquisition, we acquired
MightyMail Networks' e-mail platform. The MightyMail platform allows branding
material and marketing content to be placed within person-to-person e-mail that
is sent by individuals to individuals. The MightyMail application runs on an
Oracle database and Unix operating system. All the application code is written
using Java servlets, which are Java applets that run within a Web server
environment. The MightyMail application uses a three-tiered architecture common
to most Internet applications: an interface layer, an application layer, and a
database layer. In addition, MightyMail uses a custom mail agent that links into
a standard mail transfer agent. In the future, we expect that this custom mail
agent will be useable by any standard mail protocol for users who wish to run
the MightyMail application running in their own mail environment.
At the time of the acquisition, version 1.0 of the MightyMail technology was
functional as a commercially viable product. However, the current product has
various e-mail options and is not a truly customizable product with a rich
library of content or business user interface. In fact, version 1.0 is
approximately half of the true customizable, rich-e-mail product originally
intended to be developed. At the time of the acquisition, MightyMail Networks
was developing a second version of the MightyMail Networks technology, which was
not completely functional as a commercially viable product. Version 2.0 of the
MightyMail technology will be fully customizable, have access to a rich library
of content, have the ability to add surveys, be compatible with corporate
servers, have e-mail wizards, allow end-users to create their own content and
enable the inclusion of photographs.
The nature of the remaining estimated efforts necessary to develop version
2.0 of the MightyMail technology include:
- Integration with Xoom.com's existing webmail system. This integration will
bring MightyMail capabilities, which includes the ability to compose rich
e-mail, to Xoom.com's existing account holders, which now exceed 700,000
users.
- Re-architecting of the MightyMail platform to be technically compatible
with the Xoom.com technology infrastructure. The primary compatibility
issue will be the integration of Apache Web server technology in place of
the current Java Web Server from Sun Microsystems.
As of the date of the technology's valuation, we estimated that 50% of the
research and development effort had been completed at the date of acquisition
and expected the remaining research and development efforts relating to the
completion of the version 2.0 MightyMail technology would require approximately
six months of effort from the date of valuation through its release date in the
fourth quarter of 1999. We estimated that three full-time engineers would be
required to complete the in-process projects. These projects included the use of
one full-time engineer for six months to work on the Apache Web server
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integration efforts, and two full-time engineers for 6 months to work on the
MightyMail/XoomMail integration efforts. Accordingly, we have estimated that the
total estimated research and development costs to complete MightyMail version
2.0 are $170,000. We anticipate completion of the project in the fourth quarter
of 1999.
Paralogic Software Corporation
In connection with the Paralogic Software Corporation acquisition, we
acquired Paralogic Software Corporation's product Anexa.com, a combination of
Web site authoring and community building tools that allows users to instantly
create comprehensive Web sites featuring multi-media albums, discussion forums,
events, chat, news announcements, classified ads, guest books, membership
databases and community administration. In connection with this acquisition we
also obtained ParaChat Professional, chat software that is licensed to
individuals and businesses. This software is hosted by a server and is supported
by a staff of engineers, both of which were acquired in conjunction with the
Paralogic Software Corporation acquisition. This is in contrast to the purchase
of the ParaChat Personal Network, which we acquired in connection with the
purchase of Paralogic Corporation in March 1998. The ParaChat Personal Network
is hosted by Xoom.com, and is based on a free chat service that Xoom.com members
can download on to their Web pages.
At the time of acquisition, the current versions of Anexa.com and ParaChat
Professional did not represent the more robust, feature-rich products that
Paralogic Software Corporation envisioned and intended to develop in the twelve
months following the acquisition date. The future versions of these products are
expected to incorporate a number of significant additional features including
enhanced scalability as traffic is added, a relational database management
system, support capability, e-mail verification, improved directory services,
search capability, instant messaging, file sharing capability, home page
publishing, additional administration and management tools, calendar and address
book capabilities, polls, gift galleries, greeting cards, voice chat, and white
board functionality. The nature of the remaining estimated efforts necessary to
develop the acquired, incomplete new versions of Anexa.com and ParaChat
Professional into commercially viable products include:
- ANEXA.COM. These changes fall into the following categories:
(A) new features like Paralogic Instant Messenger, support for Uniplanet
calendar and support for MightyMail mail;
(B) feature enhancements and upgrades, like Media Albums Plus to handle
MP3 files, moderated message boards and improved event notification;
(C) user interface enhancements: administration tools; and
(D) bug fixing.
- PARACHAT PROFESSIONAL. These changes fall into the following categories:
(A) new features like voice chat and HTML chat to extend the chat
experience;
(B) user interface enhancements; support for moderated events, such as
the ability to accept or deny audience questions;
(C) administration tools, like a filth filter and "Chat 911" to help
manage abusive behavior in chat rooms;
(D) support for internationalization; and
(E) bug fixing.
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As of the date of the technology's valuation, we estimated that 17% of the
research and development effort had been completed at the date of acquisition
and expected the remaining research and development efforts relating to the
completion of the new versions of Anexa.com and ParaChat Professional technology
would require approximately nine months of effort from the date of valuation
through its expected release date of March 2000. These projects include the use
of eight engineers, spending 75% of their time on the project, for nine months,
to create the new versions of the products, at an estimated total cost to
complete of $576,000.
ACQUISITIONS DURING THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1998
Paralogic Corporation
In connection with the Paralogic Corporation acquisition, we acquired
Paralogic Corporation's base of chat members, called the ParaChat Personal
Network, as well as the rights to use the underlying chat technology, called
ParaChat Personal. ParaChat Personal is designed to provide Web sites with an
option to offer chat technology without requiring Web site hosts to buy the
software, maintain or upgrade the software, or learn any additional skills
beyond what is necessary to construct a Web site. The chat software is
maintained on Xoom.com's server and the Web site host is provided bits of source
code or "tags" that are incorporated into the Web site. The tags interface via
the Internet with the ParaChat server, and thus provide the Web site with chat
capabilities. In exchange for the free service, the Web site host allows banner
advertising on its site.
As of the date of the technology's valuation, we estimated that 55% of the
research and development effort had been completed at the date of acquisition
and expected the remaining research and development efforts relating to the
completion of the ParaChat Personal technology would require approximately six
months of effort from the date of valuation through its release date of
September 1, 1998. As of the date of valuation, we expected the benefit of the
acquired project to begin immediately after the estimated completion date. We
expected that the in-process project would be developed to technological
feasibility concurrent with the September 1998 release date. We estimated that
three full-time engineers would be required to complete the in-process projects.
These projects included the use of one full-time engineer for six months to work
on the external database connectivity efforts, one full-time engineer for six
months to work on the client layout efforts, and one full-time engineer for six
months to work on the management and control interface efforts. Accordingly, it
was determined that total estimated research and development costs-to-complete
for the ParaChat Personal in-process project were $112,500. We completed the
project by the scheduled date and the actual costs of completion were not
materially different than estimated.
Revolutionary Software, Inc.
The technology that we acquired from Revolutionary Software was a Web-based
e-mail technology known as SiteMail. This in-process Web-based e-mail technology
was designed to allow users to receive and send e-mail through the Internet
using a Web browser. Since the technology was Web-based, it would allow for the
integration of e-mail functionality into Web sites and would be accessible by
any Web-connected device anywhere in the world. Furthermore, by integrating
e-mail into a specific site, it would force the subscriber to visit that site to
access e-mail, thereby increasing traffic. In addition, when users apply for
e-mail accounts at Web sites offering SiteMail, they are given the domain name
of that Web site or company. The personalization of the domain name in an e-mail
address has become an innovative way of promoting a company's name or Web site.
As of the date of acquisition, we estimated that approximately 50% of the
research and development effort had been completed and expected the remaining
research and development efforts relating to the completion of the SiteMail
technology to continue from the date of acquisition through the release date of
November 1998. The remaining development effort was estimated to require
approximately 4.5 months of
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engineering effort. We estimated that 3.5 full-time developers would be required
to complete this project. The total cost of remaining development was estimated
to be approximately $98,000. We completed the project by the scheduled date and
the actual costs of completion were not materially different than estimated.
Pagecount, Inc.
In connection with the Pagecount acquisition, we acquired a Web page counter
product, titled Pagecount. This product is a banner page counter that tracks the
number of visitors that view a member's site. It further breaks down impression
statistics or page views by day, date, and time. Other statistics include a list
of locations from where the requests originated and the host names of up to 100
visitors. The software is maintained on the Pagecount server and tags are
integrated into the Web site, which interface with the Pagecount server. In
exchange for the use of the Pagecount service, a banner advertisement may be
placed on each counter image.
We estimated that approximately 55% of the research and development effort
had been completed at the date of acquisition and expected the remaining
research and development efforts relating to the completion of the Pagecount
technology to continue from the date of acquisition through the release date of
mid-December 1998. The remaining development effort at the date of acquisition
was estimated to require approximately five months of engineering effort. We
estimated that 2.5 full-time developers would be required to complete this
project. The total estimated remaining development effort equates to a total
cost to complete of approximately $78,000. We completed the project by the
scheduled date and the actual costs of completion were not materially different
than estimated.
AMORTIZATION OF DEFERRED COMPENSATION
We did not record any deferred stock compensation charges to equity during
the three months ended September 30, 1999 and we recorded charges to equity of
$1.0 million for the same period ended September 30, 1998. We did not record any
deferred stock compensation charges to equity during the nine months ended
September 30, 1999 and we recorded charges to equity of $2.0 million for the
same period ended September 30, 1998. The deferred compensation charges account
for the difference between the exercise price and the deemed fair value of
certain stock options we granted to our employees. We cannot guarantee that we
will not accrue additional charges, which could have a material adverse effect
on our business, results of operations and financial condition.
The amortization of deferred compensation reflects the amortization of the
deferred stock compensation charges to equity. We have recorded amortization of
deferred compensation of $90,000 during the three months ended September 30,
1999 and we recorded $304,000 during the same period ended September 30, 1998.
We recorded amortization of deferred compensation of $495,000 during the nine
months ended September 30, 1999 and we recorded $1.1 million during the same
period ended September 30, 1998.
AMORTIZATION OF INTANGIBLE ASSETS
Amortization of intangible assets totaled $5.5 million for the three months
ended September 30, 1999 and it was $741,000 for the same period ended
September 30, 1998. Amortization of intangible assets totaled $7.8 million for
the nine months ended September 30, 1999 and it totaled $1.1 million for the
same period ended September 30, 1998. The additional amounts recorded in the
three months ended September 30, 1999 represent amortization of intangible
assets and goodwill resulting from our acquisitions of LiquidMarket, Inc., and
Private One, Inc., amortized over periods ranging from 36 to 42 months. The
additional amounts recorded in the nine months ended September 30, 1999
represent amortization of intangible assets and goodwill resulting from our
acquisitions of Focused Presence, Inc., MightyMail Networks, Inc., Net
Floppy, Inc., Paralogic Software Corporation, LiquidMarket, Inc., and Private
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One, Inc., amortized over periods ranging from 36 to 48 months. The amounts
recorded in the three months and the nine months ended September 30, 1998,
represent amortization of intangible assets and goodwill resulting from our
acquisitions of Paralogic Corporation, Global Bridges Technologies, Inc.,
Pagecount, Inc., and the purchase of certain assets of Revolutionary
Software, Inc., amortized over periods ranging from 24 to 42 months.
For the acquisitions in the periods ended September 30, 1999, we have
determined the appropriateness of the estimated useful lives related to the
intangible assets based on general and specific analysis. In general, the
Internet is characterized by rapid technological change, changes in users and
customer requirements and preferences, frequent new product and service
introductions and the emergence of new industry standards and practices.
The market for community-based direct selling channels on the Internet is
new and rapidly evolving, and competition for members, consumers, visitors and
advertisers is intense. In addition, we attract members to our Web site with a
variety of free services, including home pages, e-mail, chat rooms, electronic
newsletters, clip art and software libraries, online greeting cards and page
counters. In order to continue attracting members using these various methods,
the free services must be constantly updated and improved.
With respect to the purchased technology associated with the business and
technology acquisitions, we considered the effects of obsolescence, demand,
competition, and other economic factors. Due to the rapid technological change
involved in the Internet, we estimated that new technologies would replace the
intangible assets relating to the purchased technology within periods ranging
from 24 to 48 months.
With respect to the goodwill associated with the acquisitions, we considered
the effects of obsolescence, demand, competition, other economic factors and
expected actions of competitors and others. Based on these considerations, we
determined the positive effect of the acquisitions, and therefore the life of
the goodwill, to range from 24 to 48 months. See "Factors Affecting Operating
Results--If we are unable to integrate new technologies and standards
effectively, the results of our operations could be adversely affected,"--"Any
increase in competition could adversely affect our ability to maintain or
improve our position in the market relative to that of our competitors which
could have a material adverse effect on our business and results of operations"
and--"If we are unable to successfully integrate future acquisitions into our
operation, then our business and results of operations could be adversely
affected."
OTHER INCOME, NET
Other income, net represents interest we earned on our cash and investments,
offset by interest expense we paid on our borrowings. We earned approximately
$3.2 million of interest income in the three months ended September 30, 1999 and
we earned $37,000 in the same period ended September 30, 1998. We have earned
approximately $6.2 million in interest income in the three months ended
September 30, 1999 and we earned $37,000 during the same period ended
September 30, 1998. This increase was primarily due to the increased cash
balances available to invest as a result of our initial public offering in
December 1998, our secondary public offering in April 1999, and the investment
from National Broadcasting Company in July 1999.
Interest expense represents interest charges related to notes payable and
capital leases. We incurred approximately $25,000 of interest expense in the
three months ended September 30, 1999 and we incurred approximately $20,000 in
the same period ended September 30, 1998. We incurred approximately $90,000 of
interest expense in the nine months ended September 30, 1999, and we incurred
approximately $20,000 in the same period ended September 30, 1998.
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LIQUIDITY AND CAPITAL RESOURCES
Prior to our initial public offering, we financed our operations primarily
through the private placement of common stock. On December 9, 1998, we completed
our initial public offering of common stock, in which we issued 4,600,000 shares
of common stock at a price of $14.00 per share. Proceeds from the offering were
approximately $57.3 million, net of offering costs. On April 9, 1999, we
completed a secondary public offering of our common stock and issued 4,600,000
shares (including 600,000 shares issued in connection with the exercise of the
underwriter over-allotment option) at a price of $66.00 per share. Of the
4,600,000 shares of common stock sold in the offering, 2,659,800 were sold by
Xoom.com and 1,940,200 shares were sold by existing stockholders. Proceeds from
the follow-on offering were approximately $167 million, net of offering costs.
On July 29, 1999, we issued 960,028 shares to National Broadcasting
Company, Inc. for $57.29 per share in connection with a Stock Purchase Agreement
dated June 11, 1999. We received proceeds of $55.0 million.
As of September 30, 1999, we had cash and cash equivalents and marketable
securities of approximately $198.9 million. We regularly invest excess funds in
short-term money market funds, government securities and commercial paper.
Net cash used in operating activities for the nine months ended
September 30, 1999 was $14.9 million, and it was $3.1 million in the same period
ended September 30, 1998. Cash used in operating activities in the nine months
ended September 30, 1999 was primarily the result of net losses
($18.6 million), an increase in accounts receivable related to the growth of
advertising revenues ($2.5 million), and an increase in other assets
($7.6 million) related to an increase in long-term deposits, partially offset by
amortization of intangible assets ($7.8 million) and in-process research and
development charges ($2.6 million) related to our acquisitions, and an increase
in trade accounts payable ($3.9 million) related to the growth of our business.
In the nine months ended September 30, 1998, cash used in operating activities
was primarily the result of net losses ($6.4 million) and an increase in other
assets ($1.4 million), partially offset by amortization of intangible assets
($1.1 million), and in-process research and development charges ($790,000)
related to our acquisitions, the amortization of deferred compensation
($1.1 million) related to the granting of options to employees to purchase
common stock, and the increase in trade accounts payable ($1.0 million) related
to the overall growth of our business.
Net cash used in investing activities in the nine months ended
September 30, 1999 was $187.0 million and it was $1.4 million in the same period
ended September 30, 1998. Net cash used in investing activities in the nine
months ended September 30, 1999 was primarily related to the purchase of
marketable securities ($198.5 million), partially offset by the maturity of
investments ($18.5 million). The net cash used in investing activities in each
period was also related to purchases of fixed assets and net cash paid for
business acquisitions. From time to time, we expect to evaluate the acquisition
of products, businesses and technologies that complement our business. These
acquisitions may involve cash investments.
Net cash provided by financing activities in the nine months ended
September 30, 1999 was $222.8 million and it was $5.6 million in the same period
ended September 30, 1998. Net cash provided by financing activities in the nine
months ended September 30, 1999 was primarily related to proceeds from our
secondary public offering ($167.0 million) and proceeds from the issuance of
common stock to National Broadcasting Company ($55.0 million), partially offset
by the repayment of notes payable ($608,000). Net cash provided by financing
activities in the nine months ended September 30, 1998 was primarily
attributable to net proceeds from the issuance of common stock ($5.5 million).
We believe that we have the financial resources needed to meet our presently
anticipated business requirements, including capital expenditure and strategic
operating programs, for at least the next 12 months. Thereafter, if cash
generated by operations is insufficient to satisfy our liquidity requirements,
we may need to sell additional equity or debt securities or obtain additional
credit facilities. The sale of additional equity or convertible debt securities
may result in additional dilution to our stockholders. We may not be able to
raise any such capital on terms acceptable to us or at all.
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YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. As a result, software that
records only the last two digits of the calendar year may not be able to
distinguish whether "00" means 1900 or 2000. This may result in software
failures or the creation of erroneous results.
We have conducted an internal review of software systems which we use for
site management, network monitoring, quality assurance, transactions processing
and fulfillment services. Because we developed these software systems
internally, beginning at inception in 1996 when the Year 2000 problem already
had some visibility, we were largely able to anticipate four digit requirements.
In conjunction with ongoing reviews of its own products and services, we are
also reviewing our computer infrastructure, including network equipment and
servers. We do not anticipate material problems with network equipment, as our
current configuration was installed within the last three years. Similarly, we
purchased most of our servers in 1997 and 1998. With this relatively current
equipment, we do not anticipate material Year 2000 compliance problems, and we
will replace any servers that cannot be updated either in the normal replacement
cycle or on an accelerated basis. We have also internally standardized our
personal computers on Windows NT 4.0, using reasonably current service packs,
which our vendor has advised us are Year 2000 compliant. We use multiple
software systems for internal business purposes, including accounting, e-mail,
development, human resources, customer service and support and sales tracking
systems. All of these applications have been purchased within the last three
years.
We have made inquiries of vendors of systems we believe to be mission
critical to our business regarding their Year 2000 readiness. Although we have
received various assurances, we have not received affirmative documentation of
Year 2000 compliance from any of these vendors and we have not performed any
operational tests on our internal systems. We generally do not have contractual
rights with third party providers should their equipment or software fail due to
Year 2000 issues. If this third party equipment or software does not operate
properly with regard to Year 2000, we may incur unexpected expenses to remedy
any problems. These expenses could potentially include purchasing replacement
hardware and software. We have not determined the state of compliance of some of
our third-party suppliers of services such as warehousing and fulfillment
services, phone companies, long distance carriers, financial institutions and
electric companies, the failure of any one of which could severely disrupt its
ability to carry on our business.
We anticipate that our review of Year 2000 issues and any remediation
efforts will continue throughout calendar 1999. The costs incurred to date to
remediate our Year 2000 issues have not been material. If any Year 2000 issues
are uncovered with respect to these systems or our other internal systems, we
believe that we will be able to resolve these problems without material
difficulty, as replacement systems are available on commercially reasonable
terms. We presently estimate that the total remaining cost of addressing Year
2000 issues will not exceed $150,000. We derived these estimates using a number
of assumptions, including the assumption that we have already identified our
most significant Year 2000 issues. However, these assumptions may not be
accurate, and actual results could differ materially from those anticipated. In
view of our Year 2000 review and remediation efforts to date, the recent
development of our products and services, the recent installation of our
networking equipment and servers, and the limited activities that remain to be
completed, we do not consider contingency planning to be necessary at this time.
Our applications operate in complex network environments and directly and
indirectly interact with a number of other hardware and software systems. We are
unable to predict to what extent our business may be affected if our systems or
the systems that operate in conjunction with it experience a material Year 2000
failure. Known or unknown errors or defects that affect the operation of our
software and systems could result in delay or loss of revenue, interruption of
services, cancellation of contracts and memberships, diversion of development
resources, damage to our reputation, increased service and warranty costs,
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and litigation costs, any of which could adversely affect our business,
financial condition and results of operations. The most likely worst case
scenario is that the Internet fails and we are unable to offer any services on
our community site or make any of our direct e-commerce offerings, which would
materially adversly affect our results of operations, financial position and
cash flows in fiscal 2000.
CERTAIN RISK FACTORS WHICH MAY IMPACT FUTURE OPERATING RESULTS
This report on Form 10-Q contains forward looking statements which involve
risks and uncertainties. Our actual results could differ materially from those
anticipated by such forward looking statements as a result of certain factors,
including those set forth below.
WE CANNOT ASSURE YOU THAT WE WILL BE PROFITABLE BECAUSE WE HAVE OPERATED OUR
BUSINESS ONLY FOR A SHORT PERIOD OF TIME
Xoom.com was founded in April 1996 and has a limited operating history. An
investor in our common stock must consider the risks and difficulties frequently
encountered by early stage companies in new and rapidly evolving markets,
particularly those involved in e-commerce and the Internet. These risks include:
- the level of use of the Internet and online services and consumer
acceptance of the Internet and other online services, particularly
direct e-mail marketing, for the purchase of consumer products such as
those we offer;
- the lack of broad acceptance of the community model on the Internet;
- our inability to generate significant e-commerce revenue or premium
service revenue from our members;
- our inability to maintain and increase levels of traffic on the Xoom.com
Web site;
- our failure to continue to develop and extend the Xoom.com brand;
- our inability to attract or retain members;
- our inability to meet minimum guaranteed impressions under advertising
agreements;
- our failure to anticipate and adapt to a developing market;
- our inability to upgrade and develop our systems and infrastructure and
attract new personnel in a timely and effective manner;
- the failure of our server and networking systems to efficiently handle our
Web traffic; and
- our inability to effectively manage rapidly expanding operations.
WE CANNOT BE CERTAIN THAT OUR BUSINESS STRATEGY WILL BE SUCCESSFUL OR THAT WE
WILL SUCCESSFULLY ADDRESS THESE RISKS.
As of September 30, 1999, we had an accumulated deficit of $33.0 million.
Although we have experienced growth in our net revenue, members, customers and
reach in recent periods, these growth rates are not sustainable and will
decrease in the future. To date, we have not been profitable on either a
quarterly or an annual basis, and we expect to incur net losses for the
foreseeable future. We expect our operating expenses to increase significantly,
especially in the areas of sales and marketing and brand promotion, and, as a
result, we will need to increase our revenue to become profitable. If our
revenue does not grow as expected or increases in our expenses are not in line
with forecasts, there could be a material adverse effect on our business,
results of operations and financial condition.
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THE UNPREDICTABILITY OF OUR QUARTER-TO-QUARTER RESULTS COULD CAUSE OUR STOCK
PRICE TO BE VOLATILE OR DECLINE
Our operating results have fluctuated in the past and will likely continue
to do so in the future. Some of the factors that could cause our operating
results to fluctuate are:
- the level of demand for the services and products offered in our direct
e-mail marketing and our ability to meet the demand in a timely manner;
- consumers' receptiveness to e-commerce and to direct e-mail marketing in
particular;
- developments relating to advertising on the Web;
- timely deployment and expansion of our network and network architectures;
- new services offered by our competitors that affect the level of traffic
on our Web site and the continuing expansion of our membership base;
- our ability to predict demand for products and services we offer and to
optimize inventory levels accordingly;
- marketing costs that we will need to incur in order to maintain and
enhance the Xoom.com brand name;
- the loss of key business relationships;
- the mix of domestic and international sales;
- the costs of acquiring technology or businesses and our ability to
integrate them into our operations; and
- economic conditions generally, as well as those specific to the Internet
and related industries.
To respond to these and other factors, we may need to make business
decisions that could have a material adverse effect on our quarterly operating
results.
Our business fluctuates on a seasonal basis. Traffic on our site has
historically been lower during the summer and year-end vacation and holiday
periods when people tend to spend less time on the Internet. Advertising revenue
also varies with the seasons. Typically, advertisers spend less during the first
and third calendar quarters. Web-based commerce and advertising are relatively
new, which means that new trends may develop that could affect the results of
our operations.
As a relatively new company, it is difficult for us to plan or anticipate
our operating expenses based on our limited historical financial data. If our
actual revenue is lower than predicted, we may be unable to adjust our operating
expenses accordingly.
A substantial portion of our net revenue is from short-term advertising
contracts, usually one to two months in length. That means our quarterly net
revenue is a function of the contracts we enter into within the quarter and our
ability to adjust spending in light of any net revenue shortfalls. To date, our
advertising revenue comes from a small to medium group of customers whose
composition periodically changes. For example, during the nine months ended
September 30, 1999, our five largest advertisers accounted for approximately 25%
of our total advertising revenue. As a result, the cancellation of even a small
number of these advertising contracts could affect our operating results.
Advertising revenue is also linked to the level of traffic on our Web site, so
if traffic is less than the level expected by our advertising customers, our
revenue from this source could be affected. We have guaranteed our advertisers a
minimum number of impressions on our Web site. Reduced traffic on our Web site
would cause us to fall short in meeting this minimum requirement and as a result
we may give credits to our advertisers and reduce advertising rates, which would
lead to a reduction in our revenue from advertising.
The Internet has not been available for a sufficient period of time to gauge
its effectiveness as an
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advertising medium when compared with traditional media. Notwithstanding, there
is intense competition among sellers of advertising space on the Web. This makes
it difficult to project pricing models or to anticipate whether we will be
successful in selling advertising space and relying on advertising as a
substantial source of revenue.
Due to the foregoing factors, we believe that period-to-period comparisons
of our operating results are not necessarily meaningful, you should not view
them as indicators of our future performance. If our operating results in any
period fall below the expectations of securities analysts and investors, the
market price of our shares would likely decline.
BECAUSE OUR BUSINESS MODEL IS UNPROVEN AND DEPENDS ON MAINTAINING AND EXPANDING
OUR MEMBERSHIP BASE, WE DO NOT KNOW WHETHER OUR BUSINESS MODEL WILL ULTIMATELY
BE VIABLE AND PROFITABLE
Our business model relies on using our community platform and membership
base to generate revenues from different sources. To be profitable, we will need
to provide goods and services that are attractive to our members, advertisers
and vendors. We have relied on member-generated content and the "grassroots"
voluntary promotional efforts of our members to develop and maintain our profile
as a community site. A decline in voluntary promotional activities by our
members or member-generated content could make our Web site less attractive. We
cannot be sure that Internet users will continue to be interested in communities
on the Web, or that direct e-mail marketing will prove to be a profitable or
effective method of selling goods and services.
Our future success also depends on the continued growth in the use of the
Internet and the Web. Use of the Internet for retail transactions is a recent
development and the continued demand and growth of a market for services and
products via the Internet is uncertain. For the nine months ended September 30,
1999, e-commerce was the source of approximately 51.5% of our total net revenue.
The Internet may ultimately prove not to be a viable commercial marketplace for
a number of reasons, including:
- unwillingness of consumers to shift their purchasing from traditional
retailers to online purchases;
- lack of acceptable security for data and concern for privacy of personal
information;
- limitations on access and ease of use;
- congestion leading to delayed or extended response times;
- inadequate development of Web infrastructure to keep pace with increased
levels of use;
- increased or excessive government regulation; and
- problems regarding intellectual property ownership.
Because of these factors, we do not know whether our business model will
ultimately be viable and profitable.
OUR INTERNATIONAL OPERATIONS ARE SUBJECT TO RISKS THAT COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS
We market and sell our products in the United States and internationally.
Approximately 14% of our net revenue during the first three quarters of 1999
came from sales outside the United States. We plan to establish additional
operations or form business partnerships in other parts of the world. The
expansion of
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our existing international operations and entry into additional international
markets will require substantial management attention and financial resources.
We cannot be certain that our investment in establishing operations in other
countries will produce the desired levels of revenue. In addition, international
operations are subject to other inherent risks and problems, including:
- the impact of recessions in economies outside the United States;
- greater difficulty in accounts receivable collections;
- unexpected changes in regulatory requirements;
- difficulties and costs of staffing and managing foreign operations;
- reduced protection for intellectual property rights in some countries;
- political and economic instability;
- the introduction of the euro;
- fluctuations in currency exchange rates; and
- difficulty in maintaining effective communications due to distance,
language and cultural barriers.
- Some or all of the above factors could have a material adverse effect on
the results of our operations.
ANY FAILURE OF OUR NETWORK INFRASTRUCTURE COULD HAVE A MATERIAL ADVERSE EFFECT
ON OUR RESULTS OF OPERATIONS
Our success depends upon the capacity, reliability and security of our
networking hardware and software infrastructure. We have developed an open
standard hardware and software system that is designed for reliability. System
architecture is based on a distributed model that is highly scalable, flexible
and modular, emphasizing extensive automation and a high degree of redundancy
that is designed to minimize single points of failure. The system integrates
site management, network monitoring, quality assurance, transaction processing
and fulfillment services. Currently, the system has 2.5 terabytes of unformatted
disk space, supports over 14 million hits per day, has a peak bandwidth of over
90 megabits per second and transfers about 1 terabyte of data each day.
We must continue to expand and adapt our system infrastructure to keep pace
with the increase in the number of our members who use the free services we
provide. Demands on our infrastructure that exceed our current forecasts could
result in technical difficulties with our Web site. Any system failure that
interferes with the access to our Web site and the use of the free services we
provide could diminish the level of traffic on our Web site. Continuing or
repeated system failures could impair our reputation and brand name and reduce
our commerce and advertising revenue. At present, we do not know if we will be
able to scale our systems to handle a larger amount of traffic at higher
transmission speeds. Expanding our network infrastructure will require
substantial financial, operational and management resources in the remainder of
1999 and future periods, all of which could affect the results of our
operations.
We developed our systems for maintaining our Web site, processing
transactions and managing orders internally. If, in the future, we cannot modify
these systems to accommodate increased traffic and an increased volume of
transactions and orders, we could suffer slower response time, problems with
customer service and delays in reporting accurate financial information. Any of
these factors could significantly and adversely impact the results of our
operations.
We use network servers that are housed separately by application at Exodus
Communications, Inc. in Santa Clara, California and Frontier Global Center in
Sunnyvale, California. Our site is connected to the Internet via multiple DS-3
and OC-3 links on a 24 hour-a-day, seven days per week basis by Exodus and
Frontier Global Center. Exodus and Frontier Global Center also provide and
manage power and
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environmentals for our networking and server equipment. We manage and monitor
our servers and network remotely from our headquarters in San Francisco,
California. We strive to rapidly develop and deploy high-quality tools and
features into our system without interruption or degradation in service.
Although the agreements we have with our hosting companies give us remedies
for service interruptions, we cannot guarantee that:
- we will have uninterrupted access to the Internet;
- our members will be able to reach our Web site; or
- communications via our Web site will be secure.
Any disruption in the Internet access provided by Exodus or Frontier Global
Center, or any interruption in the service that Exodus or Frontier Global Center
receives from other providers, or any failure of Exodus or Frontier Global
Center to handle higher volumes of Internet users to the Xoom.com site could
have a material adverse effect on our business, results of operations and
financial condition.
Despite precautions taken by us and by the companies that host our Web site,
our system is susceptible to natural and man-made disasters such as earthquakes,
fires, floods, power loss and sabotage. Our system is also vulnerable to
disruptions from computer viruses and attempts by hackers to penetrate our
network security. Hackers have succeeded in penetrating our network security in
the past, and we expect such attempts to continue from time to time.
We are covered for loss of income from some of the events listed above by a
$1.0 million insurance policy, but this insurance may not be adequate to cover
all instances of system failure. We have insurance coverage of $1.25 million
against loss of income due to earthquakes, but this amount may be insufficient,
especially given the frequency of earthquakes in Northern California.
Any of the events listed above could cause us interference, delays, or
service interruptions and adversely affect our business and results of
operations.
BREACHES OF OUR NETWORK SECURITY COULD ALSO DISRUPT THE OPERATION OF OUR WEB
SITE AND JEOPARDIZE THE SECURITY OF CONFIDENTIAL INFORMATION STORED IN OUR
SERVERS
Our system is also vulnerable to disruptions from computer viruses and
attempts by hackers to penetrate our network security. Hackers have succeeded in
penetrating our network security in the past, and we expect such attempts to
continue from time to time. We may need to devote substantial capital and
resources to protect against the threat of unauthorized penetration of our
network security. Breaches of our network security could also disrupt the
operation of our Web site and jeopardize the security of confidential
information stored in our servers. The occurrence of any of the events listed
above could cause us to lose members and also expose us to liability and result
in litigation, all of which could have an adverse effect on our operations.
WE DEPEND ON OUR VENDORS AND SUPPLIERS
We rely on other companies for critical aspects of our business. Banta
Corporation is primarily responsible for fulfilling orders for products and
services sold via our Web site and in response to direct e-mail marketing.
Substantially all of our revenue from e-commerce comes from these sales. We do
not have a written agreement with Banta. If our relationship with Banta were to
terminate without sufficient advance notice, our operations would be negatively
affected, even if we were able to establish a relationship with a comparable
vendor to fulfill orders. An unanticipated termination of our relationship with
Banta would be particularly damaging during the fourth calendar quarter, in
which a high percentage of our annual sales are made. We would also be affected
by problems experienced by Banta, such as insufficient capacity and damage from
human error, sabotage, fire, flood, power loss and other similar man-made or
natural disasters. The success of our specific e-mail direct e-commerce
campaigns depends
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on the timely supply of inventory by the manufacturers and suppliers of the
products we offer for sale to our members. In particular, we rely on Logic
General, Inc. for all of our CD-ROM products, DVDs and DVD-ROMs that contain
software, clip art and classic movies. The failure of Logic General or other
suppliers on whom we depend would adversely affect the results of our
operations.
IMPOSITION OF NEW TAXES OR FEES BY THE FEDERAL GOVERNMENT OF THE UNITED STATES
OR BY FOREIGN GOVERNMENTS ON INTERNET TRANSACTIONS OR ON THE USE OF THE INTERNET
AS A MEANS OF COMMUNICATION COULD ALSO ADVERSELY AFFECT US
We do not currently collect sales or similar taxes for goods that we ship
into states other than California and New York. Imposition of sales or other
similar taxes on our sales of merchandise by states or countries where we ship
goods could have a material adverse effect on our results of operations.
Imposition of new taxes or fees by the Federal government of the United States
or by foreign governments on Internet transactions or on the use of the Internet
as a means of communication could also adversely affect us.
DIFFICULTIES WE MAY ENCOUNTER DEALING WITH OUR GROWTH AND EXPANSION COULD
ADVERSELY AFFECT THE RESULTS OF OUR OPERATIONS
Our rapid rate of growth places a significant strain on our resources due
to:
- the need to manage relationships with various strategic partners,
technology licensors, members, advertisers, and other third parties;
- difficulties in hiring and retaining skilled personnel necessary to
support our business;
- the need to train and manage our growing employee base; and
- pressures for the continued development of our financial and information
management systems.
- Difficulties we may encounter dealing successfully with the above risks
relating to our rapid growth could adversely affect the results of our
operations.
THE LOSS OF KEY PERSONNEL, OR THE INABILITY TO ATTRACT AND RETAIN ADDITIONAL,
QUALIFIED PERSONNEL, COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF
OPERATIONS
Our success depends to a significant degree upon the continued contributions
of our executive management team, most of whom have worked together only for a
short time. We do not carry key man life insurance on the lives of any of our
employees, including senior management. Our success will also depend upon the
continued service of our senior management team as well as technical, marketing
and sales personnel. Competition for qualified employees is intense. Our
employees may voluntarily terminate their employment with us at any time. Our
success also depends upon our ability to attract and retain additional highly
qualified management, technical, sales and marketing and customer support
personnel. Locating personnel with the combination of skills and attributes
required to carry out our strategy is often a lengthy process. The loss of key
personnel, or the inability to attract and retain additional, qualified
personnel, could have a material adverse effect on our results of operations.
THE RESULTS OF OUR OPERATIONS COULD BE ADVERSELY AFFECTED IF OUR INVESTMENT OF
FINANCIAL AND OTHER RESOURCES IN PROMOTING OUR BRAND DOES NOT GENERATE A
CORRESPONDING INCREASE IN NET REVENUE, OR IF THE EXPENSE OF PROMOTING OUR BRAND
NAME BECOMES EXCESSIVE
As the number of Internet sites grow, brand recognition will play an
increasingly important role. Establishing and promoting the Xoom.com brand in
the face of pressures from our competitors will be critical to developing our
member base and strategic and commercial relationships. We will be required to
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continue to devote substantial financial and other resources to maintaining the
distinctiveness of our brand to our members, advertisers and commerce partners
through:
- Web advertising and marketing;
- traditional media advertising campaigns in print, radio, billboards and
television; and
- providing a high quality community experience.
The results of our operations could be adversely affected if our investment
of financial and other resources in promoting our brand does not generate a
corresponding increase in net revenue, or if the expense of promoting our brand
name becomes excessive. Changes in the quality and type of services we offer and
the character of our company as perceived by our members could make our Web site
less attractive to our members, advertisers, and strategic partners, all of
which would have a material adverse effect on the results of our operations.
IF WE ARE UNABLE TO INTEGRATE NEW TECHNOLOGIES AND STANDARDS EFFECTIVELY, THE
RESULTS OF OUR OPERATIONS COULD BE ADVERSELY AFFECTED
- Our ability to remain competitive in our area of business will depend, in
part, on our ability to:
- enhance and improve the responsiveness, functionality and features of our
Web site;
- continue to develop our technical expertise;
- develop and introduce new services and technology to meet changing
customer needs and preferences;
- influence and respond to emerging industry standards and other
technological changes in a timely and cost effective manner; and
- license leading technologies useful in our business.
We cannot assure you that we will be successful in responding to the above
technological and industry challenges in a timely and cost-effective way. If we
are unable to integrate new technologies and standards effectively, there could
be an adverse effect on our results of our operations.
PRIVACY CONCERNS, GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES COULD HAVE AN
ADVERSE EFFECT ON OUR BUSINESS AND RESULTS OF OPERATIONS
Laws and regulations that apply directly to communications or commerce over
the Internet are becoming more prevalent. The most recent session of the United
States Congress resulted in Internet laws regarding children's privacy,
copyrights, taxation and the transmission of sexually explicit material. The
European Union recently enacted its own privacy regulations. The law of the
Internet, however, remains largely unsettled, even in areas where there has been
some legislative action. It may take years to determine whether and how existing
laws that govern intellectual property, privacy, libel and taxation apply to the
Internet. The development of laws governing these areas may decrease the growth
in the use of the Internet, which could adversely impact our business. In
addition, the growth and development of the e-commerce market may prompt calls
for more stringent consumer protection laws, both in the United States and
abroad, that may impose additional burdens on companies conducting business
online. The adoption or modification of laws or regulations relating to the
Internet could adversely affect our business.
The Federal Communications Commission ("FCC") is currently reviewing its
regulatory positions on data transmissions over telecommunications networks and
could seek to impose some form of telecommunications carrier regulation on
telecommunications functions of information services. State public utility
commissions generally have declined to regulate information services, although
the public service commissions of some states continue to review potential
regulation of such services. Future regulation or regulatory changes could have
an adverse effect on our business and results of operations.
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OUR FAILURE TO ATTRACT ADVERTISING REVENUE IN QUANTITIES AND AT RATES THAT ARE
SATISFACTORY TO US COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
We have derived a material portion of our net revenue to date from the sale
of advertisements, including banner advertising revenue. For the nine months
ended September 30, 1999, advertising revenue represented approximately 47.9% of
our total net revenue. During the same period, our five largest advertising
customers accounted for approximately 25% of advertising revenue (approximately
12% of total net revenue). We intend to continue to rely on advertising as a
significant source of revenue.
It is uncertain whether Web advertising will continue to grow at a rate that
will support expansion in our net revenue. The Internet as a marketing and
advertising medium has not been available for a sufficient period of time to
gauge its effectiveness as compared with traditional media. Many of our
suppliers and advertisers have only limited experience with the Web as a sales
and advertising medium. Advertisers have not yet devoted a significant portion
of their advertising budgets to Web-based advertising and may not find such
advertising to be effective for promoting their products and services relative
to traditional print and broadcast media.
It is also possible that in the future certain Internet access providers
will act to block or limit the use of e-mail direct e-commerce solicitations,
whether at their own behest or at the request of users. Members may also choose
not to receive our e-mail offerings or may fail to respond to such offerings.
Moreover, "filter" software programs that limit or remove advertising from a Web
user's desktop are available. If these programs become popular, there could be a
material adverse effect upon the viability of advertising on the Web and on our
business, results of operations and financial condition.
ANY INCREASE IN COMPETITION COULD ADVERSELY AFFECT OUR ABILITY TO MAINTAIN OR
IMPROVE OUR POSITION IN THE MARKET RELATIVE TO THAT OF OUR COMPETITORS, WHICH
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND RESULTS OF OPERATIONS
The market for community-based direct selling channels on the Internet is
new and rapidly evolving. Competition for members, consumers, visitors and
advertisers is intense and is expected to increase over time. Barriers to entry
are relatively low. Other companies that are primarily focused on creating
Web-based communities on the Internet and with whom we compete are Tripod and
WhoWhere, subsidiaries of Lycos, GeoCities, recently acquired by Yahoo!, and
theglobe.com. We also face competition and compete for visitors and traffic with
Web directories, search engines, shareware archives, content sites, online
service providers, and traditional media companies such as ABC, America Online,
CBS, CNET, Excite, Infoseek, Lycos, NBC, Netscape, Microsoft, Time Warner and
Yahoo!.
We also expect intense competition in the e-commerce market from an ever
increasing number of companies selling goods and services over the Internet,
particularly goods and services that relate to the use of computers. These
competitors include:
- traditional computer retailers including CompUSA and Micro Electronics's
MicroCenter; various mail-order retailers including CDW Computer Centers,
Micro Warehouse, Insight Enterprises, Inc., PC Connection, Inc. and
Creative Computers;
- internet-focused retailers including Amazon.com, Egghead's Egghead.com,
software.net, and New England Circuit Sales' NECX Direct;
- manufacturers that sell directly over the Internet including Dell
Computer, Gateway 2000, Apple Computer and many software companies;
- a number of online service providers including America Online and the
Microsoft Network that offer computer products directly or in partnership
with other retailers;
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- some non-computer retailers such as Wal-Mart Stores that sell a limited
selection of computer products in their stores; and
- computer products distributors that may develop direct sales channels to
the consumer market.
Increased competition from these and other sources could require us to
respond to competitive pressures by establishing pricing, marketing and other
programs or seeking out additional strategic alliances or acquisitions that may
be less favorable to us than we could otherwise establish or obtain, and thus
could have a material adverse effect on our business, prospects, financial
condition and results of operations.
Many of our competitors have longer operating histories in the Web market,
greater name recognition, larger customer bases and significantly greater
financial, technical and marketing resources. In addition, substantially all of
our current advertising customers and strategic partners also have established
collaborative relationships with some of our competitors or other high-traffic
Web sites. Our advertising customers might also conclude that other Internet
businesses, such as search engines, commercial online services and sites that
offer professional editorial content, are more effective sites for advertising.
Moreover, we may be unable to maintain the high level of traffic on our Web site
or our member base, which would make our site less attractive than those of our
competitors. Any of these factors could adversely affect our ability to maintain
or improve our position in the market relative to that of our competitors.
OUR INABILITY TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS AND FINANCIAL CONDITION
We view our technology as proprietary and try to protect it under existing
United States and international laws relating to protection of intellectual
property. We have also developed internal procedures to control access and
dissemination of our proprietary information. Despite our precautions, third
parties may succeed in misappropriating our intellectual property or
independently developing similar intellectual property. Protecting our
intellectual property against infringement could result in substantial legal and
other costs and could divert our limited management resources and attention.
This could adversely impact our business and the results of our operations.
Some of the technology incorporated in our Web site is based on technology
licensed from third parties. As we continue to introduce new services, we may
need to license additional technology. If we are unable to timely license needed
technology on commercially reasonable terms, we could experience delays and
reductions in the quality of our services, all of which could adversely affect
our business and results of operations. Our reputation and the value of our
proprietary information could also be adversely affected by actions of third
parties to whom we license our proprietary information and intellectual
property. If someone asserts a claim relating to proprietary technology or
information against us, we may seek licenses to such intellectual property. We
cannot assure you, however, that we could obtain licenses on commercially
reasonable terms, if at all. The failure to obtain the necessary licenses or
other rights could have a material adverse effect on our business and results of
operations.
Although we do not believe we infringe the proprietary rights of any third
parties, we cannot assure you that third parties will not assert claims against
us in the future. From time to time, we have been subject to claims of alleged
infringement of intellectual property rights of others on the basis of our
actions and the content generated by our members. These categories of claims,
whether or not meritorious, could result in litigation and become a drain on our
management and financial resources. If successful, claims of this nature could
subject us to liability, injunctive relief restricting our use of intellectual
property important to our operations, and could ultimately cause us to lose
rights to some of our intellectual property. Any of these events could have a
material adverse effect on our business and results of operations.
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WE COULD BE SUBJECT TO LIABILITY FOR ONLINE CONTENT THAT MAY NOT BE COVERED BY
OUR INSURANCE
The nature and breadth of information disseminated on our Web site and
through the sites of our members could expose us to liability in various areas,
including claims relating to:
- product information and reviews we offer;
- the content and publication of various materials based on defamation,
libel, negligence, personal injury and other legal theories;
- copyright or trademark infringement and wrongful action due to the actions
of third parties;
- use of third party content made available through our Web site or through
content and material posted by members on their home pages or in chat
rooms and bulletin boards; and
- damages arising from the use or misuse of the free e-mail services we
offer.
Claims of these kinds against us would result in our incurring substantial
costs and would also be a drain on our financial and other resources. If there
were a sufficient number or severity of claims of this nature, we would need to
implement measures to reduce our exposure and potential liability. In addition
to being a drain on our resources, this may also require taking measure that
could make our services less attractive to our members and visitors. This in
turn could reduce traffic on our Web site, negatively impact our member base,
and reduce our revenue from e-commerce and advertising. We carry general
liability insurance in the aggregate amount of $2.0 million and umbrella
coverage in an aggregate amount of $5.0 million. This coverage may be
insufficient to cover expenses and losses arising in connection with any claims
against us. To the extent our insurance coverage does not cover liability or
expenses we incur, our business and results of operations would be adversely
affected.
WE COULD FACE LIABILITY FROM LEGAL PROCEEDINGS THAT COULD ADVERSELY AFFECT OUR
BUSINESS AND RESULTS OF OPERATIONS
We are litigating a dispute with Imageline, Inc., which claims to own the
copyright in some of the clip art images licensed to us by Sprint Software
Pty Ltd, an unrelated third party. Some of the disputed images were included in
versions of our Web Clip Empire CD-ROM product licensed by us to third parties,
including other software clip publishers. The images licensed from Sprint
Software generated less than 1.0% of our total net revenue in 1998, and since
September 30, 1998, we have not received any net revenue for images licensed
from Sprint Software.
To resolve this matter, we filed a lawsuit against Imageline in August 1998
in the United States District Court for the Eastern District of Virginia. We
asked for a declaration with respect to Imageline's allegations of copyright
infringement regarding the clip art images. In September 1998 Imageline filed a
counterclaim, which they amended in January 1999, seeking up to $60 million in
damages. In March 1999, the parties completed the discovery process and filed
separate motions for partial summary judgment. On April 5, 1999, the court
granted one of our motions for partial summary judgment and stayed the case to
allow Imageline to file all necessary copyright registration applications to
cover the clip art images.
We believe that the claims asserted in Imageline's counterclaim are without
merit and continue to defend against them vigorously. As part of the lawsuit, we
are seeking to enforce our right to indemnification under our license agreement
with Sprint Software for any damages that may be imposed on us. We do not know
whether Sprint Software will be able to fulfill its indemnity obligations.
Depending on the outcome of the litigation, we may also need to indemnify third
parties for damages in connection with the use of the Imageline images. An
unfavorable outcome to this litigation could adversely affect our business and
results of operations.
Zoom Telephonics, Inc. filed a lawsuit against us in September 1998 in the
United States District Court for the District of Massachusetts alleging
trademark infringement and related statutory violations.
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We were not served with Zoom Telephonics' complaint until January 1999. Zoom
Telephonics has demanded that we stop using the Xoom.com trademark and has asked
for an unspecified amount of money damages. We responded to the complaint in
February 1999. In April 1999, Zoom Telephonics filed a motion for preliminary
injunction to stop us from using any mark containing "Xoom". We have filed a
motion to oppose Zoom Telephonic's motion for preliminary injunction. A hearing
on the motion was held on September 30, 1999. On October 7, 1999 the court
denied Zoom Telephonics' motion for a preliminary injunction but allowed Zoom
Telephonics to request the court to reconsider the motion if the Xoom.com merger
does not close by October 31, 1999. On November 3, 1999 Zoom Telephonics filed a
motion to renew their previous motion for preliminary injunction. We intend to
respond to Zoom Telephonics' most recent motion. We believe that the claims
asserted by Zoom Telephonics are without merit and we intend to defend against
them vigorously. We cannot assure you, however, that the results of this
litigation will be favorable to us. An adverse result of the litigation could
have a material adverse effect on our business and results of operations,
particularly if the litigation forces us to make substantial changes to our name
and trademark usage. Any name change could result in confusion to consumers and
investors, which could adversely affect the results of our operations and the
market price of its common stock.
John G. Balletto filed a lawsuit against us in September 1999 in the San
Francisco Superior Court alleging breach of contract and specific performance.
Mr. Balletto has alleged that in connection with a loan which we obtained from
Sand Hill Capital LLC in 1998 and pursuant to an oral contract with Xoom.com, he
is entitled to a finder's fee. Mr. Balletto has sought specific performance of
the alleged oral contract by having the court direct us to issue 33,784 shares
of our common stock to Mr. Balletto and such other relief that the court may
deem just and proper. We believe that this lawsuit is without merit and intend
to defend the suit vigorously.
IF WE ARE UNABLE TO SUCCESSFULLY INTEGRATE FUTURE ACQUISITIONS INTO OUR
OPERATION, THERE COULD BE AN ADVERSE EFFECT ON OUR BUSINESS AND RESULTS OF
OPERATIONS
Acquiring complementary businesses, products and technologies is an integral
part of our business strategy. Some of the risks attendant to this acquisition
strategy are:
- difficulties and expenses of integrating the operations and personnel of
acquired companies into our operations while preserving the goodwill of
the acquired entity;
- the additional financial resources that may be needed to fund the
operations of acquired companies;
- the potential disruption of our business;
- our management's ability to maximize our financial and strategic position
by incorporating acquired technology or businesses;
- the difficulty of maintaining uniform standards, controls, procedures and
policies;
- the potential loss of key employees of acquired companies;
- the impairment of relationships with employees and customers as a result
of changes in management; and
- increasing competition with other entities for desirable acquisition
targets.
Any of the above risks could prevent us from realizing significant benefits
from our acquisitions. In addition, the issuance of our common stock in
acquisitions will dilute our stockholder interests in our company, while the use
of cash will deplete our cash reserves. Finally, if we are unable to account for
our acquisitions under the "pooling of interests" method of accounting, we may
incur significant, one-time write-offs and amortization charges. These
write-offs and charges could decrease our future earnings or
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increase our future losses. Due to all of the foregoing, implementing our
acquisition strategy may have a material adverse effect on our business and
results of operations.
IF OUR CAPITAL IS INSUFFICIENT TO PROMOTE OUR BUSINESS, AND IF WE CANNOT OBTAIN
NEEDED FINANCING, WE WILL BE UNABLE TO PROMOTE OUR BRAND NAME, EXPLOIT
ACQUISITION OPPORTUNITIES AND OTHERWISE MAINTAIN OUR POSITION RELATIVE TO THAT
OF OUR COMPETITORS
We believe that the proceeds from our initial public offering and our
secondary offering in April 1999, will be sufficient to support our operations
for the next 12 months. Notwithstanding, we may need to raise additional funds
to maintain and develop our position in the marketplace. It may be difficult or
impossible for us to obtain financing on favorable terms. Raising funds by
issuing equity securities or convertible debt securities will dilute the
percentage ownership of our current stockholders. Also, new securities we may
issue may have rights senior to the rights of our common stock. If we cannot
obtain needed financing, we will be unable to promote our brand name, exploit
acquisition opportunities and otherwise maintain our position relative to that
of our competitors.
IF IMPORTANT STRATEGIC RELATIONSHIPS ARE DISCONTINUED FOR ANY REASON, THERE
WOULD BE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND FINANCIAL CONDITION
Although our strategic relationships are a key factor in our overall
business strategy, our strategic partners may not view their relationships with
us as significant to their own business. There is a risk that parties with whom
we have strategic alliance agreements may not perform their obligations as
agreed. Our arrangements with strategic partners generally do not establish
minimum performance requirements but instead rely on the voluntary efforts of
our partners. In addition, most of our agreements with strategic partners may be
terminated by either party with little notice. If important strategic
relationships are discontinued for any reason, our business and results of
operations may be adversely affected.
YEAR 2000 ISSUES COULD NEGATIVELY AFFECT OUR BUSINESS
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. As a result, software that
records only the last two digits of the calendar year may not be able to
distinguish whether "00" means 1900 or 2000. This may result in software
failures or the creation of erroneous results.
We have conducted an internal review of software systems which we use for
site management, network monitoring, quality assurance, transaction processing
and fulfillment services. Because we developed these software systems
internally, beginning at inception in 1996 when the Year 2000 problem already
had some visibility, we were largely able to anticipate four digit requirements.
In conjunction with ongoing reviews of our own products and services, we are
also reviewing our computer infrastructure, including network equipment and
servers. We do not anticipate material problems with network equipment, as our
current configuration was installed within the last three years. Similarly, we
purchased most of our servers in 1997 and 1998. With this relatively current
equipment, we do not anticipate material Year 2000 compliance problems, and we
will replace any servers that we cannot update either in the normal replacement
cycle or on an accelerated basis. We have also internally standardized our
personal computers on Windows NT 4.0, using reasonably current service packs,
which we are advised by our vendor are Year 2000 compliant. We use multiple
software systems for internal business purposes, including accounting, e-mail,
development, human resources, customer service and support and sales tracking
systems. All of these applications have been purchased within the last three
years.
We have made inquiries of vendors of systems we believe to be mission
critical to our business regarding their Year 2000 readiness. Although we have
received various assurances, we have not received affirmative documentation of
Year 2000 compliance from any of these vendors and we have not performed any
operational tests on our internal systems. We generally do not have contractual
rights with third party
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providers should their equipment or software fail due to Year 2000 issues. If
this third party equipment or software does not operate properly with regard to
Year 2000, we may incur unexpected expenses to remedy any problems. These
expenses could potentially include purchasing replacement hardware and software.
We have not determined the state of compliance of certain third-party suppliers
of services such as warehousing and fulfillment services, phone companies, long
distance carriers, financial institutions and electric companies, the failure of
any one of which could severely disrupt our ability to carry on our business.
We anticipate that our review of Year 2000 issues and any remediation
efforts will continue throughout calendar 1999. The costs incurred to date to
remediate our Year 2000 issues have not been material. If any Year 2000 issues
are uncovered with respect to these systems or our other internal systems, we
believe that we will be able to resolve these problems without material
difficulty, as replacement systems are available on commercially reasonable
terms. We presently estimate that the total remaining cost of addressing Year
2000 issues will not exceed $150,000. We derived these estimates using a number
of assumptions, including the assumption that we have already identified our
most significant Year 2000 issues. However, these assumptions may not be
accurate, and actual results could differ materially from those anticipated. In
view of our Year 2000 review and remediation efforts to date, the recent
development of our products and services, the recent installation of our
networking equipment and servers, and the limited activities that remain to be
completed, we do not consider contingency planning to be necessary at this time.
Our applications operate in complex network environments and directly and
indirectly interact with a number of other hardware and software systems. We are
unable to predict to what extent our business may be affected if our systems or
the systems that operate in conjunction with it experience a material Year 2000
failure. Known or unknown errors or defects that affect the operation of our
software and systems could result in delay or loss of revenue, interruption of
services, cancellation of contracts and memberships, diversion of development
resources, damage to our reputation, increased service and warranty costs, and
litigation costs, any of which could adversely affect our business, financial
condition and results of operations. The most likely worst case scenario is that
the Internet fails and we are unable to offer any services on our community site
or make any of our direct e-commerce offerings.
OUR STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE VOLATILE
The trading price of our common stock has been and is likely to be highly
volatile. Our stock price could be subject to wide fluctuations in response to a
variety of factors, including:
- actual or anticipated variations in quarterly operating results;
- announcements of technological innovations;
- new products or services offered by us or our competitors;
- changes in financial estimates by securities analysts;
- conditions or trends in the e-commerce market;
- our announcement of significant acquisitions, strategic partnerships,
joint ventures or capital commitments;
- additions or departures of key personnel;
- sales of common stock; and
- other events or factors that may be beyond our control.
In addition, the Nasdaq National Market, where most publicly held Internet
companies are traded, has recently experienced extreme price and volume
fluctuations. These fluctuations often have been
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unrelated or disproportionate to the operating performance of these companies.
Many Internet companies' stocks are trading at multiples which are substantially
above historical levels.
These trading prices and multiples may not be sustainable. These broad
market and industry factors may materially adversely affect the market price of
our common stock, regardless of our actual operating performance. In the past,
following periods of volatility in the market price of a company's securities,
securities class action litigation often has been instituted against that
company. Litigation like this, if instituted, could result in substantial costs
and a diversion of management's attention and resources.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Zoom Telephonics, Inc. filed a lawsuit against us in September 1998 in the
United States District Court for the District of Massachusetts alleging
trademark infringement and related statutory violations. We were not served with
Zoom Telephonics' complaint until January 1999. Zoom Telephonics has demanded
that we stop using the Xoom.com trademark and has asked for an unspecified
amount of money damages. We responded to the complaint in February 1999. In
April 1999, Zoom Telephonics filed a motion for preliminary injunction to stop
us from using any mark containing "Xoom". We have filed a motion to oppose Zoom
Telephonic's motion for preliminary injunction. A hearing on the motion was held
on September 30, 1999. On October 7, 1999 the court denied Zoom Telephonics'
motion for a preliminary injunction but allowed Zoom Telephonics to request the
court to reconsider the motion if the Xoom.com merger does not close by
October 31, 1999. On November 3, 1999 Zoom Telephonics filed a motion to renew
their previous motion for preliminary injunction. We intend to respond to Zoom
Telephonics' most recent motion. We believe that the claims asserted by Zoom
Telephonics are without merit and we intend to defend against them vigorously.
We cannot assure you, however, that the results of this litigation will be
favorable to us. An adverse result of the litigation could have a material
adverse effect on our business and results of operations, particularly if the
litigation forces us to make substantial changes to our name and trademark
usage. Any name change could result in confusion to consumers and investors,
which could adversely affect the results of our operations and the market price
of its common stock.
John G. Balletto filed a lawsuit against us in September 1999 in the
San Francisco Superior Court alleging breach of contract and specific
performance. Mr. Balletto has alleged that in connection with a loan which we
obtained from Sand Hill Capital LLC in 1998 and pursuant to an oral contract
with Xoom.com, he is entitled to a finder's fee. Mr. Balletto has sought
specific performance of the alleged oral contract by having the court direct us
to issue 33,784 shares of our common stock to Mr. Balletto and such other relief
that the court may deem just and proper. We believe that this lawsuit is without
merit and intend to defend the suit vigorously.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
USE OF PROCEEDS FROM SALES OF REGISTERED SECURITIES. In our initial public
offering, we sold an aggregate of 4,600,000 shares of our common stock
(including 600,000 shares sold pursuant to the exercise of the Underwriters'
over-allotment option) at an initial price of $14 per share pursuant to a
Registration Statement on Form S-1 (File No. 333-62395) effective on
December 8, 1998. The sale of these 4,600,000 shares of Common Stock generated
aggregate gross proceeds of $64,400,000. We received net proceeds from the
offering of approximately $57,342,000, after deducting underwriting discounts
and commissions of $4,508,000 and our expenses of the offering of approximately
$2,550,000.
Through September 30, 1999 we used a portion of the proceeds from our
initial public offering as follows: (i) $21.1 million of net cash used for
general corporate purposes, including working capital and capital expenditures;
(ii) $2.7 million of cash used for the repayment of notes payable issued in
connection with the execution of a loan agreement, the acquisition of
Pagecount, Inc., the acquisition of Global Bridges Technologies, Inc., the
purchase of certain assets of Revolutionary Software, Inc., and the license of
certain technology from ArcaMax, Inc.; (iii) $1.3 million of net cash used in
connection with the acquisitions of Focused Presence, Inc., MightyMail
Networks, Inc., Net Floppy, Inc., Paralogic Software Corporation, Private One,
Inc., and LiquidMarket, Inc.; and (iv) $639,000 of cash used for the repayment
of capital lease obligations and other notes payable. The remaining
$31.2 million of the net proceeds shall be used for general corporate purposes,
including working capital, capital expenditures, expanding operations
internationally, potential acquisitions and promotional campaigns. The amounts
actually expended by us for such purposes may vary significantly and will depend
on a number of factors, including our future revenue and cash generated by
operations and the other factors described under "Certain Risk
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Factors Which May Impact Future Operating Results." Accordingly, our management
retains broad discretion in the allocation of the net proceeds of the offerings.
A portion of the net proceeds may also be used to acquire or invest in
complementary businesses, technologies or product offerings. In the ordinary
course of business, we evaluate potential acquisitions of such businesses,
technologies and product offerings.
SECURITIES SOLD. On July 29, 1999, we issued 960,028 shares of common stock
to National Broadcasting Company, Inc. for $57.29 in cash per share in
connection with a Stock Purchase Agreement dated June 11, 1999. We received
proceeds of $55.0 million from this sale. This issuance of stock was deemed to
be exempt from registration under the Securities Act in reliance on
Section 4(2) of the Securities Act because the issuance was a transaction by an
issuer not involving any public offering.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARKETABLE SECURITIES. We had marketable securities of $198.9 million as of
September 30, 1999. These marketable securities consist of highly liquid
investments with original maturities at the date of purchase of between three
and twelve months. We had long-term investments of $63.4 million as of
September 30, 1999. These long-term investments consist of investments with
original maturities as of the date of purchase of more than twelve months. These
investments are subject to interest rate risk and will fall in value if market
interest rates increase. A hypothetical increase in market interest rates by
10 percent from levels as of September 30, 1999 would cause the fair value of
these investments to decline by an immaterial amount. Because we are not
required to sell these investments before maturity, we have the ability to avoid
realizing losses on these investments due to a sudden change in market interest
rates. However, we could choose to sell these investments before maturity at a
loss. Declines in interest rates over time will, however, reduce our interest
income.
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ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<C> <S>
10.1 Agreement and Plan of Merger, dated as of July 26, 1999, by
and among Xoom.com, Inc., XOOM Acquisition Sub, Inc. and
LiquidMarket, Inc.*
10.2 Form of Severance Agreement by and between Xoom.com, Inc.
and Laurent Massa
10.3 Stock Purchase Agreement by and between Xoom.com, Inc. and
National Broadcasting Company, Inc., dated June 11, 1999
10.4 First Amendment to Agreement and Plan of Contribution and
Merger dated as of October 20, 1999 by and among the
Registrant, Xoom.com, Inc. CNET, Inc., SNAP! LLC and
Xenon 3, Inc.
10.5 Second Amended and Restated Agreement and Plan of
Contribution, Investment and Merger dated July 8, 1999 by
and among the Registrant, National Broadcasting Company,
Inc., GE Investments Subsidiary, Inc., Neon Media
Corporation and Xoom.com, Inc. (filed as Appendix A-2 to
the Proxy Statement/Prospectus forming a part of this
Registration Statement)
10.6 First Amendment to Second Amended and Restated Agreement and
Plan of Contribution, Investment and Merger dated
October 20, 1999 by and among the Registrant, National
Broadcasting Company, Inc., GE Investments Subsidiary,
Inc., Neon Media Corporation and Xoom.com, Inc.
10.7 Office lease for 225 Bush Street, San Francisco, California
between OAIC Bush Street, LLC and Xoom.com, Inc. dated
August 13, 1999.
27.1 Financial Data Schedule
</TABLE>
- ------------------------
* Incorporated by reference to Xoom.com report on form 8-K filed on August 5,
1999.
(b) REPORTS ON FORM 8-K
We filed the following reports on Form 8-K and 8-K/A during the three months
ended September 30, 1999:
1. On July 1, 1999, the Company filed a report on Form 8-K announcing
that it had completed the acquisition of Paralogic Software Corporation
pursuant to an Agreement and Plan of Merger, dated as of June 10, 1999, as
amended.
2. On July 2, 1999, the Company filed a report on Form 8-K/A related to
the acquisition of MightyMail Networks, Inc. This amendment was filed for
the purpose of including financial statements and pro forma financial
information and should be read in conjunction with the Form 8-K dated as of
May 5, 1999.
3. On July 19, 1999 the Company filed a report on Form 8-K/A related to
the acquisition of Paralogic Software Corporation. This amendment was filed
for the purpose of including financial statements and pro forma financial
information and should be read in conjunction with the Form 8-K dated as of
July 1, 1999.
4. On August 5, 1999, the Company filed a report on Form 8-K announcing
that it had completed the acquisition of LiquidMarket, Inc. pursuant to an
Agreement and Plan of Merger, dated as of July 26, 1999.
5. On August 31, 1999, the Company filed a report on Form 8-K/A related
to the acquisition of LiquidMarket, Inc. This amendment was filed for the
purpose of including financial statements and pro forma financial
information and should be read in conjunction with the Form 8-K dated as of
August 5, 1999.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized,
<TABLE>
<S> <C> <C>
Date: November 12, 1999 XOOM.COM, INC.
By: /s/ JOHN HARBOTTLE
-----------------------------------------
John Harbottle
VICE PRESIDENT OF FINANCE AND
CHIEF FINANCIAL OFFICER
(duly authorized officer and
principal financial officer)
</TABLE>
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SEVERANCE AND CONSULTING AGREEMENT AND RELEASE
THIS IS AN AGREEMENT (the "Agreement"), dated as of September__, 1999,
between LAURENT MASSA ("LM") and XOOM.com, Inc., a Delaware corporation
("XOOM").
RECITALS
LM is the President and CEO of XOOM.
On or about May 9, 1999, an Agreement and Plan of Contribution ("Merger
Agreement") was signed by and among CNET, Inc., XOOM, Xenon 3, Inc., SNAP! LLC,
and NBC Internet, Inc.
On or about July 8, 1999, a Second Amended and Restated Agreement of Plan
of Contribution, Investment and Merger (the "Contribution Agreement") was signed
by and among NBC, Neon Media Corporation, NBC Internet, Inc., XOOM and GE
Investments Subsidiary, Inc.
References to "NBC Internet, Inc." are to the publicly-traded corporation
that will result from the transactions now being contemplated between and among
XOOM, CNET, Inc., Xenon 3, Inc., SNAP! LLC, and NBC, among other companies.
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LM and XOOM desire to terminate their employment relationship on mutually
agreeable terms and resolve any claims as described in this Agreement and
thereby avoid the expense and uncertainty of litigation.
Accordingly, LM and XOOM agree as follows:
1. With the exception of Section 17, this Agreement will be fully binding
and enforceable on both LM and XOOM upon the signing of this Agreement
("Effective Date") and on NBC Internet, Inc. upon the closing of the
transactions ("Merger") referenced in the Contribution Agreement.
2. LM will continue to serve as President and CEO of XOOM until the closing
of the Merger.
3. Upon the closing of the Merger, LM will resign as President, Chief
Executive Officer, and director of XOOM.
4. After LM's resignation, LM will make himself available for consultation,
on a part time basis through June 30, 2000, to assist NBC Internet, Inc. to
integrate the several businesses that will comprise NBC Internet, Inc. and with
respect to such other tasks as NBC Internet, Inc.'s management may reasonably
request.
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5. LM will be paid at his present salary rate ($216,000 per year) through
the balance of 1999 and will receive an additional $216,000 as severance during
January 2000.
6. LM's bonus for 1999 will be $71,000 for all of 1999. LM will receive no
bonus for any period after 1999.
7. LM's current medical, dental, paid-time-off, life insurance and long-term
disability benefits, and entitlement to reimbursement for business and travel
expenses as described in his Employment Agreement, dated July 1, 1998, and in
XOOM"s benefit plans will continue until his resignation. Thereafter, XOOM (or
NBC Internet, Inc., as its successor) will only provide LM with COBRA benefits
as required by law, with XOOM (or NBC Internet, Inc., as its successor) to pay
the COBRA premiums for coverage until the end of December 2000. Additionally,
LM shall be entitled to reimbursements for expenses he incurs as a Consultant
for XOOM and NBC Internet, Inc. subject to XOOM's and NBC Internet, Inc.'s
policies regarding documentation and authorization.
8. All of LM's present unvested XOOM stock options issued pursuant to the
XOOM 1998 Stock Incentive Plan (Option No. 00000341, December 7, 1998) shall
fully vest upon the closing of the Merger referenced in the Contribution
Agreement.
9. All of LM's "out of plan" options (Option No. 00000031, August 23, 1996;
Option Number 00000033, August 14, 1996; Option No. 00000034, March 14, 1997;
and Option No. 00000035, December 13, 1996), that would otherwise terminate in
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connection with the Merger will be amended so that, they shall fully vest upon
the closing of the Merger referenced in the Contribution Agreement, they are
exercisable for their entire original term for the number of shares of NBC
Internet, Inc. stock and at an exercise price determined in the accordance with
the Contribution Agreement.
10. All of LM's non-qualified stock options (Option No. 00000340, December 7,
1998 & Option No. N0000341, December 7, 1998, Option No. T0000054, May 25, 1999)
(but not his incentive stock options granted under XOOM's 1998 Stock Incentive
Plan or "out of plan" options) will be amended so that, they shall fully vest
upon the closing of the Merger referenced in the Contribution Agreement, they
are exercisable for 24 months after the Merger with respect to the number of
share of NBC Internet, Inc. stock and at an exercise price determined in the
accordance with the Contribution Agreement.
11. Both during the time until the Merger closes and during the term of his
services as a consultant, LM shall not serve as an employee, consultant,
director or advisor to any company or other enterprise that is engaged in any
"business activities" and which then competes with XOOM or NBC Internet, Inc.
"Business activities," shall mean the provision of community web sites, web site
hosting, home page hosting, e-mail, chat rooms, electronic newsletters, clip
art, software libraries, page counters, online greeting cards and software
downloading, in each such case for the purpose of facilitating the direct
marketing of goods and services to persons who receive those services in the
United States or elsewhere in the world. In addition, "business activities"
shall include
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LM's serving as an employee or consultant to Yahoo, Excite, America Online,
Lycos, Infoseek, The Globe, Talk City or Fortune City. However, if LM commences
employment or a consultancy with another entity or enterprise, is not otherwise
engaging in "business activities" in that capacity, and that entity or
enterprise subsequently acquires, is acquired by or otherwise combines with
Yahoo, Excite, America Online, Lycos, Infoseek, The Globe, Talk City or Fortune
City, LM shall not be considered to be engaging in "business activities" unless
he actually then engages in one or more of the activities described in the
second sentence of this Section 11. In addition, LM acknowledges that during
his employment with XOOM, he has had access to confidential information and that
the activities forbidden by the remainder of this Section would necessarily
involve the improper use or disclosure of this confidential information. To
forestall such disclosure, use and breach, and in consideration of the Gross-Up
Payments set forth in Sections 12-15, LM agrees that for a period of six months
following the termination of the consulting arrangement (or until December 31,
2000) whichever is longer, he shall not, directly or indirectly, (i) divert or
attempt to divert from XOOM or NBC Internet, Inc. any business, including the
solicitation of customers; or (ii) engage in any business activities, as defined
above, competitive with XOOM or NBC Internet, Inc. unless LM proves in court
that any of the above action was done without the use of confidential
information. If LM breaches or threatens to breach any of the provisions of
this Section, LM acknowledges and agrees that the damage or imminent damage to
XOOM's and NBC Internet, Inc.'s business or their goodwill would be irreparable
and extremely difficult to estimate, making any remedy at law or in damages
inadequate.
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Accordingly, XOOM and NBC Internet, Inc. shall be entitled to injunctive relief
against LM in the event of any breach or threatened breach of this Section by LM
and, in the event of any actual breach, to liquidated damages of the total
amount of the Gross-Up Payment set forth in Sections 12 to 15 which shall
constitute a reasonable estimate of XOOM's and NBC Internet, Inc.'s damages and
not a penalty ("Liquidated Damages"). The amount of Liquidated Damages shall be
reduced in equal amounts on a monthly basis from the date of the closing of the
Merger through December 31, 2000 (e.g., over twelve months the Liquidated
Damages amount will be reduced by 1/12 each month), without consideration of any
partial months. Such injunctive relief and Liquidated Damages shall constitute
the sole remedies for any breach by LM of this Section 11.
12. In the event that any "parachute payment" (within the meaning of Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code")) to LM
or for LM's benefit, paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise in connection with, or arising out of,
LM's employment with XOOM (a "Payment" or "Payments"), would be subject to the
excise tax imposed by Code Section 4999, or any interest or penalties are
incurred by LM with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then LM will be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by LM of all taxes
(including any interest or penalties (other than interest and penalties imposed
by reason of LM's failure to file timely a tax return or pay taxes shown due on
LM's
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return not occasioned by acts or omissions of XOOM or NBC Internet, Inc. or its
or their accounting firm), imposed with respect to the Gross-Up Payment
including, without limitation, any and all excise taxes imposed by Code Section
4999 and all income taxes), LM retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments.
13. An initial determination as to whether a Gross-Up Payment is required
pursuant to this Agreement and the amount of such Gross-Up Payment shall be made
by XOOM or NBC Internet, Inc. XOOM or NBC Internet, Inc. shall provide its
determination (the "Determination"), together with detailed supporting
calculations and documentation, to LM within a reasonable time after LM's
resignation, if applicable, or such other time as requested by LM (provided LM
reasonably believes that any of the Payments may be subject to the Excise Tax).
If requested by LM, XOOM or NBC Internet, Inc. shall furnish LM, at XOOM's or
NBC Internet, Inc.'s expense, with an opinion reasonably acceptable to LM from
XOOM's or NBC Internet, Inc.'s regular independent accounting firm (or an
accounting firm of equivalent stature reasonably acceptable to LM) that there is
a reasonable basis for the Determination. Any Gross-Up Payment determined
pursuant to this Section 13 shall be paid by XOOM or NBC Internet, Inc. to LM
within five (5) days of receipt of the Determination.
14. It is possible that a Gross-Up Payment (or a portion thereof) will be
paid which should not have been paid (an "Excess Payment") or a Gross-Up Payment
(or a portion
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thereof) which should have been paid will not have been paid (an
"Underpayment").
(a) An Underpayment shall be deemed to have occurred (i) upon a
reasonable determination, in good faith, by LM's tax advisors that the Gross-Up
Payment is subject to a tax, all or a portion of which was not taken into
account in computing the Gross-Up Payment; (ii) upon notice (formal or informal)
to LM from any governmental taxing authority that LM's tax liability (whether in
respect of LM's current taxable year or in respect of any prior taxable year)
may be increased by reason of the imposition of the Excise Tax on a Payment or
Payments with respect to which XOOM or NBC Internet, Inc. has failed to make a
sufficient Gross-Up Payment or by reason of the imposition of any tax on the
Gross-Up Payment, all or a portion of which was not taken into account in
computing the Gross-Up Payment, (iii) upon a determination by a court, or (iv)
by reason of determination by XOOM or NBC Internet, Inc. (which shall include
the position taken by XOOM or NBC Internet, Inc., together with its consolidated
group, on its federal income tax return). If an Underpayment occurs, LM shall
promptly notify XOOM or NBC Internet, Inc. and XOOM or NBC Internet, Inc. shall
promptly, but in any event at least five (5) days prior to the date on which the
applicable government taxing authority has requested payment, pay to LM an
additional Gross-Up Payment equal to the amount of the Underpayment plus any
interest and penalties (other than interest and penalties imposed by reason of
LM's failure to file timely a tax return or pay taxes shown due on LM's return
not occasioned by the acts or omissions of XOOM or NBC Internet, Inc. or its or
their accounting firm) imposed on the Underpayment.
(b) An Excess Payment shall be deemed to have occurred upon a Final
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Determination (as hereinafter defined) that the Excise Tax shall not be imposed
upon a Payment or Payments (or portion thereof) with respect to which LM had
previously received a Gross-Up Payment. A "Final Determination" shall be deemed
to have occurred when LM has received from the applicable government taxing
authority a refund of taxes or other reduction in LM's tax liability by reason
of the Excise Payment and upon either (i) the date a determination is made by,
or an agreement is entered into with, the applicable governmental taxing
authority which finally and conclusively binds LM and such taxing authority, or
in the event that a claim is brought before a court of competent jurisdiction,
the date upon which a final determination has been made by such court and either
all appeals have been taken and finally resolved or the time for all appeals has
expired or (ii) the statute of limitations with respect to LM's applicable tax
return has expired. If an Excess Payment is determined to have been made, the
amount of the Excess Payment shall be treated as a loan by XOOM or NBC Internet,
Inc. to LM, which loan LM must repay to XOOM or NBC Internet, Inc. together with
interest at the applicable federal rate under Code Section 7872(f)(2); provided,
that no loan shall be deemed to have been made and no amount will be payable by
LM to XOOM or NBC Internet, Inc. unless, and only to the extent that, the deemed
loan and payment would either reduce the amount on which LM is subject to tax
under Code Section 4999 or generate a refund of tax imposed under Code Section
4999.
15. Notwithstanding anything contained in this Agreement to the contrary, in
the event that, according to the Determination, an Excise Tax will be imposed on
any
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Payment or Payments, XOOM or NBC Internet, Inc. shall pay to the applicable
government taxing authorities, as Excise Tax withholding, the amount of the
Excise Tax that XOOM or NBC Internet, Inc. has actually withheld from the
Payment or Payments.
16. To reflect LM's additional responsibilities in connection with the
transition to and integration of the businesses that will comprise NBC Internet,
Inc. (including, for example, the selection and training of a President and
Chief Operating Officer for NBC Internet, Inc.), on May 10, 1999 XOOM has
granted LM additional options to purchase 25,000 shares of XOOM stock. Those
options will vest ratably in monthly increments through the end of December
1999. They have an exercise price of $45.50 per share. Those options shall
become options for the purchase of NBC Internet, Inc. stock upon the closing of
the Merger referenced in the Contribution Agreement and in accordance with the
Contribution Agreement. The terms and conditions of those options are
memorialized in a separate Stock Option Agreement and related Notice of Stock
Option Grant.
17. The parties shall attempt to negotiate arrangements regarding a "NBC
Internet, Inc. Europe" that would pursue the NBC Internet, Inc. business in
Europe. However, this Section 17 shall not impose any binding obligations on
any party.
18. LM shall be given a reasonable opportunity to consult, in advance,
regarding the contents of any press release or other communication by XOOM, NBC
Internet, Inc. or any of their affiliates to the extent that press release or
other communication addresses
10
<PAGE>
LM or his status. In all events, none of XOOM, NBC Internet, Inc. or any of
their affiliates shall, whether orally, in writing or in any other manner,
disparage LM or otherwise undermine his reputation. Notwithstanding anything in
this agreement to the contrary, paragraphs 3(e) and 4 of LM's Employment
Agreement, dated July 1, 1998, shall remain in force, except that Section 11 of
this Agreement displaces the penultimate sentence of Section 4 of LM's
Employment Agreement.
19. The parties understand and agree that the preceding Sections recite the
sole consideration for this Agreement; that no representation or promise has
been made by LM or XOOM concerning the subject matter of this Agreement, except
as expressly set forth in this Agreement; and that all agreements and
understandings between the parties concerning the subject matter of this
Agreement are embodied and expressed in this Agreement. This Agreement shall
supersede all prior or contemporaneous agreements and understandings among LM
and XOOM, whether written or oral, express or implied, with respect to the
employment, termination, and benefits of LM, except to the extent that the
provisions of any such agreement or plan (for example, the agreements and
notices memorializing the stock options referenced in this Agreement and the
plans under which they were granted) have been expressly referred to in this
Agreement as having continued effect.
20. Employee Release. Except as expressly provided below, LM and his
representatives, heirs, successors, and assigns do hereby completely release and
forever
11
<PAGE>
discharge XOOM and NBC Internet, Inc., any Affiliate, and its and their present
and former shareholders, officers, directors, agents, employees, attorneys,
successors, and assigns (collectively, "LM Released Parties") from all claims,
rights, demands, actions, obligations, liabilities, and causes of action of
every kind and character, known or unknown, mature or unmatured, which LM may
have now or in the future arising from any act or omission or condition
occurring on or prior to the Effective Date (including, without limitation, the
future effects of such acts, omissions, or conditions), whether based on tort,
contract (express or implied), or any federal, state, or local law, statute, or
regulation (collectively, the "LM Released Claims"). By way of example and not
in limitation of the foregoing, LM Released Claims shall include any claims
arising under Title VII of the Civil Rights Act of 1964, the Americans with
Disabilities Act, and the California Fair Employment and Housing Act, as well as
any claims asserting wrongful termination, harassment, breach of contract,
breach of the covenant of good faith and fair dealing, negligent or intentional
infliction of emotional distress, negligent or intentional misrepresentation,
negligent or intentional interference with contract or prospective economic
advantage, defamation, invasion of privacy, and claims related to disability.
Subject to the last sentence of this Section 20, LM Released Claims shall also
include, but not be limited to, claims for wages or other compensation due,
severance pay, bonuses, sick leave, vacation pay, life or health insurance, or
any other fringe benefit. LM likewise releases the LM Released Parties from any
and all obligations for attorneys' fees incurred in regard to the above claims
or otherwise. Notwithstanding the foregoing, LM Released Claims shall not
include (i) any claims based on obligations created by or
12
<PAGE>
reaffirmed in this Agreement (including without limitation, those relating to
stock options); (ii) any vested pension rights or any workers' compensation
claims (the settlement of which would require approval by the California
Workers' Compensation Appeal Board); and (iii) all rights of LM and exculpations
running to the benefit of LM set forth in XOOM's charter and bylaws and any
indemnification or other agreements to which LM is a party or of which LM is a
beneficiary regarding LM's acts or omissions as a director or officer of XOOM or
any subsidiary of XOOM or in any other capacity respecting XOOM or any
subsidiary of XOOM.
21. Employer Release. Except as expressly provided below, XOOM and NBC
Internet, Inc. and its successors and assigns do hereby completely release and
forever discharge LM, his spouse, representatives, heirs, successors, and
assigns (collectively, "XOOM and NBC Internet, Inc. Released Parties") from all
claims, rights, demands, actions, obligations, liabilities, and causes of action
of every kind and character, known or unknown, matured or unmatured, which XOOM
and NBC Internet, Inc. may have now or in the future arising from any act or
omission or condition occurring on or prior to the Effective Date (including,
without limitation, the future effects of such acts, omissions, or conditions),
arising from or in any way related to LM's employment or position as a Director,
including, without limitation, the termination thereof, whether based on tort,
contract (express or implied), or any federal, state, or local law, statute, or
regulation (collectively, the "XOOM and NBC Internet, Inc. Released Claims").
XOOM and NBC Internet, Inc. likewise release the XOOM and NBC Internet, Inc.
Released Parties from
13
<PAGE>
any and all obligations for attorneys' fees incurred in regard to the above
claims or otherwise. Notwithstanding the foregoing, XOOM and NBC Internet, Inc.
Released Claims shall not include (1) any claims based on obligations created by
or reaffirmed in this Agreement and (2) any act, omission or transaction for
which a Director may not be relieved of liability under applicable law.
22. Section 1542 Waiver. The parties understand and agree that the LM
Released Claims and the XOOM and NBC Internet, Inc. Released Claims include not
only claims presently known to LM and XOOM and NBC Internet, Inc., respectively,
but also include all unknown or unanticipated claims, rights, demands, actions,
obligations, liabilities, and causes of action of every kind and character that
would otherwise come within the scope of the LM Released Claims and the XOOM and
NBC Internet, Inc. Released Claims, as described in the preceding Sections 20
and 21, respectively. LM and XOOM and NBC Internet, Inc. understand that they
may hereafter discover facts different from what either now believes to be true,
which if known, could have materially affected this Agreement, but each
nevertheless waives any claims or rights based on different or additional facts.
LM and XOOM and NBC Internet, Inc. each knowingly and voluntarily waives any and
all rights or benefits that either may now have, or in the future may have,
under the terms of Section 1542 of the California Civil Code, which provides as
follows: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
14
<PAGE>
THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT
WITH THE DEBTOR.
23. Covenant Not to Sue. LM shall not sue or initiate against any LM
Released Party, and XOOM and NBC Internet, Inc. shall not sue or initiate
against any XOOM and NBC Internet, Inc. Released Party, any compliance review,
action, or proceeding, or participate in the same, individually or as a member
of a class, under any contract (express or implied), or any federal, state, or
local law, statute, or regulation pertaining in any manner to the LM Released
Claims or the XOOM and NBC Internet, Inc. Released Claims, respectively.
24. This Agreement may not be amended except by an instrument in writing,
signed by each of the parties. If any provision of this Agreement is held by a
court of competent jurisdiction to be invalid, unenforceable, or void, such
provision shall be enforced to the greatest extent permitted by law, and the
remainder of this Agreement shall remain in full force and effect. This
Agreement shall be construed as a whole, according to its fair meaning, and not
in favor or against any party.
25. This Agreement shall be governed by and construed in accordance with the
laws of the State of California.
26. The parties acknowledge that (i) they have had the opportunity to consult
counsel in regard to this Agreement; (ii) they have read and understand the
Agreement and they
15
<PAGE>
are fully aware of its legal effect; and (iii) they are entering into this
Agreement freely and voluntarily, and based on each party's own judgement and
not on any representations or promises made by the other party, other than those
contained in this Agreement.
27. XOOM represents and warrants to LM, on behalf of itself and NBC, that
this Agreement has been duly authorized by XOOM and NBC Internet, Inc. and that
it does not conflict with any of the transaction document relating to the Merger
or any other agreement or instrument to which XOOM or NBC Internet, Inc. is or
will become a party or is or will become bound.
28. Counterparts. This Agreement may be executed in counterparts, each of
which shall constitute an original.
16
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
written in its first paragraph.
----------------------------------------
LAURENT MASSA
XOOM.com, Inc.
By
------------------------------------
Chris Kitze
Chairman of the Board
APPROVED AND AGREED:
NATIONAL BROADCASTING CORPORATION
By
-------------------------------
17
<PAGE>
Exhibit 10.4
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is entered into as of
June 11, 1999 by and among Xoom.com, Inc., a Delaware corporation (the
"Company"), and National Broadcasting Company, Inc. (together with its
successors and permitted assigns, the "Purchaser"). The Company desires to
sell, and the Purchaser desires to purchase, an aggregate of 960,028 shares (the
"Shares") of the Company's common stock, $.0001 par value per share (the "Common
Stock"), on the terms and subject to the conditions set forth herein.
Accordingly, the Company and the Purchaser hereby agree as follows:
1. AGREEMENT TO PURCHASE.
(a) At the Stock Closing (as defined below), and subject to the terms
and conditions set forth in this Agreement, the Purchaser will purchase the
Shares from the Company, and the Company will issue and sell the Shares to the
Purchaser, for an aggregate purchase price of $55,000,000 ($57.29 per Share).
(b) Upon the original issuance of the Shares by the Company to the
Purchaser and until such time as the same is no longer required under the
applicable requirements of the Securities Act or applicable state securities
laws, any certificate issued representing and such Shares shall bear the
following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS (A) THEY ARE SO
REGISTERED OR (B) AN EXEMPTION FROM REGISTRATION IS AVAILABLE AND THE ISSUER IS
FURNISHED WITH AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER TO
THAT EFFECT."
2. CLOSING. Subject to the satisfaction of the conditions set forth
in Section 6 below, the closing of the purchase and sale of the Shares
hereunder (the "Stock Closing") shall occur three business days after the HSR
Condition (as defined below) has been satisfied. Upon payment of the
purchase price for the Shares, by wire transfer of immediately available
funds to an account specified by the Company, the Company will deliver to the
Purchaser a certificate or certificates representing such Shares, registered
in the name of the Purchaser.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants, as of the date hereof and as of the Stock Closing,
as follows:
(1) MERGER AGREEMENT REPRESENTATIONS. The representations and
warranties of the Company contained in the Amended and Restated Agreement and
Plan of Contribution,
<PAGE>
2
Investment and Merger, dated as of June 11, 1999 (the "Merger Agreement";
capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to such terms in the Merger Agreement), among the
Purchaser, GE Investments Subsidiary, Inc., Neon Media Corporation, Xenon 2,
Inc. and the Company (i) are true and correct in all material respects, in
each case, on and as of May 9, 1999 and (ii) in the case of the
representations contained in Section 4.3(i) and 4.3(j), are true and correct
in all material respects, in each case, on and as of the date hereof and
(iii) will be true and in all material respects, in each case, on and as of
the Stock Closing, except, in each case, to the extent such representations
and warranties by their terms speak as of a specified date, in which case
they are true and correct in all material respects as of such date.
(2) AUTHORIZATION. The Company has taken all corporate action
required to authorize the execution and delivery of this Agreement and the
performance of its obligations hereunder, including the issuance of the
Shares, and this Agreement has been duly executed and delivered by the
Company and constitutes a valid and legally binding obligation of the
Company. When issued to and paid for by the Purchaser in accordance with the
terms of this Agreement, the Shares will be duly and validly issued, fully
paid and nonassessable, and the issuance of the Shares will not be subject to
any preemptive or similar rights that have not been waived.
(3) CONSENTS. Except for any filings, authorizations, consents and
approvals as may be required under the HSR Act, no consent, approval,
authorization or order of any court, governmental agency or body or
arbitrator having jurisdiction over the Company or of the Company's
affiliates is required for the execution of this Agreement or the performance
of the Company's obligations hereunder, including, without limitation, the
sale of the Shares to the Purchaser.
(4) CAPITAL STOCK. The authorized capital stock of the Company
consists of 80,000,000 shares of Common Stock and 5,000,000 shares of
preferred stock, $.0001 par value per share (the "Preferred Stock"), of the
Company, of which 17,449,049 shares of Common Stock and no shares of
Preferred Stock have been issued and are outstanding as of the date hereof.
All outstanding shares of Common Stock are duly authorized, validly issued,
fully paid and non-assessable and not subject to preemptive rights created by
statute, the certificate of incorporation or bylaws of the Company or any
agreement to which the Company is a party or by which it is bound and have
been issued in compliance with federal and state securities laws. There are
no declared or accrued unpaid dividends with respect to any shares of Common
Stock.
(5) STOCK OPTIONS. As of the date hereof, the Company has reserved
6,306,851 shares of Common Stock for issuance pursuant to the Xoom Plan
Options, Xoom Non-Plan Options and the
<PAGE>
3
MightyMail Networks, Inc. 1999 Stock Option Plan (the "MightyMail Plan"), of
which 3,363,009 have been issued as of the date hereof, of which 2,052,967
shares remain subject to Xoom Plan Options unexercised as of the date hereof,
742,282 shares remain subject to Xoom Non-Plan Options unexercised as of the
date hereof and 21,182 shares remain subject to the MightyMail Plan
unexercised as of the date hereof. None of the Xoom Options will be
accelerated in any way by the transactions contemplated by this Agreement.
(6) SECTION 203. The Boards of Directors of the Company and each
of its Subsidiaries has taken appropriate action so that the provisions of
Section 203 of the DGCL restricting "business combinations" with "interested
stockholders" (each as defined in such Section 203) will not, prior to the
termination of this Agreement pursuant to Section 7(a) hereof, apply to the
Purchaser or any of its Affiliates with respect to this Agreement or any of
the transactions contemplated hereby.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants, as of the date hereof and as of the Stock Closing,
as follows:
(1) AUTHORIZATION. The Purchaser has taken all corporate action
required to authorize the execution and delivery of this Agreement and the
performance of its obligations hereunder and this Agreement has been duly
executed and delivered by the Purchaser and constitutes a valid and legally
binding obligation of the Purchaser.
(2) CONSENTS. Except for any filings, authorizations, consents and
approvals as may be required under the HSR Act, no consent, approval,
authorization or order of any court, governmental agency or body or
arbitrator having jurisdiction over the Purchaser or of the Purchaser's
affiliates is required for the execution of this Agreement or the performance
of the Purchaser's obligations hereunder, including, without limitation, the
purchase of the Shares from the Company.
(3) PURCHASE FOR INVESTMENT. The Purchaser is acquiring the Shares
for its own account for investment purposes and not with a view to the
distribution thereof within the meaning of the Securities Act.
(4) RESTRICTED SECURITIES. The Purchaser understands that the
Shares constitute "restricted securities" within the meaning of Rule 144
under the Securities Act and may not be sold, pledged or otherwise disposed
of unless they are subsequently registered under the Securities Act and
applicable state securities laws or unless an exemption from registration is
available.
<PAGE>
4
(5) ACCREDITED INVESTOR. The Purchaser is an "accredited investor"
within the meaning of Rule 501 under the Securities Act.
5. CONDUCT OF BUSINESS OF THE COMPANY. The Company agrees that,
except as provided or permitted by the terms of the Merger Agreement, it
shall not issue, purchase or redeem, or authorize or propose the issuance,
purchase or redemption of, or declare or pay any dividend with respect to,
any shares of capital stock of the Company or any class of securities
convertible into, or rights, warrants or options to acquire, any such shares
of other convertible securities.
6. AGREEMENT TO VOTE SHARES. At every meeting of the stockholders of
the Company called with respect to any of the following, and at every
adjournment thereof, and on every action or approval by written consent of
the stockholders of the Company with respect to any of the following, the
Purchaser agrees that it shall vote (or cause to be voted) all of the Shares
that it beneficially owns on the record date of any such vote or action in
favor of the adoption of the Agreement and Plan of Contribution and Merger,
dated May 9, 1999, among CNET, Inc., the Company, Xenon 2, Inc., Xenon 3,
Inc., and Snap! LLC and the approval of the Company's adoption of the Merger
Agreement and the approval of the terms thereof (with such modifications as
the parties thereto may make (except for modifications that would adversely
affect the Purchaser)) and each of the other transactions contemplated by
such agreements.
7. CONDITIONS TO CLOSING. The obligations hereunder of the Company
and the Purchaser shall be subject to and conditioned upon the satisfaction
or waiver by the appropriate party of each of the following conditions on or
prior to the Stock Closing:
(1) NO INJUNCTIONS OR RESTRAINTS. At the Stock Closing, there
shall be (i) no injunction, restraining order or other decree of any nature
of any court of competent jurisdiction or other Governmental Authority that
is in effect that restrains or prohibits the consummation of any of the
transactions contemplated hereby, and (ii) no action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to
the transactions contemplated hereby, which makes the consummation of this
Agreement and the transactions herein illegal; PROVIDED, HOWEVER, that the
parties hereto shall use their reasonable commercial efforts to have such
injunction, order, decree, claim, action, suit, statute, rule or regulation
vacated or declared inapplicable as expeditiously as practicable.
(2) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of each party shall be true and correct in all
material respects, in each case, as of the date hereof and as of the Stock
Closing, as if such representations and warranties had been made on and as of
such dates (except with respect to representations and warranties that, by
their terms, are made as of a different date, which must be true and correct
in all material respects as of such date).
<PAGE>
5
(3) COVENANTS OF THE PARTIES. Each party shall have performed its
obligations hereunder that are required to be performed at or prior to the
Stock Closing.
(4) REGULATORY AUTHORIZATION. Any required waiting period
applicable to the purchase of the Shares hereunder pursuant to the HSR Act
shall have expired or been terminated (the "HSR Condition"). The Company and
the Purchaser will make all filings and take all reasonable actions within
their respective control required in order to satisfy the HSR Condition;
provided that neither party will be required to dispose of or agree to hold
separate any assets or business operations or to agree to any restriction on
its business activities in connection therewith.
8. MISCELLANEOUS.
(1) The terms and conditions of this Agreement represent the entire
agreement between the parties with respect to the subject matter hereof and
supersede any prior agreements or understandings, whether written or oral,
between the parties respecting such subject matter. This Agreement may be
modified only in a writing signed by the party against whom such modification
is to be enforced.
(2) The Purchaser may not assign, other than to an affiliate, this
Agreement or any rights or obligations hereunder without the prior written
consent of the Company, and the Company may not assign this Agreement or any
rights or obligations hereunder without the prior written consent of the
Purchaser.
(3) This Agreement shall be construed and enforced in accordance
with the laws of the state of New York applicable to agreements between
residents of New York wholly executed and wholly performed therein.
(4) This Agreement may be executed in one or more counterparts, and
such counterparts shall together constitute one and the same agreement.
<PAGE>
6
IN WITNESS WHEREOF, the parties have entered into this Agreement as
of the date first set forth above.
XOOM.COM, INC.
By: /s/ Chris Kitze
- ------------------------ ---------------------------------
Name: Chris Kitze
- ------------------------ -------------------------------
Title: Chairman
- ------------------------ ------------------------------
NATIONAL BROADCASTING
COMPANY, INC.
By: /s/ Mark W. Begor
- ------------------------ ---------------------------------
Name: Mark W. Begor
- ------------------------ -------------------------------
Title: Executive Vice President
- ------------------------ ------------------------------
<PAGE>
EXECUTION COPY
FIRST AMENDMENT TO AGREEMENT AND PLAN
OF CONTRIBUTION AND MERGER
This First Amendment to Agreement and Plan of Contribution and Merger,
dated as of October 20, 1999 (hereinafter, "Amendment No. 1"), among CNET,
Inc., a Delaware corporation ("CNET"), XOOM.com, Inc., a Delaware corporation,
NBC Internet, Inc., a Delaware corporation ("NBCi," referred to as "Xenon 2" in
the Original Merger Agreement hereinafter identified), Xenon 3, Inc., a
Delaware corporation and Snap! LLC, a Delaware limited liability company
("SNAP")
W I T N E S S E T H:
WHEREAS, the parties hereto have previously entered into that certain
Agreement and Plan of Contribution and Merger dated as of May 9, 1999 (the
"Original Merger Agreement"); and
WHEREAS, the parties now wish to amend the Original Merger Agreement as set
forth below;
NOW THEREFORE, the Original Merger Agreement is amended in the following
respects:
1. Section 1.1(a) of the Original Merger Agreement is amended by adding
the following sentence after the end of the definition beginning with "Code" and
prior to the next definition beginning with "Environmental Laws":
"'Contributed Assets' means outstanding Xoom Stock immediately prior
to the Effective Time and the SNAP Units to be contributed by CNET and GBI
pursuant to Section 3.1."
2. Section 5.2(b) of the Original Merger Agreement is amended in its
entirety to provide as follows:
"(b) issue, purchase or redeem, or authorize or propose the issuance,
purchase or redemption of, or make any distribution with respect to, any
equity interests of SNAP or any class of securities convertible into, or
rights, warrants or options to acquire, any such equity interests or other
convertible securities, other than (i) pursuant to employee options
outstanding on the date hereof or issued in accordance herewith, (ii) SNAP
Options issued pursuant to commitments to issue SNAP Options that were
included in job offers outstanding as of May 9, 1999, as identified on
SCHEDULE 4.1(T) as amended and (iii) additional options that, when added to
SNAP Options previously outstanding, do not exceed options for units equal
in number to 17% of the units of SNAP."
<PAGE>
3. Section 6.11(b)(i) of the Original Merger Agreement is amended by
deleting the reference therein to "Section 351(b)" and inserting in lieu thereof
the words "Section 351(a)". Section 6.11(b)(i) of the Original Merger Agreement
is further amended by deleting the period and adding the following at the end
thereof:
", the Merger will constitute a "reorganization", within the meaning of
Section 368(a) of the Code, and each of Xoom, Xenon 2 and Xenon 3 will be
treated as a "party to a reorganization", within the meaning of Section
368(b) of the Code, with respect to the Merger."
4. Section 6.7(b) of the Original Merger Agreement is amended in its
entirety to provide as follows:
"(B) SNAP EMPLOYEE OPTIONS
"SNAP and Xenon 2 will take all requisite corporate action such that,
as of the Closing Date,
"(i) each outstanding option to purchase SNAP units (a "SNAP OPTION")
held by a SNAP Employee that was issued before May 9, 1999, and each
outstanding SNAP Option held by a SNAP Employee that was issued after May
9, 1999 pursuant to a job offer that was extended before May 9, 1999, as
identified on SCHEDULE 4.1(T) as amended, shall be converted into a stock
option to purchase a number of shares of Xenon 2 (a "XENON 2 OPTION") equal
to 1.2853 times the number of units of SNAP to which the SNAP Option
pertains; and
"(ii) each outstanding option to purchase a SNAP Option held by a SNAP
Employee that was issued on or after May 9, 1999 (other than pursuant to a
job offer that was extended before May 9, 1999, as identified on SCHEDULE
4.1(T) as amended) shall be converted on a one-for-one basis into a Xenon 2
Option to purchase a number of shares of Xenon 2 equal to the number of
units of SNAP to which the SNAP Option pertains.
"The per share exercise price of each such Xenon 2 Option shall equal the
aggregate exercise price of the corresponding SNAP Option divided by the
exchange ratio used to convert such corresponding Snap Option into such
Xenon 2 Option (I.E., either 1.2853:1 or 1:1, as the case may be). The
vesting schedule of such Xenon 2 Option shall be on a monthly basis, and
otherwise consistent with the vesting schedule of the corresponding SNAP
Option, except that in the case of the Xenon 2 Options issued pursuant to
(i) above, the vesting shall be accelerated by 12 months (in accordance
with the resolution of Snap's Board of Managers dated June 24, 1999), when
compared with the corresponding SNAP Option."
5. SCHEDULE 2.7 to the Original Merger Agreement is amended by replacing
the reference to "Thomas Rogers" under the item "NBC Directors" with a reference
to "Scott M. Sassa".
<PAGE>
6. SCHEDULE 4.1(T) to the Original Merger Agreement is amended by the addition
thereto of the items listed on SCHEDULE 4.1(T)-2 hereto.
7. In all other respects, the Original Merger Agreement is unchanged and
shall remain in full force and effect.
8. GOVERNING LAW. THIS AMENDMENT NO. 1 SHALL BE GOVERNED AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE TO BE PERFORMED WITHIN SUCH STATE.
9. Article X of the Original Merger Agreement shall apply MUTATIS
MUTANDIS to this Amendment No. 1.
IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to be
duly executed as of the date first above written.
CNET, INC.
BY: /s/ Douglas N. Woodrum
------------------------
Name: Douglas N. Woodrum
Title: Chief Financial Officer
XOOM.COM, INC.
BY: /s/ John Harbottle
------------------------
Name: John Harbottle
Title: Chief Financial Officer and
Executive Vice President
NBC INTERNET, INC. (formerly, Xenon 2, Inc.)
BY: /s/ John Harbottle
-------------------------
Name: John Harbottle
Title: Chief Financial Officer and
Executive Vice President
XENON 3, INC.
BY: /s/ John Harbottle
-------------------------
Name: John Harbottle
Title: Chief Financial Officer and
Executive Vice President
SNAP! LLC
BY: /s/ Edmond Sanctis
-------------------------
Name: Edmond Sanctis
Title: Chief Operating Officer
<PAGE>
Exhibit 10.6
AMENDED AND RESTATED AGREEMENT
AND PLAN OF CONTRIBUTION, INVESTMENT AND MERGER
among
NATIONAL BROADCASTING COMPANY, INC.
GE INVESTMENTS SUBSIDIARY, INC.
NEON MEDIA CORPORATION
XENON 2, INC.
and
XOOM.COM, INC.
Dated as of June 11, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
DEFINITIONS..............................................................................................2
1.1 Definitions.....................................................................................2
ARTICLE II
CONTRIBUTIONS AND ISSUANCES..............................................................................9
2.1 Contributions to NBC and NBC Multimedia.........................................................9
2.2 Contributions to NMC; Issuances of NMC Capital Stock...........................................10
2.3 GE Investments Sub Purchase of Videoseeker Assets..............................................10
2.4 Contributions To Xenon 2; Issuances of Xenon 2 Capital Stock...................................10
2.5 Note Issuances.................................................................................11
2.6 Required Consents..............................................................................12
2.7 Tax Refunds....................................................................................12
ARTICLE III
THE MERGER..............................................................................................12
3.1 The Merger.....................................................................................12
3.2 Closing........................................................................................12
3.3 Effective Time.................................................................................13
3.4 Effects of the Merger..........................................................................13
3.5 Certificates of Incorporation..................................................................13
3.6 By-Laws........................................................................................13
3.7 Officers and Directors of Surviving Corporation and Xenon 2....................................13
3.8 Effect on Capital Stock........................................................................13
3.9 Exchange Procedures. .........................................................................14
3.10 No Further Ownership Rights in NMC Common Stock. .............................................14
3.11 Further Assurances. ..........................................................................14
3.12 Federal Income Tax Consequences. .............................................................15
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARTIES...........................................................15
4.1 Representations and Warranties of NBC..........................................................15
4.2 Representations and Warranties with respect to SNAP............................................22
4.3 Representations and Warranties of Xoom and Xenon 2.............................................30
4.4 Representations and Warranties with respect to GE Investments Sub..............................40
4.5 Survival of Representations and Warranties.....................................................41
4.6 No Other Representation or and Warranties......................................................41
ARTICLE V
CONDUCT OF BUSINESS PRIOR TO EFFECTIVE TIME.............................................................41
5.1 Conduct of the Business of Xoom Pending the Closing............................................41
5.2 Conduct of the Business of SNAP Pending the Closing............................................43
5.3 Conduct of the NBC Multimedia Businesses Pending the Closing...................................45
5.4 Access to Information..........................................................................46
5.5 No Solicitation................................................................................47
5.6 Non-Solicitation of Employees..................................................................49
5.7 Amendments to Schedules........................................................................49
</TABLE>
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<TABLE>
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ARTICLE VI
OTHER AGREEMENTS........................................................................................49
6.1 Registration Statement; Preparation of Proxy Statement.........................................49
6.2 Stockholder Meeting............................................................................50
6.3 Public Statements..............................................................................51
6.4 Reasonable Commercial Efforts..................................................................51
6.5 Notification of Certain Matters................................................................52
6.6 Xenon 2 Directors..............................................................................52
6.7 Employee Matters...............................................................................53
6.8 Xenon 2 Options. ............................................................................54
6.9 SNAP Indebtedness..............................................................................55
6.10 Organization of CNBC.com.......................................................................55
6.11 Tax Cooperation and Consistent Reporting.......................................................55
6.12 Tax Benefit Payments...........................................................................57
6.13 Xoom Cash......................................................................................58
ARTICLE VII
CONDITIONS TO CLOSING...................................................................................59
7.1 Conditions Precedent to Obligations of Each Party..............................................59
7.2 Conditions Precedent to Obligation of NBC......................................................60
7.3 Conditions Precedent to Obligations of Xenon 2.................................................60
ARTICLE VIII
INDEMNIFICATION.........................................................................................61
8.1 Indemnification by Xenon 2.....................................................................61
8.2 Indemnification by NBC.........................................................................61
8.3 Claims Procedure...............................................................................61
8.4 Exclusive Remedy...............................................................................62
ARTICLE IX
TERMINATION.............................................................................................62
9.1 Termination Events.............................................................................62
9.2 Effect of Termination..........................................................................64
ARTICLE X
MISCELLANEOUS AGREEMENTS OF THE PARTIES.................................................................64
10.1 Notices........................................................................................64
10.2 Integration; Amendments........................................................................65
10.3. Waiver.........................................................................................65
10.4. No Assignment; Successors and Assigns..........................................................66
10.5. Expenses.......................................................................................66
10.6. Severability...................................................................................66
10.7 Section Headings; Table of Contents............................................................66
10.8. Third Parties..................................................................................66
10.9 GOVERNING LAW; SUBMISSION TO JURISDICTION......................................................66
10.10 Specific Performance...........................................................................67
10.11 Counterparts...................................................................................67
10.12 Amendment and Restatement......................................................................67
</TABLE>
ii
<PAGE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit A Advertising Agreement Term Sheet
Exhibit B Standstill Agreement
Exhibit C Voting and Right of First Offer Agreement
Exhibit D Governance and Investor Rights Agreement
Exhibit E Brand Integration and License Agreement
Exhibit F Registration Rights Term Sheet
Exhibit G Summary of Principal Terms of Xenon 2 Convertible
Note
Exhibit H NBC Note- Summary of Principal Terms
Exhibit 3.5 Restated Certificate of Incorporation of Xenon 2, Inc.
Exhibit 3.6 Bylaws of Xenon 2, Inc.
SCHEDULES
Schedule 1.1(a) Knowledge Definition
Schedule 1.1(b) NBC Multimedia Assets
Schedule 1.1(c) NBC Multimedia Liabilities
Schedule 1.1(d) Videoseeker Assets
Schedule 1.1(e) Videoseeker Liabilities
Schedule 2.1 Rights and Obligations of CNBC, Inc. Interests
Schedule 3.7 Officers and Directors
Schedule 4.1(c) Governmental Approvals; Consents
Schedule 4.1(e) Financial Information
Schedule 4.1(f) Absence of Certain Changes or Events
Schedule 4.1(h) Properties, Contracts, Permits and Other Data
Schedule 4.1(i) Legal Proceedings
Schedule 4.1(j) Labor Controversies
Schedule 4.1(k) Intellectual Property and Technology
Schedule 4.1(l) Government Licenses, Permits, Etc.
Schedule 4.1(n) Environmental Matters
Schedule 4.1(o) Employee Benefit Matters
Schedule 4.1(q) Entire Business
Schedule 4.2(c) Governmental Approvals; Consents
Schedule 4.2(e) Equity Interests
Schedule 4.2(f) Financial Information; Liabilities
Schedule 4.2(g) Absence of Certain Changes or Events
Schedule 4.2(h) Title to Properties; Liens
Schedule 4.2(i) Properties, Contracts, Permits
Schedule 4.2(j) Legal Proceedings
</TABLE>
iii
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<TABLE>
<S> <C>
Schedule 4.2(k) Labor Controversies
Schedule 4.2(l) Intellectual Property and Technology
Schedule 4.2(m) Government Licenses, Permits
Schedule 4.2(o) Environmental Matters
Schedule 4.2(p) Employee Benefit Matters
Schedule 4.2(r) Tax Matters
Schedule 4.2(t) Acceleration of Options
Schedule 4.3(c) Governmental Approvals; Consents
Schedule 4.3(g) Stock Options
Schedule 4.3(h) Obligations with Respect to Capital Stock
Schedule 4.3(j) Absence of Certain Changes or Events
Schedule 4.3(k) Properties, Contracts, Permits and Other Data
Schedule 4.3(l) Legal Proceedings
Schedule 4.3(m) Labor Controversies
Schedule 4.3(n) Intellectual Property
Schedule 4.3(o) Government Licenses, Permits, Etc.
Schedule 4.3(q) Employee Benefits Matters
Schedule 4.3(q)(iii) Exception to Employee Benefit Plan Compliance
Schedule 4.3(q)(vii) Benefit Payments Required
Schedule 4.3(s) Tax Matters
Schedule 4.3(u) Year 2000 Compliance
Schedule 5.1 Conduct of the Business of Xoom Pending the Closing
Schedule 5.2 Conduct of the Business of SNAP Pending the Closing
Schedule 6.4 Required Consents
Schedule 6.7(a) Transferred Employees
Schedule 6.9 SNAP Indebtedness
Schedule 6.10 Organization of CNBC
iv
<PAGE>
AMENDED AND RESTATED AGREEMENT
AND PLAN OF CONTRIBUTION, INVESTMENT AND MERGER
This Amended and Restated Agreement and Plan of Contribution,
Investment and Merger, dated as of June 11, 1999 (hereinafter, the "AGREEMENT"),
among National Broadcasting Company, Inc., a Delaware corporation ("NBC"), GE
Investments Subsidiary, Inc., a Delaware corporation ("GE INVESTMENTS SUB"),
Neon Media Corporation, a Delaware corporation ("NMC"), Xenon 2, Inc., a
Delaware corporation ("XENON 2") and XOOM.com, Inc., a Delaware corporation
("XOOM").
W I T N E S S E T H:
WHEREAS, the parties hereto are party to the Agreement and
Plan of Contribution, Investment and Merger, dated as of May 9, 1999 (the
"EXISTING MERGER AGREEMENT");
WHEREAS, the parties hereto have agreed to amend and restate
the Existing Merger Agreement as set forth in this Agreement, all on the terms
and conditions hereinafter set forth so that, as amended and restated, the
Existing Merger Agreement reads in its entirety as provided in this Agreement;
WHEREAS, NBC owns all of the outstanding capital stock of NBC
Multimedia, Inc., a Delaware corporation ("NBC MULTIMEDIA");
WHEREAS, NBC Multimedia formed NMC for the purpose of
effecting the transactions contemplated by this Agreement and all of its
outstanding capital stock is owned by NBC Multimedia;
WHEREAS, Xoom, Xenon 2, Xenon 3, Inc., a Delaware corporation
("XENON 3"), SNAP! LLC, a Delaware limited liability company ("SNAP") and CNET,
Inc., a Delaware corporation ("CNET"), are parties to an Agreement and Plan of
Contribution and Merger dated as of May 9, 1999 (the "XENON 2 MERGER AGREEMENT")
pursuant to which, among other things, the parties thereto have agreed that (i)
Xenon 3 will merge with and into Xoom, with Xoom as the surviving corporation,
and each outstanding share of common stock of Xoom, par value $0.0001 per share,
will be converted into the right to receive one share of Class A Common Stock of
Xenon 2 and (ii) CNET will contribute to Xenon 2 certain assets in exchange for
shares of Class A Common Stock of Xenon 2;
WHEREAS, Xoom owns all of the outstanding capital stock of
Xenon 2, and Xenon 2 owns all of the outstanding stock of Xenon 3;
WHEREAS, the closing of the transactions contemplated by the
Xenon 2 Merger Agreement is a condition to the closing of the transactions
contemplated by this Agreement;
<PAGE>
2
WHEREAS, while the closing under the Xenon 2 Merger Agreement
and the closing under this Agreement are not contingent on each other, it is
intended that both transactions represent a series of steps in the formation of
Xenon 2 whereby the rights of all the parties are defined;
WHEREAS, the consummation of the transactions contemplated by
the Xenon 2 Merger Agreement and this Agreement would combine certain assets of
NBC and CNET with the existing business of Xoom in a new holding company
structure intended to achieve important business objectives;
WHEREAS, the Board of Directors of each of Xoom, Xenon 2 and
Xenon 3 believe it is advisable for such parties to enter into this Agreement
and to consummate the transactions provided for herein;
WHEREAS, concurrently with the execution hereof, in order to
induce NBC to enter into this Agreement, NBC, Xoom and certain stockholders of
Xoom are entering into a voting agreement providing for certain voting and other
restrictions with respect to shares of Xoom common stock owned by such
stockholders, all upon the terms and conditions specified therein; and
WHEREAS, NBC, GE Investments Sub, NMC, Xoom and Xenon 2 desire
to make certain representations, warranties, covenants and other agreements in
connection with the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and the
mutual promises contained herein, and intending to be legally bound, the parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. (a) Capitalized terms used and not defined in
this Agreement shall have the following meanings:
"ADVERTISING AGREEMENT" means the advertising agreement
between Xenon 2 and NBC to be dated as of the Closing Date having the terms set
forth in EXHIBIT A hereto.
"AFFILIATE" means with respect to a specified Person, any
Person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the specified
Person. As used in this definition, the term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, as trustee or executor, by contract or credit arrangement or
otherwise.
<PAGE>
3
"BUSINESS DAY" means a day, other than Saturday or Sunday, on
which commercial banks in New York City are open for the general transaction of
business.
"CLASS A COMMON STOCK" means the Class A common stock, $0.0001
par value per share, of Xenon 2.
"CLASS B COMMON STOCK" means the Class B common stock, $0.0001
par value per share, of Xenon 2.
"CNBC.COM" means the entity to be formed by NBC or its
Subsidiaries pursuant to SECTION 6.10 to conduct business through the CNBC.com
universal resource locator.
"CNET STANDSTILL AGREEMENT" means a Standstill Agreement
between Xenon 2 and CNET to be dated as of the Closing Date substantially in the
form of EXHIBIT B hereto.
"CNET VOTING AGREEMENT" means a Voting and Right of First
Offer Agreement between CNET and NBC to be dated as of the Closing Date
substantially in the form of EXHIBIT C hereto.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONTRIBUTED ASSETS" means the Xoom Stock, the interests in
SNAP and the NBC Multimedia Assets.
"ENVIRONMENTAL LAWS" means any and all laws, rules, orders,
regulations, statutes, ordinances, guidelines, codes, decrees, or other legally
enforceable requirement (including, without limitation, common law) of any
foreign government, the United States, or any state, local, municipal or other
governmental authority, regulating, relating to or imposing liability or
standards of conduct concerning protection of the environment or of human
health, or employee health and safety.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FINAL DETERMINATION" means a determination as defined in
Section 1313(a) of the Code or any other event which finally and conclusively
establishes the amount of any liability for Taxes.
"FLYING DISC" means Flying Disc Investments Limited
Partnership, a Nevada limited partnership.
<PAGE>
4
"GAAP" means generally accepted accounting principles in the
United States.
"GOVERNANCE AGREEMENT" means the governance agreement between
Xenon 2 and NBC to be dated as of the Closing Date substantially in the form set
forth in EXHIBIT D hereto.
"GOVERNMENTAL AUTHORITY" means any nation or government, any
state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"IMPLEMENTING AGREEMENTS" means, the NBC Note, the Xenon 2
Convertible Note, the Governance Agreement, the Registration Rights Agreement,
the License Agreement, the Advertising Agreement, the CNET Voting Agreement and
the CNET Standstill Agreement.
"INDEPENDENT ACCOUNTANTS" means a nationally recognized firm
of independent certified public accountants selected and retained by the mutual
agreement of NBC and Xenon 2.
"INTELLECTUAL PROPERTY" shall mean any patents, patent
registrations, patent applications, trademarks, trademark registrations,
trademark applications, tradenames, copyrights, copyright applications,
copyright registrations, franchises, universal resource locators, domain names,
permits, licenses, processes, formulae, proprietary technology, inventions,
trade secrets, know-how, product descriptions and specifications.
"KNOWLEDGE OF" or "BEST KNOWLEDGE OF" a party hereto when
modifying any representation and warranty shall mean that such party has no
actual knowledge that such representation and warranty is not true and correct
to the extent provided therein and that (i) such party has made appropriate
investigations and inquiries of its officers and responsible employees and (ii)
nothing has come to its attention in the course of such investigation and
inquiries which would cause such party, in the exercise of due care, to believe
that such representation and warranty is not true and correct to the extent
provided therein; PROVIDED that each of the parties hereto shall be deemed to
have satisfied the foregoing requirements by making appropriate investigations
and inquiries of its officers and employees listed on SCHEDULE 1.1(A), and no
knowledge of any other director, officer or employee of such party shall be
imputed to the persons listed on the Schedule or to such party.
"LIABILITY" means, as to any Person, all debts, liabilities
and obligations, direct, indirect, absolute or contingent of such Person,
whether accrued, vested or otherwise, whether known or unknown and whether or
not actually reflected, or required to be reflected, in such Person's balance
sheets.
"LICENSE AGREEMENT" means the license agreement between NBC
Multimedia and NBC to be dated as of May 9, 1999 substantially in the form set
forth in EXHIBIT E hereto.
<PAGE>
5
"LIEN" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind.
"LOSSES AND EXPENSES" means any and all damages, claims,
losses, expenses, costs, obligations and Liabilities, including, without
limiting the generality of the foregoing, Liabilities for all reasonable
attorneys' fees and expenses (including attorney and expert fees and expenses
incurred to enforce the terms of this Agreement), PROVIDED, HOWEVER, that
"Losses and Expenses" shall not include any lost profits or other incidental,
consequential or punitive damages.
"MATERIAL ADVERSE EFFECT" means, for any party, a material
adverse effect on (i) the assets, liabilities, business, results of operations
or financial condition of (A) Xoom, Xenon 2 and their respective Subsidiaries,
taken as a whole, in the case of Xoom or (B) the NBC Multimedia Businesses and
SNAP, taken as a whole, in the case of NBC; or (ii) the ability of such party to
perform its obligations hereunder, under the Voting Agreement, the Option
Agreement or under the Implementing Agreements to which it is a party.
Notwithstanding the foregoing, the occurrence of one of the following events,
without the occurrence of any other events, shall not be deemed by itself to
constitute a Material Adverse Effect: (i) a change in the market price or
trading volume of the outstanding equity securities of a party that is publicly
traded, (ii) the failure of a party to meet earnings estimates of equity
analysts as reflected in the First Call consensus estimates for any period (or
for which earnings are released) on or after May 9, 1999 and prior to the
Effective Time or (iii) adverse conditions affecting the U.S. economy as a whole
or affecting the multi-media industry (including internet-related businesses) as
a whole (PROVIDED that in each case such changes do not affect such party in a
disproportionate manner).
"MATERIALS OF ENVIRONMENTAL CONCERN" means any gasoline or
petroleum (including, without limitation, crude oil or any fraction thereof) or
petroleum products, polychlorinated biphenyls, urea-formaldehyde insulation,
asbestos, pollutants, contaminants, radioactivity, and any other substances of
any kind, whether or not any such substance is defined as hazardous or toxic
under any Environmental Law, that is regulated pursuant to or could give rise to
liability under any Environmental Law.
"MEMBER OF THE CONTROLLED GROUP" means each trade or business,
whether or not incorporated, which would be treated as a single employer with
the named trade or business under Section 4001 of ERISA or Section 414(b), (c),
(m) or (o) of the Code.
"NASDAQ" means the Nasdaq National Market.
"NBC.COM" means the NBC.com universal resource locator and the
business conducted through it.
"NBC-IN" means the NBC-IN.com universal resource locator and
the business conducted through it.
<PAGE>
6
"NBC MULTIMEDIA ASSETS" means the assets, properties and other
rights of NBC and NBC Multimedia listed on SCHEDULE 1.1(B) which are to be
contributed to NMC on the Closing Date.
"NBC MULTIMEDIA BUSINESSES" means, collectively, NBC.com,
Videoseeker and NBC- IN.
"NBC MULTIMEDIA LIABILITIES" means the liabilities of NBC
Multimedia listed on SCHEDULE 1.1(C) which are to be assumed by NMC on the
Closing Date.
"NBC NOTE" means the $340,000,000 note issued by NBC to GE
Investments Sub to be transferred to Xenon 2 on the Closing Date.
"OPTION AGREEMENT" means the Stock Option Agreement, dated as
of May 9,1999, between NBC and Xoom.
"OTHER PROPERTY OR MONEY" means other property or money within
the meaning of Section 351(b) of the Code.
"PERMITTED LIENS" means (i) Liens for Taxes that (x) are not
yet due or delinquent or (y) are being contested in good faith by appropriate
proceedings and for which adequate reserves have been established in accordance
with GAAP; (ii) statutory Liens or landlords', carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's or other like Liens arising
in the ordinary course of business with respect to amounts not yet overdue for a
period of 45 days or amounts being contested in good faith by appropriate
proceedings if a reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor; (iii) Liens incurred or deposits
made in connection with workers' compensation, unemployment insurance and other
types of social security or similar benefits; (iv) Liens incurred or deposits
made to secure the performance of tenders, bids, leases, statutory obligations,
surety and appeal bonds, government contracts, performance and return-of-money
bonds and other obligations of like nature; (v) easements, rights-of-way,
restrictions and other similar charges or encumbrances on real property
interests which, individually or in the aggregate, do not materially interfere
with the ordinary conduct of the relevant entity or business, taken as a whole
or the use of any such real property for its current uses; (vi) leases or
subleases granted to others which do not materially interfere with the ordinary
conduct of the relevant entity or business, taken as a whole; (vii) with respect
to real property, title defects or irregularities that do not in the aggregate
materially impair the use of the property; (viii) any other Liens imposed by
operation of law that do not, individually or in the aggregate, have a Material
Adverse Effect on the relevant entity or business, taken as a whole; and (ix) as
to any real property leases with respect to which the relevant entity is a
lessee, any Lien affecting the interest of the landlord thereunder.
"PERSON" means any individual, corporation, partnership, joint
venture, trust, incorporated organization, limited liability company, other form
of business or legal entity or Governmental Authority.
<PAGE>
7
"POST-CLOSING TAX PERIOD" means any Tax period (or portion
thereof) ending after the Closing Date.
"PRE-CLOSING TAX PERIOD" means any Tax period (or portion
thereof) ending on or before the Closing Date.
"REGISTRATION RIGHTS AGREEMENT" means the registration rights
agreement among Xenon 2, NBC, CNET and Flying Disc to be dated as of the Closing
Date having the terms set forth in EXHIBIT F hereto.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SNAP" means SNAP! LLC, a Delaware limited liability company.
"SNAP LLC AGREEMENT" means the limited liability agreement of
SNAP, as amended from time to time.
"SNAP UNITS" means the units representing limited liability
company interests under the SNAP LLC Agreement.
"SUBSIDIARY" or "SUBSIDIARIES" of any Person means any
corporation, partnership, limited liability company, joint venture or other
legal entity of which such Person (either alone or through or together with any
other subsidiary) owns, directly or indirectly, more than 50% of the stock or
other equity interests, the holders of which are generally entitled to vote for
the election of the board of directors or other governing body of such
corporation or other legal entity and any partnership of which such Person
serves as general partner.
"TAX AUTHORITY" shall mean any Governmental Authority having
jurisdiction over Taxes.
"TAXES" shall mean all federal, state, local and foreign
taxes, fees, charges and other assessments of a similar nature, whether imposed
directly or through withholding, including, without limitation, any net income,
gross income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, payroll, employment, excise, severance, stamp,
capital stock, occupation, property, environmental or windfall tax, premium,
custom, duty or other tax, together with any interest, additions to tax, or
penalties applicable thereto.
"TAX RETURNS" shall mean all federal, state, local and foreign
tax returns, declarations, statements, reports, schedules, forms and information
returns and any amended tax returns relating to Taxes.
<PAGE>
8
"VIDEOSEEKER" means the Videoseeker.com universal resource
locator and the business conducted through it.
"VIDEOSEEKER ASSETS" means the assets, properties and other
rights of NBC and NBC Multimedia listed on SCHEDULE 1.1(D) which are to be
purchased by Xenon 2 from GE Investments Sub on the Closing Date.
"VIDEOSEEKER LIABILITIES" means the liabilities of NBC
Multimedia listed on SCHEDULE 1.1(E).
"VOTING AGREEMENT" means the Voting Agreement, dated as of May
9, 1999, among Xoom, NBC, CNET, Chris Kitze and Flying Disc.
"XOOM PREFERRED STOCK" means shares of preferred stock, par
value $.0001 per share, of Xoom.
"XOOM STOCK" means shares of common stock, par value $.0001
per share, of Xoom.
"XENON 2 CONVERTIBLE NOTE" means the $486,894,758 Zero Coupon
Convertible Debenture due 2006 issued by Xenon 2 to GE Investments Sub on the
Closing Date having the terms set forth in EXHIBIT G hereto.
"XENON 2 MERGER AGREEMENT" means the Agreement and Plan of
Contribution and Merger, dated as of May 9, 1999, among Xoom, Xenon 2, Xenon 3,
SNAP and CNET.
Term Section
---- -------
<S> <C>
Certificate of Merger 3.3
Claim Notice 8.3
Class A Common Stock 1.1
Class B Common Stock 1.1
Closing 3.2
Closing Date 3.2
Effective Time 3.3
Financial Information 4.1(e)
Form S-4 6.1
Indemnified Party 6.6(d)
Intellectual Property 1.1
Material Transaction Proposal 5.5(c)
Merger 3.1
</TABLE>
<PAGE>
9
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Merger Consideration 3.8
NBC Multimedia Business Intellectual Property 4.1(k)
NBC Plans 6.7(b)(i)
Nominees 6.6
Non-Plan Option 6.8
Notice Period 8.3
Option Plan 6.8
Proxy Statement 6.1
Required Consents 6.4
SEC Documents 4.3(h)(i)
SNAP Balance Sheet 4.2(f)
SNAP Budget 4.2(i)
SNAP Intellectual Property 4.2(l)
SNAP Plans 4.2(p)
Stockholder Approvals 5.5
Stockholder Meeting 6.2
Surviving Corporation 3.1
Takeover Proposal 5.5(c)
Vacation Policy 6.7(b)(v)
Xenon 2 Stockholder Approval 4.3(b)
Xoom Budget 4.3(k)
Xoom ESPP 4.3(g)
Xoom Intellectual Property 4.3(n)
Xoom Options 6.8
Xoom Stockholder Approval 5.5
</TABLE>
ARTICLE II
CONTRIBUTIONS AND ISSUANCES
II.1 CONTRIBUTIONS TO NBC AND NBC MULTIMEDIA. (a) Subject to the
satisfaction or waiver of the conditions set forth in this Agreement, at the
Closing and immediately prior to the Effective Time (as defined in SECTION 3.3),
(i) NBC shall contribute to NBC Multimedia, and NBC Multimedia shall accept, a
10% equity interest in CNBC.com, which interest shall be subject to the rights
and obligations set forth on SCHEDULE 2.1 and (ii) NBC Multimedia shall dividend
to NBC, and NBC shall accept and assume, all the Videoseeker Assets owned by NBC
Multimedia and all the Videoseeker Liabilities.
(b) In connection with the transactions described in SECTION
2.1(A), NBC shall execute, and shall cause NBC Multimedia to execute all
contribution, transfer, assumption and
<PAGE>
10
other agreements which are reasonably necessary to effect the transactions
described therein. The CNBC.com interest shall be transferred free and clear of
all Liens, except those set forth on Schedule 2.1(a). The Videoseeker Assets
shall be transferred free and clear of all Liens, except those set forth on
Schedule 1.1(e).
II.2 CONTRIBUTIONS TO NMC; ISSUANCES OF NMC CAPITAL STOCK. (a) Subject
to the satisfaction or waiver of the conditions set forth in this Agreement, at
the Closing and immediately prior to the Effective Time, NBC shall, or shall
cause NBC Multimedia, to assign and contribute to NMC, and NMC shall accept, all
of NBC's and NBC Multimedia's right, title and interest in the NBC Multimedia
Assets, and NBC and NBC Multimedia shall assign and contribute to NMC, and NMC
shall assume, all of the NBC Multimedia Liabilities.
(b) In connection with the transactions described in SECTION
2.2(A), NBC, NBC Multimedia, and NMC shall execute all contribution, transfer,
assumption and other agreements which counsel for NBC and Xoom determine are
reasonably necessary to effect the transactions described therein. All of the
assets transferred pursuant to SECTION 2.2(A) shall be transferred free and
clear of all Liens (other than any Liens imposed by or on behalf of Xenon 2).
(c) In exchange for the assignments and contributions set
forth in SECTION 2.2(A), at the Closing and concurrently therewith, NMC shall
issue 12,173,111 shares of its common stock, par value $.0001 per share, which
until the Effective Time shall represent all of the outstanding capital stock of
NMC, to NBC Multimedia.
II.3 GE INVESTMENTS SUB PURCHASE OF VIDEOSEEKER ASSETS. (a) Subject to
the satisfaction or waiver of the conditions set forth in this Agreement, at the
Closing and immediately prior to the Effective Time, GE Investments Sub will
purchase and NBC will sell, assign, transfer, convey and deliver the Videoseeker
Assets, free and clear of all Liens except those set forth on Schedule 1.1(e),
in consideration for a reduction in the amount of indebtedness of NBC owing to
GE Investments Sub.
(b) In connection with the transactions described in SECTION
2.3(A), GE Investments Sub and NBC shall execute all bills of sale and other
agreements which are reasonably necessary to affect the transactions described
therein.
II.4 CONTRIBUTIONS TO XENON 2; ISSUANCES OF XENON 2 CAPITAL STOCK. (a)
Subject to the satisfaction or waiver of the conditions set forth in this
Agreement, at the Closing and immediately after the Effective Time, NBC shall
cause NBC Multimedia to transfer to Xenon 2, and Xenon 2 shall accept, all of
the right, title and interest to the SNAP Units held by NBC Multimedia,
including NBC Multimedia's rights pursuant to SECTION 7.3 and SECTION 7.4 of the
SNAP LLC Agreement to increase the number of SNAP Units held by NBC Multimedia
as provided in such agreement.
(b) In connection with the transactions described in SECTION
2.4(A), NBC, NBC Multimedia and Xenon 2 shall execute all contribution,
transfer, assumption and other
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11
agreements which counsel for NBC and Xoom determine are reasonably necessary to
effect the transactions described therein. All of the assets transferred
pursuant to SECTION 2.4(A) shall be transferred free and clear of all Liens
(other than any Liens imposed by or on behalf of Xenon 2).
(c) In exchange for the assignment and contribution of the
SNAP Units set forth in SECTION 2.4(A), at the Closing and concurrently
therewith, Xenon 2 shall issue 11,417,569 shares of Class B Common Stock to NBC
Multimedia; PROVIDED, that in no event shall NBC and its Affiliates be issued
shares of Common Stock of Xenon 2 that would result in their aggregate holding
of such shares being equal to or greater than 50% of the outstanding shares of
Common Stock of Xenon 2 after giving effect to all of the issuances of such
Common Stock on the Closing Date.
(d) Upon the original issuance of the shares of Class B Common
Stock by Xenon 2 to NBC Multimedia pursuant to SECTION 2.2 and SECTION 2.4(C),
and until such time as the same is no longer required hereunder or under the
applicable requirements of the Securities Act or applicable state securities
laws, any certificate issued representing any such Class B Common Stock shall
bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS (A) THEY ARE SO REGISTERED OR (B) AN EXEMPTION FROM REGISTRATION
IS AVAILABLE AND THE ISSUER IS FURNISHED WITH AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER TO THAT EFFECT. IN ADDITION, SUCH
SHARES MAY ONLY BE TRANSFERRED PURSUANT TO THE PROVISIONS OF A
GOVERNANCE AND INVESTOR RIGHTS AGREEMENT, DATED AS OF ______, 1999, AS
AMENDED FROM TIME TO TIME, AMONG NATIONAL BROADCASTING COMPANY, INC.
AND THE ISSUER COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL OFFICE OF
THE ISSUER."
II.5 NOTE ISSUANCES; PURCHASE OF VIDEOSEEKER ASSETS BY XENON 2. (a)
Subject to the satisfaction or waiver of the conditions set forth in this
Agreement, after the Effective Time and the consummation of all of the
transactions contemplated by SECTIONS 2.1, 2.2, 2.3 and 2.4 of this Agreement,
GE Investments Sub shall purchase the Xenon 2 Convertible Note from Xenon 2 in
exchange for an assignment of the NBC Note from GE Investments Sub to Xenon 2
and the assignment and sale by GE Investments Sub of the Videoseeker Assets to
Xenon 2, free and clear of all Liens, except those set forth on Schedule 1.1(e).
(b) In connection with the transactions described in SECTION
2.5(A), NBC, GE Investments Sub and Xenon 2 shall execute all deeds, bills of
sale, assignments and purchase, transfer and other agreements which counsel for
NBC and Xoom determine are reasonably
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12
necessary to effect the transactions described therein. Upon surrender of the
NBC Note to NBC, NBC shall issue a new note payable to Xenon 2 having the terms
set forth in EXHIBIT H.
II.6 REQUIRED CONSENTS. Notwithstanding anything to the contrary
contained in this Agreement, to the extent that the sale, conveyance, transfer,
assignment or delivery or attempted sale, conveyance, transfer, assignment or
delivery to NMC or Xenon 2 of any of the assets (including any assumed contract,
license or other agreement) is prohibited by applicable law or would require any
governmental or third-party authorization, approval, consent or waiver and such
authorization, approval, consent or waiver shall not have been obtained prior to
the Closing, this Agreement shall not constitute a sale, conveyance, transfer,
assignment or delivery, or an attempted sale, conveyance, transfer, assignment
or delivery thereof if any of the foregoing would constitute a breach of
applicable law or the rights of any third party. Following the Closing, the
parties shall use their reasonable commercial efforts, and shall cooperate with
each other, to obtain promptly such authorizations, approvals, consents or
waivers; PROVIDED, HOWEVER, that neither NBC, Xenon 2 nor any of their
respective Affiliates shall be required to pay any consideration therefor, other
than filing, recordation or similar fees payable to any governmental authority,
which fees shall be paid by Xenon 2. Pending or in the absence of such
authorization, approval, consent or waiver, the parties shall use their
reasonable commercial efforts to enter into reasonable and lawful arrangements
designed to provide to Xenon 2 the benefits and liabilities of use of such
assets from and after the Effective Time.
II.7 TAX REFUNDS. Notwithstanding anything herein to the contrary,
Xenon 2 shall be entitled to all refunds of Taxes with respect to the
activities, properties or employees of NMC or SNAP attributable to the period
after the Closing Date.
ARTICLE III
THE MERGER
III.1 THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General Corporation
Law (the "DGCL"), NMC shall be merged (the "MERGER") with and into Xenon 2 at
the Effective Time. Following the Merger, the separate corporate existence of
NMC shall cease and Xenon 2 shall continue as the surviving corporation (the
"SURVIVING CORPORATION").
III.2 CLOSING. Subject to the satisfaction or waiver (subject to
applicable law) of the conditions set forth in ARTICLE VII, the closing of the
Merger and the transactions contemplated by this Agreement (the "CLOSING") will
take place on the second Business Day after all the conditions to Closing (other
than conditions that, by their terms, cannot be satisfied until the Closing
Date) set forth in ARTICLE VII shall have been satisfied or waived, unless this
Agreement has been theretofore terminated pursuant to its terms, unless another
time or date is agreed to in writing by the parties hereto (the actual time and
date of the Closing being referred to herein as the "CLOSING DATE"). The Closing
shall be held at the offices of Simpson Thacher & Bartlett, 425
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13
Lexington Avenue, New York, New York, 10017, unless another place is agreed to
in writing by the parties hereto.
III.3 EFFECTIVE TIME. As soon as practicable following the satisfaction
of the conditions set forth in ARTICLE VII, the parties shall (i) file a
certificate of merger (the "CERTIFICATE OF MERGER") executed in accordance with
the relevant provisions of the DGCL and (ii) make all other filings or
recordings required under the DGCL. The Merger shall become effective at such
time as shall be specified in the Certificate of Merger (the date and time the
Merger becomes effective being the "EFFECTIVE TIME").
III.4 EFFECTS OF THE MERGER. At and after the Effective Time, the
Merger will have the effects set forth in the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, powers and franchises of NMC and Xenon 2 shall be
vested in the Surviving Corporation, and all debts, liabilities and duties of
NMC and Xenon 2 shall become the debts, liabilities and duties of the Surviving
Corporation.
III.5 CERTIFICATES OF INCORPORATION. Xoom shall cause the certificate
of incorporation of Xenon 2 to be amended and restated immediately prior to the
Effective Time to change the name of Xenon 2 to "NBC Internet, Inc." and so as
to otherwise read in its entirety as set forth in EXHIBIT 3.5, with such changes
therein as NBC and Xenon 2 may agree upon prior to the Effective Time, and such
amended and restated certificate of incorporation shall be the certificate of
incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law.
III.6 BY-LAWS. Xoom shall cause the by-laws of Xenon 2 to be amended
and restated effective prior to the Effective Time so as to read in their
entirety as set forth in EXHIBIT 3.6, with such changes therein as NBC and Xenon
2 may agree upon prior to the Effective Time, and such amended and restated
by-laws shall be the by-laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
III.7 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION AND XENON 2. The
officers and directors of the Surviving Corporation shall be as provided in
SCHEDULE 3.7, which individuals will serve as officers and directors of the
Surviving Corporation until the earlier of their resignation or removal or
otherwise ceasing to be an officer or director or until their respective
successors are duly elected and qualified.
III.8 EFFECT ON CAPITAL STOCK. (a) At the Effective Time by virtue of
the Merger and without any action on the part of the holder thereof, each share
of common stock, par value $0.0001, of NMC (the "NMC COMMON STOCK") issued and
outstanding immediately prior to the Effective Time (other than shares of NMC
Common Stock held by NMC, all of which shall be canceled as provided in SECTION
3.8(C)) shall be converted into one share of Class B common stock, par value
$0.0001 per share, of the Surviving Corporation (the "MERGER CONSIDERATION")
<PAGE>
14
and all shares of common stock of the Surviving Corporation issued and
outstanding at the Effective Time shall remain outstanding after the Merger.
(b) As a result of the Merger and without any action on the
part of the holders thereof, at the Effective Time, all shares of NMC Common
Stock shall be canceled and shall cease to exist, and each holder of a
certificate which immediately prior to the Effective Time represented any such
shares of NMC Common Stock (a "CERTIFICATE") shall thereafter cease to have any
rights with respect to such shares of NMC Common Stock, except as provided
herein or by law.
(c) Each share of NMC Common Stock held by NMC at the
Effective Time shall, by virtue of the Merger, cease to be outstanding and shall
be canceled and no stock of Xenon 2 or other consideration shall be delivered in
exchange therefor.
(d) Upon the original issuance of the shares of Class B Common
Stock by Xenon 2 in connection with the Merger, and until such time as the same
is no longer required hereunder or under the applicable requirements of the
Securities Act or applicable state securities laws, any certificate issued
representing any such Class B Common Stock shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS (A) THEY ARE SO REGISTERED OR (B) AN EXEMPTION FROM REGISTRATION
IS AVAILABLE AND THE ISSUER IS FURNISHED WITH AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER TO THAT EFFECT. IN ADDITION, SUCH
SHARES MAY ONLY BE TRANSFERRED PURSUANT TO THE PROVISIONS OF A
GOVERNANCE AND INVESTOR RIGHTS AGREEMENT, DATED AS OF ________, 1999,
AS AMENDED FROM TIME TO TIME AMONG NATIONAL BROADCASTING COMPANY, INC.
AND THE ISSUER COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL OFFICE OF
THE ISSUER."
III.9 EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, NBC shall cause NBC Multimedia to deliver its Certificate to
Xenon 2 and NBC Multimedia shall be entitled to receive in exchange a
certificate representing, in the aggregate, the number of shares into which the
NMC Common Stock was converted pursuant to SECTION 3.8(A).
III.10 NO FURTHER OWNERSHIP RIGHTS IN NMC COMMON STOCK. All shares of
Class B Common Stock issued upon conversion of NMC Common Stock in accordance
with the terms of this ARTICLE III shall be deemed to have been issued in full
satisfaction of all rights pertaining to the shares of NMC Common Stock formerly
represented thereby.
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15
III.11 FURTHER ASSURANCES. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of NMC or Xenon 2, any deeds,
bills of sale, assignments or assurances and to take and do, in the name and on
behalf of NMC or Xenon 2, any other actions and things to vest, perfect or
confirm of record or otherwise in the Surviving Corporation any and all right,
title and interest in, to and under any of the rights, properties or assets
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger.
III.12 FEDERAL INCOME TAX CONSEQUENCES. For federal income tax
purposes, it is intended that the transfers described in SECTION 2.1, SECTION
2.2 and SECTION 2.3 and the Merger qualify as a contribution to Xenon 2
qualifying under Section 351 of the Code.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
IV.1 REPRESENTATIONS AND WARRANTIES OF NBC. NBC represents and
warrants to Xoom and Xenon 2 as follows, PROVIDED that none of the
representations or warranties contained in this SECTION 4.1 are made with
respect to SNAP, its assets, Liabilities or the business conducted thereby
except paragraphs (a), (b) and (c) and the second sentence of paragraph (g) to
the extent related to the ownership or transfer of the SNAP Units:
(a) DUE ORGANIZATION, POWER AND GOOD STANDING. NBC, NMC and
each of Neon's Subsidiaries that is a party to an Implementing Agreement is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and has the requisite power and authority to own,
lease and operate its properties and to conduct its business as now conducted by
it. NBC, NMC and each of Neon's Subsidiaries that is a party to an Implementing
Agreement has all requisite power and authority to enter into this Agreement and
the Implementing Agreements to which it is a party and to perform its
obligations hereunder and thereunder. NBC, NMC and each of Neon's Subsidiaries
that is a party to an Implementing Agreement is qualified to do business and is
in good standing in all jurisdictions in which it conducts its business, except
where the failure to do so would not, individually or in the aggregate, taken as
a whole, have a Material Adverse Effect.
(b) AUTHORIZATION AND VALIDITY OF AGREEMENTS. The execution,
delivery and performance by NBC and its Subsidiaries of the Existing Merger
Agreement, this Agreement and the Implementing Agreements to which it or its
Subsidiaries is a party and the consummation by NBC and its Subsidiaries of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate or other governance action (including any required approval
from NBC Parent) on the part of NBC and its Subsidiaries. Each of the Existing
Merger Agreement, this Agreement, the Option Agreement and the Voting Agreement
has been, and each of the Implementing Agreements to which NBC or any of its
Subsidiaries is a party will on the Closing Date be, duly executed and delivered
by NBC and its Subsidiaries and constitutes or, in the case of the Implementing
Agreements, upon execution thereof will constitute, a valid
<PAGE>
16
and legally binding obligation of NBC and its Subsidiaries, enforceable against
each in accordance with its terms.
(c) GOVERNMENTAL APPROVALS; CONSENTS. Except as described in
SCHEDULE 4.1(C), the execution, delivery and performance of this Agreement, the
Option Agreement and the Implementing Agreements by NBC and its Subsidiaries and
the consummation by such Persons of the transactions contemplated hereby and
thereby will not (i) conflict with or result in a breach of any provision of the
certificate of incorporation or bylaws or other governing documents of NBC or
its Subsidiaries; (ii) require any consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Authority; (iii) require
the consent or approval of any Person (other than a Governmental Authority or
any approvals required under SECTION 4.1(B)) or violate or conflict with, or
result in a breach of any provision of, constitute a default (or an event which
with notice or lapse of time or both would become a default) or give to any
third party any right of termination, cancellation, amendment or acceleration
under, or result in the creation of a Lien on any of the NBC Multimedia Assets
or the Videoseeker Assets under, any of the terms, conditions or provisions of
any contract or license to which NBC or any of its Subsidiaries is a party or by
which it or its assets or property are bound; or (iv) violate or conflict with
any order, writ, injunction, decree, statute, rule or regulation applicable to
NBC or any of its Subsidiaries; other than any consents, approvals,
authorizations and permits the failure of which to obtain and any violations,
conflicts, breaches defaults and other matters set forth pursuant to clauses
(ii), (iii) and (iv) above which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
(d) CERTAIN FEES. Neither NBC or any of its Subsidiaries nor
the officers, directors or employees, thereof have employed any broker or finder
or incurred any other Liability for any brokerage fees, commissions or finders'
fees in connection with the transactions contemplated hereby; except that NBC
has employed BT Alex. Brown Incorporated whose fees and expenses will be paid in
accordance with SECTION 10.5 if the transactions contemplated by this Agreement
are consummated and will otherwise be paid by NBC.
(e) FINANCIAL INFORMATION, LIABILITIES. NBC has provided Xenon
2 with certain historical financial information relating to the NBC Multimedia
Businesses set forth on SCHEDULE 4.1(E) hereto (the "FINANCIAL INFORMATION").
The Financial Information has been prepared in accordance with the accounting
principles and procedures set forth on SCHEDULE 4.1(E) and is true and correct
in all material respects. All of the NBC Multimedia Liabilities and Videoseeker
Liabilities primarily relate to the NBC Multimedia Businesses.
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
on SCHEDULE 4.1(F), since December 31, 1998, NBC and its Subsidiaries have
conducted the NBC Multimedia Businesses in all material respects only in the
ordinary course, consistent with past practice and there has not been (i) any
material adverse change in the assets, liabilities, business, results of
operations or financial condition of the NBC Multimedia Businesses or (ii)
except in the ordinary course of business consistent with past practice and
except for such matters that would not reasonably be expected to have a Material
Adverse Effect, any damage, destruction, loss,
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17
conversion, condemnation or taking by eminent domain related to any material NBC
Multimedia Asset. In addition, except as disclosed on SCHEDULE 4.1(F), from
December 31, 1998 to May 9, 1999, neither NBC nor any of its Subsidiaries has
(A) acquired or disposed of any material assets of an NBC Multimedia Business or
entered into any agreement or other arrangement for any such acquisition or
disposition or (B) relinquished, forgiven or canceled any material debts or
claims with respect to an NBC Multimedia Business.
(g) TITLE TO PROPERTIES; ABSENCE OF LIENS. NBC or its
Subsidiaries have, and at the Closing, NMC will acquire, good title to (or, in
the case of real estate or equipment leases, a valid lease to) all properties,
assets and other rights included in the NBC Multimedia Assets, free and clear of
all Liens except for Permitted Liens and Liens described on Schedule 1.1(c). NBC
or its Subsidiaries have, and at the Closing, immediately prior to the Effective
Time, GE Investments Sub will acquire, and after the Effective Time Xenon 2 will
acquire, good title to (or in the case of real estate or equipment leases, a
valid lease to) all properties, assets and other rights included in the
Videoseeker Assets, free and clear of all Liens except for Permitted Liens and
Liens described on Schedule 1.1(e). NBC or its Subsidiaries have, and at the
Closing, Xenon 2 will acquire, good title to all of the SNAP Units held by NBC
and its Subsidiaries, free and clear of all Liens (other than Liens created,
imposed or granted by Xenon 2 and as set forth in the SNAP LLC Agreement).
Assuming the consummation of the transactions contemplated by the Xenon 2 Merger
Agreement in accordance with the terms and conditions thereof, at the Closing,
Xenon 2 will acquire good title to all of the SNAP Units.
(h) PROPERTIES, CONTRACTS, PERMITS AND OTHER DATA. Except as
specified in SCHEDULE 4.1(H) hereto, all rights, licenses, leases,
registrations, applications, contracts, commitments and other agreements of NBC
and its Subsidiaries with respect to the NBC Multimedia Businesses or by which
the NBC Multimedia Assets or Videoseeker Assets are bound are in full force and
effect and are valid and enforceable in accordance with their respective terms
except for such failures to be in full force and effect and valid and
enforceable that would not, individually or in the aggregate, have a Material
Adverse Effect. No NBC Multimedia Business is in breach or default in the
performance of any obligation thereunder and no event has occurred or has failed
to occur whereby any of the other parties thereto have been or will be released
therefrom or will be entitled to refuse to perform thereunder, the enforcement
of which would have, either individually or in the aggregate, a Material Adverse
Effect.
(i) LEGAL PROCEEDINGS. Except as described in SCHEDULE 4.1(I),
there is no litigation, proceeding or governmental investigation to which NBC or
its Subsidiaries is a party pending or, to the best Knowledge of NBC, threatened
against it or its Subsidiaries which, either individually or in the aggregate,
would reasonably be expected to result in a Material Adverse Effect or which, as
of May 9, 1999, seeks to restrain or enjoin the consummation of any of the
transactions contemplated hereby. NBC and its Subsidiaries are not party to, nor
are the NBC Multimedia Assets or Videoseeker Assets subject to, any judgment,
writ, decree, injunction or order entered by any court or governmental authority
(domestic or foreign) that, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect.
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18
(j) LABOR CONTROVERSIES. Except as set forth on SCHEDULE
4.1(J), (i) there have been no labor strikes, slow-downs, work stoppages,
lock-outs or other material labor controversies or disputes during the past two
years, nor is any such strike, slow-down, work stoppage or other material labor
controversy or dispute pending or, to the best Knowledge of NBC, threatened, in
each case with respect to the current or former employees of the NBC Multimedia
Businesses, (ii) none of the NBC Multimedia Businesses are a party to any labor
contract, collective bargaining agreement, contract, letter of understanding or,
to Neon's Knowledge, any other agreement, formal or informal, with any labor
union or organization, nor are any of the NBC Multimedia Businesses' employees
represented by any labor union or organization, and (iii) no NBC Multimedia
Business has closed any facility, effectuated any layoffs of employees or
implemented any early retirement, separation or window program within the past
two years nor has any NBC Multimedia Business planned or announced any such
action or program for the future.
(k) INTELLECTUAL PROPERTY. NBC or its Subsidiaries own or are
licensed or otherwise have the right to use, all Intellectual Property currently
used in the NBC Multimedia Businesses (the "NBC MULTIMEDIA BUSINESS INTELLECTUAL
PROPERTY"), except as would not, individually or in the aggregate, have a
Material Adverse Effect. No NBC Multimedia Business has infringed upon or is in
conflict with the Intellectual Property of any third party nor has any NBC
Multimedia Business received any written notice of any claim that any NBC
Multimedia Business has infringed upon or is in conflict with any Intellectual
Property of any third party, except as would not, individually or in the
aggregate, have a Material Adverse Effect. Except as set forth on SCHEDULE
4.1(K), none of the rights of NBC or its Subsidiaries to the NBC Multimedia
Business Intellectual Property will be impaired in any way by the transactions
provided for herein, and all of the rights of NBC and its Subsidiaries to the
NBC Multimedia Business Intellectual Property will be fully enforceable by NMC
after the Closing Date to the same extent as such rights would have been
enforceable by NBC or its Subsidiaries before the Closing, without the consent
or agreement of any other party other than any consents and agreements the
failure of which to obtain, individually or in the aggregate, would not have a
Material Adverse Effect. There have been no claims (whether private or
governmental) against NBC or its Subsidiaries asserting the invalidity or
unenforceability of its ownership, license or other right to use any of the
registered NBC Multimedia Business Intellectual Property.
(l) GOVERNMENT LICENSES, PERMITS, ETC. Except as set forth on
SCHEDULE 4.1(L), NBC and its Subsidiaries have all licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental Authorities
required for the conduct of each NBC Multimedia Business as presently conducted,
except where failure would not, individually or in the aggregate, have a
Material Adverse Effect.
(m) CONDUCT OF BUSINESS IN COMPLIANCE WITH REGULATORY AND
CONTRACTUAL REQUIREMENTS. NBC and its Subsidiaries have complied with all
applicable laws, ordinances, regulations or orders or other requirements of any
Governmental Authority applicable to the NBC Multimedia Businesses, including,
without limitation, all rules, regulations and administrative orders relating to
anti-competitive practices, discrimination, employment, health
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19
and safety, except where the failure to be in such compliance would not have,
either individually or in the aggregate, a Material Adverse Effect.
(n) ENVIRONMENTAL MATTERS. Except as set forth on SCHEDULE
4.1(N) and except for matters that, individually or in the aggregate, would not
have a Material Adverse Effect, (i) NBC and its Subsidiaries comply and have
complied with all Environmental Laws applicable to the NBC Multimedia
Businesses, and possess and comply with and have possessed and complied with all
Environmental Permits for each NBC Multimedia Business; (ii) there are and have
been no Materials of Environmental Concern, or other conditions, at any property
owned or leased by NBC or any of its Subsidiaries and included in the NBC
Multimedia Assets or Videoseeker Assets that could give rise to any liability
under any Environmental Law or result in costs arising out of any Environmental
Law; (iii) no judicial, administrative, or arbitral proceeding (including any
notice of violation or alleged violation) under any Environmental Law to which
any NBC or any of its Subsidiaries is, or to the Knowledge of NBC and its
Subsidiaries will be, named as a party is pending or, to the Knowledge of NBC,
threatened, with respect to any NBC Multimedia Business nor is any NBC
Multimedia Business the subject of any investigation in connection with any such
proceeding or potential proceeding; (iv) there are no past, present, or
anticipated future events, conditions, circumstances, practices, plans, or legal
requirements that could be expected to prevent, or materially increase the
burden on any NBC Multimedia Business of complying with applicable Environmental
Laws or of obtaining, renewing, or complying with all Environmental Permits
required under such laws; and (v) NBC has provided to the other parties true and
complete copies of all Environmental Reports relating to the NBC Multimedia
Businesses in the possession or control of NBC and its Subsidiaries.
(o) EMPLOYEE BENEFIT MATTERS. (i) Neither NBC nor any of its
Subsidiaries nor any Member of the Controlled Group of which it is a member has
(A) engaged in, or is a successor or parent corporation to an entity that has
engaged in, a transaction described in Sections 4069 or 4212(c) of ERISA or (B)
incurred, or could reasonably be expected to incur, any liability under (I)
Title IV of ERISA arising in connection with the termination of, or a complete
or partial withdrawal from, any plan covered or previously covered by Title IV
of ERISA or (II) Section 4971 of the Code that in either case could become a
liability of Xenon 2 or any Subsidiary after the Closing Date. The assets of NBC
and all of its Subsidiaries are not now, nor will they after the passage of time
be, subject to any lien imposed under Code Section 412(n) by reason of a failure
of any of NBC or any Subsidiary or any Member of the Controlled Group of which
it is a member to make timely installments or other payments required under Code
Section 412. SCHEDULE 6.7(A) sets forth (i) the names and salaries of each
employee to whom Xenon 2 shall offer employment pursuant to SECTION 6.7 and (ii)
any employment agreements between such employees and NBC or any of its
Subsidiaries.
(ii) Except as provided on SCHEDULE 4.1(O), no plan exists
with respect to the Transferred Employees that could result in the payment to
them of any money or other property or accelerate or provide any other rights or
benefits to them as a result of the transaction contemplated by this Agreement,
whether or not such payment would constitute a parachute payment within the
meaning of Code Section 280G.
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(p) ABSENCE OF CERTAIN BUSINESS PRACTICES. No officer,
employee or agent of any NBC Multimedia Business, nor any other Person acting on
behalf of any NBC Multimedia Business, has, directly or indirectly, within the
past five years given or agreed to give any gift or similar benefit to any
customer, supplier, governmental employee or other Person or entity who is or
may be in a position to help or hinder any NBC Multimedia Business (or assist
such NBC Multimedia Business in connection with any actual or proposed
transaction) which (x) subjects any party or any of their respective
Subsidiaries, to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (y) if not given in the past, would have had a
Material Adverse Effect or (z) if not continued in the future, would have a
Material Adverse Effect or which might subject any party or any of their
respective Subsidiaries, to suit or penalty in any private or governmental
litigation or proceeding.
(q) ENTIRE BUSINESS. Except as set forth in SCHEDULE 4.1(Q),
the NBC Multimedia Assets and the Videoseeker Assets, including the License
Agreement, will enable Xenon 2 to conduct the NBC Multimedia Businesses after
the Effective Time in substantially the same manner as they are currently being
conducted.
(r) TAX MATTERS. (i) NBC and each of its Subsidiaries have
timely filed (or have had timely filed on their behalf) or will timely file or
cause to be timely filed, all Tax Returns required by applicable law to be filed
by any of them prior to the Effective Time with respect to the NBC Multimedia
Businesses or the assets, employees or businesses of or to be contributed by NBC
or its Affiliates to CNBC.com. All such Tax Returns are or will be true,
complete and correct in all material respects. There are no outstanding
agreements or waivers extending the statutory period of limitation applicable to
any of such Tax Returns and neither NBC nor any of its Subsidiaries has
requested any extension of time within which to file any material Tax Return
with respect to the NBC Multimedia Businesses or the assets, employees or
businesses of or to be contributed by NBC or its Affiliates to CNBC.com, which
return has not yet been filed. There is no pending claim by any authority of a
jurisdiction where NBC or any of its Subsidiaries has not filed Tax Returns that
NBC or such Subsidiary is or may have been subject to taxation by that
jurisdiction with respect to the NBC Multimedia Businesses or the assets,
employees or businesses of or to be contributed by NBC or its Affiliates to
CNBC.com. All Taxes required to be withheld by NBC or its Affiliates with
respect to the NBC Multimedia Businesses or CNBC.com or their activities,
properties, employees or independent contractors have been withheld and paid
over to the appropriate Tax Authority.
(ii) NBC and each of its Subsidiaries have paid
(or have had paid on their behalf), or where payment is not yet due, have
established (or have had established on their behalf and for their sole benefit
and recourse), or will establish or cause to be established on or before the
Effective Time, an adequate accrual for the payment of, all Taxes due with
respect to any period beginning prior to the Effective Time with respect to the
NBC Multimedia Businesses or the assets, employees or businesses of or to be
contributed by NBC or its Affiliates to CNBC.com. No deficiency or adjustment
for any Taxes has been threatened, proposed, asserted or assessed against NBC or
any of its Subsidiaries with respect to the NBC
<PAGE>
21
Multimedia Businesses or the assets, employees or businesses of or to be
contributed by NBC or its Affiliates to CNBC.com. There are no liens for Taxes
upon the assets of NBC or any of its Subsidiaries, except for liens for current
Taxes not yet due, with respect to the NBC Multimedia Businesses or the assets,
employees or businesses of or to be contributed by NBC or its Affiliates to
CNBC.com.
(iii) With respect to the NBC Multimedia
Businesses or the assets, employees or businesses of or to be contributed by NBC
or its Affiliates to CNBC, neither NBC nor any of its Subsidiaries is required
to include in income any adjustment pursuant to Section 481(a) of the Code or
any similar applicable provision by reason of a voluntary change in accounting
method initiated by NBC or any of its Subsidiaries, and neither the Internal
Revenue Service nor any taxing authority has proposed in writing any such
adjustment or change in accounting method. Neither NBC nor any of its
Subsidiaries has received a tax ruling or entered into a closing agreement with
any taxing authority that would have a Material Adverse Effect upon the NBC
Multimedia Businesses or the assets, employees or businesses of or to be
contributed by NBC or its Affiliates to CNBC.
(iv) With respect to the NBC Multimedia Business,
neither NBC nor any of its Subsidiaries has made any payments, is obligated to
make any payments, or is a party to any agreement, in each case, that could
obligate it to make any payments that would not be deductible pursuant to
Section 280G of the Code.
(v) None of the NBC Multimedia Businesses or the
business of CNBC.com has a "permanent establishment," as defined in any
applicable Tax treaty or convention of the United States of America, or fixed
place of business in any foreign country. NBC and its Affiliates are in
compliance with the terms and conditions of any applicable tax exemptions,
agreements or orders of any foreign government to which it may be subject or
which it may have claimed with respect to the NBC Multimedia Businesses or the
assets, employees or businesses of or to be contributed by NBC or its Affiliates
to CNBC.com, and the transactions contemplated by this Agreement will not have
any adverse effect on such compliance.
(vi) CNBC.com shall initially be treated as a
partnership for federal income tax purposes.
(s) ACCREDITED INVESTOR. NBC is an "accredited investor"
within the meaning of Rule 501 of Regulation D under the Securities Act. NBC (i)
is acquiring the Class B Common Stock for investment for its own account and not
with a view to, or for sale in connection with, any distribution thereof, in
violation of the Securities Act; (ii) has had an opportunity to ask questions of
the officers and directors of, and has had access to information concerning,
Xenon 2 and its Subsidiaries; (iii) has knowledge, sophistication and experience
in business and financial matters and risks of such investment; (iv) is able to
bear the economic risk of such investment; and (v) is able to afford a complete
loss of such investment.
(t) YEAR 2000 COMPLIANCE. With respect to the NBC Multimedia
Businesses, NBC has adopted and implemented a commercially reasonable plan to
provide (x) that the
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22
change of the year from 1999 to the year 2000 will not have a Material Adverse
Effect and (y) that the impacts of such change on the venders and customers of
the NBC Multimedia Businesses will not have a Material Adverse Effect. In Neon's
reasonable best estimate, no expenditures materially in excess of currently
budgeted items previously disclosed to Xenon 2 will be required in order to
cause the information and business systems of the NBC Multimedia Businesses to
operate properly following the change of the year 1999 to the year 2000. NBC
reasonably expects any material issues related to such change of the year will
be resolved in accordance with the timetable set forth in such plan (and in any
event on a timely basis in order to be resolved before the year 2000). Between
May 9, 1999 and the Effective Time, NBC shall continue to use commercially
reasonable efforts to implement such plan.
(u) NMC. The authorized capital stock of NMC consists of 100
shares of common stock, par value $0.0001 per share, of which 100 shares have
been issued and are outstanding and held by NBC Multimedia as of May 9, 1999.
NMC has not conducted any activities other than in connection with its
organization, the negotiation and execution of this Agreement and the
consummation of the transactions contemplated hereby. Prior to the Closing Date,
NMC's certificate of incorporation will be amended to provide for an authorized
capital stock sufficient to permit NMC to issue shares of its common stock as
described in SECTION 2.2(C).
(v) NO OTHER LIABILITIES. Other than the NBC Multimedia
Liabilities or Videoseeker Liabilities or as set forth on Schedule 1.1(e), there
are no Liabilities of NBC or its Subsidiaries or GE Investments Sub that will be
transferred or assigned to, or assumed by, NMC in connection with the
transactions set forth in SECTION 2 or as to which NMC or Xenon 2 could be
liable.
IV.2 REPRESENTATIONS AND WARRANTIES WITH RESPECT TO SNAP. NBC
represents and warrants to Xenon 2 as follows:
(a) DUE ORGANIZATION, POWER AND GOOD STANDING. SNAP is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and has the requisite power and authority to own,
lease and operate its properties and to conduct its business as now conducted by
it. SNAP is qualified to do business and is in good standing in all
jurisdictions in which it conducts its business, except where the failure to do
so would not, individually or in the aggregate, taken as a whole, have a
Material Adverse Effect. SNAP has no Subsidiaries other than SNAP International
LLC which has not commenced business operations and has no material assets or
liabilities.
(b) AUTHORIZATION AND VALIDITY OF AGREEMENT. The transfer of
the interests in SNAP pursuant hereto have been duly authorized by all necessary
action on the part of SNAP.
(c) GOVERNMENTAL APPROVALS; CONSENTS. Except as described in
SCHEDULE 4.2(C), the execution, delivery and performance by NBC of this
Agreement and the Implementing Agreements to which it is a party and the
consummation by NBC of the transactions
<PAGE>
23
contemplated hereby and thereby will not (i) conflict with or result in a breach
of any provision of the SNAP LLC Agreement; (ii) require any consent, approval,
authorization or permit of, or filing with, or notification to, any Governmental
Authority; (iii) require the consent or approval of any Person (other than a
Governmental Authority) or violate or conflict with, or result in a breach of
any provision of, constitute a default (or an event which with notice or lapse
of time or both would become a default) or give to any third party any right of
termination, cancellation, amendment or acceleration under, or result in the
creation of a Lien on any of the assets of SNAP under any of the terms,
conditions or provisions of any contract or license to which SNAP is a party or
by which it or its assets or property are bound; or (iv) violate or conflict
with any order, writ, injunction, decree, statute, rule or regulation applicable
to SNAP; other than any consents, approvals, authorizations and permits the
failure of which to obtain and any violations, conflicts, breaches defaults and
other matters set forth pursuant to clauses (ii), (iii) and (iv) above which,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
(d) CERTAIN FEES. Neither SNAP nor any of the officers,
directors or employees, thereof has employed any broker or finder or incurred
any other Liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated hereby except that SNAP has
employed of BT Alex. Brown Incorporated whose fees and expenses will be paid in
accordance with SECTION 10.5 of the transactions contemplated by this Agreement
are consummated and otherwise will be paid by SNAP.
(e) EQUITY INTERESTS. As of May 9, 1999, the outstanding
equity interests in SNAP and the holders thereof are set forth on SCHEDULE
4.2(E) hereto. All outstanding SNAP Units are duly authorized, validly issued,
fully paid and non-assessable and are not subject to any preemptive rights
except as set forth in the SNAP LLC Agreement and have been issued in compliance
with federal and state securities laws. There are no declared or accrued unpaid
distributions with respect to any SNAP Units. The limited liability company
interests of SNAP International LLC have been duly authorized and issued, and
are fully paid and non-assessable and are owned by SNAP free and clear of all
Liens. Except for the capital stock of its Subsidiaries, SNAP does not own,
directly or indirectly, more than 10% of the capital stock or other ownership
interest in any Person and to the extent it owns less than 10% of the capital
stock or other ownership interest in any Person, such interests in the aggregate
do not constitute a material part of SNAP's assets. Except as set forth on
SCHEDULE 4.2(E) hereto or as provided under the terms of this Agreement, no SNAP
Units are reserved for issuance, and there are no contracts, agreements,
commitments or arrangements obligating SNAP to (i) offer, sell, issue or grant
any equity interests in, or any options, warrants or rights of any kind to
acquire any equity interests in, or any other securities that are convertible
into or exchangeable for any equity interests in SNAP or (ii) to redeem,
purchase or acquire, or offer to purchase or acquire, any outstanding equity
interests in or any outstanding options, warrants or rights of any kind to
acquire any equity interests in, or any other outstanding securities that are
convertible into or exchangeable for any equity interests in SNAP. At the
Effective Time, after giving effect to the transactions contemplated by the
Xenon 2 Merger Agreement and this Agreement, Xenon 2 will
<PAGE>
24
own all of the outstanding SNAP Units, other than SNAP Units issued pursuant to
the exercise of SNAP Options, free and clear of all Liens.
(f) FINANCIAL INFORMATION, LIABILITIES. The unaudited balance
sheet for SNAP as at December 31, 1998 (the "SNAP BALANCE SHEET") and the
related unaudited income statement for the six months ending December 31, 1998,
copies of which are attached hereto as SCHEDULE 4.2(F) present fairly in all
material respects the financial condition and results of operations of SNAP as
at December 31, 1998 and for the period then ended subject to normal year-end
audit adjustments and financial statement footnote disclosure. Except as set
forth on SCHEDULE 4.2(G), except as and to the extent disclosed in the SNAP
Balance Sheet, and except for liabilities incurred in connection with the
transactions contemplated by this Agreement and the Implementing Agreements,
there are no liabilities, whether absolute, accrued, contingent or otherwise, of
SNAP, that would be required to be reflected on, or reserved against, in such
consolidated balance sheet of SNAP, except for (x) liabilities which, singly or
in the aggregate, would not have a Material Adverse Effect and (y) liabilities
incurred subsequent to the date of such balance sheet by SNAP in the ordinary
course of business consistent with past practice.
(g) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
on SCHEDULE 4.2(G) since December 31, 1998, SNAP has conducted its business in
all material respects only in the ordinary course consistent with past practice
and there has not been (i) any material adverse change in the assets,
liabilities, business, results of operations or financial condition of SNAP, or
(ii) except in the ordinary course of business consistent with past practice and
except for such matters that would not reasonably be expected to have a Material
Adverse Effect, any damage, destruction, loss, conversion, condemnation or
taking by eminent domain related to any of its material assets. In addition,
except as disclosed on SCHEDULE 4.2(G), from December 31, 1998 to May 9, 1999,
SNAP has not (A) acquired or disposed of any material assets or entered into any
agreement or other arrangement for any such acquisition or disposition or (B)
relinquished, forgiven or canceled any material debts or claims.
(h) TITLE TO PROPERTIES; ABSENCE OF LIENS. Except as disclosed
on SCHEDULE 4.2(H), SNAP has good title to (or, in the case of real estate or
equipment leases, a valid lease to) all of its properties, assets and other
rights, free and clear of all Liens except for Permitted Liens and such assets
will enable Xenon 2 to conduct the business of SNAP after the Effective Time in
substantially the same manner as it is currently being conducted.
(i) PROPERTIES, CONTRACTS, PERMITS AND OTHER DATA. Except as
specified in SCHEDULE 4.2(I) hereto, all rights, licenses, leases,
registrations, applications, contracts, commitments and other agreements of SNAP
or by which SNAP is bound are in full force and effect and are valid and
enforceable in accordance with their respective terms except for such failures
to be in full force and effect and valid and enforceable that would not,
individually or in the aggregate, have a Material Adverse Effect. SNAP is not in
breach or default in the performance of any obligation thereunder and no event
has occurred or has failed to occur whereby any of the other parties thereto
have been or will be released therefrom or will be entitled to refuse to perform
thereunder, the enforcement of which would have, either
<PAGE>
25
individually or in the aggregate, a Material Adverse Effect. SNAP has provided
to Xoom complete and accurate copies of SNAP's current annual budget and
operating plan (the "SNAP BUDGET").
(j) LEGAL PROCEEDINGS. Except as described in SCHEDULE 4.2(J),
there is no litigation, proceeding or governmental investigation to which SNAP
is a party pending or, to the best Knowledge of SNAP, threatened against it or
its assets which, either individually or in the aggregate, would reasonably be
expected to result in a Material Adverse Effect or which, as of May 9, 1999,
seeks to restrain or enjoin the consummation of any of the transactions
contemplated hereby. SNAP is not a party to nor are its assets subject to any
judgment, writ, decree, injunction or order entered by any court or governmental
authority (domestic or foreign) that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
(k) LABOR CONTROVERSIES. Except as set forth on SCHEDULE
4.2(K), (i) there have been no labor strikes, slow-downs, work stoppages,
lock-outs or other material labor controversies or disputes during the past two
years, nor is any such strike, slow-down, work stoppage or other material labor
controversy or dispute pending or, to the best Knowledge of NBC, threatened with
respect to the current or former employees of SNAP, (ii) SNAP is not a party to
any labor contract, collective bargaining agreement, contract, letter of
understanding or, to Neon's Knowledge, any other agreement, formal or informal
with any labor union or organization, nor are any of SNAP's employees
represented by any labor union or organization and (iii) SNAP has not closed any
facility, effectuated any layoffs of employees or implemented any early
retirement, separation or window program within the past two years nor planned
or announced any such action or program for the future.
(l) INTELLECTUAL PROPERTY. SNAP owns or is licensed or
otherwise has the right to use, all Intellectual Property currently used in its
business (the "SNAP INTELLECTUAL PROPERTY"), except as would not, individually
or in the aggregate, have a Material Adverse Effect. SNAP has not infringed upon
or is in conflict with the Intellectual Property of any third party nor has SNAP
received any written notice of any claim that it has infringed upon or is in
conflict with any Intellectual Property of any third party, except as would not,
individually or in the aggregate, have a Material Adverse Effect. Except as set
forth on SCHEDULE 4.2(L), none of the rights of SNAP to the SNAP Intellectual
Property will be impaired in any way by the transactions provided for herein,
and all of the rights of SNAP to the SNAP Intellectual Property will be fully
enforceable by SNAP after the Closing Date to the same extent as such rights
would have been enforceable by SNAP before the Closing, without the consent or
agreement of any other party other than any consents and agreements the failure
of which to obtain, individually or in the aggregate, would not have a Material
Adverse Effect. There have been no claims (whether private or governmental)
against SNAP asserting the invalidity or unenforceability of its ownership,
license or other right to use any of the registered SNAP Intellectual Property.
(m) GOVERNMENT LICENSES, PERMITS, ETC. Except as set forth on
SCHEDULE 4.2(M), SNAP has all licenses, permits, consents, approvals,
authorizations, qualifications and
<PAGE>
26
orders of Governmental Authorities required for the conduct of its business as
presently conducted, except where failure would not, individually or in the
aggregate, have a Material Adverse Effect.
(n) CONDUCT OF BUSINESS IN COMPLIANCE WITH REGULATORY AND
CONTRACTUAL REQUIREMENTS. SNAP has complied with all applicable laws,
ordinances, regulations or orders or other requirements of any Governmental
Authority including, without limitation, all rules, regulations and
administrative orders relating to anti-competitive practices, discrimination,
employment, health and safety, except where the failure to be in such compliance
would not have, either individually or in the aggregate, a Material Adverse
Effect.
(o) ENVIRONMENTAL MATTERS. Except as set forth on SCHEDULE
4.2(O) and except for matters that, individually or in the aggregate, would not
have a Material Adverse Effect, (i) SNAP complies and has complied with all
applicable Environmental Laws, and possesses and complies with and has possessed
and complied with all Environmental Permits; (ii) there are and have been no
Materials of Environmental Concern, or other conditions, at any property owned
or leased by SNAP that could give rise to any liability under any Environmental
Law or result in costs arising out of any Environmental Law; (iii) no judicial,
administrative, or arbitral proceeding (including any notice of violation or
alleged violation) under any Environmental Law to which SNAP is, or to the
Knowledge of SNAP will be, named as a party is pending or, to the Knowledge of
SNAP, threatened, nor is SNAP the subject of any investigation in connection
with any such proceeding or potential proceeding; (iv) there are no past,
present, or anticipated future events, conditions, circumstances, practices,
plans, or legal requirements that could be expected to prevent, or materially
increase the burden on SNAP of complying with applicable Environmental Laws or
of obtaining, renewing, or complying with all Environmental Permits required
under such laws; and (v) SNAP has provided to the other parties true and
complete copies of all Environmental Reports relating to it in the possession or
control of such party.
(p) EMPLOYEE BENEFIT MATTERS. (i) SCHEDULE 4.2(P) contains a
true and complete list of each "employee benefit plan" (within the meaning of
section 3(3) of ERISA, and all stock purchase, stock option, severance,
employment, change-in-control, fringe benefit, collective bargaining, bonus,
incentive, deferred compensation and other employee benefit plans, agreements,
programs, policies or other arrangements, whether or not subject to ERISA
(including any funding mechanism therefor now in effect or required in the
future as a result of the transaction contemplated by this Agreement or
otherwise), whether formal or informal, oral or written, legally binding or not,
under which any employee or former employee of SNAP or its Subsidiaries has any
present or future right to benefits and under which SNAP or its Subsidiaries has
any present or future liability. All such plans, agreements, programs, policies
and arrangements shall be collectively referred to as the "SNAP PLANS".
(ii) With respect to each SNAP Plan which is maintained solely
by SNAP (the "PORTAL LEVEL PLANS"), SNAP has made available to NBC a current,
accurate and complete copy (or, to the extent no such copy exists, an accurate
description) thereof and, to the extent applicable: (A) any related trust
agreement or other funding instrument; (B) the most recent
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27
determination letter, if applicable; (C) any summary plan description and other
written communications (or a description of any oral communications) by SNAP or
its Subsidiaries to their employees concerning the extent of the benefits
provided under a SNAP Plan; and (D) for the most recent two years (I) the Form
5500 and attached schedules and (II) audited financial statements.
(iii) (A) Each SNAP Plan has been established and administered
in accordance with its terms, and in compliance with the applicable provisions
of ERISA, the Code and other applicable laws, rules and regulations; (B) each
SNAP Plan which is intended to be qualified within the meaning of Code section
401(a) is so qualified and has received a favorable determination letter as to
its qualification (or is established using a prototype plan form which has
received such a letter), and nothing has occurred, whether by action or failure
to act, that could reasonably be expected to cause the loss of such
qualification; (C) for each SNAP Plan with respect to which a Form 5500 has been
filed, no material change has occurred with respect to the matters covered by
the most recent Form since the date thereof; (D) no non-exempt "prohibited
transaction" (as such term is defined in ERISA section 406 and Code section
4975) with respect to any SNAP Plan; and (E) no SNAP Plan provides retiree
welfare benefits and neither SNAP nor its Subsidiaries have any obligations to
provide any retiree welfare benefits except as provided under Section 4980B of
the Code.
(iv) No SNAP Plan is subject to Title IV of ERISA (including a
multiemployer plan within the meaning of Section 3(37) of ERISA), no SNAP Plan
is a multiple employer plan; and no SNAP Plan is subject to the minimum funding
requirements of ERISA Section 302 or Code Section 412.
(v) Neither SNAP nor any of its Subsidiaries nor any member of
the Controlled group of which it is a member has (A) engaged in, or is a
successor or parent corporation to an entity that has engaged in, a transaction
described in Sections 4069 or 4212(c) of ERISA or (B) incurred, or could
reasonably be expected to incur, any liability under (I) Title IV of ERISA
arising in connection with the termination of, or a complete or partial
withdrawal from, any plan covered or previously covered by Title IV of ERISA or
(II) Section 4971 of the Code that in either case could become a liability of
the SNAP or any Subsidiary or NMC after the Closing Date. The assets of SNAP and
all of its Subsidiaries are not now, nor will they after the passage of time be,
subject to any lien imposed under Code Section 412(n) by reason of a failure of
any of the SNAP or any Subsidiary or any member of the Controlled Group of which
it is a member to make timely installments or other payments required under Code
Section 412.
(vi) With respect to any SNAP Plan, (A) no actions, suits or
claims (other than routine claims for benefits in the ordinary course) are
pending or, to the Knowledge of SNAP or its Subsidiaries, threatened and (B) no
facts or circumstances exist that could reasonably be expected to give rise to
any such actions, suits or claims.
(vii) Except as provided on SCHEDULE 4.2(P), no SNAP Plan
exists that could result in the payment to any present or former employee of
SNAP or its Subsidiaries of any
<PAGE>
28
money or other property or accelerate or provide any other rights or benefits to
any present or former employee of SNAP or its Subsidiaries as a result of the
transaction contemplated by this Agreement, whether or not such payment would
constitute a parachute payment within the meaning of Code Section 280G.
(q) ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither SNAP, nor
any officer, employee or agent of SNAP, nor any other Person acting on behalf of
SNAP, has, directly or indirectly, within the past five years given or agreed to
give any gift or similar benefit to any customer, supplier, governmental
employee or other Person or entity who is or may be in a position to help or
hinder SNAP (or assist SNAP in connection with any actual or proposed
transaction) which (x) subjects any party or NMC or any of their respective
Affiliates, to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (y) if not given in the past, could have had a
Material Adverse Effect or (z) if not continued in the future, could have a
Material Adverse Effect or which might subject any party or NMC or any of their
respective Affiliates to suit or penalty in any private or governmental
litigation or proceeding.
(r) TAX MATTERS. Except as set forth on SCHEDULE 4.2(R), (i)
SNAP and its Subsidiaries have timely filed (or have had timely filed on their
behalf) or will timely file or cause to be timely filed, all Tax Returns
required by applicable law to be filed by SNAP and its Subsidiaries prior to the
Effective Time. All such Tax Returns are or will be true, complete and correct
in all material respects. There are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any of such Tax
Returns and SNAP and its Subsidiaries has not requested any extension of time
within which to file any material Tax Return, which return has not yet been
filed. There is no pending claim by any Tax Authority of a jurisdiction where
SNAP or any of its Subsidiaries have not filed Tax Returns that SNAP are any of
its Subsidiaries are or may have been subject to taxation by that jurisdiction.
All Taxes required to be withheld by SNAP or its Affiliates with respect to
their activities, properties, employees or independent contractors have been
withheld and paid over to the appropriate Tax Authority.
(ii) SNAP and its Subsidiaries have paid (or have had paid on
their behalf), or where payment is not yet due, have established (or have had
established on their behalf and for their sole benefit and recourse), or will
establish or cause to be established on or before the Effective Time, an
adequate accrual for the payment of, all Taxes due with respect to any period
beginning prior to the Effective Time. No deficiency or adjustment for any Taxes
has been threatened, proposed, asserted or assessed against SNAP or its
Subsidiaries. There are no liens for Taxes upon the assets of SNAP or its
Subsidiaries, except for liens for current Taxes not yet due.
(iii) SNAP and its Subsidiaries are not required to include in
income any adjustment pursuant to Section 481(a) of the Code or any similar
applicable provision by reason of a voluntary change in accounting method
initiated by SNAP or its Subsidiaries, and neither the Internal Revenue Service
nor any taxing authority has proposed in writing any such adjustment or change
in accounting method. SNAP and its Subsidiaries have not received a tax
<PAGE>
29
ruling or entered into a closing agreement with any taxing authority that would
have a Material Adverse Effect on SNAP or its Subsidiaries.
(iv) SNAP and its Subsidiaries have not made any payments, are
not obligated to make any payments, and are not a party to any agreement that
could obligate it to make any payments that would not be deductible pursuant to
Section 280G of the Code.
(v) SNAP has been and currently is taxable as a partnership
for federal income tax purposes and in all jurisdictions in which it is subject
to Taxes or files Tax Returns. Each of SNAP's Subsidiaries has been and
currently is (A) wholly owned by SNAP and (B) an entity disregarded from its
owner pursuant to Section 301.7701-2 of the Treasury Regulations. Neither SNAP
nor any Subsidiary is a party to any safe harbor lease within the meaning of
Section 168(f)(8) of the Code, as in effect prior to amendment by the Tax Equity
and Fiscal Responsibility Act of 1982. SNAP and its Subsidiaries are not a party
to any joint venture, partnership, or other agreement, contract, or arrangement
(either in writing or verbally, formally or informally) which could be treated
as partnership for federal income tax purposes.
(vi) Neither SNAP nor any of its Subsidiaries has a "permanent
establishment," as defined in any applicable Tax treaty or convention of the
United States of America, or fixed place of business in any foreign country.
SNAP and its Subsidiaries are in compliance with the terms and conditions of any
applicable tax exemptions, agreements or orders of any foreign government to
which it may be subject or which it may have claimed, and the transactions
contemplated by this Agreement will not have any adverse effect on such
compliance.
(vii) Neither SNAP nor any of its Subsidiaries is or has been
bound by any tax sharing or tax allocation agreement, and it has no contractual
obligation to indemnify any other person with respect to Taxes.
(s) YEAR 2000 COMPLIANCE. SNAP has adopted and implemented a
commercially reasonable plan to provide (x) that the change of the year from
1999 to the year 2000 will not have a Material Adverse Effect and (y) that the
impacts of such change on the venders and customers of SNAP will not have a
Material Adverse Effect. In SNAP's reasonable best estimate, no expenditures
materially in excess of currently budgeted items previously disclosed to Xenon 2
will be required in order to cause the information and business systems of SNAP
to operate properly following the change of the year 1999 to the year 2000. SNAP
reasonably expects any material issues related to such change of the year will
be resolved in accordance with the timetable set forth in such plan (and in any
event on a timely basis in order to be resolved before the year 2000). Between
the date of this Agreement and the Effective Time, SNAP shall continue to use
commercially reasonable efforts to implement such plan.
(t) OPTIONS. Except for the SNAP 1998 LLC Option Plan, SNAP
has never adopted or maintained any option plan or other plan providing for
equity compensation of any Person. As of May 9, 1999, SNAP has reserved
1,604,938 units for issuance pursuant to the SNAP 1998 LLC Option Plan ("SNAP
OPTIONS"), of which 1,432,970 have been issued as of
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30
May 9, 1999, all of which units remain subject to SNAP Options unexercised as of
May 9, 1999. Except as set forth in SCHEDULE 4.2(T), none of the SNAP Options
will be accelerated in any way by the transactions contemplated by this
Agreement. SNAP has made available to NBC accurate and complete copies of all
option plans pursuant to which SNAP has granted options and the applicable
vesting schedule for each such option. All units subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, would be duly authorized,
validly issued, fully paid and non-assessable. Except as set forth in SCHEDULE
4.2(T), there are no commitments or agreements of any character to which SNAP is
bound obligating SNAP to accelerate the vesting of any SNAP Options as a result
of this Agreement. SCHEDULE 4.2(E) lists each outstanding SNAP Option and
identifies with respect to each such SNAP Option; its exercise price; its grant
date; its vesting schedule; and what portion of such SNAP Option remains
outstanding as of May 9, 1999. NBC shall prepare and deliver to Xenon 2 and Xoom
an updated version of SCHEDULE 4.2(E) prior to the Effective Time as of a date
no earlier than 5 days prior to the Effective Time.
4.3 REPRESENTATIONS AND WARRANTIES OF XOOM AND XENON 2. Xoom and Xenon
2 represent and warrant to NBC and NMC as follows:
(a) DUE ORGANIZATION, POWER AND GOOD STANDING. Xoom, Xenon 2
and each of their respective Subsidiaries is duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization, and has
the requisite power and authority to own, lease and operate its properties and
to conduct its business as now conducted by it. Xoom, Xenon 2 and each of their
respective Subsidiaries party to an Implementing Agreement has all requisite
power and authority to enter into this Agreement, the Xenon 2 Merger Agreement,
the Voting Agreement, the Option Agreement and the Implementing Agreements to
which it is a party and to perform its obligations hereunder and thereunder.
Xoom, Xenon 2 and each of their respective Subsidiaries is qualified to do
business and is in good standing in all jurisdictions in which it conducts its
business, except where the failure to do so would not, individually or in the
aggregate, taken as a whole, have a Material Adverse Effect.
(b) AUTHORIZATION AND VALIDITY OF AGREEMENT. The execution,
delivery and performance by Xoom, Xenon 2 and each of their respective
Subsidiaries of the Existing Merger Agreement, this Agreement, the Xenon 2
Merger Agreement, the Voting Agreement, the Option Agreement and the
Implementing Agreements to which Xoom, Xenon 2 or their respective Subsidiaries
is a party and the consummation by Xoom, Xenon 2 and each of their respective
Subsidiaries of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of Xoom, Xenon 2 and
each of their respective Subsidiaries, subject to obtaining, in the case of the
Xenon 2 Merger Agreement, the Stockholder Approval (as defined therein), and, in
the case of the Existing Merger Agreement and this Agreement, the affirmative
vote of the holders of a majority of the outstanding shares of common stock of
Xenon 2 (the "XENON 2 STOCKHOLDER APPROVAL"). The Board of Directors of Xoom, by
resolutions duly adopted by unanimous vote with one abstention at a meeting duly
called and held and not subsequently rescinded or modified in any way, has duly
determined that each of the Existing Merger Agreement and this Agreement is
advisable for Xoom and its stockholders,
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31
approved each of the Existing Merger Agreement and this Agreement and the Merger
and recommended that the stockholders of Xoom adopt the Xenon 2 Merger Agreement
and approve the transactions contemplated thereby and vote in favor of Xoom, as
sole stockholder of Xenon 2, adopting the NMC Agreement at the Xenon 2
Stockholder Meeting. Each of the Existing Merger Agreement, this Agreement, the
Xenon 2 Merger Agreement, the Option Agreement and the Voting Agreement has
been, and each of the other Implementing Agreements to which Xoom, Xenon 2 or
any of their respective Subsidiaries is a party will on the Closing Date be,
duly executed and delivered by Xoom, Xenon 2 and each of their respective
Subsidiaries and constitutes or, in the case of the other Implementing
Agreements, upon execution thereof will constitute, a valid and legally binding
obligation of Xoom, Xenon 2 and each of their respective Subsidiaries,
enforceable against each in accordance with their respective terms.
(c) GOVERNMENTAL APPROVALS; CONSENTS. Except as described in
SCHEDULE 4.3(C), the execution, delivery and performance of this Agreement, the
Xenon 2 Merger Agreement, the Voting Agreement, the Option Agreement and the
Implementing Agreements by Xoom, Xenon 2 and each of their respective
Subsidiaries and the consummation by such party of the transactions contemplated
hereby and thereby will not (i) conflict with or result in a breach of any
provision of the certificate of incorporation or bylaws or other governing
documents of Xoom, Xenon 2 or their respective Subsidiaries; (ii) require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority; (iii) require the consent or approval of any
Person (other than a Governmental Authority) or violate or conflict with, or
result in a breach of any provision of, constitute a default (or an event which
with notice or lapse of time or both would become a default) or give to any
third party any right of termination, cancellation, amendment or acceleration
under, or result in the creation of a Lien on any of the assets of Xoom, Xenon 2
or any of their respective Subsidiaries under, any of the terms, conditions or
provisions of any contract or license to which Xoom, Xenon 2 or any of their
respective Subsidiaries is a party or by which it or its assets or property are
bound; or (iv) violate or conflict with any order, writ, injunction, decree,
statute, rule or regulation applicable to Xoom, Xenon 2 or any of their
respective Subsidiaries; other than any consents, approvals, authorizations and
permits the failure of which to obtain and any violations, conflicts, breaches
defaults and other matters set forth pursuant to clauses (ii), (iii) and (iv)
above which, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect.
(d) CERTAIN FEES. None of Xoom, Xenon 2 or any of their
respective Subsidiaries nor the officers, directors or employees thereof have
employed any broker or finder or incurred any other Liability for any brokerage
fees, commissions or finders' fees in connection with the transactions
contemplated hereby; except that Xoom has employed Bear, Stearns & Co., Inc. and
Hambrecht & Quist, LLC whose fees and expenses will be paid in accordance with
SECTION 10.5 if the transactions contemplated by this Agreement are consummated
and otherwise will be paid by Xoom. Xoom has provided NBC a copy of the
engagement letter entered into with Hambrecht & Quist, LLC related to the
transactions contemplated hereby.
(e) OPINION OF FINANCIAL ADVISOR. Xoom has received the
opinion of each of Bear, Stearns & Co. Inc. and Hambrecht & Quist, LLC, in each
case as of May 9, 1999, with
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32
respect to the fairness of the transactions contemplated by the Existing Merger
Agreement from a financial point of view which fairness opinion shall remain in
effect upon entering into this Agreement.
(f) CAPITAL STOCK. (i) As of May 9, 1999, the authorized
capital stock of Xoom consists of 40,000,000 shares of Xoom Stock and 5,000,000
shares of Xoom Preferred Stock, of which 17,162,056 shares of Xoom Stock and no
shares of Xoom Preferred Stock have been issued and are outstanding as of May 9,
1999. All outstanding shares of Xoom Stock are duly authorized, validly issued,
fully paid and non-assessable and not subject to preemptive rights created by
statute, the certificate of incorporation or bylaws of Xoom or any agreement to
which Xoom is a party or by which it is bound and have been issued in compliance
with federal and state securities laws. There are no declared or accrued unpaid
dividends with respect to any shares of Xoom Stock. All of the shares of capital
stock of each of the Subsidiaries of Xoom are duly authorized and issued, fully
paid and nonassessable and are owned by Xoom or another Subsidiary of Xoom free
and clear of all Liens. Except for the capital stock of its Subsidiaries, Xoom
does not own, directly or indirectly, any capital stock or other ownership
interest in any Person.
(ii) As of May 9, 1999, the authorized capital stock of Xenon
2 consists of 100 shares of common stock, par value $0.0001 per share, of which
100 shares have been issued and are outstanding as of May 9, 1999. Prior to the
Closing Date, Xenon 2's certificate of incorporation will be amended to provide
for an authorized capital stock sufficient to permit Xenon 2 to issue all of the
Class A Common Stock and Class B Common Stock to be issued by Xenon 2 pursuant
to this Agreement and the Xenon 2 Merger Agreement. All capital stock issued by
Xenon 2 pursuant to the Xenon 2 Merger Agreement and this Agreement will be duly
authorized, validly issued, fully paid and non-assessable and not subject to
preemptive rights created by statute, the certificate of incorporation or bylaws
of Xenon 2 or any agreement to which Xenon 2 is a party or by which it is bound
and issued in compliance with federal and state securities laws. All of the
shares of capital stock of each of the Subsidiaries of Xenon 2 are duly
authorized and issued, fully paid and nonassessable and are owned by Xenon 2
free and clear of all Liens. Except for the capital stock of its Subsidiaries,
Xenon 2 does not own, directly or indirectly, any capital stock or other
ownership interest in any Person.
(g) STOCK OPTIONS. Except for the Xoom 1998 Employee Stock
Purchase Plan (the "XOOM ESPP"), the Xoom Option Plan pursuant to which the Xoom
Plan Options were issued, and the Xoom Non-Plan Options (together with the Xoom
Plan Options, the "XOOM OPTIONS"), none of Xoom, Xenon 2 or any of their
respective Subsidiaries has ever adopted or maintained any stock option plan or
other plan providing for equity compensation of any person. As of May 9, 1999,
Xoom has reserved 3,535,224 shares of Xoom Stock for issuance pursuant to the
Xoom ESPP, Xoom Plan Options and Xoom Non-Plan Options, of which 3,336,157 have
been issued as of May 9, 1999, of which 2,043,556 shares remain subject to Xoom
Plan Options unexercised as of May 9, 1999 and 981,212 shares remain subject to
Xoom Non-Plan Options unexercised as of May 9, 1999. Except pursuant to SECTION
6.8 and as reflected on SCHEDULE 4.3(G) none of the Xoom Options will be
accelerated in any way by the transactions
<PAGE>
33
contemplated by this Agreement. Xoom, Xenon 2 and their respective Subsidiaries
have made available to NMC accurate and complete copies of all stock option
plans pursuant to which Xoom, Xenon 2 and their respective Subsidiaries have
granted stock options that are currently outstanding, the form of all stock
option agreements evidencing such options and the applicable vesting schedule
for each such option. All shares of Xoom Stock and Class A Common Stock subject
to issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, would be duly authorized,
validly issued, fully paid and non-assessable. Except as set forth in SCHEDULE
4.3(G) or as contemplated by this Agreement, there are no commitments or
agreements of any character to which Xoom, Xenon 2 or any of their respective
Subsidiaries are bound obligating Xoom, Xenon 2 or any of their respective
Subsidiaries to accelerate the vesting of any Xoom Option as a result of this
Agreement. SCHEDULE 4.3(G) lists each outstanding Xoom Option and identifies
with respect to each such Xoom Option whether it is a Xoom Plan Option or a Xoom
Non-Plan Option; its exercise price; its grant date; its vesting schedule; and
what portion of such Xoom Option remains outstanding as of May 9, 1999. Xoom,
Xenon 2 and their respective Subsidiaries shall prepare and deliver to NMC an
updated version of SCHEDULE 4.3(G) prior to the Effective Time as of a date no
earlier than 5 days prior to the Effective Time.
(h) OBLIGATIONS WITH RESPECT TO CAPITAL STOCK. Except as set
forth in SECTION 4.3(F) and SECTION 4.3(G) and on SCHEDULE 4.3(H), there are no
equity securities, partnership interests or similar ownership interests of any
class of any equity security of Xoom, Xenon 2 or any of their respective
Subsidiaries, or any securities exchangeable or convertible into or exercisable
for such equity securities, partnership interests or similar ownership
interests, issued, reserved for issuance or outstanding. Except as set forth in
SCHEDULE 4.3(H) or as set forth in SECTION 4.3(G) hereof, there are no
subscriptions, options, warrants, equity securities, partnership interests or
similar ownership interests, calls, rights (including preemptive rights),
commitments or agreements of any character to which Xoom, Xenon 2 or any of
their respective Subsidiaries is a party or by which Xoom, Xenon 2 or any of
their respective Subsidiaries is bound obligating Xoom, Xenon 2 or any of their
respective Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, or repurchase, redeem or otherwise acquire, or cause the
repurchase, redemption or acquisition of, any shares of capital stock,
partnership interests or similar ownership interests of Xoom, Xenon 2 or any of
their respective Subsidiaries or obligating Xoom, Xenon 2 or any of their
respective Subsidiaries to grant, extend, accelerate the vesting of or enter
into any such subscription, option, warrant, equity security, call, right,
commitment or agreement. Except as contemplated by this Agreement, there are no
registration rights and there is no voting trust, proxy, stockholder rights
plan, antitakeover plan or other agreement or understanding to which Xoom, Xenon
2 or any of their respective Subsidiaries is a party or by which they are bound
with respect to any equity security, partnership interest or similar ownership
interest of any class of any equity security of Xoom, Xenon 2 or any of their
respective Subsidiaries.
(i) SEC FILINGS, FINANCIAL INFORMATION, LIABILITIES. Xoom has
filed and made publicly available a true and complete copy of each report,
schedule, registration statement and definitive proxy statement required to be
filed with the SEC since December 9, 1998 (the "SEC
<PAGE>
34
DOCUMENTS"). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, applicable to such SEC Documents. None of the SEC
Documents when filed contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of Xoom included in the
SEC Documents comply as to form in all material respect with the applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with GAAP during the
period involved (except as may be indicated in the notes thereto or, in the case
of the unaudited statements, as permitted by Form 10-Q of the SEC, or for normal
year-end adjustments) and fairly present in all material respects the
consolidated financial position of Xoom and its consolidated Subsidiaries as at
the dates thereof and the consolidated results of their operations and cash for
the periods then ended. Except as set forth in the SEC Documents (including any
item accounted for in the financial statements contained in the SEC Documents or
set forth in the notes thereto) as of December 31, 1998, neither Xoom nor any of
its Subsidiaries had, and since such date neither Xoom or any of its
Subsidiaries has incurred, any claims, liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) which, individually or in
the aggregate, would have a Material Adverse Effect on Xoom (other than claims,
liabilities or obligations contemplated by this Agreement or expressly permitted
to be incurred pursuant to this Agreement). In addition, since December 31,
1998, there has not been any declaration, setting aside or payment of a dividend
or other distribution with respect to Xoom Stock or any material change in
accounting methods or practices by Xoom or any of its Subsidiaries.
(j) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
on SCHEDULE 4.3(J) since December 31, 1998, Xoom, Xenon 2 and each of their
respective Subsidiaries have conducted their businesses in all material respects
only in the ordinary course, consistent with past practice and there has not
been prior to May 9, 1999, (x) any material adverse change in the assets,
liabilities, business, results of operations or financial condition of Xoom,
Xenon 2, or any of their respective Subsidiaries or (y) except in the ordinary
course of business consistent with past practice and except for such matters
that would not reasonably be expected to have a Material Adverse Effect, any
damage, destruction, loss, conversion, condemnation or taking by eminent domain
related to any material asset of Xoom, Xenon 2 and any of their respective
Subsidiaries, taken as a whole. In addition, except as disclosed on SCHEDULE
4.3(J), from December 31, 1998 to May 9, 1999, none of Xoom, Xenon 2 or any of
their respective Subsidiaries has (A) acquired or disposed of any material
assets or entered into any agreement or other arrangement for any such
acquisition or disposition or (B) relinquished, forgiven or canceled any
material debts or claims.
(k) PROPERTIES, CONTRACTS, PERMITS AND OTHER DATA. Except as
specified in SCHEDULE 4.3(K) hereto, all rights, licenses, leases,
registrations, applications, contracts, commitments and other agreements of
Xoom, Xenon 2 and their respective Subsidiaries are in full force and effect and
are valid and enforceable in accordance with their respective terms except for
such failures to be in full force and effect and valid and enforceable that
would not,
<PAGE>
35
individually or in the aggregate, have a Material Adverse Effect. None of Xoom,
Xenon 2 or any of their respective Subsidiaries is in breach or default in the
performance of any obligation thereunder and no event has occurred or has failed
to occur whereby any of the other parties thereto have been or will be released
therefrom or will be entitled to refuse to perform thereunder, the enforcement
of which would have, either individually or in the aggregate, a Material Adverse
Effect. Xoom has provided to NBC complete and accurate copies of its current
annual budget and operating plan (the "XOOM BUDGET").
(l) LEGAL PROCEEDINGS. Except as described in SCHEDULE 4.3(L),
there is no litigation, proceeding or governmental investigation to which Xoom,
Xenon 2 or their respective Subsidiaries is a party pending or, to the best
Knowledge of Xoom, Xenon 2 and their respective Subsidiaries, threatened against
Xoom, Xenon 2 or any of their respective Subsidiaries which, either individually
or in the aggregate, would reasonably be expected to result in a Material
Adverse Effect or which, as of May 9, 1999, seeks to restrain or enjoin the
consummation of any of the transactions contemplated hereby. None of Xoom, Xenon
2, or any of their respective Subsidiaries is a party to, nor are any of their
respective assets subject to, any judgment, writ, decree, injunction or order
entered by any court or governmental authority (domestic or foreign) that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
(m) LABOR CONTROVERSIES. Except as set forth on SCHEDULE
4.3(M), (i) there have been no labor strikes, slow-downs, work stoppages,
lock-outs or other material labor controversies or disputes during the past two
years, nor is any such strike, slow-down, work stoppage or other material labor
controversy or dispute pending or, to the best Knowledge of such party,
threatened with respect to the current or former employees of Xoom, Xenon 2 and
their respective Subsidiaries, (ii) none of Xoom, Xenon 2 or any of their
respective Subsidiaries is a party to any labor contract, collective bargaining
agreement, contract, letter of understanding or, to such party's Knowledge, any
other agreement, formal or informal with any labor union or organization, nor
are any of Xoom's, Xoom 2's or any of their respective Subsidiaries' employees
represented by any labor union or organization nor have there been any labor
union organizing activities at any Xoom, Xenon 2 or any of their respective
Subsidiaries' facilities within the last three years and (iii) none of Xoom,
Xenon 2 or any of their respective Subsidiaries has closed any facility,
effectuated any layoffs of employees or implemented any early retirement,
separation or window program within the past two years nor has Xoom, Xenon 2 or
any of their respective Subsidiaries planned or announced any such action or
program for the future.
(n) INTELLECTUAL PROPERTY. Xoom, Xenon 2 and their respective
Subsidiaries own or are licensed or otherwise have the right to use, all
Intellectual Property currently used by Xoom, Xenon 2 and each of their
respective Subsidiaries (the "XOOM INTELLECTUAL PROPERTY"), except as would not,
individually or in the aggregate, have a Material Adverse Effect. None of Xoom,
Xenon 2 or any of their respective Subsidiaries has infringed upon or is in
conflict with the Intellectual Property of any third party nor has Xoom, Xenon 2
or any of their
<PAGE>
36
respective Subsidiaries received any written notice of any claim that Xoom,
Xenon 2 or any of their respective Subsidiaries has infringed upon or is in
conflict with any Intellectual Property of any third party, except as would not,
individually or in the aggregate, have a Material Adverse Effect. Except as set
forth on SCHEDULE 4.3(N), none of the rights of Xoom, Xenon 2 or their
respective Subsidiaries to the Xoom Intellectual Property will be impaired in
any way by the transactions provided for herein, and all of the rights of Xoom,
Xenon 2 and their respective Subsidiaries to the Xoom Intellectual Property will
be fully enforceable by Xenon 2 after the Closing Date to the same extent as
such rights would have been enforceable by Xoom, Xenon 2 and their respective
Subsidiaries before the Closing, without the consent or agreement of any other
party other than any consents and agreements the failure of which to obtain,
individually or in the aggregate, would not have a Material Adverse Effect.
There have been no claims (whether private or governmental) against Xoom, Xenon
2 or their respective Subsidiaries asserting the invalidity or unenforceability
of its ownership, license or other right to use to any of the registered Xoom
Intellectual Property.
(o) GOVERNMENT LICENSES, PERMITS, ETC. Except as set forth on
SCHEDULE 4.3(O), Xoom, Xenon 2 and their respective Subsidiaries have all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of Governmental Authorities required for the conduct of its Business as
presently conducted, except where failure would not, individually or in the
aggregate, have a Material Adverse Effect.
(p) CONDUCT OF BUSINESS IN COMPLIANCE WITH REGULATORY AND
CONTRACTUAL REQUIREMENTS. Xoom, Xenon 2 and their respective Subsidiaries have
complied with all applicable laws, ordinances, regulations or orders or other
requirements of any Governmental Authority, including, without limitation, all
rules, regulations and administrative orders relating to anti-competitive
practices, discrimination, employment, health and safety, except where the
failure to be in such compliance would not have, either individually or in the
aggregate, a Material Adverse Effect.
(q) EMPLOYEE BENEFIT MATTERS. (i) SCHEDULE 4.3(Q)(I) contains
a true and complete list of each "employee benefit plan" (within the meaning of
section 3(3) of ERISA), and all stock purchase, stock option, severance,
employment, change-in-control, fringe benefit, collective bargaining, bonus,
incentive, deferred compensation and other employee benefit plans, agreements,
programs, policies or other arrangements, whether or not subject to ERISA
(including any funding mechanism therefor now in effect or required in the
future as a result of the transaction contemplated by this Agreement or
otherwise), whether formal or informal, oral or written, legally binding or not,
under which any employee or former employee of Xoom, Xenon 2 or their respective
Subsidiaries has any present or future right to benefits and under which Xoom,
Xenon 2 or their respective Subsidiaries has any present or future liability.
All such plans, agreements, programs, policies and arrangements shall be
collectively referred to as the "XOOM PLANS".
(ii) With respect to each Xoom Plan, Xoom, Xenon 2 and their
respective Subsidiaries have made available to NBC a current, accurate and
complete copy (or, to the extent no such copy exists, an accurate description)
thereof and, to the extent applicable: (A) any related
<PAGE>
37
trust agreement or other funding instrument; (B) the most recent determination
letter, if applicable; (C) any summary plan description and other written
communications (or a description of any oral communications) by Xoom, Xenon 2 or
their respective Subsidiaries to their employees concerning the extent of the
benefits provided under a Xoom Plan; and (D) for the most recent two years (I)
the Form 5500 and attached schedules and (II) audited financial statements.
(iii) (A) Except as set forth on SCHEDULE 4.3(Q)(III), each
Xoom Plan has been established and administered in accordance with its terms,
and in compliance with the applicable provisions of ERISA, the Code and other
applicable laws, rules and regulations; (B) each Xoom Plan which is intended to
be qualified within the meaning of Code section 401(a) is so qualified and has
received a favorable determination letter as to its qualification (or
established using a prototype plan form which has received such a letter), and
nothing has occurred, whether by action or failure to act, that could reasonably
be expected to cause the loss of such qualification; (C) for each Xoom Plan with
respect to which a Form 5500 has been filed, no material change has occurred
with respect to the matters covered by the most recent Form since the date
thereof; (D) no nonexempt "prohibited transaction" (as such term is defined in
ERISA section 406 and Code section 4975) with respect to Xoom Plans; and (E) no
Xoom Plan provides retiree welfare benefits and none of Xoom, Xenon 2 or any of
their respective Subsidiaries have any obligations to provide any retiree
welfare benefits except as provided under Section 4980B of the Code.
(iv) No Xoom Plan is subject to Title IV of ERISA (including a
multiemployer plan within the meaning of Section 3(37) of ERISA), no Xoom Plan
is a multiple employer plan; and no Xoom Plan is subject to the minimum funding
requirements of ERISA Section 302 or Code Section 412.
(v) None of Xoom, Xenon 2 or any of their respective
Subsidiaries nor any Member of the Controlled Group of which it is a member has
(A) engaged in, or is a successor or parent corporation to an entity that has
engaged in, a transaction described in Sections 4069 or 4212(c) of ERISA or (B)
incurred, or could reasonably be expected to incur, any liability under (I)
Title IV of ERISA arising in connection with the termination of, or a complete
or partial withdrawal from, any plan covered or previously covered by Title IV
of ERISA or (II) Section 4971 of the Code that in either case could become a
liability of Xenon 2, Xoom or NMC or any of their respective Subsidiaries after
the Closing Date. The assets of Xoom, Xenon 2 and all of their respective
Subsidiaries are not now, nor will they after the passage of time be, subject to
any lien imposed under Code Section 412(n) by reason of a failure of any of any
Subsidiary or any Member of the Controlled Group of which it is a member to make
timely installments or other payments required under Code Section 412.
(vi) With respect to any Xoom Plan, (A) no actions, suits or
claims (other than routine claims for benefits in the ordinary course) are
pending or, to the Knowledge of Xoom, Xenon 2 or their respective Subsidiaries,
threatened and (B) no facts or circumstances exist that could reasonably be
expected to give rise to any such actions, suits or claims.
<PAGE>
38
(vii) Except as provided on SCHEDULE 4.3(Q)(VII), no Xoom Plan
exists that could result in the payment to any present or former employee of
Xoom, Xenon 2 or their respective Subsidiaries of any money or other property or
accelerate or provide any other rights or benefits to any present or former
employee of Xoom, Xenon 2 or their respective Subsidiaries as a result of the
transaction contemplated by this Agreement, whether or not such payment would
constitute a parachute payment within the meaning of Code Section 280G.
(r) ABSENCE OF CERTAIN BUSINESS PRACTICES. None of Xoom, Xenon
2 or any of their respective Subsidiaries, nor any officer, employee or agent
thereof, nor any other Person acting on behalf of such Persons, has, directly or
indirectly, within the past five years given or agreed to give any gift or
similar benefit to any customer, supplier, governmental employee or other Person
or entity who is or may be in a position to help or hinder Xoom, Xenon 2 or
their respective Subsidiaries (or assist Xoom, Xenon 2 or their respective
Subsidiaries in connection with any actual or proposed transaction) which (x)
subjects any party or Xenon 2 or any of their respective Subsidiaries, to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding, (y) if not given in the past, could have had a Material Adverse
Effect or (z) if not continued in the future, could have a Material Adverse
Effect or which might subject any party or Xenon 2 or any of their respective
Subsidiaries to suit or penalty in any private or governmental litigation or
proceeding.
(s) TAX MATTERS. Except as set forth on SCHEDULE 4.3(S), (i)
Xoom, Xenon 2 and each of their respective Subsidiaries have timely filed (or
have had timely filed on their behalf) or will timely file or cause to be timely
filed, all Tax Returns required by applicable law to be filed by any of them
prior to the Effective Time. All such Tax Returns are or will be true, complete
and correct in all material respects. There are no outstanding agreements or
waivers extending the statutory period of limitation applicable to any of such
Tax Returns and none of Xoom, Xenon 2 nor any of their respective Subsidiaries
has requested any extension of time within which to file any material Tax
Return, which return has not yet been filed. There is no pending claim by any
Tax Authority of a jurisdiction where Xoom, Xenon 2 or any of their respective
Subsidiaries has not filed Tax Returns that Xoom, Xenon 2 or such Subsidiary is
or may have been subject to taxation by that jurisdiction. All Taxes required to
be withheld by Xoom, Xenon 2 or their respective Affiliates with respect to
their activities, properties, employees or independent contractors have been
withheld and paid over to the appropriate Tax Authority.
(ii) Xoom, Xenon 2 and each of their respective Subsidiaries
have paid (or have had paid on their behalf), or where payment is not yet due,
have established (or have had established on their behalf and for their sole
benefit and recourse), or will establish or cause to be established on or before
the Effective Time, an adequate accrual for the payment of, all Taxes due with
respect to any period beginning prior to the Effective Time. No deficiency or
adjustment for any Taxes has been threatened, proposed, asserted or assessed
against Xoom, Xenon 2 or any of their respective Subsidiaries. There are no
liens for Taxes upon the assets of Xoom, Xenon 2 or any of their respective
Subsidiaries, except for liens for current Taxes not yet due.
<PAGE>
39
(iii) None of Xoom, Xenon 2 or any of their respective
Subsidiaries is required to include in income any adjustment pursuant to Section
481(a) of the Code or any similar applicable provision by reason of a voluntary
change in accounting method initiated by Xoom, Xenon 2 or any of their
respective Subsidiaries, and neither the Internal Revenue Service nor any taxing
authority has proposed in writing any such adjustment or change in accounting
method. None of Xoom, Xenon 2 or any of their respective Subsidiaries has
received a tax ruling or entered into a closing agreement with any taxing
authority that would have a continuing Material Adverse Effect upon Xoom, Xenon
2 or any of their respective Subsidiaries.
(iv) None of Xoom, Xenon 2 or any of their respective
Subsidiaries has made any payments, is obligated to make any payments, or is a
party to any agreement that could obligate it to make any payments that would
not be deductible pursuant to Section 280G of the Code.
(v) None of Xoom, Xenon 2 or any of their respective
Subsidiaries has a "permanent establishment," as defined in any applicable Tax
treaty or convention of the United States of America, or fixed place of business
in any foreign country. Xoom, Xenon 2 and their respective Affiliates are in
compliance with the terms and conditions of any applicable tax exemptions,
agreements or orders of any foreign government to which it may be subject or
which it may have claimed, and the transactions contemplated by this Agreement
will not have any adverse effect on such compliance.
(vi) Neither Xoom nor any Subsidiary is a party to any safe
harbor lease within the meaning of Section 168(f)(8) of the Code, as in effect
prior to amendment by the Tax Equity and Fiscal Responsibility Act of 1982. Xoom
and its Subsidiaries are not a party to any joint venture, partnership, or other
agreement, contract, or arrangement (either in writing or verbally, formally or
informally) which could be treated as partnership for federal income tax
purposes.
(vii) Neither Xoom nor any of its Subsidiaries is or has been
bound by any tax sharing or tax allocation agreement, and it has no contractual
obligation to indemnify any other person with respect to Taxes.
(t) SECTION 203. The Boards of Directors of Xoom, Xenon 2 and
each of their respective Subsidiaries has taken appropriate action so that the
provisions of Section 203 of the DGCL restricting "business combinations" with
"interested stockholders" (each as defined in such Section 203) will not, prior
to the termination of this Agreement pursuant to ARTICLE IX hereof, apply to NBC
or NMC or any of their Affiliates with respect to this Agreement, the Xenon 2
Merger Agreement, the Option Agreement, the Voting Agreement, any of the
Implementing Agreements or any of the transactions contemplated hereby or
thereby.
(u) YEAR 2000 COMPLIANCE. Except as set forth on SCHEDULE
4.3(V), Xoom, Xenon 2 and each of their respective Subsidiaries has adopted and
implemented a commercially reasonable plan to provide (x) that the change of the
year from 1999 to the year 2000 will not have a Material Adverse Effect and (y)
that the impacts of such change on the venders and
<PAGE>
40
customers of Xoom, Xenon 2 and each of their respective Subsidiaries will not
have a Material Adverse Effect. In the reasonable best estimate of Xoom, Xenon 2
and each of their respective Subsidiaries, no expenditures materially in excess
of currently budgeted items previously disclosed to Xenon 2 will be required in
order to cause the information and business systems of Xoom, Xenon 2 and each of
their respective Subsidiaries to operate properly following the change of the
year 1999 to the year 2000. Xoom, Xenon 2 and each of their respective
Subsidiaries reasonably expects any material issues related to such change of
the year will be resolved in accordance with the timetable set forth in such
plan (and in any event on a timely basis in order to be resolved before the year
2000). Between May 9, 1999 and the Effective Time, Xoom, Xenon 2 and each of
their respective Subsidiaries shall continue to use commercially reasonable
efforts to implement such plan.
(v) NO BUSINESS ACTIVITIES. Neither Xenon 2 nor Xenon 3 has
conducted any activities other than in connection with their organization, the
negotiation and execution of this Agreement and the NMC Merger Agreement and the
consummation of the transactions contemplated hereby and thereby.
4.4 REPRESENTATIONS AND WARRANTIES WITH RESPECT TO GE INVESTMENTS SUB.
GE Investments Sub represents and warrants to Xoom and Xenon 2 as follows:
(a) DUE ORGANIZATION, POWER AND GOOD STANDING. GE Investments Sub is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and has the requisite power and authority to own,
lease and operate its properties and to conduct its business as now conducted by
it. GE Investments Sub has all requisite power and authority to enter into this
Agreement and to perform its obligations hereunder and thereunder. GE
Investments Sub is qualified to do business and is in good standing in all
jurisdictions in which it conducts its business, except where the failure to do
so would not, individually or in the aggregate, taken as a whole, have a
Material Adverse Effect.
(b) AUTHORIZATION AND VALIDITY OF AGREEMENT. The execution, delivery
and performance by GE Investments Sub of this Agreement and the consummation by
GE Investments Sub of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part of GE Investments
Sub. This Agreement has been duly executed and delivered by GE Investments Sub
and constitutes a valid and legally binding obligation of GE Investments Sub,
enforceable against GE Investments Sub in accordance with its terms.
(c) GOVERNMENTAL APPROVALS; CONSENTS. Except as described in SCHEDULE
4.1(C), the execution, delivery and performance of this Agreement and the
consummation by GE Investments Sub of the transactions contemplated hereby will
not (i) conflict with or result in a breach of any provision of the certificate
of incorporation or bylaws or other governing documents of GE Investments Sub;
(ii) require any consent, approval, authorization or permit of, or filing with
or notification to, any Governmental Authority; (iii) require the consent or
approval of any Person (other than a Governmental Authority) or violate or
conflict with, or result in a breach of any provision of, constitute a default
(or an event which with notice or lapse of time or
<PAGE>
41
both would become a default) or give to any third party any right of
termination, cancellation, amendment or acceleration under, or result in the
creation of a Lien on any of the assets of GE Investments Sub under, any of the
terms, conditions or provisions of any contract or license to which GE
Investments Sub is a party or by which it or its assets or property are bound;
or (iv) violate or conflict with any order, writ, injunction, decree, statute,
rule or regulation applicable to GE Investments Sub; other than any consents,
approvals, authorizations and permits the failure of which to obtain and any
violations, conflicts, breaches defaults and other matters set forth pursuant to
clauses (ii), (iii) and (iv) above which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect.
IV.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties given by the parties in ARTICLE IV and in the
certificates delivered pursuant to ARTICLE VII shall survive the Closing other
than the representations and warranties set forth in SECTION 4.1(C)(III) and
SECTION 4.1(V).
IV.6 NO OTHER REPRESENTATION OR AND WARRANTIES. Except for the
representations and warranties set forth in this ARTICLE IV, the parties hereto
make no other representations or warranties, express or implied.
ARTICLE V
CONDUCT OF BUSINESS PRIOR TO EFFECTIVE TIME
V.1 CONDUCT OF THE BUSINESS OF XOOM PENDING THE CLOSING. Xoom agrees
that except with the prior written consent of NBC and except as may be expressly
permitted by this Agreement or as set forth on SCHEDULE 5.1, prior to the
Closing, it shall, and shall cause, its Subsidiaries to operate their businesses
only in the usual, regular and ordinary manner, on a basis consistent with past
practice and, to the extent consistent with such operation, use its reasonable
efforts to preserve its present business organization intact, keep available the
services of its present employees, preserve its present business relationships
(consistent with past practice) and maintain all rights, privileges and
franchises in the normal conduct of Xoom's businesses. Without limitation of the
foregoing, from May 9, 1999 until the Effective Time, except as expressly
permitted by this Agreement or as set forth on SCHEDULE 5.1, Xoom shall not:
(a) amend its certificate of incorporation or bylaws;
(b) issue, purchase or redeem, or authorize or propose the
issuance, purchase or redemption of, or declare or pay any dividend with respect
to, any shares of capital stock of Xoom or any class of securities convertible
into, or rights, warrants or options to acquire, any such shares of other
convertible securities other than (i) issuances of Xoom Stock pursuant to Xoom
Options outstanding on May 9, 1999, the Option Agreement or the obligations to
issue Xoom Stock set forth on SCHEDULE 4.3(H) and (ii) (x) Xoom Options with an
exercise price of not less than the fair market value on the date of grant and
vesting over not less than 2 years to be
<PAGE>
42
issued to employees currently holding Xoom Plan Options exercisable in the
aggregate for not more than that number of shares of Xoom Plan Stock that equals
15% of the shares of Xoom stock for which Xoom Plan Options will remain unvested
and nonexercisable after giving effect to the acceleration of vesting described
in SECTION 6.8; and (y) Xoom Options with an exercise price of not less than 85%
of the fair market value on the date of grant, and vesting over not less than 3
years, to be issued to employees currently holding Xoom Non-Plan Options
exercisable in the aggregate for not more than the lesser of (i) that number of
shares of Xoom that equals two times the number of shares of Xoom for which Xoom
Non-Plan Options will remain unvested and nonexercisable and terminate after
giving effect to the acceleration of vesting described in SECTION 6.8 or (ii)
150,000 shares of Xoom.
(c) adopt any stockholders rights plan or take any other
action which would restrict or impede the ability of NBC or its Subsidiaries to
acquire any shares of Xoom Stock to the extent permitted by the terms hereof;
(d) acquire any business or any assets (other than inventory
and any other assets acquired solely for use in an existing business in the
ordinary course consistent with past practice of such business) or acquire any
minority investment in any Person, except for any acquisitions for consideration
not in excess of $10,000,000 individually or $25,000,000 in the aggregate taken
together with all such acquisitions.
(e) dispose of any business or any assets (other than
inventory and any other assets acquired solely for use in an existing business
in the ordinary course consistent with past practice of such business) or
dispose of any minority investment in any Person, except for any dispositions
having a fair market value not in excess of $10,000,000 individually or
$25,000,000 in the aggregate taken together with all such dispositions;
(f) except as otherwise permitted by this SECTION 5.1, make
any expenditures other than in the ordinary course of business and in any event
not in excess of the aggregate budgeted expenditures provided in the Xoom
Budget;
(g) except as otherwise permitted by SECTION 5.1(D),enter into
any transaction involving a cash expenditure other than in the ordinary course
of business consistent with past practice;
(h) except as otherwise permitted by this SECTION 5.1, enter
into any transaction involving the incurrence of indebtedness other than in the
ordinary course of business consistent with past practice;
(i) enter into any transaction involving the merger,
consolidation or sale of all or substantially all of the assets of Xoom;
(j) file any voluntary petition for bankruptcy or receivership
of Xoom or fail to oppose any other person's petition for bankruptcy or action
to appoint a receiver of Xoom;
<PAGE>
43
(k) except as required by applicable law, as contemplated in
this Agreement or the Xenon 2 Merger Agreement or to the extent required under
existing employee benefit plans, agreements or arrangements as in effect on May
9, 1999, (A) increase the compensation or fringe benefits of any present or
former director, officer or employee of Xoom or its Subsidiaries, except for
increases, in the ordinary course of business, in salary or wages of employees
who are not officers, (B) except in the ordinary course of business grant any
severance or termination pay to any present or former director, officer or
employee of Xoom or its Subsidiaries or (C) enter into or amend or terminate any
collective bargaining, bonus, profit sharing, thrift, compensation, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of any
present or former director, officer or employee of Xoom or its Subsidiaries;
(l) allow any payables or other obligations to become
delinquent, except where the amount or validity of such payables or obligations
is currently being contested in good faith by appropriate proceedings and
reserves in conformity with GAAP with respect thereto have been recorded, or
change or modify the usual, regular and ordinary manner of collecting
receivables from past practice;
(m) except with respect to transactions permitted by SECTION
5.1(D) and SECTION 5.1(E), enter into any contract, agreement, joint venture or
other commitment that is not terminable in Xoom's sole discretion on or prior to
one year from May 9, 1999 without payment of any termination fee or penalty;
(n) settle any claim, action or proceeding involving money
damages in excess of $50,000 in the aggregate or that could result in any
injunction or prohibition on any part of the business of Xoom;
(o) amend, supplement or otherwise modify the Xenon 2 Merger
Agreement or terminate the Xenon 2 Merger Agreement other than in accordance
with Section 9.1(f) thereof; or
(p) authorize any of, or commit or agree to take any of, the
foregoing actions.
V.2 CONDUCT OF THE BUSINESS OF SNAP PENDING THE CLOSING. NBC agrees
that except with the prior written consent of Xoom, and except as may be
expressly permitted or contemplated by this Agreement or as set forth on
SCHEDULE 5.2, prior to the Closing Date, NBC shall use reasonable efforts to
cause each of SNAP and its Subsidiary to be operated only in the usual, regular
and ordinary manner, on a basis consistent with past practice and, to the extent
consistent with such operation, use its reasonable efforts to preserve its
present business organization intact, keep available the services of its present
employees, preserve its present business relationships and maintain all rights,
privileges and franchises necessary or desirable in the normal conduct of SNAP's
businesses. Without limiting the generality of the foregoing, from May 9, 1999
until the Closing, except as expressly permitted or contemplated by this
<PAGE>
44
Agreement or as set forth on SCHEDULE 5.2, NBC shall use reasonable efforts not
to permit SNAP to:
(a) amend the SNAP LLC Agreement;
(b) issue, purchase or redeem, or authorize or propose the
issuance, purchase or redemption of, or make any distribution with respect to,
any equity interests of SNAP or any class of securities convertible into, or
rights, warrants or options to acquire, any such equity interests or other
convertible securities other than (i) pursuant to employee options outstanding
on May 9, 1999 or (ii) SNAP Options with an exercise price of not less than the
fair market value on the date of grant to be issued to employees exercisable in
the aggregate for not more than 195,132 units of SNAP;
(c) acquire any business or any assets (other than inventory
and any other assets acquired solely for use in an existing business in the
ordinary course consistent with past practice of such business) or acquire any
minority investment in any Person, except for any acquisitions for consideration
not in excess of $10,000,000 individually or $25,000,000 in the aggregate taken
together with all such acquisitions;
(d) dispose of any business or any assets (other than
inventory and any other assets acquired solely for use in an existing business
in the ordinary course consistent with past practice of such business) or
dispose of any minority investment in any Person, except for any dispositions
having a fair market value not in excess of $10,000,000 individually or
$25,000,000 in the aggregate taken together with all such dispositions;
(e) except as otherwise permitted by this SECTION 5.2, make
any expenditures other than in the ordinary course of business and in any event
not in excess of the aggregate budgeted expenditures provided in the SNAP
Budget;
(f) except as otherwise permitted by SECTION 5.2(C), enter
into any transaction involving a cash expenditure by SNAP other than in the
ordinary course of business consistent with past practice;
(g) except as otherwise permitted by this SECTION 5.2, enter
into any transaction involving the incurrence of indebtedness by SNAP other than
in the ordinary course of business consistent with past practice;
(h) file any voluntary petition for bankruptcy or receivership
of SNAP or fail to oppose any other person's petition for bankruptcy or action
to appoint a receiver of SNAP;
(i) except with respect to transactions permitted by SECTION
5.2 (C) and SECTION 5.2(D), enter into any contract, agreement, joint venture or
other commitment that is not terminable in SNAP's sole discretion on or prior to
one year from May 9, 1999 without payment of any termination fee or penalty;
<PAGE>
45
(j) except as required by applicable law, as contemplated in
this Agreement or the Xenon 2 Merger Agreement or to the extent required under
existing employee benefit plans, agreements or arrangements as in effect on May
9, 1999, (A) increase the compensation or fringe benefits of any employee of
SNAP, except for increases, in the ordinary course of business, in salary or
wages of employees who are not officers, (B) except in the ordinary course of
business grant any severance or termination pay to any employee of SNAP, (C)
hire, except in the ordinary course of business, any new employees or
consultants, or (D) enter into or amend or terminate any collective bargaining,
bonus, profit sharing, thrift, compensation, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any employee of SNAP;
(k) allow any payables or other obligations to become
delinquent, except where the amount or validity of such payables or obligations
is currently being contested in good faith by appropriate proceedings and
reserves in conformity with GAAP with respect thereto have been recorded, or
change or modify the usual, regular and ordinary manner of collecting
receivables from past practice;
(l) except as otherwise permitted by SECTION 5.2(D), dispose
of or abandon outside the ordinary course of business any assets of SNAP that
are material, individually or in the aggregate, to SNAP and not transfer any
rights of material value of SNAP;
(m) permit or allow any of the material assets of SNAP to
become subject to any Liens, except for Permitted Liens or waive any material
claims or rights of SNAP;
(n) except as otherwise permitted by SECTION 5.2(C), acquire
or agree to acquire outside the ordinary course of business any assets that are
material, individually or in the aggregate, to SNAP;
(o) enter into any transaction involving the merger,
consolidation or sale of all or substantially all of the assets of SNAP;
(p) settle any claim, action or proceeding involving money
damages in excess of $50,000 in the aggregate or that could result in any
injunction or prohibition on any part of the business of SNAP; or
(q) authorize any of, or commit or agree to take any of, the
foregoing actions.
V.3 CONDUCT OF THE NBC MULTIMEDIA BUSINESSES PENDING THE CLOSING. NBC
agrees that except with the prior written consent of Xoom and except as may be
expressly permitted or contemplated by this Agreement or as set forth on
SCHEDULE 5.2, prior to the Closing Date, it shall, and shall cause its
Subsidiaries to, operate the NBC Multimedia Businesses only in the usual,
regular and ordinary manner, on a basis consistent with past practice and, to
the extent consistent with such operation, use its reasonable efforts to
preserve the NBC Multimedia
<PAGE>
46
Businesses' present business organization intact, keep available the services of
the NBC Multimedia Businesses' present employees, preserve their present
business relationships and maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of the NBC Multimedia Businesses.
NBC shall not cause or permit NMC to conduct any business or take other actions
other than for the purposes of effectuating the transactions contemplated
hereby. Without limiting the generality of the foregoing, from May 9, 1999 until
the Closing, except as expressly permitted or contemplated by this Agreement or
as set forth on SCHEDULE 5.2, NBC shall not:
(a) except as required by applicable law or to the extent
required under existing employee benefit plans, agreements or arrangements as in
effect on May 9, 1999 or as contemplated by this Agreement, (A) increase the
compensation or fringe benefits of any Transferred Employee (including, for all
purposes in this section, persons eligible to become Transferred Employees upon
occurrence of future events such as the acceptance of offers of employment),
except for increases, in the ordinary course of business, in salary or wages of
employees who are not officers, (B) except in the ordinary course of business
grant any severance or termination pay to any Transferred Employee or (C) enter
into or amend or terminate any collective bargaining, bonus, profit sharing,
thrift, compensation, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any Transferred Employee;
(b) transfer, dispose of or abandon any of the material NBC
Multimedia Assets or Videoseeker Assets, other than in the ordinary course of
business, consistent with past practice;
(c) permit or allow any of the NBC Multimedia Assets or
Videoseeker Assets to become subject to any Liens, except for Permitted Liens or
waive any material claims or rights relating to the NBC Multimedia Assets or the
Videoseeker Assets;
(d) transfer any rights of material value included in the NBC
Multimedia Assets or Videoseeker Assets;
(e) authorize any of, or commit or agree to take any of, the
foregoing actions.
V.4 ACCESS TO INFORMATION. From May 9, 1999 to the Closing Date, each
of Xoom and NBC and their respective Subsidiaries shall afford the officers,
employees, auditors and other agents of NBC and Xoom reasonable access during
normal business hours to the officers, employees, properties, offices, plants
and other facilities of (i) SNAP and the NBC Multimedia Businesses, in the case
of NBC and (ii) Xoom and its Subsidiaries, in the case of Xoom and Xenon 2, and
to the contracts, commitments, books, records and Tax Returns relating thereto,
and shall furnish such Persons all such documents and such financial, operating
and other data and information regarding such businesses and Persons that are in
the possession of such Person as NBC or Xoom, as applicable, through their
respective officers, employees or agents may from time to time reasonably
request. All such information, as well as any information provided prior
<PAGE>
47
to the date hereof, shall be used only for the purposes of the transactions
contemplated hereby and, unless required by subpoena or otherwise required by
law, the parties agree not to disclose to any third party (other than their
respective professional advisors) any portion of the information so provided
which constitutes confidential information (i.e., information that is not
otherwise publicly available). The confidential information shall not, without
the other parties' prior written consent, be disclosed to third parties. The
parties will disclose the information internally only to persons who require
knowledge thereof for the purposes of the transactions contemplated hereby.
V.5 NO SOLICITATION. (a) From and after May 9, 1999 until the earlier
of the Effective Time or the termination of this Agreement in accordance with
its terms, Xoom shall not, nor shall it permit any of its Subsidiaries to, nor
shall it authorize or permit any officer, director or employee of, or any
investment banker, attorney or other advisor or representative of, Xoom or any
of its Subsidiaries to, directly or indirectly, (i) take any action to solicit,
initiate, encourage or knowingly facilitate any Material Transaction Proposal
(as defined below) or the submission of a Material Transaction Proposal or (ii)
enter into or participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, a Material Transaction
Proposal; PROVIDED that, prior to obtaining the affirmative vote of the holders
of a majority of the outstanding shares of common stock of Xoom to adopt the
Xenon 2 Merger Agreement (the "XOOM STOCKHOLDER APPROVAL" and, together with the
Xenon 2 Stockholder Approval, the "STOCKHOLDER APPROVALS"), in response to an
unsolicited BONA FIDE Takeover Proposal, Xoom may, to the extent that the Board
of Directors of Xoom determines in good faith based on the advice of outside
legal counsel that such action is required to comply with their fiduciary duties
under applicable law, (A) furnish information with respect to Xoom and its
Subsidiaries to the person making such Takeover Proposal and its representatives
and discuss such information with such person and its representatives and (B)
participate in negotiations regarding such Takeover Proposal. Xoom will promptly
notify NBC of receipt of any request for information or any Material Transaction
Proposal, the material terms and conditions of such request or Material
Transaction Proposal and the identity of the person making any such request or
Material Transaction Proposal, and will keep NBC fully informed on a current
basis of the status and details of any such request or Material Transaction
Proposal, PROVIDED that, prior to providing any information to any Person or
participating in negotiations with any Person, Xoom shall have received an
executed confidentiality agreement. Xoom will immediately cease and cause to be
terminated any existing activities, discussions and negotiations conducted
heretofore with respect to any Material Transaction Proposal.
(b) From and after May 9, 1999 until the earlier of the
Effective Time or the termination of this Agreement in accordance with its
terms, the Board of Directors of Xoom shall not (i) approve or recommend or
propose publicly to approve or recommend any Material Transaction Proposal, (ii)
cause or agree to cause Xoom or any of its Subsidiaries to enter into any
agreement (including, without limitation, any letter of intent or agreement in
principle) related to a Material Transaction Proposal or (iii) prior to the Xoom
Stockholder Approval, withdraw or modify, in a manner adverse to NBC, the
approval or recommendation of the Board of Directors of Xoom for the adoption of
the Xenon 2 Merger Agreement or vote in favor of
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48
Xoom, as sole stockholder of Xenon 2, adopting the NMC Merger Agreement at the
Xenon 2 Stockholder Meeting. Notwithstanding the foregoing, if the Board of
Directors of Xoom receives a Takeover Proposal without having violated SECTION
5.5(A) hereof, the Board of Directors of Xoom may, prior to obtaining the Xoom
Stockholder Approval, to the extent it determines in good faith based on the
advice of outside legal counsel that such action is required to comply with
their fiduciary duties under applicable law, take any action specified in
clauses (i), (ii) or (iii) above with respect to such Takeover Proposal, but in
each case only (x) at a time that is at least five (5) business days after
receipt by NBC of written notice from Xoom advising NBC that the Board of
Directors of Xoom has resolved to take such action and (y) if Xoom
simultaneously therewith terminates this Agreement pursuant to SECTION 9.1(G)
hereof. Nothing contained in this Agreement shall prohibit Xoom or its board of
directors from complying with Rules 14D-9 and 14e-2 under the Exchange Act with
respect to any Takeover Proposal.
(c) As used herein, "MATERIAL TRANSACTION PROPOSAL" means any
inquiry, proposal or offer from any Person relating to (i) the direct or
indirect acquisition or purchase of 20% or more of the assets (based on the fair
market value thereof) of Xoom and its Subsidiaries, taken as a whole, or of 20%
or more of any class of equity securities of Xoom or any of its Subsidiaries or
any tender offer or exchange offer (including by Xoom or its Subsidiaries) that
if consummated would result in any person beneficially owning 20% or more of any
class of equity securities of Xoom or any of its Subsidiaries, or (ii) any
merger, consolidation, business combination, sale of all or substantially all
assets, recapitalization, liquidation, dissolution or similar transaction
involving Xoom or any of its Subsidiaries other than the Transactions
contemplated by this Agreement; PROVIDED, HOWEVER, that in no event shall any
merger, consolidation, sale or similar transaction involving only Xoom and one
or more of its wholly-owned subsidiaries or involving only any two or more of
such wholly-owned subsidiaries be deemed to be a Material Transaction Proposal
if such transaction is not entered into in violation of the terms of this
Agreement.. As used herein, "TAKEOVER PROPOSAL" means any inquiry, proposal or
offer from any Person relating to (A) any of the matters set forth in clause (i)
of the definition of Material Transaction Proposal but replacing "20%" with
"50%" each place "20%" is used in such definition, (B) a sale of all or
substantially all of the assets of Xoom and its Subsidiaries or (C) a merger or
consolidation of Xoom as a result of which the stockholders of Xoom immediately
prior to such transaction would not beneficially own immediately after such
transaction 50% or more of the resulting or surviving entity (or the parent
thereof).
(d) The parties acknowledge that there may be no adequate
remedy at law for a breach of SECTION 5.5 and that money damages may not be an
adequate remedy for breach of such Section. Therefore, the parties agree that
NBC and Xoom each shall have the right, in addition to any other rights it may
have, to injunctive relief and specific performance in the event of any breach
of this SECTION 5.5. The remedy set forth in the preceding two sentences is
cumulative and shall in no way limit any other remedy any party hereto has at
law, in equity or pursuant hereto.
V.6 NON-SOLICITATION OF EMPLOYEES. The parties hereto agree that
beginning on May 9, 1999 and continuing until one year after the Effective Time,
no party shall, directly or
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49
indirectly, solicit for employment any person who is now employed by any of the
other parties in an executive position, technical position or is otherwise
considered a key employee; PROVIDED, HOWEVER, that a party shall not be
precluded from hiring any such employee who (i) initiates discussions regarding
such employment without any direct or indirect solicitation by such party, (ii)
responds to any general public advertisement placed by such party or (iii) has
been terminated by the other party prior to commencement of employment
discussions between such party and the employee.
V.7 AMENDMENTS TO SCHEDULES. If no later than five business days prior
to the Closing Date, Xoom, Xenon 2, NBC, SNAP or GE Investments Sub becomes
aware of any fact or circumstance (whether or not it existed prior to May 9,
1999) which would make any representation, warranty, covenant or agreement of
such party untrue, then such party shall be permitted to amend any Schedule to
this Agreement so as to identify such fact or circumstance to the extent
necessary to make such representation, warranty, covenant or agreement true and
correct; PROVIDED that if any such amendment, individually or in the aggregate
with all such other amendments, discloses facts and circumstances that
constitute a Material Adverse Effect, then notwithstanding anything to the
contrary in this Agreement, the other party (which shall be Xoom in the case of
amendments by NBC, SNAP or GE Investments Sub and shall be NBC in the case of
amendments by Xoom or Xenon 2) shall have the right to terminate this Agreement.
Notwithstanding the foregoing, any change to a Schedule that refers solely to an
item previously disclosed in the SEC Documents shall not be deemed to have a
Material Adverse Effect on Xenon if such reference is to a specific section of a
specific SEC Document.
ARTICLE VI
OTHER AGREEMENTS
VI.1 REGISTRATION STATEMENT; PREPARATION OF PROXY STATEMENT. (a) As
soon as practicable after the execution of this Agreement, Xoom shall prepare
and cause to be filed with the SEC preliminary proxy materials (the "PROXY
STATEMENT") for the solicitation of approval by the stockholders of Xoom of the
Xenon 2 Merger Agreement and of Xoom, in its capacity as sole stockholder of
Xenon 2, approving this Agreement, the Merger and the other transactions
contemplated hereby and the other Implementing Agreements as may reasonably
require approval of Xenon 2's stockholders. Xoom shall cause Xenon 2 to include
the Proxy Statement as part of the prospectus to be included in the registration
statement on Form S-4 (the "FORM S-4") that Xenon 2 is preparing and filing with
respect to the shares of Class A Common Stock issuable pursuant to the
transactions contemplated by the Xenon 2 Merger Agreement. Each of Xenon 2 and
Xoom shall cause the Form S-4 and the Proxy Statement related thereto to comply
with applicable law and the rules and regulations promulgated by the SEC, to
respond promptly to any comments of the SEC or its staff and to have such
registration statement declared effective under the Securities Act as promptly
as practicable after it is filed with the SEC and Xoom shall use its best
efforts to cause the proxy statement to be mailed to Xoom's stockholders as
promptly as practicable after the registration statement is declared effective
under the Securities Act. Each
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50
of the parties hereto shall promptly furnish to the other party all information
concerning itself, its stockholders and its Affiliates that may be required or
reasonably requested in connection with any action contemplated by this SECTION
6.1. If any event relating to any party occurs, or if any party becomes aware of
any information, that should be disclosed in an amendment or supplement to the
Form S-4 or the Proxy Statement, then such party shall inform the other thereof
and shall cooperate with each other in filing such amendment or supplement with
the SEC and, if appropriate, in mailing such amendment or supplement to the
stockholders of Xoom. The Proxy Statement shall include the recommendation of
the Board of Directors of Xoom in favor of the adoption of this Agreement and
the Xenon 2 Merger Agreement and the approval of the transactions contemplated
hereby and thereby.
(b) Prior to the Effective Time, Xoom shall cause Xenon 2 to
use reasonable efforts to obtain all regulatory approvals needed to ensure that
the Class A Common Stock to be issued in connection with the transactions
contemplated the Xenon 2 Merger Agreement (i) will be registered or qualified
under the "blue sky" laws of every jurisdiction of the United States in which
any registered holder of the outstanding Xoom common stock who is receiving
registered shares of Class A Common Stock has an address of record or be exempt
from such registration; and (ii) will be approved for quotation at the Effective
Time on Nasdaq.
(c) Each of Xoom, Xenon 2 and NBC agrees with respect to the
information to be supplied by such party that: (i) none of the information to be
supplied by such party or its Affiliates for inclusion in the Form S-4 will, at
the time the Form S-4 becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading; (ii) none
of the information to be supplied by such party or its Affiliates for inclusion
in the Proxy Statement will, at the time the Proxy Statement is mailed to the
stockholders of Xoom or as of the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; and (iii) as to
matters respecting such party, the Proxy Statement and the Form S-4 will comply
as to form in all material respects with the provisions of the Securities Act
and the Exchange Act, as applicable, and the rules and regulations promulgated
by the SEC thereunder.
VI.2 STOCKHOLDER MEETING. Xoom shall promptly after May 9, 1999
take all action necessary in accordance with applicable law and its certificate
of incorporation and bylaws to duly call, hold and convene a meeting of Xoom's
stockholders (the "XOOM STOCKHOLDER MEETING") and a meeting of Xoom 2's
stockholder (the "XENON 2 STOCKHOLDER MEETING). Except as required by the SEC or
applicable court order, Xoom shall not postpone or adjourn (other than for the
absence of a quorum) the Xoom Stockholder Meeting or the Xenon 2 Stockholder
Meeting without the consent of NBC. Notwithstanding anything in this Agreement
to the contrary, Xenon 2 shall, and Xoom shall cause Xenon 2, to duly call, hold
and convene the Xenon 2 Stockholder Meeting immediately after Xoom Stockholders
Meeting, and Xoom, in its capacity as sole stockholder of Xenon 2, shall vote
with respect to the adoption of this
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51
Agreement at the Xenon 2 Stockholder Meeting as instructed by the votes of at
least a majority of the Xoom Stockholders at the Xoom Stockholder Meeting. Each
of Xenon 2 and Xoom shall not authorize or permit (i) the Xenon 2 Stockholder
Meeting to occur at or after the effectiveness of the merger contemplated by the
Xenon 2 Merger Agreement or (ii) the adoption of this Agreement by the
stockholder of Xenon 2 to be effected by a written consent to action without a
meeting. Neither NBC, Xenon 2 nor Xoom shall in any way challenge the validity,
enforceability or effectiveness of the voting agreements or proxies entered into
by certain stockholders of Xoom in connection with this Agreement or the Xenon 2
Merger Agreement and the transactions contemplated hereby and thereby. Xoom
shall take all other action necessary or advisable to secure the Stockholder
Approvals subject to the fiduciary duty set forth in SECTION 5.5. Without
limiting the generality of the foregoing but subject to its rights to terminate
the Agreement pursuant to SECTION 9.1(G), Xoom agrees that its obligations
pursuant to this SECTION 6.2 shall not be affected by the commencement, public
proposal, public disclosure or communication to Xoom of any Material Transaction
Proposal.
VI.3 PUBLIC STATEMENTS. Before any party or any Affiliate of such party
shall release any information concerning this Agreement or the matters
contemplated hereby which is intended for or may result in public dissemination
thereof, such party shall cooperate with the other parties, shall furnish drafts
of all documents or proposed oral statements to the other parties, provide the
other parties the opportunity to review and comment upon any such documents or
statements and shall not release or permit release of any such information
without the consent of the other parties, except to the extent required by
applicable law or the rules of any securities exchange or automated quotation
system on which its securities or those of its Affiliate are traded.
VI.4 REASONABLE COMMERCIAL EFFORTS. (a) Subject to the terms and
conditions provided in this Agreement, each party shall use reasonable
commercial efforts to take promptly, or cause to be taken, all actions, and to
do promptly, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated hereby, to obtain all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, including,
without limitation, an appropriate filing of a Notification and Report Form
pursuant to the HSR Act with respect to the transactions contemplated hereby,
and the filings and consents set forth on SCHEDULE 6.4 hereto (the "REQUIRED
CONSENTS") and to remove any injunctions or other impediments or delays, legal
or otherwise, in order to consummate and make effective the transactions
contemplated by this Agreement for the purpose of securing to the parties hereto
the benefits contemplated by this Agreement; PROVIDED that notwithstanding
anything to the contrary in this Agreement, no party nor any of their Affiliates
shall be required to make any disposition, including, without limitation, any
disposition of, or any agreement to hold separate, any Subsidiary, asset or
business, and no party hereto nor any of their Affiliates shall be required to
make any payment of money nor shall any party or its Affiliates be required to
comply with any condition or undertaking or take any action which, individually
or in the aggregate, would materially adversely affect the economic benefits to
such party of the transactions contemplated hereby and
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52
the Implementing Agreements, taken as a whole or adversely affect any other
business of such party or its Affiliates.
(b) Each of the parties hereto shall execute and cause its
Subsidiaries to execute on or prior to the Closing Date each Implementing
Agreement to which it or they are a party on the terms set forth in the relevant
Exhibits hereto.
(c) Each of the parties hereto agrees, from time to time, to
execute and deliver, or use reasonable commercial efforts to cause to be
executed and delivered, such additional instruments, certificates or documents
(including bills of sale and assignment and assumption agreements), and take all
such actions, reasonably necessary to implement or effectuate the transactions
contemplated by this Agreement.
VI.5 NOTIFICATION OF CERTAIN MATTERS. Each party to this Agreement
shall give prompt notice to each other party of (i) the occurrence or
non-occurrence of any event, the occurrence or non-occurrence of which is likely
to cause any representation or warranty of any party contained in this Agreement
to be untrue or inaccurate at or prior to the Effective Time and (ii) any
failure of any party to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; PROVIDED, HOWEVER,
that the delivery of any notice pursuant to this SECTION 6.5 shall not limit or
otherwise affect any remedies available to the parties receiving such notice. No
disclosure by any party pursuant to this SECTION 6.5, however, shall be deemed
to amend or supplement the disclosures set forth on the Schedules to ARTICLE IV
or prevent or cure any misrepresentations, breach of warranty or breach of
covenant.
VI.6 XENON 2 DIRECTORS. (a) NBC shall have the right to select six
persons to serve as members of the Board of Directors of Xenon 2 to be elected
by the holders of the Class B Common Stock, voting separately as a class (such
persons, or any replacement persons, the "NOMINEES"), and Xoom and Xenon 2 shall
cause the Nominees to be appointed to the Board of Directors of Xenon 2 (to the
extent the Nominees so consent) as of the Effective Time.
(b) Xoom and Xenon 2 shall also cause to be appointed to the
Board of Directors of Xenon 2 (to the extent they so consent) as of the
Effective Time the current Chairman of the Board of Xoom, the four current
outside directors of Xoom and an additional person designated by Xoom.
(c) Xoom and Xenon 2 shall also cause to be appointed to the
Board of Directors of Xenon 2 as of the Effective Time one additional person
mutually agreed upon by NBC and Xoom who shall not be affiliated with either
party.
(d) Xenon 2 will cause the Surviving Corporation to indemnify
each person who is now, or has been at any time prior to May 9, 1999, or who
becomes prior to the Effective Time, a director or officer of NMC from and after
the Effective Time (individually an "INDEMNIFIED PARTY" and collectively the
"INDEMNIFIED PARTIES"), with respect to acts or omissions occurring prior to the
Effective Time to the full extent provided as of May 9, 1999
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53
under the certificate of incorporation, bylaws, other similar organizational
documents of NMC or applicable law. The rights under this SECTION 6.6(D) are
contingent upon the occurrence of, and will survive consummation of, the
transactions contemplated hereby and are expressly intended to benefit each
Indemnified Party each of whom shall have third party beneficiary rights
hereunder.
VI.7 EMPLOYEE MATTERS.
(a) EMPLOYEES AND OFFERS OF EMPLOYMENT. Between May 9, 1999
and the Closing Date, Xenon 2 shall offer employment as of the Closing Date to
each individual who is listed on SCHEDULE 6.7(A) and who, on the Closing Date,
is employed by NBC or its Affiliates or who is absent from work by reason of
vacation, sick leave, short-term disability or due to authorized leave of
absence or military service; PROVIDED that for any such employee who, as of the
Closing Date, is absent from work due to sick leave, short-term disability or
due to authorized leave of absence or military service, such offer of employment
shall be effective as of the date such employee is able to commence active
employment with Xenon 2. Each offer of employment shall include salary, title
and level of responsibility which are no less favorable in the aggregate than
those in effect for such employee on May 9, 1999; PROVIDED that nothing shall
prohibit Xenon 2 from terminating the employment of any Transferred Employee at
any time. Such employees who accept and commence employment with Xenon 2 are
herein collectively referred to as "TRANSFERRED EMPLOYEES".
(b) EMPLOYEE BENEFIT PLANS
(i) As of the Closing Date, except as otherwise expressly
provided under the applicable employee benefit plan of NBC or its Affiliates
(the "NBC PLANS") the Transferred Employees shall cease to accrue further
benefits under NBC Plans and shall immediately commence participation in the
Xenon 2 plans (which, except as otherwise provided in this Agreement, shall
initially be the Xoom Plans) on a basis no less favorable than similarly
situated employees of Xenon 2 or Xoom. Xenon 2 or Xoom shall cause each Xenon 2
Plan to treat the prior service of each Transferred Employee with NBC or its
affiliates as service rendered to Xenon 2 or Xoom for purposes of eligibility,
vesting and benefit accrual (but not for purposes of benefit accruals) under any
defined benefit plan to the same extent such service was taken into
consideration under comparable NBC Plans.
(ii) NBC shall retain responsibility for and continue to pay
all medical, life insurance, disability and other welfare plan expenses and
benefits for each Transferred Employee with respect to claims incurred by such
Employees or their covered dependents prior to the Closing Date. Expenses and
benefits with respect to claims incurred by Transferred Employees or their
covered dependents on or after the Closing Date shall be the responsibility of
Xenon 2. For purposes of this paragraph, a claim is deemed incurred when the
services that are the subject of the claim are performed; in the case of life
insurance, when the death occurs, in the case of long-term disability benefits,
when the disability occurs and, in the case of a hospital stay, when the
employee first enters the hospital.
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54
(iii) With respect to any welfare benefit plans (as defined in
section 3(1) of ERISA) maintained by Xenon 2 or its Subsidiaries for the benefit
of Transferred Employees and SNAP Employees on and after the Closing Date, Xenon
2 or its Subsidiaries shall use best efforts to (A) cause there to be waived any
pre-existing condition limitations and (B) give effect, in determining any
deductible and maximum out-of-pocket limitations, to claims incurred and amounts
paid by, and amounts reimbursed to, such employees with respect to similar plans
maintained by NBC for their benefit immediately prior to the Closing Date.
(iv) NBC shall retain all assets and liabilities and
obligations under NBC Plans with respect to the Transferred Employees.
Notwithstanding the foregoing, Xenon 2 shall be responsible, with respect to
Transferred Employees, for all accrued bonuses for the year of Closing.
(v) With respect to any accrued but unused vacation time to
which any Transferred Employee is entitled pursuant to the vacation policy
applicable to such Transferred Employee immediately prior to the Closing Date
(the "VACATION POLICY"), Xenon 2 shall allow such Transferred Employee to use
such accrued vacation; PROVIDED, HOWEVER, that if Xenon 2 deems it necessary to
disallow such Transferred Employee from taking such accrued vacation, Xenon 2
shall be liable for and pay in cash to each such Transferred Employee an amount
equal to such vacation time in accordance with terms of the Vacation Policy.
VI.8 XENON 2 OPTIONS. (a) Prior to the Effective Time, with respect to
each option to purchase shares of Xenon 2 into which options to purchase shares
of Xoom (a "XOOM OPTION"), which were granted pursuant to the Xoom 1998 Stock
Incentive Plan (the "XOOM OPTION PLAN") prior to May 9, 1999, were converted
(the "CONVERTED XOOM PLAN OPTIONS"), Xenon 2 shall cause the Administrator (as
defined in the Xoom Option Plan) to exercise its discretion to provide, and
shall take any other necessary action to provide, that each Converted Xoom Plan
Option shall vest and become exercisable with respect to all shares as to which
such options would otherwise have vested within 12 months following the
Effective Time. With respect to each option to purchase shares of Xenon 2 into
which Xoom Options, which were not granted pursuant to the Xoom Option Plan
prior to May 9, 1999, were converted (the "CONVERTED XOOM NON-PLAN OPTIONS"),
Xenon 2 shall take any necessary action to provide that such Converted Xoom
Non-Plan Options shall to the extent provided in the award agreement evidencing
such option vest and become exercisable with respect to 75% of the then unvested
portion of such Converted Xoom Non-Plan Option and any portion of a Converted
Xoom Non-Plan Option which remains unexercised upon the occurrence of the
Effective Time shall terminate upon the occurrence of the Effective Time. In
addition, with respect to each option to purchase shares of Xenon 2 into which
Xoom Options, which were granted after May 9, 1999, were converted (the
"CONVERTED NEW XOOM OPTIONS"), Xenon 2 shall cause the Administrator to exercise
its discretion to provide, and shall take any other necessary action to provide,
that each option Converted New Xoom Option shall not immediately vest (but
rather, shall vest in accordance with its stated vesting schedule) with respect
to any of the shares subject thereto. Xenon 2 and Xoom acknowledge that the
transaction contemplated hereby shall constitute a "Corporate
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55
Transaction" for purposes of both the Xoom Option Plan and the Converted Xoom
Non-Plan Options and the Administrator, the Board of Directors of Xoom and the
Board of Directors of Xenon 2 shall take all necessary action to effect the
foregoing.
(b) In the event that any Xoom employee incurs an excise tax
under Section 4999 of the Code as a result of the accelerated vesting of the
Xoom Options pursuant to SECTION 6.8(A), Xenon 2 shall make available to such
employee a loan (the "TAX LOAN") in an amount sufficient to pay such excise tax.
The determination of whether any such excise tax will be payable and the amount
of such excise tax will be made by Xoom 2's independent auditors. The Tax Loan
will (i) have a term of two years, and (ii) bear interest at the lowest
permissible rate without imputation of income, compounded annually and (iii) to
the extent not previously forgiven become immediately due and payable upon the
termination of such employee's employment with Xenon 2 and its Affiliates for
cause or due to such employee's voluntary resignation. The Tax Loan, will be
forgiven with respect to 1/24 of the initial principal amount of the Tax Loan
(together with accrued interest thereon) on the last day of each 1 month
anniversary of the Effective Time if the employee has remained continually
employed with Xenon 2 and its Affiliates through such date or if such employee's
employment with Xenon 2 and its Affiliates is terminated without cause or due to
the employee's death or disability.
VI.9 SNAP INDEBTEDNESS. Immediately following Closing, Xenon 2 will
repay and terminate the commitments with respect to the indebtedness for money
borrowed (including all interest, fees and other amounts payable in respect
thereof) set forth on SCHEDULE 6.9 and Xenon 2 shall use its best efforts to
cause the guarantee of such indebtedness by General Electric Company to be fully
released. Neither SNAP nor NBC or any of its Subsidiaries shall be required to
repay prior to Closing any indebtedness of SNAP, including any incurred from and
after May 9, 1999 in accordance with the terms of this Agreement.
VI.10 ORGANIZATION OF CNBC.COM. NBC shall organize an entity and
contribute the assets, properties and other rights set forth on SCHEDULE 6.10 to
such entity on or before the Closing Date.
VI.11 TAX COOPERATION AND CONSISTENT REPORTING.
(a) Xenon 2 and NBC agree to furnish or cause to be furnished
to each other, upon request, as promptly as practicable, such information and
assistance relating to the Contributed Assets as is reasonably necessary for the
filing of all Tax Returns, and making of any election related to Taxes, the
preparation for any audit by any Tax Authority, and the prosecution or defense
of any claim, suit or proceeding relating to any Tax Return. Xenon 2 and NBC
will cooperate with each other in the conduct of any audit or other proceeding
related to Taxes and all other Tax matters relating to the Contributed Assets,
and each will execute and deliver such powers of attorney and other documents as
are necessary to carry out the intent of this SECTION 6.11.
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56
(b) Unless there has been a Final Determination to the
contrary, NBC, Xenon 2 and Xoom covenant and agree, for all Tax purposes
including all Tax Returns and any Tax controversies to (and to cause any
Affiliate or successor to their assets or business to) take each of the
positions set forth below (and not to take any positions inconsistent
therewith):
(i) The transfer of the Contributed Assets pursuant to the
Agreement will qualify under Section 351(a) of the Code.
(ii) None of the consideration received for the Contributed
Assets pursuant to the Agreement will be treated as Other Property or Money.
(iii) None of the Class A Common Stock or Class B Common Stock
issued to NBC or CNET pursuant to the terms of the Agreement will be paid or
issued for services.
(iv) The tax basis of each Contributed Asset to be received by
Xenon 2 will be the same as the tax basis of such asset in the hands of the
transferor increased by the amount of any gain recognized by the transferor on
the transfer of such asset.
(v) The holding period of each Contributed Asset will include
the period during which such asset was held by the transferor.
(vi) Neither Xenon 2, Xoom, any affiliate thereof, nor any
successor to their assets or businesses will be entitled to claim any deduction
in respect of any assumed Liability to the extent previously deducted by the
transferor.
(c) Xenon 2 represents, covenants and agrees that (A) it has
no plan or intention to (i) issue additional shares of stock after the Merger,
or take any other action, that would result in NBC, NBC Multimedia, CNBC, CNET
and the Xoom shareholders losing control of Xenon 2, (ii) liquidate or merge
Xenon 2; (iii) sell or otherwise dispose of any of its assets (or of any of the
assets acquired from NBC Multimedia), except for dispositions made in the
ordinary course of business, transfers permitted under Section 368(a)(2)(C) of
the Code, or transfers prescribed by Section 1.368-1(d) that will not affect
Xoom 2's satisfaction of the "continuity of business enterprise" requirement
under Section 368 of the Code for purposes of qualifying the Merger as a
"reorganization" under said section, and (iv) reacquire any of the shares of its
stock issued pursuant to this Agreement, and (B) the historic business of NBC
Multimedia will be continued or a significant portion of NBC Multimedia's
historic business assets will be used in a business.
(d) (i) NBC and Xenon 2 agree to report to the other any
communication from or with the Internal Revenue Service which relates in any way
to the characterization of the transactions contemplated by the Agreement.
Notwithstanding any such communication, Xenon 2 and Xoom covenant and agree to
(and to cause any Affiliate or successor to their assets or business to)
continue to take each of the positions specified in SECTION 6.11(B) for all Tax
purposes (unless there has been a Final Determination contrary to such
position).
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(ii) Without limiting the generality of SECTION 6.11(D)(I),
(A) NBC will file with its federal income tax return for the taxable year in
which the Agreement is consummated (which tax return shall be timely filed) the
information required by Treas. Reg ss. 1.351-3(a), and will deliver a copy of
that statement to Xenon 2 within ten days thereafter, and (B) Xenon 2 will file
with its federal income tax return for the taxable year in which the Agreement
is consummated (which tax return shall be timely filed) the information required
by Treas. Reg ss. 1.351-3(b), and will deliver a copy of that statement to NBC
within ten days thereafter. Within ninety days after the Closing Date, NBC will
deliver to Xenon 2 all of the cost and other basis information relating to the
Contributed Assets and assumed Liabilities for federal income tax purposes
reasonably required for Xenon 2 to prepare the statement required by Treas. Reg.
ss. 1.351-3(b)(2). Such information will be delivered in the form normally
maintained by NBC and will include reasonably complete data relating to the tax
basis, year of acquisition, depreciable life, and amount and method of
depreciation of tangible and intangible property. NBC and Xenon 2 also will
maintain such records as are required by Treas. Reg. ss. 1.351-3(c).
(iii) Without limiting the generality of SECTION 6.11(D)(I),
(A) Xenon 2 and NBC Multimedia will comply with the record-keeping and
information filing requirements of Section 1.368-3 of the Treasury Regulations
with respect to the Merger, and (B) Xenon 2 will file with its federal income
tax return for the taxable year in which the Agreement is consummated (which tax
return shall be timely filed) the information required by Treasury Regulations
Section 1.351-3(b) and maintain such records as are required by Treasury
Regulations Section 1.351-3(c) with respect to the Merger.
VI.12 TAX BENEFIT PAYMENTS.
(a) If a Final Determination is made contrary to any of the
positions described in 6.11(b)(i), (ii), or (iii), then (in addition to any
other remedies which may be available to NBC but without duplication thereof)
Xenon 2 will pay to NBC for each Post-Closing Tax Period an amount equal to the
excess of (A) the liability for federal, state and local Taxes to which Xenon 2,
Xoom or any other Affiliates or any successor to their assets or businesses
(collectively, the "TAXPAYER") would have been subject for all Post-Closing Tax
Periods in each relevant jurisdiction had the positions described in SECTION
6.11(B)(I), SECTION 6.11(B)(II) and SECTION 6.11(B)(III) been sustained (and had
Xenon 2 not been required to make any payments pursuant to this SECTION 6.12),
over (B) the Taxpayer's actual liability for such Taxes for such periods. Such
payment will be due (subject to a ten business-day grace period) when, as, and
to the extent the Taxpayer derives an actual benefit (in the form of any refund,
reduction in Tax liability, or otherwise) as the result of such excess. If any
payment required under this SECTION 6.12(A) for any Post-Closing Tax Period is
not made on or before the due date (without extensions) of the return of such
period, then such payment will be made together with interest at the rate per
annum determined from time to time under Section 6621(a)(2) of the Code
compounded daily for the period from such due date to the date on which the
payment is actually made.
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(b) In addition, Xenon 2 will pay to NBC, no later than ten
business days after each date on which the Taxpayer receives a refund of
federal, state or local Taxes for a Pre-Closing Tax Period, the excess of such
refunds over such refunds to which the Taxpayer would have been entitled had the
positions described in SECTION 6.11(B) been sustained (and had Xenon 2 not been
required to make any payments under this SECTION 6.12). If any payment required
under this SECTION 6.12(B) is not made on or before the date such payment is
due, then such payment will be made together with interest at the rate per annum
determined from time to time under Section 6621(a)(2) of the Code compounded
daily for the period from the date such payment was due to the date on which
such payment is actually made.
(c) In the event of any adjustment to the Taxpayer's liability
for federal, state or local Taxes or entitlement to a refund, as a result of
audit, carryover, or otherwise, the amounts previously payable under this
SECTION 6.12 will be appropriately adjusted and Xenon 2 or NBC, as the case may
be, will pay to the other the amount, required as a result of such adjustment,
together with interest at the rate per annum determined from time to time under
Section 6621(a)(2) of the Code compounded daily for the period from the original
payment date affected by the adjustment to the date on which the payment is
made. At the time of any payment under this SECTION 6.12 (or at the request of
NBC if Xenon 2 has determined that no payment is due), Xenon 2 will submit a
schedule showing in reasonable detail its calculation of the payment to be made
(or the basis for its determination that no payment is due). Any dispute
concerning the calculation of payments due under this SECTION 6.12 will be
resolved by the Independent Accountants.
(d) Any payment to NBC under this SECTION 6.12 will be
allocated between principal and interest for purposes of Section 483, Section
1273, and any other relevant provision of the Code by using as a discount rate
the rate per annum determined from time to time under Section 6621(a)(2) of the
Code compounded daily for the period from the date of Closing to the date on
which the payment is made. The portion of any such payment created as principal
will be treated as additional exchange consideration. Any payment to Xenon 2
under this SECTION 6.12 (other than interest) will be treated as a reduction of
the exchange consideration.
(e) NBC will pay (i) any fees or other amounts due to the
Independent Accountants in respect of the resolution of any dispute pursuant to
SECTION 6.12(C), and (ii) all reasonable costs (including the reasonable
internal costs of Xenon 2 or any Affiliate or successor thereto) incurred by
Xenon 2 (or by such Affiliate or successor) to comply with the provisions of
this SECTION 6.12.
VI.13 XOOM CASH. As long as the Effective Time occurs on or prior to
September 30, 1999, Xoom covenants and agrees immediately prior to the Effective
Time that it will have cash, net of outstanding indebtedness of Xoom, in an
amount at least equal to the sum of $230 million less any cash used in
connection with acquisitions made in accordance with the terms of SECTION 5.1;
PROVIDED that if the Effective Time occurs after that date, the foregoing amount
shall also be less $7.5 million for each month after September 30, 1999 and
prior to the Effective Time.
<PAGE>
59
VI.14 TRANSITION SERVICES. Promptly after May 9, 1999, NBC, Xoom and
Xenon 2 shall use their good faith efforts to negotiate a transition services
agreement pursuant to which NBC shall provide certain administrative and support
services and facilities relating to the NBC Multimedia Businesses to Xenon 2 for
a transition period after the Effective Time on terms mutually acceptable to the
parties.
VI.15 CONVERSION OF NBC'S CLASS A COMMON STOCK. On the Closing Date,
any Class A Common Stock purchased pursuant to the Stock Purchase Agreement,
dated as of June 11, 1999, between Xoom and NBC held by NBC or its Affiliates
will be automatically converted into Class B Common Stock pursuant to the
certificate of incorporation attached hereto as Exhibit 3.5. As soon as
reasonably practicable after the Effective Time, NBC or its Affiliates, as the
case may be, shall deliver any certificates representing such Class A Common
Stock to Xenon 2 and NBC or its Affiliates, as the case may be, shall be
entitled to receive in exchange a certificate representing the same number of
shares of Class B Common Stock, which certificate shall, until such time as the
same is no longer required hereunder or under the applicable requirements of the
Securities Act or applicable state securities laws, bear the legend set forth in
Section 3.8(d).
ARTICLE VII
CONDITIONS TO CLOSING
7.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH PARTY. The respective
obligations of each party to this Agreement to consummate this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction or waiver
by the appropriate party of each of the following conditions on or prior to the
Closing Date:
(a) NO INJUNCTIONS OR RESTRAINTS. At the Closing Date, there
shall be (i) no injunction, restraining order or other decree of any nature of
any court of competent jurisdiction or other Governmental Authority that is in
effect that restrains or prohibits the consummation of any of the transactions
contemplated hereby, and (ii) no action taken, or any statute, rule, regulation
or order enacted, entered, enforced or deemed applicable to the transactions
contemplated hereby, which makes the consummation of this Agreement and the
transactions herein illegal; PROVIDED, HOWEVER, that the parties hereto shall
use their reasonable commercial efforts to have such injunction, order, decree,
claim, action, suit, statute, rule or regulation vacated or declared
inapplicable as expeditiously as practicable.
(b) REGULATORY AUTHORIZATIONS. All orders, consents and
approvals of any Governmental Authorities legally required for the consummation
of the transactions contemplated by this Agreement, including the Required
Consents, shall have been obtained, and all waiting periods applicable under the
HSR Act and other applicable antitrust, merger control or competition laws or
regulations shall have expired or been terminated, except those for which
failure to obtain such consents and approvals would not, individually and in the
aggregate, have a Material Adverse Effect.
<PAGE>
60
(c) STOCKHOLDER APPROVALS. The Stockholder Approvals shall
have been obtained.
(d) XENON 2 MERGER AGREEMENT. The transactions contemplated by
the Xenon 2 Merger Agreement to occur at the closing thereunder shall have been
consummated as set forth therein.
7.2 CONDITIONS PRECEDENT TO OBLIGATION OF NBC. The obligation of NBC to
consummate this Agreement and the transactions contemplated hereby shall be
subject to the satisfaction of each of the following conditions, or by the
waiver of such condition by NBC, on or prior to the Closing Date:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES OF XOOM AND
XENON 2. The representations and warranties of Xoom contained in this Agreement
shall be true and correct in all material respects, in each case on and as of
May 9, 1999 and on and as of the Closing Date as though made on and as of such
time, except to the extent such representations and warranties by their terms
speak as of a specified date, in which case they shall be true and correct in
all material respects as of such date; and NBC shall have received from Xoom a
certificate to such effect dated as of the Closing Date signed by an officer
thereof.
(b) COVENANTS OF XOOM. Xoom shall have complied in all
material respects with all covenants contained in this Agreement to be performed
by it on or prior to the Closing; and NBC shall have received from Xoom a
certificate to such effect dated as of the Closing Date signed by an officer
thereof.
(c) IMPLEMENTING AND OTHER AGREEMENTS. Each of CNET, Xenon 2
and Xoom shall have entered into, or shall have caused their respective
Subsidiaries to have entered into, each of the Implementing Agreements to which
such Person is a party.
(d) DIRECTORS AND OFFICERS OF XENON 2. The officers and
directors of Xenon 2 shall, as of the Effective Time, consist of the Persons set
forth on SCHEDULE 3.7, who shall have been elected or appointed in accordance
with SECTION 6.6 hereof.
VII.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF XENON 2. The obligation of
Xenon 2 to consummate this Agreement and the transactions contemplated hereby
shall be subject to the satisfaction of each of the following conditions, or the
waiver of such condition by NBC, on or prior to the Closing Date:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES OF NBC. The
representations and warranties of NBC contained in this Agreement shall be true
and correct in all material respects, in each case on and as of May 9, 1999 and
on and as of the Closing Date as though made on and as of such time, except to
the extent such representations and warranties by their terms speak as of a
specified date, in which case they shall be true and correct in all material
<PAGE>
61
respects as of such date; and Xenon 2 shall have received from NBC a certificate
to such effect with respect to such party dated as of the Closing Date signed by
an officer thereof.
(b) COVENANTS OF NBC. NBC and its Subsidiaries shall have
complied in all material respects with all covenants contained in this Agreement
to be performed on or prior to the Closing; and Xenon 2 shall have received from
NBC a certificate to such effect dated as of the Closing Date signed by an
officer thereof.
(c) IMPLEMENTING AND OTHER AGREEMENTS. NBC shall have entered
into, or shall have caused its Subsidiaries to have entered into, each of the
Implementing Agreements to which such Person is a party.
ARTICLE VIII
INDEMNIFICATION
VIII.1 INDEMNIFICATION BY XENON 2. From and after the Closing, Xenon 2
shall indemnify and hold harmless NBC and its Affiliates and each of its
directors, officers, employees, agents, heirs, executors, successors and assigns
from and against any and all Losses and Expenses suffered or incurred by any
such indemnified Person arising from, relating to or otherwise in respect of any
breach of the covenant of Xoom contained in SECTION 6.13 of this Agreement.
VIII.2 INDEMNIFICATION BY NBC. From and after the Closing Date, NBC
shall indemnify and hold harmless Xenon 2 and its Affiliates and each of the
foregoing's respective directors, officers, employees and agents, heirs,
executors, successors and assigns of any of the foregoing from and against any
and all Losses and Expenses suffered or incurred by any such indemnified Person
arising from, relating to or otherwise in respect of any breach of the
representations and warranties set forth in SECTION 4.1(C)(III) and SECTION
4.1(V) of this Agreement.
VIII.3 CLAIMS PROCEDURE. (a) If a claim by a third party is made
against an indemnified Person hereunder, and if such indemnified Person intends
to seek indemnity with respect thereto under this Article, such indemnified
Person shall promptly notify the indemnifying Person in writing of such claims
setting forth such claims in reasonable detail (the "CLAIM NOTICE"), PROVIDED
that failure of such indemnified Person to give prompt notice as provided herein
shall not relieve the indemnifying Person of any of its obligations hereunder,
except to the extent that the indemnifying Person is materially prejudiced by
such failure. The indemnifying Person shall have twenty (20) days after receipt
of such notice (the "NOTICE PERIOD") to undertake, through counsel of its own
choosing, subject to the reasonable approval of such indemnified Person, and at
its own expense, the settlement or defense thereof, and the indemnified Person
shall cooperate with it in connection therewith; PROVIDED, HOWEVER, that the
indemnified Person may participate in such settlement or defense through counsel
chosen by such indemnified Person, PROVIDED that the fees and expenses of such
counsel shall be borne by such indemnified Person. If the
<PAGE>
62
indemnifying Person shall assume the defense of a claim, it shall not settle
such claim without the prior written consent of the indemnified Person, unless
(i) such settlement includes as an unconditional term thereof the giving by the
claimant of a release of the indemnified Person from all Liability with respect
to such claim or (ii) such settlement does not involve the imposition of
equitable remedies or the imposition of any material obligations on such
indemnified Person other than financial obligations for which such indemnified
party will be indemnified hereunder. If the indemnifying Person shall assume the
defense of a claim, the fees of any separate counsel retained by the indemnified
Person shall be borne by such indemnified Person unless there exists a material
conflict between them as to their respective legal defenses (other than one that
is of a monetary nature), in which case the indemnified Person shall be entitled
to retain one law firm (plus any necessary local counsel) as its separate
counsel, the reasonable fees and expenses of which shall be reimbursed by the
indemnifying Person. If the indemnifying Person does not notify the indemnified
Person within twenty (20) days after the receipt of the indemnified Person's
notice of a claim of indemnity hereunder that it elects to undertake the defense
thereof, the indemnified Person shall have the right to contest, settle or
compromise the claim but shall not thereby waive any right to indemnity therefor
pursuant to this Agree ment.
(b) OTHER CLAIMS. In the event the indemnified party should
have a claim against the indemnifying party hereunder which does not involve a
claim or demand being asserted against or sought to be collected from it by a
third party, the indemnified party shall promptly send a Claim Notice with
respect to such claim to the indemnifying party. If the indemnifying party does
not notify the indemnified party within the Notice Period that they dispute such
claim, the amount of such claim shall be conclusively deemed a liability of the
indemnifying party hereunder.
VIII.4 EXCLUSIVE REMEDY. From and after the Closing, the
indemnification obligations under this ARTICLE VIII and the obligations of NBC
in SECTION 9.2 constitute the sole and exclusive remedy of each party for any
breach of, or inaccuracy in, any representation or warranty of another party
contained in this Agreement or in any certificate delivered pursuant hereto or
any breach of any covenant in this Agreement in each case to the extent they
survive the Closing.
ARTICLE IX
TERMINATION
IX.1 TERMINATION EVENTS. Without prejudice to other remedies which may
be available to the parties by law or this Agreement, this Agreement may be
terminated and the transactions contemplated herein may be abandoned at any time
prior to the Effective Time:
(a) by mutual written consent of NBC and Xenon 2;
<PAGE>
63
(b) by either NBC or Xenon 2 by written notice to the other
parties if the transactions contemplated by this Agreement have not been
consummated by December 31, 1999, unless extended by written agreement of the
parties hereto, PROVIDED that the party terminating this Agreement shall not be
in material default or breach hereunder and PROVIDED, FURTHER, that the right to
terminate this Agreement under this clause (b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure to consummate the transactions
contemplated by this Agreement on or before such date;
(c) by either NBC or Xenon 2 if (i) any Governmental
Authority, the consent or approval of which is required for the consummation of
the transactions contemplated hereby, shall have determined not to grant its
consent or approval and all appeals of such determination shall have been taken
and have been unsuccessful or (ii) any court of competent jurisdiction in the
United States shall have issued a final and unappealable permanent injunction,
order, judgment or other decree (other than a temporary restraining order)
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby, PROVIDED that the party seeking to terminate
this Agreement under this clause (c) is not then in material breach of this
Agreement and PROVIDED, FURTHER, that the right to terminate this Agreement
under this clause (c) shall not be available to any party who shall not have
used reasonable commercial efforts to avoid the issuance of such order, decree
or ruling;
(d) by either NBC or Xenon 2 if upon a vote at a duly held
Xoom Stockholders Meeting or any adjournment thereof, the Xoom Stockholder
Approval shall not have been obtained or by NBC if upon a vote at a duly held
Xenon 2 Stockholders Meeting or any adjournment thereof, the Xenon 2 Stockholder
Approval shall not have been obtained;
(e) by NBC if the Board of Directors of Xoom or Xenon 2 or any
committee thereof shall have withdrawn or modified in a manner adverse to NBC
its approval or recommendation of this Agreement, the Xenon 2 Merger Agreement
or any of the transactions contemplated hereby or thereby;
(f) by NBC if the Board of Directors of Xoom shall have
accepted or recommended a Takeover Proposal or shall have resolved to do so;
(g) by Xoom or Xenon 2, prior to the receipt of the Xoom
Stockholder Approval, on five business days written notice, if, Xoom receives,
without violating its obligations under SECTION 5.5 hereof, a bona fide Takeover
Proposal from a third party on terms which the Board of Directors of Xoom (i)
determines in good faith and after consultation with a financial advisor of
nationally recognized reputation to be more favorable to the Xoom stockholders
than the transactions contemplated by this Agreement and (ii) concludes in good
faith based on the advice of outside legal counsel that termination of this
Agreement is required to comply with its fiduciary duties under applicable law;
or
<PAGE>
64
(h) by either NBC or Xenon 2 in the event there has been a
material default or breach by (x) NBC, where Xenon 2 is terminating this
Agreement, or (y) Xoom or Xenon 2, where NBC is terminating this Agreement, in
each case which default or breach is not curable, or if curable, is not cured
within 30 days after written notice of such breach is given by the non-breaching
party.
(i) automatically and without any action by the parties upon
the termination of the Xenon 2 Merger Agreement.
IX.2 EFFECT OF TERMINATION. In the event of any termination of the
Agreement as provided in SECTION 9.1 hereto, this Agreement shall forthwith
become wholly void and of no further force and effect (except SECTION 5.6,
SECTION 6.3, SECTION 9.2 and ARTICLE X hereof) and there shall be no liability
on the part of any parties hereto or their respective officers or directors,
except as provided in such sections and article. Notwithstanding the foregoing,
no party hereto shall be relieved from liability for any willful breach of this
Agreement; PROVIDED, HOWEVER, that if NBC wilfully fails to close the
transactions contemplated by this Agreement after all of the conditions to
closing set forth in SECTION 7.1 and SECTION 7.2 have been satisfied, within 2
business days of the termination of this Agreement by Xenon 2, NBC shall pay to
Xenon 2 $475 million, which amount shall constitute the sole and exclusive
remedy of Xoom and Xenon 2 for such breach by NBC.
ARTICLE X
MISCELLANEOUS AGREEMENTS OF THE PARTIES
X.1 NOTICES. Any notice in connection with this Agreement shall be in
writing and shall be delivered by air courier or by facsimile at the addresses
or facsimile numbers given below. If notice is given by: (a) air courier, notice
shall be deemed given when recorded on the records of the air courier as
received by the receiving party; or (b) facsimile, notice shall be deemed given
upon transmission, if on a business day and during business hours in the country
of receipt; otherwise, notice shall be deemed to have been given at 9:00 A.M. on
the next Business Day in the country of receipt.
If to NBC, NMC or GE Investments Sub:
National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, New York 10012
Attn.: Tom Rogers
Facsimile: (212) 664-3914
with a copy to:
<PAGE>
65
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn.: Richard Capelouto
Facsimile: (212) 455-2502
If to Xoom or Xenon 2:
Xenon 2, Inc.
300 Montgomery Street
Suite 300
San Francisco, California 94104
Attn.: Chris Kitze
Facsimile: (415) 288-2580
with a copy to:
Morrison & Foerster LLP
425 Market Street
San Francisco, California 94105
Attn.: Bruce Alan Mann
Facsimile: (415) 268-7522
with a copy to:
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Attn.: Allen L. Weingarten
Facsimile: (212) 468-7900
or to such other address as any such party shall designate by written notice to
the other parties hereto.
X.2 INTEGRATION; AMENDMENTS. This Agreement (including the Schedules
and Exhibits hereto) contains the entire agreement and understanding of the
parties with regard to the matters contained herein and supercedes any prior
written or oral agreement with respect to the subject matter hereto. This
Agreement may not be amended or modified except in a writing signed by all
parties hereto.
X.3. WAIVER. No waiver by any of the parties hereto of any of the
provisions hereof shall be effective unless explicitly set forth in writing and
executed by the party so waiving. Except as provided in the preceding sentence,
no action taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to
<PAGE>
66
constitute a waiver by the party taking such action of compliance with any
representations, warranties, covenants, or agreements contained herein, and in
any documents delivered or to be delivered pursuant to this Agreement and in
connection with the Closing hereunder. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.
X.4. NO ASSIGNMENT; SUCCESSORS AND ASSIGNS. The parties' respective
rights and obligations hereunder may not be assigned, transferred, pledged, or
encumbered, in any manner, direct or indirect, contingent or otherwise, in whole
or in part, voluntarily or by operation of law, without the prior written
consent of the other parties, PROVIDED that NBC may assign, in whole or in part,
any of its rights and obligations hereunder and under the Implementing
Agreements to one or more of its Affiliates without the consent of the other
parties hereto, but NBC will remain liable for its obligations hereunder and
under each of the Implementing Agreements to which it is a party. Subject to the
preceding sentence, this Agreement shall be binding on the parties hereto and
their respective successors and permitted assigns.
X.5. EXPENSES. Except as set forth in this Agreement, if the
transactions contemplated by this Agreement are consummated, all legal and other
costs and expenses (including fees and expenses of any financial advisors,
accountants or other professional advisors) incurred by Xoom, SNAP or NBC in
connection with this Agreement and the transactions contemplated hereby shall be
paid or reimbursed by Xenon 2. If the transactions contemplated by this
Agreement are not consummated, all legal and other costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs.
X.6. SEVERABILITY. If any provision of this Agreement shall be
declared by any court of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of this Agreement shall not be affected and
shall remain in full force and effect, and the parties hereto shall negotiate in
good faith to replace such illegal, void or unenforceable provision with a
provision that corresponds as closely as possible to the intentions of the
parties as expressed by such illegal, void or unenforceable provision.
X.7 SECTION HEADINGS; TABLE OF CONTENTS. The section headings
contained in this Agreement and the table of contents to this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
X.8. THIRD PARTIES. This Agreement does not create any rights, claims
or benefits inuring to any person that is not a party hereto nor create or
establish any third party beneficiary hereto, except as set forth in SECTION
6.6(D).
X.9 GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT SHALL BE
GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS EXECUTED AND PERFORMED WITHIN SUCH STATE (EXCEPT TO THE
EXTENT THAT THE DGCL APPLIES TO THE MERGER), AND EACH PARTY HEREBY SUBMITS TO
THE EXCLUSIVE
<PAGE>
67
JURISDICTION OF ANY STATE OR U.S. FEDERAL COURT SITTING WITHIN THE
COUNTY OF NEW YORK. EACH OF THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY LITIGATION ARISING OUT OF
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY IN THE COURTS OF THE
STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK,
AND HEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO
PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH LITIGATION BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
X.10 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement in
addition to any other remedy to which they are entitled at law or in equity.
X.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
X.12 AMENDMENT AND RESTATEMENT. (a) This Agreement amends certain
provisions of the Existing Merger Agreement and restates the terms of the
Existing Merger Agreement in their entirety so as to reflect and give effect to
such amendments. Except as provided in SECTION 10.12(B), all amendments to the
Existing Merger Agreement effected by this Agreement, and all other covenants,
agreements, terms and provisions of this Agreement, shall have effect from the
date of the Existing Merger Agreement.
(b) Each of the representations and warranties made in
SECTIONS 4.1, 4.2 and 4.3 shall be deemed (i) to be made on the date of the
Existing Merger Agreement (other than the representations and warranties in
respect of this Agreement that are contained in SECTIONS 4.1(B) and 4.3(B) which
are made as of the date hereof) and as of the Closing Date and (ii) not made on
the date hereof (except as set forth in the parenthetical in clause (i) of this
SECTION 10.12(B)).
<PAGE>
68
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first above written.
NATIONAL BROADCASTING COMPANY,
INC.
By:
------------------------------
Name:
Title:
GE INVESTMENTS SUBSIDIARY, INC.
By:
------------------------------
Name:
Title:
NEON MEDIA CORPORATION
By:
------------------------------
Name:
Title:
XENON 2, INC.
By:
------------------------------
Name:
Title:
XOOM.COM, INC.
By:
------------------------------
Name:
Title:
<PAGE>
EXECUTION COPY
FIRST AMENDMENT TO SECOND AMENDED AND RESTATED AGREEMENT AND PLAN
OF CONTRIBUTION, INVESTMENT AND MERGER
This First Amendment to Second Amended and Restated Agreement and Plan of
Contribution, Investment and Merger, dated as of October 20, 1999 (hereinafter,
"Amendment No. 1"), among National Broadcasting Company, Inc., a Delaware
corporation ("NBC"), GE Investments Subsidiary, Inc., a Delaware corporation,
Neon Media Corporation, a Delaware Corporation, NBC Internet, Inc., a Delaware
corporation ("NBCi," referred to as "Xenon 2" in the Original Contribution
Agreement hereinafter identified), and XOOM.com, Inc., a Delaware corporation
("Xoom")
W I T N E S S E T H:
WHEREAS, the parties hereto have previously entered into that certain
Second Amended and Restated Agreement and Plan of Contribution, Investment and
Merger dated as of July 8, 1999 (the "Original Contribution Agreement"); and
WHEREAS, the parties now wish to amend the Original Contribution Agreement
as provided below;
NOW THEREFORE, the Original Contribution Agreement is amended in the
following respects:
1. Section 5.2(b) of the Original Contribution Agreement is amended in
its entirety to provide as follows:
"(b) issue, purchase or redeem, or authorize or propose the issuance,
purchase or redemption of, or make any distribution with respect to, any
equity interests of SNAP or any class of securities convertible into, or
rights, warrants or options to acquire, any such equity interests or other
convertible securities, other than (i) pursuant to employee options
outstanding on the date hereof or issued in accordance herewith, (ii) SNAP
Options issued pursuant to commitments to issue SNAP Options that were
included in job offers outstanding as of May 9, 1999, as identified on
SCHEDULE 4.1(t) as amended and (iii) additional options that, when added to
SNAP Options previously outstanding, do not exceed options for units equal
in number to 17% of the units of SNAP."
2. SCHEDULE 3.7 to the Original Contribution Agreement is amended by
replacing the reference to "Thomas Rogers" under the item "NBC Directors" with a
reference to "Scott M. Sassa".
3. SCHEDULE 4.2(t) to the Original Contribution Agreement is amended by
the addition thereto of the items listed on SCHEDULE 4.2(t)-2 hereto.
<PAGE>
4. SCHEDULE 6.9 to the Original Contribution Agreement is amended by
deleting the reference to "August 25, 1998" and replacing it with "September 14,
1999," and the parties acknowledge and agree that NBCi shall, accordingly, be
obligated pursuant to Section 6.9 of the Contribution Agreement to repay and
terminate the indebtedness represented by that certain Credit Agreement dated
September 14, 1999 between SNAP and Bank of America National Trust and Savings
Association, and use its best efforts to cause the guarantee of such
indebtedness by General Electric Company to be fully released immediately
following the Closing.
5. EXHIBIT A to the Original Contribution Agreement is amended by
increasing the value of the Spots to be provided by NBC to Xenon 2 to $405
million and by establishing that the aggregate value of the Spots to be provided
in the fourth quarter of 1999 shall be no less than $45 million.
6. In all other respects, the Original Contribution Agreement is
unchanged and shall remain in full force and effect.
7. GOVERNING LAW. THIS AMENDMENT NO. 1 SHALL BE GOVERNED AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE TO BE PERFORMED WITHIN SUCH STATE.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK.]
<PAGE>
8. Article X of the Original Merger Agreement shall apply MUTATIS MUTANDIS
to this Amendment No. 1.
IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to be duly
executed as of the date first above written.
NATIONAL BROADCASTING COMPANY, INC.
BY: /s/ Martin Yudkovitz
--------------------
Name: Martin Yudkovitz
Title: President, NBC Interactive
GE INVESTMENTS SUBSIDIARY, INC.
BY: /s/ Robert E. Healing
---------------------
Name: Robert E. Healing
Title: Vice President
NEON MEDIA CORPORATION
BY: /s/ Martin Yudkovitz
--------------------
Name: Martin Yudkovitz
Title: President, NBC Interactive
NBC INTERNET, INC. (formerly, Xenon 2, Inc.)
BY: /s/ John Harbottle
------------------
Name: John Harbottle
Title: Chief Financial Officer and
Executive Vice President
XOOM.COM, INC.
BY: /s/ John Harbottle
------------------
Name: John Harbottle
Title: Chief Financial Officer and
Executive Vice President
<PAGE>
OFFICE LEASE
between
OAIC Bush Street, LLC
a Delaware limited liability company
as Landlord
and
Xoom.com, Inc.,
A Delaware corporation
as Tenant
THE SUBMISSION OF THIS DOCUMENT FOR EXAMINATION, NEGOTIATION AND/OR SIGNATURE
DOES NOT CONSTITUTE AN OFFER TO LEASE. THIS DOCUMENT SHALL NOT BE BINDING AND IN
EFFECT AGAINST EITHER PARTY UNTIL AT LEAST ONE COUNTERPART, DULY EXECUTED BY
LANDLORD AND TENANT, HAS BEEN RECEIVED BY LANDLORD AND TENANT.
<PAGE>
TABLE OF CONTENTS
<TABLE>
PAGE
<S> <C>
1. DEFINITIONS.............................................................................................1
2. LEASE TERM; CONDITION OF PREMISES.......................................................................1
3. 8TH AND 9TH FLOORS......................................................................................2
4. RENTAL..................................................................................................3
5. ADDITIONAL RENT FOR EXPENSES AND REAL ESTATE TAXES......................................................5
6. USE....................................................................................................10
7. SERVICES...............................................................................................11
8. TENANT REMEDIES........................................................................................14
9. IMPOSITIONS PAYABLE BY TENANT..........................................................................15
10. ALTERATIONS............................................................................................16
11. LIENS..................................................................................................18
12. REPAIRS; CONDITION OF PREMISES.........................................................................19
13. DESTRUCTION OR DAMAGE..................................................................................19
14. INSURANCE..............................................................................................21
15. WAIVER OF SUBROGATION..................................................................................23
16. INDEMNIFICATION........................................................................................24
17. COMPLIANCE WITH LEGAL REQUIREMENTS.....................................................................24
18. ASSIGNMENT AND SUBLETTING..............................................................................25
19. RULES; NO DISCRIMINATION...............................................................................29
20. ENTRY BY LANDLORD......................................................................................29
21. EVENTS OF DEFAULT......................................................................................30
22. TERMINATION UPON DEFAULT...............................................................................31
23. CONTINUATION AFTER DEFAULT.............................................................................32
24. OTHER RELIEF...........................................................................................32
25. LANDLORD'S RIGHT TO CURE DEFAULTS......................................................................32
26. LANDLORD DEFAULT.......................................................................................32
27. ATTORNEYS' FEES........................................................................................33
28. EMINENT DOMAIN.........................................................................................33
29. SUBORDINATION AND NONDISTURBANCE.......................................................................33
30. NO MERGER..............................................................................................34
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
31. AMENDMENTS.............................................................................................34
32. ESTOPPEL CERTIFICATE...................................................................................34
33. NO LIGHT, AIR, OR VIEW EASEMENT........................................................................34
34. HOLDING OVER...........................................................................................34
35. SECURITY DEPOSIT.......................................................................................35
36. WAIVER.................................................................................................37
37. NOTICES AND CONSENTS...................................................................................37
38. COMPLETE AGREEMENT.....................................................................................37
39. CORPORATE AUTHORITY....................................................................................37
40. STORAGE SPACE..........................................................................................38
41. NO CONSEQUENTIAL DAMAGES...............................................................................38
42. MISCELLANEOUS..........................................................................................38
43. ABANDONMENT............................................................................................39
44. AMERICANS WITH DISABILITIES ACT AND SIMILAR ACTS.......................................................39
45. EXHIBITS...............................................................................................39
46. LANDLORD'S LIABILITY; SALE OF BUILDING.................................................................39
47. NAME OF BUILDING AND SIGNAGE...........................................................................40
48. HAZARDOUS SUBSTANCE DISCLOSURE.........................................................................41
49. REAL ESTATE BROKERS....................................................................................43
50. NOTICE TO MORTGAGEE; FINANCIAL STATEMENT...............................................................43
51. OPTION TO EXTEND.......................................................................................43
52. RIGHT OF FIRST REFUSAL.................................................................................46
53. PARKING................................................................................................47
54. BICYCLE PARKING........................................................................................48
55. INTERNAL FIRE STAIRS...................................................................................48
56. DEDICATED ELEVATOR.....................................................................................48
57. YEAR 2000..............................................................................................48
</TABLE>
-ii-
<PAGE>
OFFICE LEASE
BASIC LEASE INFORMATION
Lease Execution Date: August 13, 1999
The Lease Execution Date shall be the date upon which the Lease is
fully executed by both parties. Upon Lease execution by Landlord,
Landlord shall promptly send a copy of the fully executed Lease to
Tenant by facsimile, followed by overnight delivery of a complete,
fully executed original Lease.
Landlord: OAIC Bush Street, LLC, a Delaware limited liability company
Tenant: Xoom.com, Inc., a Delaware corporation
Building (Section 1(a)): 225 Bush Street, San Francisco, California
Premises (Section 1(b)):
Suite 800 on the entire 8th floor of the Building (the "8th Floor")
Suite 900 on the entire 9th floor of the Building (the "9th Floor")
Suite 1200 on the entire 12th floor of the Building (the "12th Floor")
Suite 1300 on the entire 13th floor of the Building (the "13th Floor")
Suite 1900 on the entire 19th floor of the Building (the "19th Floor")
Suite 2000 on the entire 20th floor of the Building (the "20th Floor")
Suite 2100 on the entire 21st floor of the Building (the "21st Floor")
Suite 2200 on the entire 22nd floor of the Building (the "22nd Floor")
Rentable Area of Premises (Section 1(b)):
25,233 rentable square feet on the 8th floor
26,042 rentable square feet on the 9th floor
26,041 rentable square feet on the 12th floor
26,034 rentable square feet on the 13th floor
24,157 rentable square feet on the 19th floor
22,123 rentable square feet on the 20th floor
18,751 rentable square feet on the 21st floor
18,314 rentable square feet on the 22nd floor
The total rentable square footage for the Premises is 186,695 rentable
square feet.
III
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The Premises rentable square footage was measured based upon ANSI/BOMA
Z65.1-1996 standards, except for the 22nd floor which calculation
excludes the exterior loggia area for the purposes of this Lease.
Landlord and Tenant have agreed to the Premises rentable square footage
for all purposes and said square footage will not be revised during the
entire term of the Lease, including all Extension Periods.
Term Commencement Date (Section 2(a)):
(1) The Term Commencement Date for the 19th Floor shall be on or
before September 1, 1999 (the "19th Floor Term Commencement Date").
(2) The Term Commencement Date for the 12th Floor and 13th Floor
shall be the earlier of twenty-six (26) weeks after the Lease Execution Date,
plus days attributable to Landlord Delays and Force Majeure Events, or
substantial completion of the Tenant Work and Base Building Work on the 12th and
13th Floor (the "12th and 13th Floor Term Commencement Date"). The estimated
12th and 13th Floor Term Commencement Date is February 4, 2000 (the "Estimated
12th and 13th Floor Term Commencement Date").
(3) The Term Commencement Date for the 20th Floor and 21st Floor
shall be the earlier of twenty-six (26) weeks after the Lease Execution Date,
plus days attributable to Landlord Delays and Force Majeure Events, or
substantial completion of the Tenant Work and Base Building Work on the 20th
Floor and 21st Floor (the "20th and 21st Floor Term Commencement Date"). The
estimated 20th and 21st Floor Term Commencement Date is February 4, 2000 (the
"Estimated 20th and 21st Floor Term Commencement Date").
(4) The Term Commencement Date for the 22nd Floor shall be the
earlier of fourteen (14) months after the Lease Execution Date, plus days
attributable to Landlord Delays and Force Majeure Events, or upon substantial
completion of the Tenant Work and Base Building Work on the 22nd Floor (the
"22nd Floor Term Commencement Date"). The estimated 22nd Floor Term Commencement
Date is October 15, 2000 (the "Estimated 22nd Floor Term Commencement Date").
(5) The Term Commencement Date for the 8th Floor and 9th Floor
shall be as set forth in Section 3 of the Lease.
Term Expiration Date (Section 2(a)): The last day of the month, one hundred
twenty (120) months after the 20th and 21st Floor Term Commencement Date.
IV
<PAGE>
Base Monthly Rental (Section 3(a)):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
FLOOR OF PREMISES YEARS(2) 1-5: YEARS 6-10
<S> <C> <C>
- ----------------------------------------------------------------------------------------
8th Floor $73,596.25/mo. $79,904.50/mo.
$883,155/an. ($35.00(1)) $958,854/an. ($38.00(1))
- ----------------------------------------------------------------------------------------
9th Floor $75,955.83/mo. $82,466.33/mo.
$911,470/an. ($35.00(1)) $989,596/an. ($38.00(1))
- ----------------------------------------------------------------------------------------
12th Floor $80,293.08/mo. $84,633.25/mo.
$963,517.00/an. ($37.00(1)) $1,015,599.00/an. ($39.00(1))
- ----------------------------------------------------------------------------------------
13th Floor $80,271.50/mo. $84,610.50/mo.
$963,258.00/an. ($37.00(1)) $1,015,326.00/an. ($39.00(1))
- ----------------------------------------------------------------------------------------
19th Floor $74,484.08/mo. $78,510.25/mo.
$893,809.00/an. ($37.00(1)) $942,123.00/an. ($39.00(1))
- ----------------------------------------------------------------------------------------
20th Floor $73,743.33/mo. $82,961.25/mo.
$884,920.00/an. ($40.00(1)) $995,535.00/an. ($45.00(1))
- ----------------------------------------------------------------------------------------
21st Floor $62,503.33/mo. $70,316.25/mo.
$750,040.00/an. ($40.00(1)) $843,795.00/an. ($45.00(1))
- ----------------------------------------------------------------------------------------
22nd Floor $67,151.33/mo. $70,203.67/mo.
$805,816.00/an. ($44.00(1)) $842,444.00/an. ($46.00(1))
- ----------------------------------------------------------------------------------------
Total: $587,998.73/mo. $633,606.00/mo.
$7,055,985.00/an. $7,603,272.00/an.
- ----------------------------------------------------------------------------------------
</TABLE>
(1) Per rentable square, per annum.
(2) Years shall be measured from the 20th and 21st Floor Term Commencement Date
Base Expense Year (Section 1(c)): 2000
Base Tax Year (Section 1(d)): 2000
V
<PAGE>
Tenant's Expense Share (Section 5(a)): 33.62%
Tenant's Expense Share by floor of the Premises shall be
4.54% for the 8th Floor
4.69% for the 9th Floor
4.69% for the 12th Floor
4.69% for the 13th Floor
4.35% for the 19th Floor
3.98% for the 20th Floor
3.38% for the 21st Floor
3.30% for the 22nd Floor
Landlord and Tenant agree that Tenant's Expense Share is calculated
based upon the Building containing 555,325 rentable square feet
("Building Square Footage").
Tenant's Tax Share (Section 5(a)): 33.62% of the Building
Tenant's Tax Share by floor of the Premises shall be:
4.54% for the 8th Floor
4.69% for the 9th Floor
4.69% for the 12th Floor
4.69% for the 13th Floor
4.35% for the 19th Floor
3.98% for the 20th Floor
3.38% for the 21st Floor
3.30% for the 22nd Floor
Landlord and Tenant agree that Tenant's Tax Share is calculated based
upon the Building Square Footage (as defined above).
Security Deposit (Section 35): Upon full execution of the Lease: a Letter
of Credit in the amount of $4,500,000
subject to reduction and/or return to the
Tenant in accordance with the terms of
Section 35 of this Lease
Tenant's Address
for Notices (Section 37):
Prior to 19th Floor Term Commencement Date:
Xoom.com, Inc.
300 Montgomery Street, Suite 300
VI
<PAGE>
San Francisco, California 94104
Attn: Director of Operations and Administration
Phone: (415) 288-2500
Fax: (415) 288-2580
After the 19th Floor Term Commencement Date:
Xoom.com, Inc.
225 Bush Street, Suite ____
San Francisco, California 94104
Attn: Director of Operations and Administration
Phone: (415)_________________________
Fax: (415)___________________________
[blanks to be completed on occupancy]
Landlord's Address
for Notices (Section 37)
OAIC Bush Street, LLC
c/o Ocwen Capital Corporation
1675 Palm Beach Lakes Boulevard
The Forum, Suite 511
West Palm Beach, FL 33401
Attn: Secretary
Phone: (561) 682-8517
Fax: (561) 682-8177
with a copy to:
OAIC Bush Street, LLC
c/o Ocwen Capital Corporation
1675 Palm Beach Lakes Boulevard
The Forum
West Palm Beach, FL 33401
Attn: Real Estate Asset Management Department
Phone: (561) 682-8275
Fax: (561) 682-8163
VII
<PAGE>
with a copy to:
Jones Lang LaSalle
225 Bush Street, Suite 770
San Francisco, California 94104
Attn: Property Manager
Phone: (415) 835-0225
Fax: (415) 835-0222
Exhibit(s) and Addendum (Section 45):
Exhibit A: Floor Plan
Exhibit B: Rules and Regulations
Exhibit C: Work Letter
Exhibit D: Commencement Date Memorandum
Exhibit E: Tenant Estoppel
Exhibit F: Subordination, Attornment and Non-Disturbance Agreement
Real Estate Brokers (Section 49): Mark Rosen of Rosen and Reynolds for Tenant
and Angus Scott and Richard Dougherty of Grubb & Ellis for Landlord.
The provisions of the Lease identified above in parentheses are those provisions
where references to particular Basic Lease Information appear. Each such
reference shall incorporate the applicable Basic Lease Information. In the event
of any conflict between any Basic Lease Information and the Lease, the latter
shall control.
TENANT: LANDLORD:
Xoom.com, Inc. OAIC Bush Street, LLC,
a Delaware corporation a Delaware limited liability company
By: /s/ Chris Kitze By: /s/ Gregory Breskin
----------------------------- ---------------------------------
Name: Chris Kitze Name: Gregory Breskin
--------------------------- -------------------------------
Its: Chairman Its: Vice President
---------------------------- --------------------------------
By: /s/ John Harbottle By: /s/ Christine Reich
----------------------------- ---------------------------------
Name: John Harbottle Name: Christine Reich
--------------------------- -------------------------------
Its: CFO Its: President
---------------------------- --------------------------------
VIII
<PAGE>
OFFICE LEASE
THIS LEASE, dated August 13, 1999, for purposes of reference only,
is made and entered into by and between OAIC Bush Street, LLC, a Delaware
limited liability company ("Landlord"), and Xoom.com, Inc., a Delaware
corporation ("Tenant").
WITNESSETH:
Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, the premises described in Section 1(b) below for the term and
subject to the terms, covenants, agreements and conditions hereinafter set
forth, to each and all of which Landlord and Tenant hereby mutually agree.
1. DEFINITIONS. Unless the context otherwise specifies or
requires, the following terms shall have the meanings herein specified:
(a) The term "Building" shall mean the building or
buildings described in the Basic Lease Information, and the parcel or parcels
of land on which such building or buildings are situated, together with all
other improvements and other real property located on such parcel or parcels,
including without limitation the garage, as well as any property interest in
the area of the streets bounding the parcel described in the Basic Lease
Information, and all other improvements on or appurtenances to said parcel or
said streets.
(b) The term "Premises" shall mean the portion of the
Building located on the floors specified in the Basic Lease Information which
is shown crosshatched on the floor plan(s) attached to this Lease as EXHIBIT A.
Landlord and Tenant agree that the Premises consist of the number of square
feet of rentable area set forth in the Basic Lease Information. All the
outside walls and windows of the Premises and any space in the Premises used
for shafts, stacks, pipes, conduits, ducts, electric or other utilities,
sinks or other Building facilities, and the use thereof and access thereto
through the Premises for the purposes of operation, maintenance and repairs,
are reserved to Landlord.
(c) The term "Base Expense Year" shall mean the
calendar year specified in the Basic Lease Information as the Base Expense
Year.
(d) The term "Base Tax Year" shall mean the calendar
year specified in the Basic Lease Information as the Base Tax Year.
2. LEASE TERM; CONDITION OF PREMISES.
(a) The Lease term (the "Lease Term") shall commence
for the respective floors of the Premises on the Term Commencement Dates
specified in the Basic Lease Information, as modified by the terms of the
Lease and the Work Letter attached hereto as Exhibit C (the "Work Letter"),
and unless ended sooner as herein provided, shall expire on the Term
Expiration Date specified in the Basic Lease Information.
<PAGE>
(b) Tenant and Landlord shall construct or install in
the Premises the improvements to be constructed or installed pursuant to the
Work Letter. Landlord shall own all of said initial improvements to be
constructed or installed pursuant to the Work Letter as of the Term
Commencement Date for each respective floor in the Premises.
(c) If Landlord for any reason whatsoever cannot
deliver possession of the Premises to Tenant on the respective Premises
Delivery Date (as defined in Exhibit C), this Lease shall not be void or
voidable, no obligation of Tenant shall be affected hereby and Landlord shall
not be liable to Tenant for any loss or damage resulting therefrom.
3. 8TH AND 9TH FLOORS.
(a) In connection with the 8th floor (the "8th Floor")
and 9th floor (the "9th Floor") in the Building, Landlord shall give written
notice to Tenant upon the current 8th and 9th Floor tenant's vacation of the
8th and 9th Floors (the "Availability Notice"). In no event shall Landlord
give Tenant the Availability Notice prior to January 1, 2000. Tenant shall
have thirty (30) days after Landlord provides the Availability Notice (the
"Availability Notice Period") to give Landlord written notice that (i) Tenant
desires to build out the 8th and/or 9th Floors for Tenant's use ("Tenant
Build Out"), or (ii) Tenant desires to sublet the 8th and/or 9th Floor to a
third party sublessee and build out the 8th and 9th Floors accordingly
("Sublessee Build Out"). Tenant shall have the right to pursue a Tenant Build
Out or a Sublessee Build Out on either the 8th Floor or 9th Floor and is not
required to elect the same build out for both of said floors. If Tenant fails
to deliver written notice during the Availability Notice Period, Tenant shall
be deemed to have elected a "Sublessee Build Out" for both the 8th Floor and
9th Floor. Each and every provision of this Lease and Exhibit C shall apply
to a Tenant Build Out or Sublessee Build Out, except as provided to the
contrary in this Section or in Exhibit C.
(b) In the case of a Tenant Built Out on the 8th Floor
and/or 9th Floor, as applicable, (i) Tenant shall be entitled to a Tenant
Improvement Allowance in Section 5 of Exhibit C of Forty Dollars ($40.00) per
square foot of rentable area for the 8th Floor ($1,009,320) and/or Forty
Dollars ($40.00) per square foot of rentable area for the 9th Floor
($1,041,680), (ii) as required in Section 1(a) of Exhibit C, Tenant shall
deliver an initial draft of the Space Plan for the 8th Floor and/or 9th
Floor, as applicable, after the end of the Availability Notice Period,
(iii) the Premises Delivery Date (as defined in Exhibit C), in Section 2(c)
of Exhibit C, for the 8th Floor and/or 9th Floor, as applicable, shall be on
or before six (6) weeks after the end of the Availability Notice Period, as
extended by any Force Majeure Events and/or Landlord Delay, and (iv) the Term
Commencement Date for the 8th Floor and/or 9th Floor ("8th Floor Term
Commencement Date" and/or "9th Floor Term Commencement Date" as applicable)
shall be twelve (12) weeks after the Premises Delivery Date. In addition to
the definition of Landlord Delay in EXHIBIT C, for purposes of this Section 3,
every day after January 1, 2000 until the date on which Landlord delivers the
Availability Notice to Tenant shall be considered a Landlord Delay.
(c) In the case of a Sublessee Build Out on the
8th Floor and/or 9th Floor, as applicable, (i) Tenant shall be entitled to an
initial Tenant Improvement Allowance in Section 5
2
<PAGE>
of Exhibit C of up to and including Five Dollars ($5.00) per square foot of
rentable area for the 8th Floor ($126,165) and/or up to and including Five
Dollars ($5.00) per square foot of rentable area for the 9th Floor
($130,210), (ii) as required in Section 1(a) of Exhibit C, Tenant shall
deliver an initial draft of the Space Plan for the 8th Floor and/or 9th
Floor, as applicable, after the end of the Availability Notice Period,
(iii) the Premises Delivery Date, in Section 2(c) of Exhibit C, for the
8th Floor and/or 9th Floor, as applicable, shall be the date that Landlord
receives written notice from the Tenant electing a Sublessee Build Out, but
in no event later than the expiration of the Availability Notice Period, and
(iv) the Term Commencement Date for the 8th Floor and/or 9th Floor
("8th Floor Term Commencement Date" and/or "9th Floor Term Commencement Date"
as applicable) shall be March 1, 2000, as extended by any Force Majeure
Events and/or Landlord Delay.
(d) In the event that Tenant elects a Sublessee Build
Out pursuant to this Section for either the 8th Floor and/or 9th Floor,
Tenant shall have the option, exercisable upon written notice to Landlord
("Additional Build Out Notice"), to further build out the 8th Floor and/or
9th Floor, as applicable for Tenant's use ("Additional Tenant Build Out"). In
connection therewith, Tenant shall be entitled to a total Tenant Improvement
Allowance in Section 5 of Exhibit C of Forty Dollars ($40.00) per square foot
of rentable area for the 8th Floor ($1,009,320) and/or ($40.00) per square
foot of rentable area for the 9th Floor ($1,041,680), less the amount of the
Tenant Improvement Allowance expended during the Sublessee Build Out of the
8th Floor and/or 9th Floor, as applicable. Notwithstanding anything to the
contrary contained herein, during the last twenty-four (24) months of the
original Lease Term, Tenant shall not be entitled to an any additional Tenant
Improvement Allowance from Landlord in connection with an Additional Tenant
Build Out. In the event that Tenant exercises the option contained in this
Section 3(d) Tenant shall deliver an initial draft of the Space Plan for the
tenant improvements to be constructed on the 8th Floor and/or 9th Floor, as
applicable, as required in Section 1(a) of Exhibit C after the Additional
Build Out Notice, and (ii) the parties agree that Landlord shall be required
to complete any remaining Base Building Work (as defined in Exhibit C) at the
time of the Additional Build Out.
(e) If the Tenant elects the Sublessee Build Out,
Tenant shall be entitled to a credit against the 8th Floor Base Monthly
Rental and 9th Floor Base Monthly Rental (collectively, "Rent Credit") in the
amount of three dollars ($3.00) per rentable square foot per year until the
earlier of (i) the nineteenth (19th) month after the 8th Floor Term
Commencement Date and/or the 9th Floor Term Commencement Date, as applicable,
or (ii) eighteen (18) weeks after the Additional Build Out Notice.
4. RENTAL.
(a) Commencing on the respective Rent Commencement
Dates, as defined below, with respect to each floor of the Premises and
thereafter through the remainder of the Lease Term, Tenant shall pay to
Landlord throughout the Lease Term as basic monthly rental for the Premises
the sum specified for each floor of the Premises in the Basic Lease
Information as the Base Monthly Rental. As additional rent hereunder during
such period, Tenant shall pay to Landlord the additional rent described in
Section 5 below. Base Monthly Rental and additional
3
<PAGE>
rent payable pursuant to Section 5 shall be collectively referred to herein
as "monthly rental." As used herein the "Rent Commencement Date" for each
floor of the Premises shall mean the Term Commencement Date for each
respective floor of the Premises as set forth in the Basic Lease Information.
Landlord and Tenant hereby agree to confirm the Rent Commencement Date and
Term Commencement Date for each floor of the Premises promptly after the Term
Commencement Date for each floor of the Premises, by executing and delivering
to each other a Commencement Date Memorandum in conformance with EXHIBIT D
attached hereto, but failure to do so shall not affect the Rent Commencement
Date, Term Commencement Date or Lease Term.
(b) Monthly rental shall be paid to Landlord on or
before the Rent Commencement Date and on or before the first day of each and
every successive calendar month thereafter during the term hereof. In the
event the Rent Commencement Date is on a day other than the first day of a
calendar month or the Lease Term ends on a day other than the last day of a
calendar month, the monthly rental for the first and last fractional months
hereof shall be appropriately prorated.
(c) All sums of money due from Tenant hereunder not
specifically characterized as rental shall constitute additional rent, and if
any such sum is not paid when due it shall nonetheless be collectible as
additional rent with the next installment of monthly rental thereafter
falling due, but nothing contained herein shall be deemed to suspend or delay
the payment of any sum of money at the time it becomes due and payable
hereunder, or to limit any other remedy of Landlord.
(d) Tenant hereby acknowledges that late payment by
Tenant to Landlord of monthly rental will cause Landlord to incur costs not
contemplated by this Lease, the exact amounts of which will be difficult to
ascertain. Such costs include, but are not limited to, processing and
accounting charges, and late charges which may be imposed on Landlord by the
terms of any encumbrances covering the Building and the Premises.
Accordingly, if any installment of monthly rental shall not be received by
Landlord prior to the expiration of any applicable grace period described in
Section 21(a), Tenant shall pay to Landlord a late charge equal to five
percent (5%) of such overdue amount; provided that, on not more than two
(2) occasions in any consecutive twelve (12) month period Tenant may be up to
five (5) days late in the payment of monthly rental after written notice from
Landlord; provided further that, if monthly rental is not paid when due three
(3) times during any Lease Year, then thereafter Tenant shall not be entitled
to any grace period, and such late charge shall be assessed on any monthly
rental not paid by 5:00 p.m. on the date due. The parties hereby agree that
such late charge represents a fair and reasonable estimate of the costs
Landlord will incur by reason of late payment by Tenant based on the
circumstances existing as of the date of this Lease. Acceptance of such late
charge by Landlord shall in no event constitute a waiver of Tenant's default
with respect to such overdue amount, nor prevent Landlord from exercising any
of the other rights and remedies granted hereunder.
(e) Any amount due from Tenant, if not paid when first
due, shall bear interest from the date first due until paid at an annual rate
of thirteen percent (13%) (but in no event in
4
<PAGE>
excess of the maximum rate of interest permitted by law), provided that
interest shall not be payable on late charges incurred by Tenant nor on any
amounts upon which late charges are paid by Tenant to the extent such
interest would cause the total interest to be in excess of that legally
permitted. Payment of interest shall not excuse or cure any default hereunder
by Tenant.
(f) Subject to the provisions of Section 21(a) below,
all payments due from Tenant to Landlord shall be paid to Landlord, without
notice, demand, deduction or offset, in lawful money of the United States of
America in immediately available funds or by good check as described below
and unless otherwise instructed, addressed to the Property Manager at the
address set forth in the Basic Lease Information, or to such other person or
at such other place as Landlord may from time to time designate by notice to
Tenant. Payments made by check must be drawn either on a California financial
institution or on a financial institution that is a member of the federal
reserve system. Notwithstanding the foregoing, Tenant may make any payments
due to Landlord by wire transfer and said payments shall be considered
received by Landlord upon receipt into Landlord's bank account.
5. ADDITIONAL RENT FOR EXPENSES AND REAL ESTATE TAXES.
(a) For purposes of this Section 5, the following
terms shall have the meanings hereinafter set forth:
(i) "Tenant's Tax Share" and "Tenant's
Expense Share" mean the percentage figures so specified in the Basic Lease
Information.
(ii) "Tax Year" means each twelve (12)
consecutive month period commencing January 1st of each year during the Lease
Term, including, without limitation, any partial year during which the Lease
may commence; provided that Landlord, upon notice to Tenant, may change the
Tax Year from time to time to any other twelve (12) consecutive month period
and, in the event of any such change, Tenant's Tax Share of Real Estate Taxes
shall be adjusted for the Tax Year involved in any such change.
(iii) "Real Estate Taxes" means all taxes,
assessments (whether general or special), levies, excises, fees and charges
of any kind whatsoever, ordinary or extraordinary, unforeseen as well as
foreseen, assessed, imposed or levied upon or with respect to the Building or
any part thereof or any personal property of Landlord used in the operation
thereof, or Landlord's interest in the Building or such personal property.
Real Estate Taxes shall include, without limitation: all general real
property taxes and general and special assessments, charges, fees, or
assessments for transit, housing, police, fire, or other governmental
services or purported benefits to the Building or the occupants thereof,
service payments in lieu of taxes, business taxes, and any tax, fee, or
excise on the act of entering into this Lease or any other lease of space in
the Building, or on the use or occupancy of the Building or any part thereof,
or on the rent payable under any lease or in connection with the business of
renting space in the Building, or any gross receipt taxes or excise taxes
that are now or hereafter levied or assessed against Landlord by the United
States of America, the State of California or any political subdivision
thereof, public corporation, district, or any other political or public
entity, and shall also include any other tax, fee, charge or other excise,
however described, that may be levied or assessed as a
5
<PAGE>
substitute for, or as an addition to, in whole or in part, any other Real
Estate Taxes, whether or not now customary or in the contemplation of the
parties on the date of this Lease. Real Estate Taxes shall not include taxes
assessed solely upon and/or paid by other tenants in the Building, franchise,
transfer, inheritance or capital stock taxes or income taxes measured by the
net income of Landlord from all sources unless, due to a change in the method
of taxation, any of such taxes is levied or assessed against Landlord as a
substitute for, or as an addition to, in whole or in part, any other tax that
would otherwise constitute a Real Estate Tax. Real Estate Taxes shall also
include legal fees, costs, and disbursements incurred in connection with
proceedings to contest, determine, or reduce Real Estate Taxes.
(iv) "Expense Year" means each twelve (12)
consecutive month period commencing January 1st of each year during the Lease
Term, including, without any limitation, any partial year during which the
Lease may commence; provided that Landlord, upon notice to Tenant, may change
the Expense Year from time to time to any other twelve (12) consecutive month
period and, in the event of any such change, Tenant's Expense Share of
Expenses shall be adjusted for the Expense Years involved in any such change.
(v) "Expenses" means the total costs and
expenses paid or incurred by Landlord in connection with the ownership,
management, operation, maintenance and repair of the Building, including,
without limitation: (i) the cost of air conditioning, electricity, steam,
water, sewer, heating, mechanical, telephone, ventilating, escalator and
elevator systems and all other services and utilities; (ii) the cost of
repairs and replacements and all labor and material costs related thereto,
and the cost of general maintenance, cleaning and service contracts and the
cost of all supplies, tools and equipment required in connection thereof;
(iii) the cost of the Building delivery and messenger service; (iv) the cost
incurred by Landlord for all insurance carried on the Building or in
connection with the use and/or occupancy thereof and the amount of any
deductible on uninsured loss (earthquake insurance shall either be included
in the base year Expenses calculation or, if earthquake insurance is not so
included in the base year Expenses calculation, and Landlord in the future
desires to carry earthquake insurance, only that portion of the earthquake
insurance cost as represents the reasonable increase in the cost of such
earthquake insurance over an imputed base year cost shall be included as an
Expense); (v) wages, salaries, payroll taxes and other labor costs and
employee benefits for employees up to and including the level of Building
manager; (vi) management fees, which shall not exceed the market range for
such fees; (vii) fees, charges and other costs of all independent contractors
engaged by Landlord, including those providing janitorial, window cleaning,
security, extermination, rubbish removal, planting and other services;
(viii) accounting and legal expenses and the costs of other professionals and
consultants; (ix) Landlord's share of any shared expenses under any
reciprocal easement agreement or similar document; (x) depreciation on
personal property, including, without limitation, carpeting in public
corridor and common areas and window coverings provided by Landlord; (xi) the
rental paid for offices in the Building for the property manager and related
management and operations personnel; (xii) the cost of any capital
improvements made to the Building, or capital assets acquired by Landlord,
after completion of the Building's construction that are (A) a labor-saving
or energy saving device or to enhance the health and safety of the public
(including tenants) or to effect other economies in the operation or
maintenance of the Building to the extent of the actual savings, enhancement
or effect on other
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economies, or (B) made to the Building after the date of this Lease that are
required under any governmental law or regulation or insurance carrier that
was not applicable to the Building at the time that permits for the
construction thereof were obtained; provided that the total cost of said
improvements or assets that shall be included in the Expenses calculation
shall not exceed Three Hundred Thousand Dollars ($300,000) during any Expense
Year; (C) to the extent that the cost of any such improvement or asset is
less than One Hundred Thousand Dollars ($100,000.00), provided that the total
cost of said improvements or assets that shall be included in the Expenses
calculation shall not exceed Two Hundred Thousand Dollars ($200,000) during
any Expense Year, or (D) which improvements or assets have a useful life of
five (5) years or less (and the cost of which is not otherwise included in
Expenses pursuant to this Section 5(a)(v)), so long as the amortized amount
under this subsection (D) above that is included in the Expenses calculation
for any Expense year, when combined with the costs under subsection (C),
shall not exceed Two Hundred Thousand Dollars ($200,000); the costs pursuant
to this subsection 5(a)(v)(xii) (other than those described in clause (C)
above) are to be amortized over such period as Landlord shall determine
(including, without limitation, with respect to any improvements which result
in cost savings with respect to the Building, such period as would allow
Landlord to amortize the improvements to the extent of such cost savings in
any year or to any greater extent deemed appropriate to Landlord, together
with interest on the unamortized balance at the rate of ten percent (10%) per
annum or such higher rate as may have been paid by Landlord on funds borrower
for the purpose of constructing such capital improvements (GAAP shall be used
to determine if an item is an expense or a capital expenditure); (xiii) the
amortized cost of the Transit Impact Development Fee of the City and County
of San Francisco; (xiv) the cost of contesting the validity or applicability
of any governmental enactments which may affect operating expenses; (xv)
license, permit and inspection fees and charges; (xvi) sales, use and excise
taxes on goods and services purchased by Landlord in connection with the
operation, maintenance or repair of the Building and building systems and
equipment; (xvii) supplies, tools, materials and equipment used in connection
with the operation, maintenance or repair of the Building; (xviii) painting
the exterior or the public or common areas of the Building and the cost of
maintaining the sidewalks, landscaping and other common areas of the
Building; and (xiv) any other expenses and costs of any kind whatsoever
incurred in connection with the ownership, management, operation, maintenance
and repair of the Building. Expenses shall not include Real Estate Taxes, the
cost of tenant improvements, real estate broker's commissions, or interest or
principal payments on loans which are secured by a deed of trust or mortgage
encumbering the Building.
Actual Expenses for both the Base Expense Year and each
subsequent Expense Year shall be adjusted to equal Landlord's reasonable
estimate of the Expenses had the total area of the Building been occupied for
each such Expense Year. Landlord and Tenant acknowledge and agree that
certain costs of the ownership, management, operation maintenance and repair
of the Building may be allocated exclusively to a single component of the
Building (for example, and without limitation, to an office area, a retail
area or a parking facility) and certain of such costs may be allocated among
such components. The determination of such costs and their allocation shall
be made by Landlord in Landlord's reasonable discretion. To the extent costs
and expenses described above relate to both the Building and other property,
such costs and
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expenses shall, in determining the amount of Expenses, be allocated as
Landlord may determine to be appropriate.
Notwithstanding anything to the contrary in the definition
of Expenses, Expenses shall not include:
(i) Depreciation (except as provided in
Section 5(a)(v)(x) above), interest, or amortization on mortgages payments;
(ii) Leasing commissions, attorney's fees and
other costs and expenses incurred in connection with negotiations or disputes
with present or prospective tenants or other occupants of the Building;
(iii) Advertising and promotional expenditures
related to leasing tenant space in the Building;
(iv) Costs incurred with respect to the
installation of tenant improvements made for new tenants in the Building or
incurred in renovating or otherwise improving, decorating, painting or
redecorating space leased by or exclusively available to other tenants or
other occupants of the Building;
(v) Expenses, costs, and disbursements
relating to, or arising directly or indirectly from, the testing for or
analysis, handling, removal, treatment, disposal, remediation, or replacement
of asbestos or asbestos-containing materials, lead or Hazardous Materials in,
on, around, beneath, or from the Building;
(vi) To the extent that retail tenants in the
Building are separately metered or separately billed, the cost of
electricity, chilled and hot water for heating and cooling air, and
janitorial service for such retail tenants in their premises and in excess of
standard water service to retail tenants in the Building;
(vii) Cost for public art (including, without
limitation, paintings and sculptures); and
(viii) Expenses, to the extent reimbursed by
third parties; and
(ix) Any sales, mortgage or other brokerage
commissions in connection with the sale of financing of the Building.
(b) Tenant shall pay to Landlord as additional rent
one twelfth (1/12) of Tenant's Tax Share of increases in the Real Estate
Taxes for each Tax Year or portion thereof during the Lease Term after the
Base Tax Year when compared to Real Estate Taxes for the Base Tax Year (the
"Tax Increases"), in advance, on or before the first day of each month during
such Tax Year, in an amount estimated by Landlord in a writing delivered to
Tenant. Landlord may revise such estimates from time to time and Tenant will
thereafter make payments on the basis of such revised estimates.
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(c) Tenant shall pay to Landlord as additional rent
one twelfth (1/12) of Tenant's Expense Share of increases in the Expenses for
each Expense Year or portion thereof during the Lease Term after the Base
Expense Year when compared to Expenses for the Base Expense Year (the
"Expense Increases"), in advance, on or before the first day of each month
during such Expense Year, in an amount estimated by Landlord in a writing
delivered to Tenant. Landlord may revise such estimates from time to time and
Tenant will thereafter make payments on the basis of such revised estimates.
(d) With reasonable promptness after the expiration of
each Expense Year and Tax Year after the Base Expense Year and Base Tax Year,
including, without limitation, the Expense Year and Tax Year during which
this Lease terminates, Landlord will furnish Tenant with a statement (herein
called "Landlord's Expense Statement" and "Landlord's Tax Statement"),
prepared by Landlord or its accountant, setting forth in reasonable detail
the Expenses and Real Estate Taxes for each such Expense Year and Tax Year
and Tenant's Expense Share of the Expense Increases and Tenant's Tax Share of
the Tax Increases, which statement shall be conclusive and binding upon
Tenant, subject to Section 5(e). If the total of Tenant's Expense Share of
the Expense Increases for any such Expense Year as set forth in Landlord's
Expense Statement exceeds the total estimated payments for Expense Increases
paid by Tenant for such Expense Year, Tenant shall pay to Landlord (whether
or not this Lease has terminated) the difference between the total amount of
estimated payments paid by Tenant with respect to Expense Increases and the
total of Tenant's Expense Share of the actual Expense Increases within thirty
(30) days after the receipt of Landlord's Expense Statement. If the total
amount paid by Tenant for any such Expense Year shall exceed Tenant's Expense
Share of the actual Expense Increases for such Expense Year, such excess
shall be credited against the next installment of Expenses Increases due from
Tenant to Landlord hereunder. If this Lease has terminated and no amounts are
due or are to become due to Landlord from Tenant hereunder, any excess shall
be paid to Tenant by check within thirty (30) days after such final
determination of the actual Expenses. If the total of Tenant's Tax Share of
the Tax Increases for any Tax Year as set forth in Landlord's Tax Statement
exceeds the total estimated payments for Tax Increases paid by Tenant for
such Tax Year, Tenant shall pay to Landlord (whether or not this Lease has
terminated) the difference between the total amount of estimated payments
paid by Tenant with respect to Tax Increases and the total of Tenant's Tax
Share of the actual Tax Increases within thirty (30) days after the receipt
of Landlord's Tax Statement. If the total amount paid by Tenant for any such
Tax Year shall exceed Tenant's Tax Share of the actual Tax Increases for such
Tax Year, such excess shall be credited against the next installment of Tax
Increases due from Tenant to Landlord hereunder. If this Lease has terminated
and no amounts are due or are to become due to Landlord from Tenant hereunder,
any excess shall be paid to Tenant by check within thirty (30) days after
such final determination of the actual Tax Increases. Notwithstanding
anything to the contrary contained herein, in the event that the Expenses for
any subsequent Expense Year are less than Expenses for the Base Expense Year
or in the event that the Real Estate Taxes for any subsequent Tax Year are
less than the Real Estate Taxes for the Base Tax Year, Tenant shall not be
entitled to a credit against any Base Monthly Rental or other sums payable by
Tenant hereunder or to a payment from Landlord to Tenant with respect
thereto. Notwithstanding anything to the contrary contained herein, in no
event shall Tenant pay for Real Estate Taxes or Expenses attributable to the
period prior to the commencement of the Lease
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Term and following the Term Expiration Date, as the same may be extended
pursuant to the terms of the Lease.
(e) Tenant shall have the right, during the nine (9)
month period following delivery of a Landlord's Expense Statement or a
Landlord's Tax Statement, at Tenant's sole cost, to review in Landlord's
offices Landlord's records of Expenses or Real Estate Taxes for the subject
calendar year. Such review shall be carried out only by regular employees of
Tenant or by a major national accounting firm and not by any other third
party. No person conducting such an audit shall be compensated on a
"contingency" or other incentive basis. If, as of the end of the ninth (9th)
month after delivery to Tenant of a Landlord's Expense Statement or a
Landlord's Tax Statement, Tenant shall not have delivered to Landlord an
objection statement (as defined below), then such Landlord's Expense
Statement or Landlord's Tax Statement shall be final and binding upon
Landlord and Tenant, and Tenant shall have no further right to object thereto
or to obtain any further review or accounting thereof, all of which rights
Tenant expressly waives. If within such nine (9) month period, Tenant
delivers to Landlord a written statement specifying objections to such
Landlord Expense Statement or Landlord's Tax Statement (an "objection
statement"), then Tenant and Landlord shall meet to attempt to resolve such
objection within ten (10) days after delivery of the objection statement. If
such objection is not resolved within such ten (10) day period, then either
party shall have the right to require that the dispute be submitted to
binding arbitration under the rules of the American Arbitration Association.
Notwithstanding that any such dispute remains unresolved, Tenant shall be
obligated to pay when billed Landlord all amounts payable in accordance with
this Section 5 (including any disputed amount). If such dispute results in an
agreement or an arbitrator's determination that Tenant is entitled to a
refund, Landlord shall, at its option, either pay such refund or credit the
amount thereof to the monthly rental next becoming due from Tenant, or if the
Lease has terminated, pay Tenant such refund of credit within thirty (30)
days.
(f) If any of the respective Rent Commencement Dates
or Term Expiration Date of the term shall occur on a date other than the
first or last day, respectively, of a Tax Year and/or Expense Year, then
Tenant's Tax Share of the Tax Increases and/or Tenant's Expense Share of
Expense Increases for the year in which the Rent Commencement Date or Term
Expiration Date occurs shall be prorated based on a 365 day year , but shall
remain subject to adjustment based on receipt of information after the Term
Expiration Date.
6. USE.
(a) The Premises shall be used for general business
and professional office purposes only and for no other purpose without the
prior written consent of Landlord, which consent may be granted or denied in
Landlord's absolute discretion. Tenant shall not do or permit to be done in
or about the Premises, nor bring or keep or permit to be brought or kept
therein, anything which is prohibited by or would in any way conflict with
any law, statute, ordinance or governmental rule or regulation now in force
or which may hereafter be enacted or promulgated. Tenant shall not do or
permit anything to be done in or about the Premises which would in any way
obstruct or interfere with the rights of other tenants of the Building, or
injure or annoy them, or use or allow the Premises to be used for any
improper, immoral, unlawful or
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objectionable purposes, nor shall Tenant cause, maintain or permit any
nuisance or waste in, on or about the Premises.
(b) Tenant shall not cause or permit the storage, use,
generation, release, or disposal (collectively, "Handling") of any Hazardous
Materials (as defined below), in, on, or about the Premises or the Building
by Tenant or any agents, employees, contractors, licensees, subtenants,
customers, guests or invitees of Tenant (collectively with Tenant, "Tenant
Parties"), except that Tenant shall be permitted to use normal quantities of
office supplies or products (such as copier fluids or cleaning supplies)
customarily used in the conduct of general business office activities
("Common Office Chemicals"), providing that the Handling of such Common
Office Chemicals shall comply at all times with all Hazardous Materials Laws
(as defined below). Notwithstanding anything to the contrary contained
herein, however, in no event shall Tenant permit any usage of Common Office
Chemicals in a manner that may cause the Premises or the Building to be
contaminated by any Hazardous Materials or in violation of any Hazardous
Materials Laws. Tenant's obligations under this Section shall survive the
expiration or other termination of this Lease. For purposes of this Section
"Hazardous Materials" means any explosive, radioactive materials, hazardous
wastes, or hazardous substances, including without limitation, asbestos and
asbestos containing materials ("ACMs"), PCBs, CFCs, or substances defined or
regulated as hazardous substances or hazardous materials in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
42 U.S.C. Section 9601-9657; the Hazardous Materials Transportation Act of
1975, 42 U.S.C. Section 1001-1012; the Resource Conservation and Recovery Act
of 1976, 42 U.S.C. Section 6901-6987; or any other federal, state or local
law, ordinance or regulation. "Hazardous Materials Laws" shall mean all
federal, state, and local laws, ordinances and regulations defining,
regulating, restricting or otherwise governing the storage, use, generation,
release or disapproval of Hazardous Materials.
(c) Tenant shall immediately furnish Landlord with any
(i) notices received from any insurance company or governmental agency or
inspection bureau regarding any unsafe or unlawful conditions within the
Premises, and (ii) notices or other communications sent by or on behalf of
Tenant to any person relating to environmental laws or hazardous substances.
7. SERVICES.
(a) Landlord shall maintain the public and common
areas of the Building, including the lobbies, stairs, internal fire-stairs,
elevators, corridors and rest rooms (with hot water), windows, mechanical,
plumbing and electrical equipment, and the roof, external walls, foundations
and the structure itself in reasonably good order and condition except for
damage occasioned by the acts of Tenant, its employees, agents, contractors
or invitees, which damage shall be repaired by Landlord at Tenant's expense.
Tenant shall, at all times, have access to the Building, the Premises and,
for those individuals with monthly parking rights, the garage, twenty four
(24) hours a day, seven (7) days a week during the Lease Term , and the
utilities and services described in this Section shall be available to Tenant
twenty four (24) hours a day, seven (7) days a week. Landlord hereby agrees
that it shall do all of the foregoing in a manner
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consistent with the standards for other comparable first class office
buildings in the financial district of San Francisco north of Market Street
("Comparable Buildings").
(b) Landlord shall furnish the Premises with
(1) electricity for lighting and the operation of customary office machines
in an amount normally used for ordinary office use, (2) heat to the extent
reasonably required for the comfortable occupancy by Tenant in its use of the
Premises during the period from 7 a.m. to 6 p.m. on weekdays (except
holidays) ("Building Hours"), or such shorter period as may be prescribed by
any applicable policies or regulations adopted by any utility or governmental
agency, (3) elevator service, (4) lighting replacement (for building standard
lights), (5) restroom supplies, (6) window washing with reasonable frequency,
and (7) lobby attendant services and janitor service during the times and in
the manner that such services are customarily furnished in comparable
buildings; provided that, Landlord shall not be required to maintain any HVAC
system service to the Tenant's server room and Tenant shall be required to
maintain said service to Tenant's server room. Landlord hereby agrees that it
shall furnish said services to the Building in a manner consistent with the
standards for such services provided to other Comparable Buildings.
(c) Landlord may establish reasonable measures to
conserve energy, including but not limited to, automatic switching off of
lights after hours, so long as such measures do not unreasonably interfere
with Tenant's use of the Premises. Except to the extent due to Landlord's or
Landlord's agents', employees' or contractors' gross negligence or willful
misconduct, Landlord shall not be in default hereunder or be liable for any
damages directly or indirectly resulting from, nor shall the rental herein
reserved be abated, or this Lease terminated, 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, (ii) failure to furnish or
delay in furnishing any such services or the making of necessary repairs or
improvements to the Premises or to the Building, or (iii) the limitation,
curtailment, rationing or restrictions on use of water, electricity, gas or
any other utilities serving the Premises or the Building, nor, in any event,
shall any such matter constitute or be construed as a constructive eviction.
Tenant hereby waives the provisions of California Civil Code Section 1932(1)
or any other applicable existing or future law, ordinance or governmental
regulation permitting the termination of this Lease due to such failure or
interruption. Landlord shall use reasonable diligent efforts to remedy any
interruption in the furnishing of such services. In the event any
governmental authority or public utility promulgates or revises any law,
ordinance, rule or regulation, or issues mandatory controls or voluntary
controls relating to the use or conservation of energy, water, gas, light or
electricity, the reduction of automobile or other emissions, or the provision
of any other utility or service (collectively "Controls"), or in the event
Landlord is required or elects to make alterations to the Premises or the
Building in order to comply with such mandatory or voluntary Controls,
Landlord may, in its discretion, take any reasonably appropriate action to
comply with such Controls or make such alterations to the Premises and/or
Building related thereto. Such compliance and the making of such alterations
shall not entitle Tenant to any abatement of rent, constitute an eviction of
Tenant, constructive or otherwise, or impose upon Landlord any liability
whatsoever, including but not limited to, liability for consequential damages
or loss of business by Tenant. In carrying out such compliance and
alterations, Landlord shall use its reasonable efforts to minimize any
disruptions to Tenant's business in the Premises.
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(d) Landlord shall provide twenty-four (24) hour
security service (either manned or electronic), comparable to other
Comparable Buildings, three hundred sixty-five (365) days per year. The
parties acknowledge that safety and security devices, services and programs
provided by Landlord, if any, while intended to deter crime and ensure
safety, may not in given instances prevent theft or other criminal acts, or
ensure safety of persons or property. The risk that any safety or security
device, service or program may not be effective, or may malfunction, or be
circumvented by a criminal, is assumed by Tenant with respect to Tenant's
property and interests, and Tenant shall obtain insurance coverage to the
extent Tenant desires protection against such criminal actions and other
losses, as further described in this Lease. Tenant agrees to cooperate in any
reasonable safety or security program developed by Landlord or required by
law. Tenant, at Tenant's sole cost and expense, may install a security system
in the Premises, including an electronic, magnetic card or similar door
access system, provided that said electric, magnetic card or similar door
access system complies with all applicable codes, regulations and law and
provided that Landlord shall have the right to approve any such system. In
the event that Landlord installs an electronic, magnetic or similar door
system, Landlord shall use reasonable efforts to inform Tenant about said
system and discuss and compare said system with any similar system of
Tenant's; provided that, said information and discussion shall in no way
increase Landlord's responsibility or obligations with respect to the
security of the Building or Premises.
(e) Whenever heat-generating equipment or lighting
other than building standard lights are used in the Premises by Tenant in
excess of ordinary office use, Landlord shall have the right, after notice to
Tenant, to install supplementary air conditioning facilities in the Premises
or otherwise modify the ventilating and air conditioning system serving the
Premises, and the cost of such facilities and modifications shall be borne by
Tenant.
(f) Landlord makes no representation to Tenant
regarding the adequacy or fitness of the heating or ventilation equipment in
the Building to maintain temperatures that may be required for, or because
of, any of Tenant's equipment which uses other than the fractional horsepower
normally required for office equipment, and Landlord shall have no liability
for loss or damage suffered by Tenant or others in connection therewith.
Landlord shall provide up to five (5) watts of electrical current per
rentable square foot, exclusive of lighting and life safety systems (the
"Electrical Allowance"); provided, however, (i) without Landlord's consent,
Tenant shall not install, or permit the installation, in the Premises of any
type of equipment or machines which will increase Tenant's use of electric
current in excess of that which Landlord is obligated to provide hereunder
(provided the foregoing shall not preclude the use of personal computers or
similar office equipment); (ii) if Tenant shall require electric current in
excess of the Electrical Allowance, Landlord may condition its consent upon
Tenant's payment of the cost of installing and providing any additional
facilities required to furnish such excess power to the Premises and upon the
installation in the Premises of electric current meters to measure the amount
of electric current consumed, in which latter event Tenant shall pay for the
cost of such meter(s) and the cost of installation, maintenance and repair
thereof, as well as for all excess electric current consumed at the rates
charged by the applicable local public utility, plus a reasonable amount to
cover the additional expenses incurred by Landlord in keeping account of the
electric current so consumed; (iii) if Tenant's increased electrical
requirements materially affect the temperature
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level in the Premises or the Building, Landlord's consent may be conditioned
upon Tenant's requirement to pay such amounts as will be incurred by Landlord
to install and operate any machinery or equipment necessary to restore the
temperature level to that otherwise required to be provided by Landlord,
including but not limited to the cost of modifications to the air
conditioning system, if any, in other parts of the Building. Landlord shall
not, in any way, be liable or responsible to Tenant for any loss or damage or
expense which Tenant may incur or sustain if, for any reasons beyond
Landlord's reasonable control, either the quantity or character of electric
service is changed or is no longer available or suitable for Tenant's
requirements. Tenant covenants that at all times its use of electric current
shall never exceed the capacity of the feeders, risers or electrical
installations of the Building. If submetering of electricity in the Building
will not be permitted under future laws or regulations, the Base Monthly
Rental will then be equitably adjusted to include an additional payment to
Landlord reflecting the cost to Landlord for furnishing electricity to the
Premises. Any amounts which Tenant is required to pay pursuant to this
Section shall be payable upon demand by Landlord and shall constitute
additional rent.
(g) In the event that Landlord, at Tenant's request,
provides services to Tenant that are not otherwise provided for in this Lease
(including electrical power or heating at times other than Building Hours or
in amounts in excess of the Electrical Allowance), Tenant shall pay
Landlord's reasonable charges for such services upon billing therefor,
including, without limitation, Landlord's then current administrative fee
therefor. Currently, the cost for HVAC outside of Business Hours, is
approximately sixty dollars ($60) per hour, which cost is subject to
adjustment by Landlord from time to time in Landlord's reasonable discretion.
Any such request for extra services shall be made not less than twenty-four
(24) hours in advance.
8. TENANT REMEDIES.
(a) Notwithstanding any contrary provision of this
Lease, in the event that there is a water leak into the Tenant's server room,
for a reason not caused by the acts of Tenant ("Water Leak"), Tenant shall
promptly provide written notice of a Water Leak as set forth in Section 8(c)
below ("Water Leak Notice"). If the Water Leak Notice is delivered to
Landlord during Building Hours, Landlord shall have four (4) hours to
commence curing said Water Leak and shall thereafter diligently pursue such
cure to completion using commercially reasonable efforts, subject to Force
Majeure Events. If the Water Leak Notice is delivered to Landlord outside of
Building Hours, Landlord shall have until the next business day, but in no
event longer than eight (8) hours, to commence curing said Water Leak and
shall diligently pursue such cure to completion using commercially reasonable
efforts, subject to Force Majeure Events. In the event that the Landlord
fails to commence the cure of a Water Leak within the applicable cure
commencement period as extended by Force Majeure Events, Tenant shall be
entitled to undertake such commercially reasonable efforts as are reasonably
necessary to cure the Water Leak. Subject to the rights of other tenants in
the Building, Tenant shall have the right to enter such portions of the
Building as may be reasonably required to effectuate any reasonable cure of
such Water Leak, provided that (i) Tenant shall use all reasonable efforts to
include the Building manager or Building personnel in connection with the
entry into any portions of the Building outside of the Premises, and (ii)
Tenant shall repair any damage caused by any such repair
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activities of Tenant and shall indemnify and hold Landlord harmless from any
claims, including any related attorneys fees, by other tenants in the
Building for damage to persons or property resulting from such activities of
Tenant. Tenant shall be entitled to reimbursement for the sums reasonably
expended by Tenant to effectuate such cure within thirty (30) days after
submitting a written invoice of said sums to Landlord. If Landlord fails to
reimburse Tenant within said thirty (30) days, Tenant shall be entitled to
offset said sums from its Base Monthly Rental; provided that, if Landlord
disputes the amount of such claim for reimbursement, Landlord shall give
Tenant written notice of such dispute prior to the end of such thirty (30)
day period in which event Landlord and Tenant shall meet and confer on not
less than two (2) occasions (at a mutually agreeable time and place in
San Francisco, California) in the ensuing sixty (60) days in an attempt to
resolve such dispute and Tenant shall not offset said sums until ninety (90)
days after the date of submission of such written invoice. Notwithstanding
anything to the contrary contained herein, nothing contained in this
subsection or elsewhere in this Lease shall be construed in any way to make
Landlord liable to Tenant in any way for a Water Leak which is caused by
Force Majeure Events.
(b) Notwithstanding any contrary provision of this
Lease, in the event that there is a failure in supply of electrical power to
the Premises or a telecommunications or data interruption in the Premises,
for a reason not caused by the acts of Tenant ("Communication Failure"),
Tenant shall promptly provide written notice of a Communication Failure as
set forth in Section 8(c) below ("Communication Failure Notice"). If the
Communication Failure Notice is delivered to Landlord during Building Hours,
Landlord shall have four (4) hours to commence curing said Communication
Failure and shall thereafter diligently pursue such cure to completion using
commercially reasonable efforts, subject to Force Majeure Events. If the
Communication Failure Notice is delivered to Landlord outside of Building
Hours, Landlord shall have until the next business day, but in no event
longer than eight (8) hours, to commence curing said Communication Failure
and shall diligently pursue such cure to completion using commercially
reasonable efforts, subject to Force Majeure Events. In the event that the
Landlord fails to commence the cure of a Communication Failure within the
applicable cure commencement period as extended by Force Majeure Events,
Tenant shall be entitled to undertake such commercially reasonable efforts as
are reasonably necessary to cure the Communication Failure. Subject to the
rights of other tenants in the Building, Tenant shall have the right to enter
such portions of the Building as may be reasonably required to effectuate any
reasonable cure of such Communication Failure, provided that (i) Tenant shall
use all reasonable efforts to include the Building manager or Building
personnel in connection with the entry into any portions of the Building
outside of the Premises, and (ii) Tenant shall repair any damage caused by
any such repair activities of Tenant and shall indemnify and hold Landlord
harmless from any claims, including any related attorneys fees, by other
tenants in the Building for damage to persons or property resulting from such
activities of Tenant. Tenant shall be entitled to reimbursement for the sums
reasonably expended by Tenant to effectuate such cure within thirty (30) days
after submitting a written invoice of said sums to Landlord. If Landlord
fails to reimburse Tenant within said thirty (30) days, Tenant shall be
entitled to offset said sums from its Base Monthly Rental; provided that, if
Landlord disputes the amount of such claim for reimbursement, Landlord shall
give Tenant written notice of such dispute prior to the end of such thirty
(30) day period in which event Landlord and Tenant shall meet and confer on
not less than two (2)
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occasions (at a mutually agreeable time and place in San Francisco,
California) in the ensuing sixty (60) days in an attempt to resolve such
dispute and Tenant shall not offset said sums until ninety (90) days after
the date of submission of such written invoice. Notwithstanding anything to
the contrary contained herein, nothing contained in this subsection or
elsewhere in this Lease shall be construed in any way to make Landlord liable
to Tenant in any way for a Communication Failure which is caused by Force
Majeure Events.
(c) For purposes of Section 8, during Building Hours,
Tenant shall provide written notice to the Building Manager or Building Chief
Engineer and outside of Building Hours, Tenant shall provide written notice
to the Building Manager, Building Chief Engineer or the Building security
guard in the main lobby.
9. IMPOSITIONS PAYABLE BY TENANT. In addition to the monthly
rental and other charges to be paid by Tenant hereunder, Tenant shall pay or
reimburse Landlord for any and all of the following items (hereinafter
collectively referred to as "Impositions"), whether or not now customary or
in the contemplation of the parties hereto: taxes (other than local, state
and federal personal or corporate income or franchise taxes measured by the
net income of Landlord from all sources), assessments (including, without
limitation, all assessments for public improvements, services or benefits,
irrespective of when commenced or completed), excises, levies, business
taxes, license, permit, inspection and other authorization fees, transit
development fees, assessments or charges for housing funds, service payments
in lieu of taxes and any other fees or charges of any kind, which are levied,
assessed, confirmed or imposed by any public authority, but only to the
extent the Impositions are: (a) upon, measured by or reasonably attributable
to the cost or value of Tenant's equipment, furniture, fixtures and other
personal property located in the Premises, or the cost or value of any
leasehold improvements made in or to the Premises by or for Tenant,
regardless of whether title to such improvements (b) upon, with respect to or
by reason of the development, possession, leasing, operation, management,
maintenance, alteration, repair, use or occupancy by Tenant of the Premises
or (c) upon this transaction or any document to which Tenant is a party
creating or transferring an interest or an estate in the Premises (including
any sales, excise or gross receipts tax measured by the rental payable
hereunder). In the event that it shall not be lawful for Tenant to reimburse
Landlord for the Impositions but it is lawful to increase the monthly rental
to take into account Landlord's payment of the Impositions, the monthly
rental payable to Landlord shall be revised to net Landlord the same net
return without reimbursement of the Impositions as would have been received
by Landlord with reimbursement of the Impositions.
10. ALTERATIONS.
(a) Tenant may make alterations, additions or
improvements (collectively, "Alterations") to the Premises or install
fixtures in the Premises after first obtaining Landlord's consent, which
consent shall not be unreasonably withheld; provided however, that it shall
be deemed reasonable for Landlord to withhold its consent if: (a) the cost of
the work will exceed Two Hundred Fifty Thousand Dollars ($250,000) (b) a
building permit will be required; or (c) if there will be any material
modifications to any exterior or structural components of the Building or any
of the Building's operating systems, including, without limitation, heating,
ventilating, air
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conditioning, plumbing, electrical, and other operating systems.
Notwithstanding the foregoing, Tenant may make any Alterations which are
cosmetic (e.g. minor painting, changes of floor coverings or wall coverings,
installation of artwork or decorations, etc.), without Landlord's consent
being required, provided such cosmetic alterations do not require a building
permit and do not effect the exterior of the Building or the structural or
mechanical components of the Building. Upon Tenant's written request for
Landlord's consent to certain Alterations pursuant to this Section, Landlord
shall have thirty (30) days from the date on which Landlord receives all
information reasonably required by Landlord for Landlord's review of said
request to provide Tenant with notice of Landlord's consent or withholding of
consent to Tenant's request (along with a written description of Landlord's
reason(s) for withholding of consent, if applicable). In the event that
Landlord elects to and has a right to oversee (or cause to be overseen)
Tenant's requested Alteration(s), Landlord shall provide Tenant with notice
of such election within said thirty (30) day period. In connection with
Tenant's request for Landlord's consent under this Lease, Tenant shall
pre-pay to Landlord the sum of Two Hundred Fifty Dollars ($250.00) for
Landlord's review of applicable documents and plans. Tenant also shall
reimburse Landlord for any third-party costs and expenses incurred or to be
incurred by Landlord related to such review within ten (10) days of receipt
of Landlord's statement therefor. Furthermore, in the event Landlord may
elect to oversee, or cause to be overseen, such Alterations, Landlord shall
be entitled to receive a fee for such oversight in an amount equal to three
(3%) of the cost of such alterations, additions or improvements. Landlord's
review and approval of Tenant's plans and specifications for any work
performed for or on behalf of Tenant shall not be deemed to be a
representation by Landlord that such plans and specifications comply with
applicable insurance requirements, building codes, ordinances, laws or
regulations including, without limitation, the provisions of the Americans
With Disabilities Act, 42. U.S.C. 12101 et seq. and any governmental
regulations with respect thereof (the "ADA") and Title 24 of the California
Administrative Code ("Title 24"), and other similar federal, state, and local
laws and regulations or that the Alterations are constructed in accordance
with such plans and specifications or that such plans and specifications will
be adequate for Tenant's use. In no event, however, may the Tenant make any
Alterations or install fixtures which, in Landlord's reasonable judgment,
might adversely affect the structural components of the Building or Building
mechanical, utility or life safety systems. At the time such consent is
requested, Tenant shall furnish to Landlord a description of the proposed
work, an estimate of the cost thereof and such information as shall
reasonably be requested by Landlord substantiating Tenant's ability to pay
for such work. Landlord, at its sole option, may require as a condition to
the granting of such consent to any work costing in excess of Five Hundred
Thousand Dollars ($500,000), that Tenant provide to Landlord, at Tenant's
sole cost and expense, a lien and completion bond in an amount equal to one
and one-half (1-1/2) times any and all estimated costs of the proposed work,
to insure Landlord against any liability for mechanics' and materialmen's
liens and to insure completion of the work. Before commencing any work,
Tenant shall give Landlord at least twenty (20) days written notice of the
proposed commencement of such work in order to give Landlord an opportunity
to prepare, post and record such notice as may be permitted by law to protect
Landlord's interest in the Premises and the Building from mechanics' and
materialmen's liens. Within a reasonable period following completion of any
work for which plans and specifications were required to obtain a building
permit for such work, Tenant shall furnish to Landlord "as built" plans
showing the changes made to the Premises.
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(b) All Alterations shall be constructed in a good and
workmanlike manner using building standard materials or other new materials
of equal or greater. Landlord, to the extent necessary to avoid any
disruption to the tenants and occupants of the Building, shall have the right
to designate the reasonable times when any such Alterations may be performed
(Tenant hereby agrees that it is reasonable for Landlord to require
Alterations to be performed on nights and weekends) and to otherwise
designate reasonable rules, regulations, and procedures for the performance
of work in the Building. Any Alterations to the Premises shall be made by
Tenant at Tenant's sole cost and expense, and any contractor, subcontractor
or other person selected by Tenant to make the same shall be selected from
Landlord's approved bidder list. Tenant's contractor and its subcontractors
shall employ union labor to the extent necessary to insure, so far as may be
possible, the progress of the Alterations and the performance of any other
work or the provision of any services in the Building without interruption on
account of strikes, work stoppage or similar causes of delay. All work
performed by Tenant shall comply with the laws, rules, orders, directions,
regulations and requirements of all governmental entities having jurisdiction
over such work including, without limitation, any laws, regulations or
requirements respecting asbestos or ACMs, the ADA and Title 24 and shall
comply with the rules, orders, directions, regulations and requirements of
any nationally recognized board of insurance underwriters. All Alterations
shall immediately become Landlord's property and shall remain on the Premises
without compensation to Tenant; provided, however, that unless Landlord has
previously agreed in writing that an Alteration does not have to be removed
by Tenant at the end of the Lease Term, Tenant shall, prior to the end of the
Lease Term, at its sole cost and expense, remove the Alterations required to
be removed by Landlord and repair and restore the Premises to their condition
at the commencement of the Lease Term. At the time that Tenant requests
Landlord's consent to an Alteration(s), Tenant may also request and require
that Landlord determine whether said Alteration(s) must be removed by Tenant
at the end of the Lease Term. If so requested by Tenant, Landlord shall
provide notice to Tenant of the Alteration(s) that Tenant is required to
remove at the end of the Lease Term simultaneous with Landlord's consent to
said Alteration(s), if Landlord's consent is given. In the event that
Landlord determines that an Alteration(s) must be removed by Tenant at the
end of the Lease Term, Tenant shall remove said Alteration(s) at Tenant's
sole cost and expense and repair and restore the Premises to their condition
prior to said Alteration.
(c) Tenant may, in a manner consistent with the
provisions of this Lease, install, maintain, replace, remove or use any
communications or computer wires, cables, and related devices (collectively,
the "Lines") at the Building in or serving the Premises, provided: (i) Tenant
shall obtain Landlord's prior written consent, which consent may be
conditioned as reasonably required by Landlord, (ii) if Tenant at any time
uses any equipment that may create an electromagnetic field exceeding the
normal insulation ratings of ordinary twisted pair riser cable or cause
radiation higher than normal background radiation, the Lines therefor
(including riser cables) shall be appropriately insulated to prevent such
excessive electromagnetic fields or radiation, and (iii) Tenant shall pay all
costs in connection therewith. Landlord reserves the right to require that
Tenant remove any Lines which are installed in violation of these provisions.
Landlord may (but shall not have the obligation to): (i) install new Lines at
the Property, and (ii) create additional space for Lines at the Property, and
(iii) adopt reasonable and uniform rules and regulations with respect to
Lines.
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Notwithstanding anything to the contrary contained in this Lease,
Landlord reserves the right to require Tenant to remove any or all Lines
installed by or for Tenant within or serving the Premises upon the Expiration
Date or earlier termination of this Lease. Tenant shall not, without the
prior written consent of Landlord in each instance, grant to any third party
a security interest or lien in or on the Lines, and any such security
interest or lien granted without Landlord's written consent shall be null and
void. Except to the extent arising from the gross negligence or intentional
acts of Landlord, Landlord or Landlord's agents or employees, Landlord shall
have no liability for damages arising from, and Landlord does not warrant
that Tenant's use of any Lines will be free from the following (collectively
"Line Problems"): (i) any eavesdropping or wire-tapping by unauthorized
parties, or (ii) any failure of any lines to satisfy Tenant's requirements.
Except to the extent arising from the Landlord's breach of Section 21(b) of
this Lease, or the gross negligence or intentional acts of Landlord or
Landlord's agents or employees, Landlord shall have no liability for damages
arising from, and Landlord does not warrant that Tenant's use of any Lines
will be free from any shortages, failures, variations, interruptions,
disconnections, loss or damage caused by the installation, maintenance,
replacement, use or removal of lines by or for other tenants or occupants at
the Property. Under no circumstances shall any Line Problems be deemed an
actual or constructive eviction of Tenant, render Landlord liable to Tenant
for abatement of Base Monthly Rental, or relieve Tenant from performance of
Tenant's obligations under this Lease. Landlord in no event shall be liable
for damages by reason of loss of profits, business interruption or other
consequential damages arising from any Line Problems.
11. LIENS. Tenant shall pay when due all costs for work
performed and materials supplied to the Premises. Tenant shall keep Landlord,
the Premises and the Building free from all liens, stop notices and violation
notices relating to the work performed, materials furnished or obligations
incurred by or for Tenant and Tenant shall protect, indemnify, hold harmless
and defend Landlord, the Premises and the Building of and from any and all
loss, cost, damage, liability and expense, including attorney's fees and
costs, arising out of or related to any such liens or notices. During the
progress of such work, Tenant shall, upon Landlord's request, furnish
Landlord with sworn contractor's statements and lien waivers covering all
work theretofore performed. Tenant shall satisfy or otherwise discharge all
liens, stop notices or other claims or encumbrances within twenty (20) days
after Tenant obtains knowledge that any such lien, stop notice, claim or
encumbrance has been filed. If Tenant fails to pay and remove such lien,
claim or encumbrance within such twenty (20) days, or Tenant fails to
diligently pursue, discharge or satisfy said lien, stop notice, claim or
encumbrance, Landlord, at its election, may pay and satisfy the same and in
such event the sums so paid by Landlord, with interest from the date of
payment as set forth in Section 3(e) hereof for amounts owed Landlord by
Tenant, shall be deemed additional rent due and payable by Tenant at once
without notice or demand. Notwithstanding the foregoing, if Tenant is
contesting any mechanics lien and provides to Landlord a bond reasonably
satisfactory to Landlord and sufficient to remove the lien of record under
California law, Landlord shall have no right to pay such lien after said bond
has been provided to Landlord.
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12. REPAIRS; CONDITION OF PREMISES.
(a) Subject to the Work Letter, by entry hereunder,
Tenant accepts the Premises as being in the condition in which Landlord is
obligated to deliver the Premises. Subject to the Work Letter, Tenant shall,
at all times during the term hereof and at Tenant's sole cost and expense,
keep the Premises in good condition and repair, in compliance with all laws,
including without limitation, the ADA and Title 24 (as defined hereafter);
ordinary wear and tear and damage thereto by fire, earthquake, act of God or
the elements excepted. Tenant hereby waives all rights to make repairs at the
expense of Landlord or in lieu thereof to vacate the Premises, abate rent or
terminate this Lease. Subject to the Work Letter, and subject to Landlord's
rights to require the removal of Alterations, Tenant shall at the end of the
term hereof surrender to Landlord the Premises and all Alterations thereto in
the same condition as when received, ordinary wear and tear and damage by
fire, earthquake, act of God or the elements excepted. Landlord has no
obligation and has made no promise to alter, remodel, improve, repair,
decorate or paint the Premises or any part thereof, except as specifically
herein set forth. No representations respecting the condition of the Premises
or the Building have been made by Landlord or Landlord's agents to Tenant,
except as specifically herein set forth.
(b) Subject to the Work Letter, Tenant has examined
the Premises and is fully informed to Tenant's satisfaction of the physical
and environmental condition and the utility of the Premises. Tenant
acknowledges that Landlord, its agents and employees and other persons acting
on behalf of Landlord have made no representation or warranty of any kind,
express or implied, with respect to: (i) the physical or environmental
condition, value, zoning or legal status or the Building; (ii) the fitness of
the Premises for Tenant's intended use; (iii) the degree of sound transfer
within the Building; (iv) the absence of electrical or radio interference in
the Premises or the Building; (v) the condition, capacity or performance of
electrical or communications systems or facilities; or (vi) the absence of
objectionable odors, bright lights or other conditions which may affect
Tenant's use and enjoyment of the Premises or the Building, upon which Tenant
has relied directly or indirectly for any purpose, except as specifically set
forth in this Lease.
13. DESTRUCTION OR DAMAGE.
(a) In the event the Premises or the portion of the
Building necessary for Tenant's use and enjoyment of the Premises are damaged
by fire, earthquake, act of God, the elements or other casualty, Landlord
shall repair the same (including the Tenant Work in the portion of the
Premises damaged to the extent of the actual cost of said Tenant Work, but
not to exceed the Tenant Improvement Allowance plus an additional Five
Dollars ($5.00) per rentable square foot for the portion of the Premises so
damaged), subject to the provisions of this Section hereinafter set forth, if
(i) such repairs can, in Landlord's reasonable opinion, be made within a
period of twelve (12) months after the date of casualty, (ii) the cost of
repairing damage for which Landlord is not insured shall be less than five
percent (5%) of the then full insurable value of the Premises with respect to
repairing any damage to the Premises, or five percent (5%) of the then full
insurable value of the Building with respect to repairing any damage to other
areas of the Building, (iii) the damage or destruction does not occur during
the last twelve (12) months of
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the Lease Term as the same may be extended under the terms of this Lease
(said twelve (12) months shall be measured after taking into account any
extension of the Lease Term under the terms of this Lease), and (iv)
Landlord's mortgagee does not require that the insurance proceeds payable as
a result of a casualty be applied to the payment of the mortgage debt. This
Lease shall remain in full force and effect except that so long as the damage
or destruction is not caused by the negligence or fault of Tenant, its
contractors, agents, employees or invitees, an abatement of monthly rental
shall be allowed Tenant for such part of the Premises as shall be rendered
unusable by Tenant in the conduct of its business during the time such part
is so unusable and Tenant does not actually occupy such part.
(b) As soon as is reasonably possible following the
occurrence of any damage, Landlord shall notify Tenant of the estimated time and
cost required for the repair or restoration of the Premises or the portion of
the Building necessary for Tenant's occupancy (including the Tenant Work in the
portion of the Premises damaged to the extent of the actual cost of said Tenant
Work, but not to exceed the Tenant Improvement Allowance plus an additional Five
Dollars ($5.00) per rentable square foot for the portion of the Premises so
damaged). If, in Landlord's reasonable opinion, such repairs cannot be made
within twelve (12) months as set forth in Section 13(a)(i) above, Landlord or
Tenant may elect by written notice to the other within thirty (30) days after
Landlord's notice of estimated time and cost is given (i) in the event of damage
or destruction to two entire floors in the Premises or less, to terminate this
Lease only as to the portion of the Premises damaged or destroyed, effective as
of the date of such damage, or (ii) in the event of damage or destruction to
more than two floors in the Premises, to terminate this Lease effective as of
the date of such damage. If Landlord is not obligated to effect the repair based
upon the circumstances set forth in Sections 13(a)(ii) or 13(a)(iii) above,
Landlord shall have the right to terminate this Lease, by written notice to
Tenant within thirty (30) days after Landlord's notice of time and cost is
given, effective as of the date of such damage or destruction. If neither party
so elects to terminate this Lease, this Lease shall continue in full force and
effect, but the rent shall be partially abated as provided in Section 13(a)
above, and Landlord shall proceed with reasonable promptness to repair such
damage.
(c) A total destruction of the Building shall
automatically terminate this Lease. Tenant hereby waives all statutory rights of
termination, including any such rights under California Civil Code Section 1933.
(d) In no event shall Tenant be entitled to any
compensation or damages from Landlord, specifically including, but not limited
to, any compensation or damages for (i) loss of the use of the whole or any part
of the Premises, (ii) damage to Tenant's personal property in or improvements to
the Premises, or (iii) any inconvenience, annoyance or expense occasioned by
such damage or repair (including moving expenses and the expense of establishing
and maintaining any temporary facilities).
(e) Landlord, in repairing the Premises, shall not be
required to repair any injury or damage to the personal property of Tenant, or
to make any repairs to or replacement of any alterations, additions,
improvements or fixtures installed on the Premises by or for Tenant, except the
Tenant Work to the extent of the actual cost of the Tenant Work, not to exceed
the
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Tenant Improvement Allowance plus an additional Five Dollars ($5.00) per
rentable square foot for the portion of the Premises so damaged.
14. INSURANCE.
(a) Tenant shall, at its sole cost and expense, during
the Lease Term, cause all improvements at any time located in the Premises
(other than Tenant Work to the extent of the actual cost thereof not to exceed
the Tenant Improvement Allowance plus an additional five dollars ($5.00) per
rentable square foot of the Premises) and all equipment and fixtures from time
to time used or intended to be used in connection with the operation and
maintenance of the Premises, to be insured for the mutual benefit of Landlord
and Tenant against loss or damage by fire and against loss or damage by other
risks now or hereafter included in an All-Risk insurance policy, in an amount
equal to the full insurable value thereof. All proceeds from such insurance
shall be used for the repair or replacement of such improvements, equipment and
fixtures.
(b) All coverage shall be written on an occurrence basis
and shall be primary and non-contributory over any insurance the Landlord may
elect to provide on its behalf. Upon the commencement of the Lease Term, and
upon renewal of such insurance coverage, Tenant shall deliver to the Landlord
certified copies of Tenant's insurance policies, or an original certificate of
such insurance from the insurer providing a minimum of thirty (30) days' notice
of cancellation or modification. In the event Tenant shall fail to procure such
insurance or to deliver such policies and certificates, Landlord may, at
Landlord's option and in addition to Landlord's other remedies in the event of a
default by Tenant hereunder, procure the same for the account of Tenant, and the
cost thereof shall be paid to Landlord as additional rent. All policies of
insurance required to be carried by Tenant under this Section 14 shall be in
form reasonably satisfactory to Landlord and, except for workers compensation,
business interruption and property, shall name Landlord, Landlord's mortgagee,
Landlord's managing agent and any other party designated by Landlord as
additional insureds. All policies of insurance required by Landlord under this
Lease shall be issued by responsible insurance companies which are licensed to
do business in the State of California, and shall have a Best's rating of at
least "A-" and a financial rating of not less than "X" and have been approved in
writing by Landlord. The Commercial General Liability policy shall contain
cross-liability endorsements or its equivalent, and shall be for the mutual and
joint benefit and protection of Landlord, Tenant and any other party designated
by Landlord as an additional insured.
Notwithstanding any other provisions of this Lease, Tenant, at its own
expense, shall also maintain the following insurance coverage:
(i) WORKER'S COMPENSATION AND EMPLOYER'S
LIABILITY. Tenant shall maintain Worker's Compensation insurance sufficient to
comply with all applicable State and/or Federal laws and an Employer's Liability
policy with a limit of not less than One Million Dollars ($1,000,000.00).
(ii) COMMERCIAL GENERAL LIABILITY. Tenant shall
maintain a Commercial General Liability policy applying to the use and occupancy
of the Premises and the Building, and any part of either, and any areas adjacent
thereto, and the business operated by
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Tenant, or by any other occupant of the Premises with limits of liability not
less than Two Million Dollars ($2,000,000.00) per occurrence and Three
Million Dollars ($3,000,000.00) general aggregate for Bodily Injury and
Property Damage and Three Million Dollars ($3,000,000.00) aggregate
products/completed operations coverage. Such policy shall specifically name
the Landlord, Landlord's mortgagee and Landlord's managing agent as
additional insureds. All such insurance shall provide for severability of
interests; shall provide that an act or omission of one of the named insureds
shall not reduce or avoid coverage to the other named insureds; and shall
afford coverage for all claims based on acts, omissions, injury and damage,
which claims occurred or arose (or the onset of which occurred or arose) in
whole or in part during the policy period. Tenant's Commercial General
Liability policy shall not provide for a deductible in excess of Two Hundred
Thousand Dollars ($200,000) without the prior written approval of Landlord
which shall not be unreasonably withheld. The amounts of insurance required
in this Section 14(b)(ii) may be satisfied by purchasing coverage for the
limits specified or by a combination of underlying and umbrella limits, so
long as the total amount of insurance is not less than the limits specified.
(iii) BUSINESS INTERRUPTION. Tenant shall also
maintain a policy of (or obtain an endorsement providing) business interruption
insurance insuring Tenant against losses from interruption of its use of the
Premises for any reason with coverage for a period of not less than one (1)
year.
(iv) PROPERTY INSURANCE. Tenant shall, at its
sole cost and expense, during the Lease Term, cause all improvements at any time
located in the Premises (other than the Building standard tenant improvements)
and all equipment and fixtures from time to time used or intended to be used in
connection with the operation and maintenance of the Premises, to be insured for
the mutual benefit of Landlord and Tenant against loss or damage by fire and
against loss or damage by other risks now or hereafter included in an All-Risk
insurance policy, in an amount equal to the full insurable value thereof. All
proceeds from such insurance shall be used for the repair or replacement of such
improvements, equipment and fixtures. Tenant's property policy shall not provide
for a deductible in excess of One Hundred Thousand Dollars ($100,000) without
the prior written approval of Landlord which shall not be unreasonably withheld.
(v) ADDITIONAL INSURANCE. Whenever good business
practice, in Landlord's reasonable judgment, indicates the need for additional
insurance coverage or different types of insurance in connection with the
Premises or Tenant's use and occupancy thereof, Tenant shall, upon request,
obtain such insurance at Tenant's expense and provide Landlord with evidence
thereof.
(c) Before any repairs, alterations, additions,
improvements, or construction are undertaken by or on behalf of Tenant, Tenant
shall carry and maintain at its expense, or Tenant shall require any contractor
performing work in the Premises to carry and maintain, at no expense to
Landlord, in addition to workers' compensation insurance as required by the
jurisdiction in which the Building is located, All Risk Builder's Risk Insurance
in the amount of the replacement cost of any alterations, additions or
improvements (or such other amount
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reasonably required by Landlord) and Commercial General Liability Insurance
(including, without limitation, Contractor's Liability coverage), written on
an occurrence basis with a minimum combined single limit of $2,000,000.00 and
adding the "owners of the Building and its (or their) respective members,
principals, beneficiaries, partners, officers, directors, employees, managing
agents, agents (and their respective members and principals) and
mortgagee(s)" (and any other designees of Landlord as the interest of such
designees shall appear) as additional insureds.
(d) Tenant shall not do or fail to do anything in, upon
or about the Premises which will: (i) violate the terms of any of Landlord's
insurance policies; (ii) prevent Landlord from obtaining policies of insurance
acceptable to Landlord or any mortgagees; or (iii) result in an increase in the
rate of any insurance on the Premises, the Building, any other property of
Landlord or of others in the Building. In the event of the occurrence of any of
the events set forth in this Section 14(d), Tenant shall pay Landlord, upon
demand, as additional rent, the cost of the amount of any increase in any such
insurance premium, provided that the acceptance by Landlord of such payment
shall not be construed as a waiver of any rights by Landlord in connection with
a default by Tenant under the Lease.
(e) Tenant shall, prior to and throughout the Lease Term,
procure from each of its insurers under all policies of fire, theft, public
liability, commercial general liability and any other insurance policies of
Tenant now or hereafter existing, pertaining in any way to the Premises or the
Building or any operation therein (except workers' compensation), a waiver, as
set forth in Section 15 of this Lease, of all rights of subrogation which the
insurer might otherwise, if at all, have against the Landlord or any officer,
agent or employee of Landlord (including, without limitation, Landlord's
managing agent).
(f) Landlord also shall maintain (i) a Commercial General
Liability policy applying to its use and occupancy of the Building and any areas
adjacent thereto, and the business operated by Landlord, with limits of
liability not less than One Million Dollars ($1,000,000.00) per occurrence and
Two Million Dollars ($2,000,000.00) general aggregate for Bodily Injury and
Property Damage with an umbrella liability policy with a minimum limit of Five
Million Dollars ($5,000,000) per occurrence and in the aggregate (the "Umbrella
Policy"), and (ii) a policy covering loss by fire or other casualty in the form
of an All-Risk policy covering the Building and the Tenant Work, but only the
extent of the actual cost of the Tenant Work, not to exceed the Tenant
Improvement Allowance plus five dollars ($5.00) per rentable square foot of the
Premises, in such amounts and with such coverages as would generally be carried
in Comparable Buildings, provided that Landlord may, but shall not be required
to, carry earthquake insurance.
15. WAIVER OF SUBROGATION. Landlord and Tenant shall each have
included in all policies of fire, extended coverage, business interruption and
other insurance respectively obtained by them covering the Premises, the
Building and contents therein, a waiver by the insurer of all right of
subrogation against the other in connection with any loss or damage thereby
insured against. Any additional premium for such waiver shall be paid by the
primary insured party. To the full extent permitted by law, Landlord and Tenant
each waives all rights of
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recovery against the other for, and agrees to release the other from
liability for, loss or damage to the extent such loss or damage is covered by
valid and collectible insurance in effect at the time of such loss or damage
or would be covered by the insurance required to be maintained under this
Lease by the party seeking recovery.
16. INDEMNIFICATION. Tenant hereby waives all claims against
Landlord and any employee or agent of Landlord and the direct or indirect
constituent partners, members, shareholders or other owners thereof and the
officers, directors, managers, agents and employees of all such persons
(collectively the "Landlord Indemnitees") for damage to any property or injury
or death of any person in, upon or about the Premises arising at any time and
from any cause except to the extent caused by reason of gross negligence or
willful act of Landlord, its agents, employees or contractors. Landlord shall
provide Tenant with prompt notice of such claims and Tenant shall defend
Landlord against, hold Landlord and each of the Landlord Indemnitees harmless
from, and reimburse Landlord and each of the Landlord Indemnitees for any and
all claims, liabilities, damages, losses, costs and expenses, including without
limitation, reasonable attorneys' fees and costs arising out of or in any way
connected with (a) injury to or death of any person, and (b) damage to or
destruction of any property, occurring in, on or about the Premises or
attributable to or resulting from the condition, use or occupancy of the
Premises by Tenant or Tenant's failure to perform its obligations under this
Lease, except such as is caused principally by gross negligence or willful
misconduct of Landlord, its contractors or employees. Landlord shall have the
right to approve the attorneys used by Tenant pursuant to this Section, which
approval shall not be unreasonably withheld or delayed; provided that, Landlord
shall have the right to use attorneys selected by Landlord, subject to Tenant's
approval which shall not be unreasonably withheld or delayed, if a conflict
between Landlord and Tenant exists which would make representation of Landlord
by Tenant's attorneys infeasible. Subject to the foregoing provision regarding
the use of a mutually acceptable attorney for a common defense, the foregoing
indemnity obligation of Tenant shall include reasonable attorneys' fees,
investigation costs and all other reasonable costs and expenses incurred by
Landlord or any Landlord Indemnitee from the first notice that injury, death or
damage has occurred or that any claim or demand is to be made or may be made.
The provisions of this Section 16 shall survive the termination of this Lease
with respect to any damage, injury or death occurring prior to such termination.
17. COMPLIANCE WITH LEGAL REQUIREMENTS. Tenant, at its sole cost
and expense, shall promptly comply with all laws, statutes, ordinances and
governmental rules, regulations or requirements now in force or which may
hereafter be in force; with the requirements of any board of fire underwriters
or other similar body now or hereafter constituted; with any direction or
occupancy certificate issued pursuant to any law by any public officer or
officers, insofar as any thereof relate to or affect the condition, use or
occupancy of the Premises, including, without limitation, structural, utility
system and life safety system changes necessitated by Tenant's acts and specific
use of the Premises (but not by Tenant's mere occupancy of the Premises) or by
improvements made by or for Tenant.
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18. ASSIGNMENT AND SUBLETTING.
(a) Subject to the other provisions hereof, Tenant shall
not, without the prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed by Landlord, transfer or assign this Lease or
any interest herein, sublet the Premises or any part thereof, or permit the use
of the Premises by any party other than Tenant. Subject to the other provisions
hereof, this Lease shall not, nor shall any interest herein, be assignable as to
the interest of Tenant by operation of law without the consent of Landlord,
which consent shall not be unreasonably withheld or delayed. Tenant shall not
hypothecate or encumber this Lease or any interest herein without the prior
written consent of Landlord, which consent may be granted or denied in
Landlord's reasonable discretion. Any of the foregoing acts without such consent
shall be void and shall at the option of Landlord, terminate this Lease.
(b) Notwithstanding any of the provisions of this Section
18, Tenant shall have the right (i) to assign the Premises or sublet the
Premises or any portion thereof to an Affiliate (as defined below) of Tenant,
and (ii) to sublet any portion of the Premises or permit the use or occupancy of
the Premises, either temporarily or long term, but in no event in excess of
10,000 square feet in the aggregate at any one time, to a supplier of services
to Tenant (e.g. data processing, photocopy, messenger, travel, communications,
facilities management, accounting, etc.), Tenant's consultants or Tenant's
contractors (the transfers described in (i) and (ii) above are referred to as
"Permitted Transfers" and the transferees described in (i) and (ii) above are
referred to as "Permitted Transferees"). "Affiliate" shall mean (i)the National
Broadcasting Company ("NBC"), (ii) any corporation in which or with which Tenant
is merged or consolidated in accordance with applicable statutory provisions for
merger or consolidation of corporations, so long as the liabilities of the
corporations participating in such merger or consolidation are assumed by the
corporation surviving such merger or created by such consolidation, (iii) to any
corporation or other entity acquiring this Lease and all or substantially all of
Tenant's assets, or (iv) to any corporation or other entity which purchases all
of the stock of Tenant, provided that Landlord has approved in writing the
financial condition of any such entity described in clauses (i), (ii), (iii) and
(iv) pursuant to Landlord's reasonable discretion, and any such entity has
assumed all obligations of Tenant hereunder pursuant to an assumption agreement
acceptable to Landlord; provided that, Landlord shall be deemed to have approved
the financial condition under (iv) above for NBC and that company resulting from
the merger transaction described in the S-4 Registration document filed July 12,
1999 by Tenant.
Tenant shall provide written notice to Landlord of any Permitted
Transfers and the full name of any Permitted Transferee using, occupying,
subletting or taking by assignment the Premises. The use of the Premises by each
Permitted Transferee is subject to all the terms and conditions of the Lease. No
subletting or assignment to a Permitted Transferee shall release Tenant of
Tenant's obligations under this Lease or alter the primary liability of Tenant
to pay the rental and to perform all other obligations to be performed by Tenant
hereunder. The acceptance of rental by Landlord from a Permitted Transferee
shall not be deemed to be a waiver by Landlord of any provision hereof and
Landlord has no obligation to accept any rental from a Permitted Transferee. In
the event of default by any Permitted Transferee in the performance of
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any of the terms hereof, Landlord may proceed directly against Tenant without
the necessity of exhausting remedies against such assignee, sublessee or
successor.
(c) If Tenant is a publicly held corporation, the public
trading of stock in Tenant shall not be deemed an assignment or transfer within
the meaning of this Section.
(d) Without limiting the other instances in which it may
be reasonable for Landlord to withhold its consent to an assignment or
subletting, Landlord and Tenant acknowledge that it shall be reasonable for
Landlord to withhold or delay its consent in the following instances:
(1) if, at the time consent is requested, or at
any time prior to the granting of consent, Tenant is in default under this
Lease or would be in default under this Lease but for the pendency of any
grace or cure period under Section 21 below;
(2) if the proposed assignee or sublessee is
a governmental agency;
(3) if, in Landlord's sole and absolute
discretion, the use of the Premises by the proposed assignee or sublessee
would not be compatible with the operation and uses of other tenants in the
Building, would entail any alterations which would lessen the value of the
leasehold improvements in the Premises, would result in an increased burden
on the Building, the Premises and systems and structures thereof, would
likely cause an increase in insurance premiums for insurance policies
applicable to the Building, would conflict with any so-called "exclusive" or
percentage lease then in favor of another tenant of the Building or would
likely impair the dignity, reputation or character of the Building.
(4) if, in Landlord's reasonable judgement,
the financial worth or capacity of the proposed assignee or sublessee does
not meet the credit standards applied by Landlord for other tenants under
leases with comparable terms, or in Landlord's sole and absolute discretion,
the character, reputation, or business of the proposed assignee or sublessee
is not consistent with the quality of the other tenancies in the Building;
(5) any portion of the Building or Premises
would become subject to additional or different governmental laws and
regulations including, without limitation, the ADA and Title 24; provided
that, if Tenant elects to be responsible and pay for all costs resulting from
said additional or different governmental laws and regulations including,
without limitation, the ADA and Title 24, it shall not be reasonable for
Landlord to withhold or delay its consent;
(6) if the proposed assignee or sublessee is
an existing tenant, or affiliate of an existing tenant, of the Building; or
(7) if the proposed use is prohibited by law
or by any provision of this Lease, including, without limitation, the rules
and regulations then in effect; or
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(8) if Landlord is negotiating with, and has
at any time within the past sixty (60) days negotiated with, the proposed
assignee or sublessee for space in the Building.
(e) If, at any time during the Lease Term, Tenant desires
to assign its interest in this Lease or sublet all or any part of the Premises,
Tenant shall give written notice to Landlord ("Tenant's Notice") setting forth
the terms of the proposed transaction, which shall be expressly subject to the
provisions of this Lease, the identity of the parties to the transaction, the
proposed documentation for the transaction and reasonably detailed information
regarding the business and financial condition of the parties involved as
requested by Landlord. Landlord shall have the option, exercisable by notice
given to Tenant ("Landlord's Election Notice") within fifteen (15) days after
Tenant's Notice is given ("Landlord's Option Period"), to either (i) consent to
the assignment or subletting, in which event the provisions of Section 18(g)
hereof shall be applicable, or (ii) disapprove the proposed assignment or
subletting. In the event that Landlord fails to provide Landlord's Election
Notice during the Landlord's Option Period, Landlord shall be deemed to have
consented to the assignment or sublet, in which event the provisions of Section
18(g) hereof shall be applicable.
Notwithstanding the foregoing or anything else to the contrary
contained herein, in the event that Tenant desires to assign its interest in
this Lease or sublet more than fifty percent (50%) of the Premises during the
last five (5) years of the Lease Term (as the same may be extended pursuant to
the terms of this Lease), Tenant shall give written notice of its intent to
market and offer such space to any third party ("Intent to Market Space") and
Landlord shall have the option, exercisable by written notice given to Tenant
within thirty (30) days after receipt of Tenant's Intent to Market Space
("Landlord's Notice") to (i) consent to Tenant's intent to market and offer such
space to a third party, or (ii) in the case of an assignment, terminate this
Lease in its entirety or, in the case of a subletting, terminate this Lease as
to the portion of the Premises proposed to be sublet, in which event Tenant
shall, on the date specified by Landlord (which shall be no less than forty-five
(45) days and no more than ninety (90) days after Landlord's Notice) surrender
the Premises, or the portion proposed to be assigned or sublet, to Landlord (if
only a portion of the Premises on a given floor is involved, Landlord shall
retain such rights of access to and from such portion of the Premises as may be
reasonably required for Landlord or its tenant(s)' use and enjoyment and Tenant
shall receive a proportionate adjustment in the Base Monthly Rental payable
hereunder). If Landlord fails to provide Tenant notice under either (i) or (ii)
above within said thirty (30) day period, Landlord shall be deemed to have
consented to Tenant's intent to market and offer such space to a third party and
the process shall be governed by the first grammatical paragraph of this Section
18(e).
Notwithstanding anything to the contrary contained herein, in the event
that Tenant desires to sublet any part of the 20th Floor and/or 21st Floor other
than to a Permitted Transferee, it shall be a requirement that said floors be
sublet together and at the same time on a full floor basis.
(f) No sublessee shall have a right further to sublet
without Landlord's prior consent, which Tenant acknowledges may be withheld in
Landlord's absolute discretion, and any
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assignment by a sublessee of its sublease shall be subject to Landlord's
prior consent in the same manner as if Tenant were entering into a new
sublease. No sublease, once consented to by Landlord, shall be modified or
terminated by Tenant without Landlord's prior consent, which consent shall
not be unreasonably withheld.
(g) In the case of an assignment or sublet, fifty percent
(50%) of any sums above the rate paid by Tenant, or other economic consideration
received by Tenant as a result of such assignment or sublet, shall be paid to
Landlord, after subtracting out-of-pocket leasing commissions paid to third
party brokers by Tenant (not to exceed market rate leasing commissions) and
tenant improvement costs paid by Tenant in connection with the assignment or
sublet (provided that in no event shall said tenant improvement costs exceed Ten
Dollars ($10.00) per rentable square foot).
(h) If, at any time during the Lease, Tenant sublets a
portion of the Premises pursuant to Section 18(e) above which is less than fifty
percent (50%) of the Premises, but more than twenty-five thousand (25,000)
square feet, Tenant shall only have a right to sublet said portion of the
Premises a total of four (4) times during the Lease Term; provided that, if
Tenant initially sublets the 8th Floor and/or 9th Floor (as opposed to an
initial occupancy on the 8th Floor and/or 9th Floor by Tenant), said initial
sublets on the 8th Floor and/or 9th Floor shall not be included in the four (4)
allowed sublets discussed above.
(i) Regardless of Landlord's consent and regardless of
whether Landlord consent is required pursuant to the terms hereof, no subletting
or assignment shall release Tenant of Tenant's obligations under this Lease or
alter the primary liability of Tenant to pay the rental and to perform all other
obligations to be performed by Tenant hereunder. The acceptance of rental by
Landlord from any other person shall not be deemed to be a waiver by Landlord of
any provision hereof. Consent to one assignment or subletting shall not be
deemed consent to any subsequent assignment or subletting. In the event of
default by any assignee of Tenant or any successor of Tenant in the performance
of any of the terms hereof, Landlord may proceed directly against Tenant without
the necessity of exhausting remedies against such assignee or successor.
(j) Any request for Landlord's consent pursuant to this
Section 18 shall also be accompanied by a payment to Landlord of Five Hundred
Dollars ($500.00) for the review, evaluation, and/or preparation of any
materials or documents; provided however, if Landlord elects to terminate
pursuant to Section 18, the Five Hundred Dollars ($500.00) shall be refunded to
Tenant. Under no other event shall any of these costs be reimbursable to Tenant.
In addition, Tenant shall pay Landlord, within ten (10) days after demand, the
amount of Landlord's reasonable out-of-pocket costs incurred in processing each
proposed assignment, transfer or sublet (including, without limitation,
attorneys' and other professional fees and costs).
(k) Notwithstanding anything to the contrary contained
herein, any and all unexercised options to expand the Premises and any and all
rights of first refusal and similar rights are intended by both Landlord and
Tenant to be personal to the original Tenant set forth in the Basic Lease
Information and any Affiliates, and are not intended to benefit any other
assignee
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or sublessee hereunder. Except in the case of assignment or subletting to an
to an Affiliate, upon any assignment of the Premises or a subletting of more
than fifty percent (50%) of the Premises, any such options or rights to
expand or rights of first refusal set forth in Section 52 shall automatically
and without any further action by Landlord terminate and be of no further
force and effect;
(l) Notwithstanding anything to the contrary contained
herein, any and all unexercised options to extend or renew the term of the Lease
are intended by both Landlord and Tenant to be personal to the original Tenant
set forth in the Basic Lease Information and any Affiliates, and are not
intended to benefit any other assignee or sublessee hereunder. Except in the
case of assignment or subletting to an Affiliate, upon any assignment of the
Premises or a subletting of more than fifty percent (50%) of the Premises, any
such options or rights to extend or renew the term of the Lease in Section 51
shall automatically and without any further action by Landlord terminate and be
of no further force and effect;
(m) Notwithstanding anything to the contrary contained
herein, regardless of whether Tenant initially sublets or occupies the 8th Floor
and/or 9th Floor, the 8th Floor and 9th Floor shall not be included in the fifty
percent calculations described in Sections 18(k) and 18(l) above for the first
thirty-six (36) months after the earlier of the 8th Floor Term Commencement Date
or the 9th Floor Term Commencement Date; if Tenant initially sublets the 8th
and/or 9th Floor and the sublease has a term of five (5) years or more, then
said sublease shall not be included in the fifty percent calculations described
in Sections 18(k) and 18(l) above.
(n) Notwithstanding any contrary provision of law,
including California Civil Code section 1995.310, Tenant shall have no right,
and Tenant hereby waives and relinquishes any right, to cancel or terminate this
Lease in the event Landlord is determined to have unreasonably withheld or
delayed its consent to a proposed transfer, assignment or subletting.
19. RULES; NO DISCRIMINATION. Tenant shall faithfully observe and
comply with the rules and regulations attached to this Lease as EXHIBIT B, and
after notice thereof, all reasonable modifications thereof and additions thereto
from time to time promulgated in writing by Landlord. Landlord shall not be
responsible to Tenant for the nonperformance by any other tenant or occupant of
the Building of any of said rules and regulations. Tenant specifically covenants
and agrees that Tenant shall not discriminate against or segregate any person or
group of persons on account of race, sex, creed, color, national origin, or
ancestry in the occupancy, use, sublease, tenure or enjoyment of the Premises.
20. ENTRY BY LANDLORD.
(a) Upon prior reasonable notice, except in the case of
an emergency when Landlord shall provide such notice as is reasonable under the
circumstances, Landlord may enter the Premises at reasonable hours to (a)
inspect the same; (b) exhibit the same to prospective purchasers, lenders or
tenants (provided, however, that Landlord shall only exhibit the Premises to
prospective tenants during or after the final one hundred eighty (180) days of
the Lease Term); (c) make repairs or perform maintenance required of Landlord
under the terms hereof or repairs to any adjoining space or utility services or
make repairs, alterations or improvements to any
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other portion of the Building; (d) supply janitor service and any other
service to be provided by Landlord to Tenant under this Lease; and (e) post
notices of non-responsibility (provided, however, that all such work shall be
done as promptly as reasonably practical and so as to cause as little
interference to Tenant as reasonably practical). Tenant hereby waives any
claim for damages for any inconvenience to or interference with Tenant's
business or any loss of occupancy or quiet enjoyment of the Premises
occasioned by such entry. Landlord shall at all times have and retain a key
with which to unlock all of the doors in, on or about the Premises (excluding
Tenant's vaults, safes and similar areas designated in writing by Tenant in
advance); and Landlord shall have the right to use any and all means which
Landlord may deem proper to open Tenant's doors in an emergency in order to
obtain entry to the Premises, and any entry to the Premises obtained by
Landlord in an emergency shall not be construed or deemed to be a forcible or
unlawful entry into or a detainer of the Premises or an eviction, actual or
construction, of Tenant from the Premises or any portion thereof and Landlord
shall have no liability to Tenant as a result thereof.
(b) Notwithstanding anything to the contrary contained
herein, except in the case of an emergency, Landlord shall not enter into any
electrical or telephone closet, or any LAN communication or computer server
area (collectively, "Secured Areas") on any floor occupied by Tenant so long
as Tenant occupies the entire floor; provided that, upon prior reasonable
notice, Landlord shall have the right to enter a Secured Area with
appropriate Tenant personnel and in the event of an emergency Landlord shall
have the right to enter the Secured Area at any time.
21. EVENTS OF DEFAULT. The following events shall constitute
Events of Default under this Lease:
(a) a default by Tenant in the payment when due of any
rent or other sum payable hereunder and the continuation of such default for
a period of five (5) days after written notice from Landlord that the same is
due; provided, however, that after the second failure in any calendar year to
pay any rent or other sum on or before the date it is due, any further
failure during such calendar year to pay any rent or other sum on or before
the date it is due shall be an immediate Event of Default and shall not
require any written notice from Landlord pursuant to the Lease;
(b) a default by Tenant in the performance of any of
the other terms, covenants, agreements or conditions contained herein and, if
the default is curable, the continuation of such default for a period of
thirty (30) days after notice by Landlord or beyond the time reasonably
necessary for cure if Tenant is diligently pursuing a cure, if default is of
a nature to require more than thirty (30) days to remedy; provided, however,
in no event shall Tenant have more than a period of one hundred eighty (180)
days to remedy any such default;
(c) the bankruptcy or insolvency of Tenant, transfer
by Tenant in fraud of creditors, an assignment by Tenant for the benefit of
creditors, or the commencement of any proceedings of any kind by or against
Tenant under any provision of the Federal Bankruptcy Act or under any other
insolvency, bankruptcy or reorganization act unless, in the event any such
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proceedings are involuntary, Tenant is discharged from the same within sixty
(60) days thereafter;
(d) the appointment of a receiver for a substantial part
of the assets of Tenant;
(e) the abandonment of the Premises by Tenant;
(f) the levy upon this Lease or any estate of Tenant
hereunder by any attachment or execution and the failure to have such attachment
or execution vacated within thirty (30) days thereafter; or
(g) the default of a guarantor under a guaranty or
repudiation of a guaranty required under this Lease.
In no event shall this Lease be assigned or assignable by reason of
any voluntary or involuntary bankruptcy proceedings, nor shall any rights or
privileges hereunder be an asset of Tenant, the trustee,
debtor-in-possession, or the debtor's estate in any bankruptcy, insolvency or
reorganization proceedings.
22. TERMINATION UPON DEFAULT. Upon the occurrence of any Event
of Default by Tenant hereunder, Landlord may, at its option and without any
further notice or demand, in addition to any other rights and remedies given
hereunder or by law, terminate this Lease and exercise its remedies relating
thereto in accordance with the following provisions:
(a) Landlord shall have the right, so long as the
Event of Default remains uncured, to give notice of termination to Tenant,
and on the date specified in such notice this Lease shall terminate.
(b) In the event of any such termination of this
Lease, Landlord may then or at any time thereafter by judicial process,
re-enter the Premises and remove therefrom all persons and property and again
repossess and enjoy the Premises, without prejudice to any other remedies
that Landlord may have by reason of Tenant's default or of such termination.
(c) In the event of any such termination of this
Lease, and in addition to any other rights and remedies Landlord may have,
Landlord shall have all of the rights and remedies of a landlord provided by
Section 1951.2 of the California Civil Code. The amount of damages which
Landlord may recover in event of such termination shall include, without
limitation: (1) the worth at the time of award (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) of the amount by which the unpaid rent
for the balance of the term after the time of award exceeds the amount of
rental loss that Tenant proves could be reasonably avoided; (2) all legal
expenses and other related costs incurred by Landlord following Tenant's
default; (3) all costs incurred by Landlord in restoring the Premises to good
order and condition, or in remodeling, renovating or otherwise preparing the
Premises for reletting; (4) all costs (including, without limitation, any
brokerage commissions) actually incurred by Landlord in reletting the
Premises; and (5) any and all other damages suffered by Landlord.
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(d) After terminating this Lease, Landlord may remove
any and all personal property located in the Premises and place such property
in a public or private warehouse or elsewhere at the sole cost and expense of
Tenant. In the event that Tenant shall not immediately pay the cost of
storage of such property after the same has been stored for a period of
thirty (30) days or more, Landlord may sell any or all thereof at a public or
private sale in such manner and at such times and places as Landlord in its
sole discretion may deem proper, without notice to or demand upon Tenant.
Tenant waives all claims for damages that may be caused by Landlord's
removing or storing or selling the property as herein provided, and Tenant
shall indemnify and hold Landlord free and harmless from and against any and
all claims, damages, liabilities, losses, costs and expenses, including,
without limitation, all costs of court and attorneys' fees of Landlord
occasioned thereby.
(e) In the event of the occurrence of any of the
events specified in Section 21(c) of this Lease, if Landlord shall not choose
to exercise, or by law shall not be able to exercise, its rights hereunder to
terminate this Lease, then, in addition to any other rights of Landlord
hereunder or by law, (i) Landlord may discontinue the services provided
pursuant to Section 7 of this Lease, unless Landlord has received
compensation in advance for such services in the amount of Landlord's
reasonable estimate of the compensation required with respect to such
services, and (ii) neither Tenant, as debtor-in-possession, nor any trustee
or other person (collectively, the "Assuming Tenant") shall be entitled to
assume this Lease unless on or before the date of such assumption, the
Assuming Tenant (a) cures, or provides adequate assurance that the Assuming
Tenant will promptly cure, any existing default under this Lease, (b)
compensates, or provides adequate assurance that the Assuming Tenant will
promptly compensate Landlord for any pecuniary loss (including, without
limitation, attorneys' fees and disbursements) resulting from such default,
and (c) provides adequate assurance of future performance under this Lease.
For purposes of this Section 22(e) "adequate assurance" of such cure,
compensation or future performance shall be effected by the establishment of
an escrow fund for the amount at issue or by bonding.
23. CONTINUATION AFTER DEFAULT. Landlord shall have the remedy
described in California Civil Code Section 1951.4 (i.e. Landlord may continue
this Lease in effect after Tenant's abandonment and recover rental as it
becomes due, because Tenant has the right to sublet or assign, subject only
to reasonable limitations). Even though Tenant has breached this Lease and
abandoned the Premises, this Lease shall continue in effect for so long as
Landlord does not terminate Tenant's right to possession, and Landlord may
enforce all its rights and remedies as it becomes due under this Lease. Acts
of maintenance or preservation or efforts to relet the Premises or the
appointment of a receiver upon initiative of Landlord to protect Landlord's
interest under this Lease shall not constitute a termination of Tenant's
right to possession.
24. OTHER RELIEF. The remedies provided for in this Lease are
in addition to any other remedies available to Landlord at law or in equity,
by statute or otherwise.
25. LANDLORD'S RIGHT TO CURE DEFAULTS. All agreements and
provisions to be performed by Tenant under any of the terms of this Lease
shall be at its sole cost and expense
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and without any abatement of rental. If Tenant shall fail to pay any sum of
money, other than rental, required to be paid by it hereunder or shall fail
to perform any other act on its part to be performed hereunder and such
failure shall continue for thirty (30) days after notice thereof by Landlord,
or such longer period as may be allowed hereunder, Landlord may, but shall
not be obligated so to do, and without waiving or releasing Tenant from any
obligations of Tenant, make any such payment or perform any such other act on
Tenant's part to be made or performed as in this Lease provided to the extent
Landlord may deem desirable. All sums so paid by Landlord (with interest at
an annual rate of thirteen percent (13%), but in no event in excess of the
maximum rate of interest permitted by law) and all necessary incidental costs
shall be payable to Landlord on demand.
26. LANDLORD DEFAULT. Landlord's failure to perform any of its
obligations under this Lease shall constitute an Event of Default by Landlord
if the failure continues for thirty (30) days after written notice of the
failure from Tenant to Landlord. If the required performance cannot be
completed within thirty (30) days, Landlord's failure to perform shall not
constitute an Event of Default, provided Landlord undertakes to cure the
failure within the thirty (30) days and diligently and continuously attempts
to complete this cure as soon as reasonably possible.
27. ATTORNEYS' FEES. If any action arising out of this Lease is
brought by either party hereto against the other, then and in that event the
unsuccessful party to such action shall pay to the prevailing party all costs
and expenses of such action and any appeal related thereto, including
reasonable attorneys' fees, incurred by such prevailing party, and if the
prevailing party shall recover judgment in such action, such costs expenses
and attorneys' fees shall be included in and as part of such judgment.
28. EMINENT DOMAIN. If all or any part of the Premises shall be
taken as a result of eminent domain action or voluntary deed under threat
thereof, this Lease shall terminate as to the part so taken as of the date of
taking, and, in the case of a partial taking, either Landlord or Tenant shall
have the right to terminate this Lease as to the balance of the Premises by
notice to the other within thirty (30) days after such date; provided,
however, that a condition to the exercise by Tenant of such right to
terminate shall be that the portion of the Premises taken shall be of such
extent and nature so as substantially to handicap, impede or impair Tenant's
use of the balance of the Premises. In the event of any taking, Landlord
shall be entitled to any and all compensation, damages, income, rent, awards,
or any interest therein whatsoever which may be paid or made in connection
therewith, and Tenant shall have no claim against Landlord for the value of
any unexpired Lease Term or otherwise. In the event of a partial taking of
the Premises which does not result in a termination of this Lease, the
monthly rental thereafter to be paid shall be equitably reduced. Nothing
contained herein, however, shall be deemed to give Landlord any interest in,
or to require Tenant to assign to Landlord, any award made to Tenant
specifically for its relocation expenses, the taking of personal property and
fixtures belonging to Tenant, or the interruption of or damage to Tenant's
business if such award is made separately to Tenant and not as part of the
damages recoverable by Landlord and if Tenant's claim does not adversely
affect Landlord's award or interfere with Landlord's prosecution of its claim
for the condemnation or taking.
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29. SUBORDINATION AND NONDISTURBANCE.
(a) This Lease shall be subject and subordinate to any
mortgage, deed of trust, or any other hypothecation for security now or
hereafter placed upon the Building and to any and all advances made on the
security thereof or Landlord's interest therein, and to all renewals,
modifications, consolidations, replacements and extensions thereof. In the
event any mortgage or deed of trust to which this Lease is subordinate is
foreclosed or a deed in lieu of foreclosure is given to the mortgagee or
beneficiary, Tenant shall attorn to the purchaser at the foreclosure sale or
to the grantee under the deed in lieu of foreclosure. Tenant agrees to
execute within ten (10) days any documents required to effectuate such
subordination, to make this Lease prior to the lien of any mortgage or deed
of trust as may be requested by the holder of any such mortgage or deed of
trust, or to evidence such attornment, provided, however, as a pre-condition
to Tenant's subordination to a mortgage and any subordination set forth in
this Section below, the mortgagee shall first provide Tenant with a
Subordination, Non-Disturbance and Attornment Agreement in the form attached
hereto as Exhibit F.
(b) In the event any mortgage or deed of trust which
is entered into by Landlord after the date hereof to which this Lease is
subordinate is foreclosed or a deed in lieu of foreclosure is given to the
mortgagee or beneficiary, this Lease shall not be barred, terminated, cut off
or foreclosed, nor shall the rights and possession of Tenant hereunder be
disturbed if Tenant shall not then be in default in the payment of rental and
other sums due hereunder or otherwise be in default under the terms of this
Lease, and if Tenant shall attorn to the purchaser, or grantee as provided in
Section 29(a) above (provided, that, the non-disturbance of Tenant's rights
and possession of this Section 29(b) shall not be contingent on whether
Landlord requests Tenant's attornment) or, if requested, enter into a new
lease for the balance of the term hereof upon the same terms and provisions
as are contained in this Lease.
(c) Landlord shall obtain a non-disturbance agreement
from the holder of the existing first deed of trust covering the Building in
the form attached hereto as Exhibit F.
30. NO MERGER. The voluntary or other surrender of this Lease
by Tenant, or a mutual cancellation thereof, shall not work a merger, and
shall, at the option of Landlord, terminate all or any existing subleases or
subtenancies, or operate as an assignment to it of any or all such subleases
or subtenancies.
31. AMENDMENTS. This Lease may not be amended or modified in
any respect whatsoever except by an instrument in writing signed by Landlord
and Tenant.
32. ESTOPPEL CERTIFICATE.
At any time and from time to time but on not less than ten
(10) business days prior notice by Landlord, Tenant shall execute,
acknowledge, and deliver to Landlord, promptly upon request, a certificate in
substantially the form attached hereto as EXHIBIT E certifying (a) that this
Lease is unmodified and in full force and effect (or, if there have been
modifications, that this Lease is in full force and effect, as modified, and
stating the date and nature of each modification), (b) the date, if any, to
which rental and other sums payable hereunder have been
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paid, (c) that no notice has been received by Tenant of any default which has
not been cured, except as to defaults specified in the certificate, (d)
whether there is then existing any claim by Tenant of default hereunder by
Landlord, and, if so, specifying the nature thereof, and (e) such other
matters as may be reasonably requested by Landlord Any such certificate may
be relied upon by any prospective purchaser, mortgagee or beneficiary under
any deed of trust on the Building or any part thereof.
33. 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 the Building shall in no way affect this Lease or impose any
liability on Landlord.
34. HOLDING OVER. If Tenant holds possession of the Premises
after expiration of the Lease Term, Tenant shall become a tenant from month
to month upon the terms herein specified but at a monthly rental equivalent
to one hundred fifty percent (150%) of the monthly rental payable by Tenant
during the last full month prior to the expiration of the Lease Term, payable
in advance on or before the first day of each month. Without limiting and in
addition to the foregoing, Tenant hereby agrees to indemnify, defend and hold
harmless Landlord, its beneficiary, and their respective agents, contractors
and employees, from and against any and all claims, liabilities, actions,
losses, damages (including without limitation, direct, indirect, incidental
and consequential) and expenses (including, without limitation, court costs
and reasonable attorneys' fees) asserted against or sustained by any such
party and arising from or by reason of such retention of possession, which
obligations shall survive the expiration or termination of the Lease Term.
35. SECURITY DEPOSIT.
(a) Within five (5) business days of execution of the
Lease by both parties, Tenant shall deposit with Landlord an unconditional,
irrevocable letter of credit (the "Letter of Credit"), in the amount of Four
Million Five Hundred Thousand Dollars ($4,500,000) as a security deposit.
The Letter of Credit shall (i) be issued by a commercial bank reasonably
satisfactory to Landlord ("Issuer"); (ii) be an unconditional and irrevocable
letter of credit; (iii) be payable to Landlord; (iv) require that any draw on
the Letter of Credit shall be made only upon receipt by the Issuer of a
demand notice from Landlord (the "Demand Notice"); (v) provide that it is
governed by the Uniform Customs and Practice for Documentary Credits (1993
revisions), International Chamber of Commerce Publication No. 500; (vi)
comply with any requirements for the Letter of Credit as set forth in Exhibit
F; and (vi) otherwise be in a form reasonably acceptable to Landlord. Tenant
shall keep the Letter of Credit, or a renewal thereof, in effect during the
entire Lease Term, as the same may be extended, plus a period of four (4)
weeks thereafter. At least thirty (30) days prior to the expiration of the
Letter of Credit, the term thereof shall be renewed or extended pursuant to
an amendment thereto reasonably acceptable to the Landlord and any failure to
so renew or extend the Letter of Credit shall entitle Landlord to immediately
draw down all sums available thereunder. If Tenant fails to renew or extend
the Letter of Credit and Landlord draws downs all sums available thereunder,
Tenant shall have the right to replace the expired Letter of Credit with a
letter of credit meeting the requirements set forth herein. Upon Tenant's
replacement of the Letter of Credit with a substitute letter of credit
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meeting the requirements set forth herein, Landlord shall immediately return
the drawn down sums to Tenant upon demand.
(b) Provided that Tenant has not committed a monetary
Event of Default during the previous twelve (12) months (or by the time of
the merger described below) and that any other Event of Default has not
occurred with respect to Tenant which remains uncured, Tenant may reduce the
amount of the Letter of Credit to Two Million Two Hundred Fifty Thousand
Dollars ($2,250,000) upon completion of Tenant's merger transaction as
described in the S-4 Registration document filed July 12, 1999 by Tenant, by
an amendment or by substitution of a new letter of credit which complies with
the requirements of this paragraph, which reflects such reduced amount (the
"Amended Amount").
(c) Provided that Tenant has not committed a monetary
Event of Default during the previous twenty-four (24) months and that any
other Event of Default has not occurred with respect to Tenant which remains
uncured, Tenant may reduce the amount of the Letter of Credit to Six Hundred
Thirty Three Thousand Six Hundred Six Dollars ($633,606) by an amendment or
by substitution of a new letter of credit which complies with the
requirements of this paragraph, which reflects such reduced amount (the
"Further Amended Amount").
(d) Provided that Tenant has not committed a monetary
Event of Default during the previous twelve (12) months and that any other
Event of Default has not occurred with respect to Tenant and remains uncured,
in the event that Tenant obtains a "BBB" credit rating from Standard & Poors,
or a rating equivalent to such Standard & Poors' rating from Moody's, Fitch,
or any other comparable rating agency acceptable to Landlord, for senior
unsecured debt, the Letter of Credit shall be returned to Tenant within
thirty (30) days after Tenant's prior written notification to Landlord that
it has received such rating. In the event that said senior unsecured debt
credit rating is later withdrawn or reduced, then Tenant shall have thirty
(30) days to post a new Letter of Credit in an amount calculated in
accordance with the reductions permitted under this subparagraph and
subparagraphs 32(a) and (b) above.
(e) If an Event of Default occurs, Landlord shall be
entitled to draw upon the Letter of Credit in the amount determined by
Landlord necessary to cure such Event of Default and compensate Landlord for
any damages suffered by Landlord as a result thereof. Tenant shall
immediately restore the face amount of the Letter of Credit to the face
amount which was applicable immediately prior to Landlord's drawing down sums
thereunder pursuant to an amendment to the Letter of Credit reasonably
acceptable to Landlord or a replacement of the Letter of Credit (provided the
Letter of Credit requirements in Section 35(a) are satisfied, or shall
deposit with Landlord a cash sum in an amount which when added to the amount
available to be drawn under the Letter of Credit equals the amount of the
Letter of Credit immediately prior to Landlord's draw under the Letter of
Credit. Any cash deposited with Landlord shall be held by Landlord as a
Security Deposit pursuant to subparagraph 32(b) of this Lease.
Notwithstanding anything to the contrary contained herein, any failure by
Tenant to restore the face value of the Letter of Credit to such amount, to
replace the Letter of Credit or to deposit with Landlord a corresponding cash
amount, within five business (5) days after its receipt of a written request
from Landlord shall be an Event of Default. Without limiting any other rights
or remedies of
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Landlord as a result of such Event of Default, Landlord may draw down any
sums then remaining under the Letter of Credit and Tenant shall within five
(5) business days after its receipt of a written request from Landlord
deposit cash with Landlord in an amount sufficient to bring the sums held by
Landlord to an amount equal to the current Amended Amount. The cash then held
by Landlord in the amount of such current Amended Amount shall be held as the
Security Deposit pursuant to the provisions of subparagraph 32 of the Lease
for the remainder of the term of the Lease. In the event of termination of
Landlord's interest in this Lease, Landlord shall transfer said deposit to
Landlord's successor in interest.
(f) The Security Deposit shall be held by Landlord as
security for the faithful performance by Tenant of all the provisions of this
Lease to be performed or observed by Tenant. If Tenant fails to pay rent or
other sums due hereunder, or otherwise defaults with respect to any provision
of this Lease, Landlord may use, apply or retain all or any portion of the
Security Deposit for the payment of any rent or other sum in default or for
the payment of any other sum to which Tenant compensates Landlord for any
loss or damage which Landlord may suffer thereby. If Landlord so uses or
applies all or any portion of the Security Deposit, Tenant shall within ten
(10) days after demand therefor deposit cash with Landlord in an amount
sufficient to restore the Security Deposit to the full amount thereof and
Tenant's failure to do so shall be a material breach of this Lease.
(g) Subject to the other provisions of this Lease, at
the end of the Lease Term, as the same may be extended as provided hereunder,
the then current Letter of Credit and any amount held by Landlord as a
Security Deposit shall be returned to Tenant within sixty (60) days of the
Term Expiration Date. The Letter of Credit and Security Deposit amount, if
any, shall be returned to Tenant pursuant to this Section 35(g) by the then
Landlord regardless of whether the then Landlord, or any buyer in a
foreclosure sale has received the Letter of Credit or Security Deposit;
provided the foregoing shall not apply to any lender or mortgagee, unless
specifically agreed to in writing by such lender or mortgagee.
36. WAIVER. The waiver by Landlord or Tenant of any agreement,
condition or provision herein contained shall not be deemed to be a waiver of
any subsequent breach of the same or any other agreement, condition or
provision herein contained, nor shall any custom or practice which may grow
up between the parties in the administration of the terms hereof be construed
to waive or to lessen the right of either party to insist upon the
performance by the other party in strict accordance with such terms. The
subsequent acceptance of rental hereunder by Landlord shall not be deemed to
be a waiver of any preceding breach by Tenant of any agreement, condition or
provision of this Lease, other than the failure of Tenant to pay the
particular rental so accepted, regardless of Landlord's knowledge of
preceding breach at the time of acceptance of the rental.
37. NOTICES AND CONSENTS. All notices, consents, demands and
other communications from one party to the other that are given pursuant to
the terms of this Lease shall be in writing and shall be deemed to have been
fully given (i) three (3) days after deposit in the United States mail,
certified or registered, postage prepaid, (ii) one (1) day after mailed by
overnight courier service, (iii) on the date of delivery if personally
delivered (provided that, personal delivery in
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the Building is not effective delivery to the Landlord) and addressed as
follows: prior to the Rent Commencement Date, to Tenant at the address
specified in the Basic Lease Information, and to the Premises thereafter, or
to such other place as Tenant may from time to time designate in a notice to
Landlord; and to Landlord at the address specified in the Basic Lease
Information, or to such other place as Landlord may from time to time
designate in a notice to Tenant.
38. COMPLETE AGREEMENT. There are no oral agreements between
Landlord and Tenant affecting this Lease, and this Lease supersedes and
cancels any and all previous negotiations, arrangements, brochures,
agreements, letters of intent and understandings if any, between Landlord and
Tenant or displayed by Landlord to Tenant with respect to the subject matter
of this Lease, the Building or related facilities.
39. CORPORATE AUTHORITY. If Tenant signs as a corporation,
partnership or other entity, each of the persons executing this Lease on
behalf of Tenant warrants that Tenant is duly organized and existing, that
Tenant has been and is qualified to do business in California, that Tenant
has full right and authority to enter into this Lease, and that each and both
of the persons signing on behalf of Tenant were authorized by Tenant to do so
on its behalf. If Landlord signs as a corporation, partnership or other
entity, each of the persons executing this Lease on behalf of Landlord
warrants that each of the persons signing on behalf of Landlord were
authorized by Landlord to do so on its behalf.
40. STORAGE SPACE. Tenant shall have the right, exercisable by
written notice to Landlord prior to December 31, 1999, to lease up to
approximately 7,000 square feet of storage space in the Building, but
noncontiguous to the Premises, on a month to month basis at the rate of
$16.00 per square foot per annum commencing on the date which is thirty (30)
days after Tenant has provided notice to Landlord of its intention to lease
such storage space. After December 31, 1999, Tenant may only lease such
storage space as available and at such rates as Landlord may then be offering
such space to third parties. Upon Tenant's written notice to Landlord
pursuant to this Section 40, Tenant and Landlord shall enter into a separate
lease for the storage space.
41. NO CONSEQUENTIAL DAMAGES. Notwithstanding any other
provision of this Lease, Landlord shall not be liable for any consequential
damages, nor shall Landlord be liable for loss of or damage to artwork,
currency, jewelry, bullion, unique or valuable documents, securities or other
valuables, or for other property not in the nature of ordinary fixtures,
furnishings and equipment used in general administrative and executive office
activities and functions.
42. MISCELLANEOUS. If there be more than one Tenant, the
obligations hereunder imposed upon Tenant shall be joint and several. The
words "include," "includes" and "including" shall be deemed to be followed by
the phrase "without limitation." The term "Landlord" or any pronoun used in
place thereof includes the plural as well as the singular and the successors
and assigns of Landlord. The term "Tenant" or any pronoun used in place
thereof includes the plural as well as the singular and individuals, firms,
associations, partner-ships and corporations, and their and each of their
respective heirs, executors, administrators, successors and permitted
assigns, according to the context hereof. The term "person" includes the
plural as
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well as the singular and individuals, firms, associations, partnerships and
corporations. Words used in any gender include other genders. Time is of the
essence of this Lease and each and all of its provisions. Submission of this
instrument for examination or signature by Tenant does not constitute a
reservation of or option for lease, and it is not effective as a lease or
otherwise until execution and delivery by both Landlord and Tenant. The
agreements, conditions and provisions herein contained shall, subject to the
provisions as to assignment, apply to and bind the heirs, executors,
administrators, successors and assigns of the parties hereto. Subject to the
provisions of Section 47 below, Tenant shall not, without the consent of
Landlord, use the name of the Building for any purpose other than as the
address of the business to be conducted by Tenant in the Premises. Upon the
request of Landlord, Tenant shall provide to Landlord from time to time, at
no expense to Landlord, copies of such financial statements with respect to
Tenant as may have been prepared by or for Tenant. Landlord's acceptance of a
partial rent payment shall not constitute a waiver of any rights of Tenant or
Landlord, including, without limitation, any right Landlord may have to
recover possession of the Premises, in unlawful detainer, or otherwise.
Tenant shall not record this Lease or any portion or any reference hereto. If
Tenant shall record this Lease, or shall permit or causes this Lease, or any
portion hereof or reference hereto to be recorded, this Lease shall, at
Landlord's option terminate, or Landlord may declare a default hereunder and
pursue any and all remedies provided for in this Lease. If any provisions of
this Lease shall be determined to be illegal or unenforceable, such
determination shall not affect any other provision of this Lease and all such
other provisions shall remain in full force and effect. This Lease shall be
governed by and construed pursuant to the laws of the State of California.
43. ABANDONMENT. Subject to Tenant's rights under Section 18 of
this Lease, Tenant shall not vacate or abandon the Premises or any part
thereof at any time during the Lease Term. Tenant shall not be deemed to have
vacated the Premises if, upon prior written notice to Landlord, Tenant
temporarily vacates not more that two floors in the Premises for a period not
to exceed three (3) months. Tenant understands that if Tenant should leave
the Premises or any part thereof vacant or abandoned, the risk of fire, other
casualty, and vandalism to the Premises and the Building will be increased
and that, therefore, such action by Tenant shall constitute a material breach
of this Lease, whether or not Tenant continues to pay rent and additional
rent under this Lease. If Tenant shall vacate, abandon or surrender the
Premises, or be dispossessed by process of law or otherwise, any personal
property belonging to Tenant and left on the Premises shall be deemed to be
abandoned, at the option of Landlord, and Landlord may sell or otherwise
dispose of such personal property in any commercially reasonable manner.
44. AMERICANS WITH DISABILITIES ACT AND SIMILAR ACTS.
Notwithstanding anything to the contrary contained herein or in the Lease,
Tenant, at its sole cost and expense, shall (i) cause all alterations,
additions, improvements and repairs to the Premises to comply with the
provisions of the ADA, Title 24 of the California Administrative Code, and
other similar federal, state, and local laws and regulations, including,
without limitation, any alterations required under ADA for the purposes of
"public accommodations" (as that term is used in the ADA), and (ii) reimburse
Landlord upon demand for any and all costs and expenses incurred by Landlord
to comply with ADA, Title 24, or such similar federal, state, or local laws
and regulations in any other portion of the Building in which the Premises
are located arising out of Tenant's specific use of or construction in the
Premises, excluding any such costs and expenses arising out of the
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tenant improvement work described in EXHIBIT C and approved by Landlord.
Except as provided above, Tenant shall have no responsibility to comply with
such laws in portions of the Building outside of the Premises.
45. EXHIBITS. The exhibit(s) and addendum, if any, specified
in the Basic Lease Information are attached to this Lease and by this
reference made a part hereof.
46. LANDLORD'S LIABILITY; SALE OF BUILDING. The term
"Landlord," as used in this Lease, shall mean only the owner or owners of the
Building at the time in question. Tenant acknowledges and agrees that the
liability of Landlord with respect to its obligations under this Lease, or
arising in connection with the ownership, operation, management, leasing,
repair, renovation, alteration or any other matter relating to the Building
or the Premises, is limited to Landlord's interest in the Building, and
Tenant agrees to look solely to Landlord's interest in the Building to
satisfy any claim or judgment against or any liability or obligation of
Landlord to Tenant under this Lease. In no event shall any partner, officer,
director, employee, trustee, beneficiary, advisor, investment manager,
manager, agent, member, advisor, or shareholder of Landlord have any personal
liability to Tenant with respect to any liability or obligation of Landlord
to Tenant, and no recourse shall be had by Tenant against any such parties or
the assets of any such parties to satisfy any claim or judgment of Tenant for
Landlord's breach of any of its obligations under this Lease. In addition, in
the event of any conveyance of title to the Building, Landlord shall be
relieved of all liability with respect to Landlord's obligations to be
performed under this Lease after the date of such conveyance; provided that,
the new owner has assumed the obligations under this Lease in writing. If
Tenant provides Landlord with any security for Tenant's performance of its
obligations hereunder, Landlord shall transfer such security to the grantee
or transferee of Landlord's interest in the Real Property, and once such
transfer has been made, Landlord shall be released from any further
responsibility or liability of such security. Wherever in this Lease Tenant
(i) releases Landlord from any claim or liability, (ii) waives or limits any
of its rights to assert any claim against Landlord or to seek recourse
against any property of Landlord or (iii) agrees to indemnify Landlord
against any matters, the relevant release, waiver, limitation or indemnity
shall run in favor of and apply to Landlord, the direct and indirect
constituent shareholders, partners, trustees, beneficiaries, members or other
owners of Landlord, and the directors, officers, employees and agents of
Landlord and each such constituent shareholder, partner or other owner.
47. NAME OF BUILDING AND SIGNAGE.
(a) Landlord shall provide Tenant, at Landlord's sole
cost and expense, with a proportionate share of the existing Building
directory in the main lobby and in any future directory in the Building annex
lobby. Tenant may display its name or logo in such directory, consistent with
the current directory format and in a manner approved by Landlord. Landlord
shall provide Tenant, at Landlord's sole cost and expense, enhanced building
signage at the top of the Building directory in the main lobby and the future
directory in the Building annex lobby. Landlord shall provide Tenant, at
Landlord's sole cost and expense, building standard tenant identification on
each floor of the Premises.
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(b) During the Lease Term and so long as Tenant
occupies at least one hundred thousand (100,000) rentable square feet in the
Building, Tenant shall have the exclusive right, at Tenant's sole cost and
expense, to erect and maintain signage with its corporate name and/or logo,
subject to Landlord's approval, on the exterior of the Building in the
current location of the Standard Oil plaque at the entrance to the Building
and at the top of Building directories within the main lobby and annex lobby
of the Building as set forth in Section 47(a) above. If Tenant does not
occupy at least one hundred thousand (100,000) rentable square feet in the
Building, Tenant shall have a nonexclusive right to erect and maintain such
signage within the main lobby and annex lobby of the Building, in size and
location appropriately reflecting Tenant's proportional occupancy of the
Building. Tenant shall comply, at its sole cost and expense, with any and all
laws, statutes, ordinances and governmental rules, regulations or
requirements applicable to such signage, including, without limitation, all
historical designation regulations and requirements ("Signage Legal
Requirements"), and all such signage shall be subject to Landlord's prior
approval, which approval shall not be unreasonably withheld. Tenant may
request additional signage on the exterior of the building, subject to
Landlord's approval. In the event that Landlord approves such additional
signage on the exterior of the Building, Tenant shall be responsible for
obtaining all necessary approvals from governmental authorities and paying
all costs thereof, including, but not limited to any historical review
agencies, for said additional signage and complying with all Signage Legal
Requirements and paying all costs for the manufacturing and installation of
said signage. For purposes of this Section 47, space shall be deemed
"occupied" by Tenant if, and only if, such space is leased to Tenant and,
such space is not subject to a sublease or assignment by Tenant or any other
form of occupancy agreement between Tenant and any third party.
(c) During the Lease Term and so long as Tenant
occupies at least one hundred thousand (100,000) rentable square feet in the
Building, (i) Tenant shall have the exclusive right to name the Building, as
reasonably approved by Landlord, and Landlord shall adopt and reasonably use
the name as designated by Tenant on or before December 31, 1999, and
(ii) Tenant shall have the exclusive right to the exterior premier office
signage at the main lobby entrance and the annex entrance to the Building.
Notwithstanding the foregoing, Tenant and any Affiliate shall have the right
to use its corporate name or a variation thereof as the Building name. Tenant
shall have the right to rename the Building up to four (4) times during the
Lease Term, as extended pursuant to the terms herein, subject to Landlord's
reasonable approval. Landlord shall use such name designated by Tenant in
Building marketing or promotional materials produced by or on behalf of
Landlord; provided, that, Tenant grants Landlord a license to use such name
for said purposes and in the case of a logo, Tenant provides Landlord with
the appropriate logo art work for use in connection with said materials.
Tenant agrees that Landlord and other tenants of the Building may, but are
not required to, use such name as part of their address. If Tenant changes
its designation of the Building name after Tenant's initial designation of
the Building name pursuant to this Section 47(c), Tenant shall reimburse
Landlord for all actual out-of-pocket costs and expenses incurred by Landlord
in reprinting the Building stationary, advertising and promotional materials
and making all required signage changes.
(d) In the event that Tenant does not occupy at least
one hundred thousand (100,000) rentable square feet in the Building, either
Landlord or Tenant shall have the right to
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remove any signage erected by Tenant on the exterior of the Building at the
sole cost and expense of Tenant, upon which all use of the name designated by
Tenant pursuant to Section 47(c) above to identify the Building shall cease
and Landlord shall thereafter have the right, in its sole and absolute
discretion, to cease using such name in Building marketing and promotional
materials and to rename the Building.
(e) The rights granted to Tenant pursuant to this
Section shall be personal to Xoom.com, Inc. and any Affiliate, and such right
shall not inure to the benefit of any assignee or subtenant of Xoom.com, Inc.,
except to an Affiliate.
(f) Notwithstanding anything to the contrary contained
herein, any signage rights specifically designated to retail tenants in the
Building shall be excluded from Tenant's rights herein.
48. HAZARDOUS SUBSTANCE DISCLOSURE.
(a) California law requires landlords to disclose to
tenants the existence of certain Hazardous Materials. Accordingly, the
existence of gasoline and other automotive fluids, asbestos containing
materials, maintenance fluids, copying fluids and other office supplies and
equipment, certain construction and finish materials, tobacco smoke,
cosmetics and other personal items must be disclosed. Gasoline and other
automotive fluids are found in the garage area of the Building. Cleaning,
lubricating and hydraulic fluids used in the operation and maintenance of the
Building are found in the utility areas of the Building not generally
accessible to Building occupants or the public. Many Building occupants use
copy machines and printers with associated fluids and toners, and pens,
markers, inks, and office equipment that may contain Hazardous Materials.
Certain adhesives, paints and other construction materials and finishes used
in portions of the Building may contain Hazardous Materials. Although smoking
is prohibited in the public areas or the Building, these areas may from time
to time be exposed to tobacco smoke. Building occupants and other persons
entering the Building from time to time may use or carry prescription and
non-prescription drugs, perfumes, cosmetics and other toiletries, and foods
and beverages, some of which may contain Hazardous Materials.
(b) Tenant acknowledges that certain reports and
letters (collectively "Reports") dealing with the presence of ACMs in the
Building are available for its review in the property management office of
the Building. The Reports contain the specific locations within the Building
where ACMs are present, describe potential health risks or impacts that may
result from exposure to asbestos contained in the ACMs, and set forth certain
information to convey that moving, drilling, boring or otherwise disturbing
the ACMs may present a health risk, and consequently, should not be attempted
by any person who is not qualified to handle ACMs. Tenant acknowledges that
it is aware of the existence, location and condition of ACMs, both friable
and non-friable in the Building and (if applicable) in the Premises. Tenant
agrees that it has been afforded full and adequate opportunity to inspect or
otherwise evaluate asbestos and ACMs in the Building and Premises and that,
subject to the Work Letter, by taking possession of the Premises, it accepts
the condition of such Premises and the Building with respect thereto. During
the Lease Term, and so long as Tenant occupies any portion of the Premises,
Tenant shall
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familiarize itself and comply with all recommendations under the Reports,
with respect to the maintenance of any and all ACMs in the Premises so as to
prevent the release of any asbestos fibers or other ACMs. Tenant shall be
responsible for insuring that all employees of Tenant and all individuals
entering the Premises are aware of the matters set forth in the Reports with
respect to the presence of ACMs in the Premises and the Building. To the
extent any individuals enter the Premises, who are not engaged by Landlord,
to perform maintenance, repairs, alterations or renovations, such individuals
will be apprised by Tenant of the presence of ACMs and Tenant will make the
contents of the Reports available to such individuals to ensure that all
statutes, codes and regulations applicable to the handling of all ACMs in the
Building. Tenant shall inform Landlord in a timely manner of any work to be
undertaken in the Premises that may disturb any ACMs, so that Landlord may
obtain a release, in form satisfactory to Landlord in its sole discretion,
from those involved in such activities with respect to any liability accruing
from such work undertaken in the Premises. Such notification shall be in
addition to, and not in lieu of, any and all notifications and consents
required under this Lease with respect to alterations or other work in the
Premises by Tenant. Tenant shall indemnify, defend, protect and hold Landlord
harmless from any and all claims, losses, liabilities or damages, including
attorney's fees and costs, resulting from Tenant's failure to comply with the
foregoing provisions related to ACMs and asbestos, including, without
limitation, the failure to notify Landlord in the manner described above.
Tenant will further indemnify, defend, protect and hold Landlord harmless
from any and all claims (known and unknown), losses, liabilities or damages
(including attorneys' fees) relating to exposure to or injury caused or
aggravated by ACMs, directly or indirectly, from Tenant's failure to follow
the prescribed safety requirements, precautions and procedures outlined in
the Reports as the same may be hereinafter modified, updated or revised; or
which results from Tenant's failure to inform individuals and employees of
Tenant of the contents of the Reports, including, without limitation, failure
to so inform individuals who are so undertaking alterations, renovations,
maintenance or repairs of ACMs containing areas of the Premises or the
Building; or which results from any failure of such individuals or Tenant's
employees to comply with recommendations or requirements set forth in the
Reports. By its execution of this Lease, Tenant acknowledges that the notice
set forth hereinabove shall constitute the notice required under California
Health and Safety Code Section 25915.5.
(c) Tenant shall have no liability for the removal or
remediation of Hazardous Material existing in the Building prior to the date
of the execution and delivery of this Lease. Subject to Tenant's obligations
in Section 48, Landlord shall indemnify, defend, protect and hold Tenant
harmless from any and all claims, losses, liabilities or damages, including
reasonable attorney's fees and costs, resulting from or arising out of the
presence of any Hazardous Material found on, in or under the Building or
Premises, other than any Hazardous Materials brought into the Premises or
Building by Tenant and Tenant's agents, employees and contractors and any
claims, losses, liabilities or damages resulting from or arising out of the
negligence of Tenant, its agents, employees, contractors or invitees.
49. REAL ESTATE BROKERS. Landlord and Tenant each represents
and warrants to the other that such party has negotiated this Lease directly
with the Real Estate Brokers identified in the Basic Lease Information and
has not authorized or employed, or acted by implication to authorize or to
employ, any other real estate broker or salesman to act for such party in
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connection with this Lease. All leasing commissions due in connection with
this Lease shall be paid by Landlord in accordance with (i) a separate
agreement between Landlord and Grubb & Ellis, and (ii) that certain Brokerage
Commission Agreement by and between Landlord and The Robax Group, Inc.,
dba Rosen & Reynolds. Landlord shall indemnify, defend and hold Tenant
harmless from and against any and all claims for said leasing commissions by
the Real Estate Brokers identified in the Basic Lease Information. Each party
shall indemnify, defend and hold the other harmless from and against any and
all claims by any real estate broker or salesman other than the Real Estate
Brokers identified in the Basic Lease Information for a commission, finder's
fee or other compensation as a result of the inaccuracy of such party's
representation above.
50. NOTICE TO MORTGAGEE; FINANCIAL STATEMENT. If the holder of
any mortgage covering all or a portion of the Premises shall give notice to
Tenant that it is the holder of such mortgage and such notice includes the
address to which notices to such mortgagee are to be sent, then Tenant agrees
to give to said holder of such mortgage notice simultaneously with any notice
given to Landlord to correct any default of Landlord and agrees that the
holder of such mortgage shall have the right, within sixty (60) days after
receipt of said notice, to commence correction of such default and diligently
prosecute completion thereof before Tenant may take any action under this
Lease by reason of any default. Should Landlord or mortgage holder under this
Lease request a copy of Tenant's current financial statement, Tenant agrees
to furnish a certified copy of same to Landlord within fifteen (15) days of
such request; provided, that, so long as Tenant is a public company, Tenant
agrees to provide the most recent financial statements publicly available.
51. OPTION TO EXTEND.
(a) Tenant shall have two (2) consecutive options to
extend the Term of this Lease with respect to all of the Premises for a
period of five (5) years each commencing on the Term Expiration Date (the
"Extension Period") subject to the conditions contained in this Section. The
options to extend are sometimes referred to collectively herein as an "Option
to Extend."
(i) The Option to Extend shall be exercised,
if at all, by written notice of exercise given to Landlord by Tenant not more
than eighteen (18) months nor less than twelve (12) months prior to the
expiration date of the Term Expiration Date. In the event that Tenant fails
to deliver such exercise notice to Landlord on or before the date that is
exactly twelve (12) months prior to the Term Expiration Date, the Option to
Extend shall be null and void and of no further force or effect.
(ii) Anything herein to the contrary
notwithstanding, if an Event of Default has occurred with respect to Tenant
which remains uncured following the expiration of any applicable notice and
cure period, either at the time Tenant exercises the Option to Extend or on
the commencement date of the Extension Period, then Landlord shall have, in
addition to all of Landlord's other rights and remedies provided in this
Lease, the right to terminate the Option
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to Extend upon thirty (30) days written notice to Tenant (with Tenant having
failed to cure the default during such thirty (30) day period).
(b) In the event the Option to Extend is exercised in
a timely fashion, this Lease shall be extended for an additional five (5)
years upon all of the terms and conditions of this Lease; provided, that, the
Base Expense Year and Base Tax Year shall be adjusted to the calendar year in
which each Option to Extend is effective (however, if the Option to Extend is
effective during the last three (3) months of a calendar year, the Base
Expense Year and Base Tax Year shall be the next calendar year); and provided
further that, the Base Monthly Rent and additional rent for such Extension
Period shall be adjusted to equal ninety-seven percent (97%) of the "Fair
Market Rent" for each floor of the Premises and provided further that there
shall be no tenant improvement allowance and, upon the exercise of the second
Option to Extend, no further option to extend the Lease Term. For purposes
hereof, "Fair Market Rent" shall mean the prevailing gross rental rate per
annum per square foot as of the date six (6) months prior to the commencement
of the Extension Period, including, without limitation, base rent, additional
rent and all other monetary payments (including base rent increases and
step-ups) agreed to be paid by new tenants generally for similar space in a
condition (including the state of build out) and location (within the
Building and any comparison buildings) comparable to each floor of the
Premises in comparable buildings for five (5) year terms, pursuant to new
leases entered into by such other tenants, and considering any rental
abatement and any other similar concessions granted in connection with new
leases for such comparable space (including tenant improvement allowances and
other similar items but excluding the payment of any leasing commissions in
comparable transactions).
(c) On or before the date that is nine (9) months
prior to the commencement of the Extension Period, Landlord shall notify
Tenant in writing of Landlord's proposed Fair Market Rental for the term of
the Extension Period, based on the provisions of this Section above. Within
thirty (30) days after receipt of such notice from Landlord, Tenant shall
have the right either to (i) accept Landlord's statement of Fair Market Rent
as the Fair Market Rental for the Extension Period, or (ii) elect to
arbitrate Landlord's estimate of Fair Market Rent, such arbitration to be
conducted pursuant to the provisions hereof. Failure on the part of Tenant to
require arbitration of Fair Market Rent within thirty (30) such day period
shall constitute acceptance of the Fair Market Rental for the Extension
Period, as proposed by Landlord. If Tenant elects arbitration, the
arbitration shall be concluded as expeditiously as reasonably possible with
the goal of being concluded within ninety (90) days after the date of
Tenant's election. To the extent that arbitration has not been completed
prior to commencement of the Extension Period, Tenant shall pay Base Monthly
Rental, additional rent and all other charges in an amount equal to the Fair
Market Rent proposed by Landlord, and the Base Monthly Rental, additional
rent and all other charges shall be adjusted, if necessary, once the Fair
Market Rent is ultimately determined by arbitration. Should the monthly
installments of Base Monthly Rental, additional rent and all other charges as
adjusted for the period following the completion of such arbitration exceed
the amount previously paid by Tenant for such period, Tenant shall pay the
entire difference to Landlord within thirty (30) days following delivery of
written demand. Should the monthly installments of Base Monthly Rental,
additional rent and all other charges as adjusted following completion of
such arbitration be less than the amount previously paid by
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Tenant for such period, Landlord shall credit such difference against the
next installment(s) of Base Monthly Rental coming due. Upon determination of
the Fair Market Rent for the Extension Period (whether by mutual agreement or
by arbitration), the parties shall enter into an amendment to this Lease
memorializing such determination.
(d) In the event of arbitration, the judgment or the
award rendered in any such arbitration may be entered in any court having
jurisdiction and shall be final and binding between the parties. The
arbitration shall be conducted and determined in the City and County of San
Francisco in accordance with the then prevailing rules of the American
Arbitration Association or its successor for arbitration of commercial
disputes except to the extent that the procedures mandated by said rules
shall be modified as follows:
(i) Tenant shall make demand for arbitration
in writing within thirty (30) days after service of Landlord's determination
of Fair Market Rent given as provided above, specifying therein the name and
address of the person to act as the arbitrator on its behalf. The arbitrator
shall be qualified as a real estate appraiser with at least five (5) years
experience or a real estate broker with at least ten (10) years experience
and otherwise familiar with the Fair Market Rent of office space in the
above-described area who would qualify as an expert witness over objection to
give opinion testimony addressed to the issue in a court of competent
jurisdiction. Failure on the part of Tenant to make a proper demand in a
timely manner for such arbitration shall constitute a waiver of the right
thereto. Within fifteen (15), days after the service of the demand for
arbitration, Landlord shall give notice to Tenant, specifying the name and
address of the person designated by Landlord to act as arbitrator on its
behalf who shall be similarly qualified. If Landlord fails to notify Tenant
of the appointment of its arbitrator, within or by the time above specified,
then the arbitrator appointed by Tenant shall be the arbitrator to determine
the issue.
(ii) In the event that two (2) arbitrators are
chosen pursuant to the provisions of this Section, the arbitrators so chosen
shall, within fifteen (15) days after the second arbitrator is appointed,
appoint a third arbitrator, who shall be a competent and impartial person
with qualifications similar to those required of the first two (2)
arbitrators pursuant to subparagraph (d)(1). In the event the two (2)
arbitrators are unable to agree upon such appointment within ten (10) days
after expiration of said fifteen (15) day period, the third arbitrator shall
be selected by the parties themselves, if they can agree thereon, within a
further period of fifteen (15) days. If the parties do not so agree, then
either party, on behalf of both, may request appointment of such a qualified
person by the then Chief Judge of the United States District Court having
jurisdiction over the City and County of San Francisco, acting in his private
and not in his official capacity, and the other party shall not raise any
question as to such Judge's full power and jurisdiction to entertain the
application for and make the appointment. The third arbitrator shall decide
the dispute if it has not previously been resolved by following the procedure
set forth below.
(iii) Where an issue as to Fair Market Rent
cannot be resolved by settlement between the parties during the course of
arbitration, the issue shall be resolved by the third arbitrator in
accordance with the following procedure. The arbitrator selected by each of
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the parties shall state in writing his or her determination of the Fair
Market Rent supported by the reasons therefor with counterpart copies to each
party. The arbitrator shall arrange for a simultaneous exchange of the
determination of Fair Market Rent. The role of the third arbitrator shall be
to select which of the two proposed determinations of Fair Market Rent most
closely approximates his or her determination of Fair Market Rent. The third
arbitrator shall have no right to propose a middle ground or any modification
of either of the two proposed determinations of Fair Market Rent. The
resolution he or she chooses as most closely approximating his or her
determination shall constitute the decision of the arbitrators and be final
and binding upon the parties.
(iv) In the event of a failure, refusal or
inability of any arbitrator to act, his or her successor shall be appointed
by him, but in the case of the third arbitrator, his or her successor shall
be appointed in the same manner as provided for appointment of the third
arbitrator. The arbitrators shall decide the issue within fifteen (15) days
after the appointment of the third arbitrator. Any decision in which the
arbitrator appointed by Landlord and the arbitrator appointed by Tenant
concur shall be binding and conclusive upon the parties. Each party shall pay
the fee and expenses of its respective arbitrator and both shall share the
fee and expenses of the third arbitrator. The attorneys' fees and expenses of
counsel for the respective parties and of witnesses shall be paid by the
respective party engaging such counsel or calling such witnesses.
(v) The third arbitrator shall have the right
to consult experts and competent authorities to obtain factual information or
evidence pertaining to a determination of Fair Market Rent, but any such
consultation shall be made in the presence of both parties with full right on
their part to cross-examine. The third arbitrator shall render his or her
decision in writing with counterpart copies to each party. The third
arbitrator shall have no power to modify the provisions of this Lease.
(e) The Option to Extend granted to Tenant pursuant to
this Section shall be personal to Xoom.com, Inc. and any Affiliate, and such
right shall not inure to the benefit of any assignee or subtenant of
Xoom.com, Inc., except to an Affiliate.
52. RIGHT OF FIRST REFUSAL.
(a) Tenant shall have a continuing right of first
refusal with respect to any contiguous space in the Building of ten thousand
(10,000) square feet or greater as measured by the ANSI/BOMA Z65.1-1996
standards that becomes available during the term of the Lease, excluding any
space on the ground floor of the Building (the "Refusal Space"), subject to
the existing rights of existing tenants to the Refusal Space. Provided that
no Event of Default has occurred which has not been cured, if Landlord shall
receive an offer to lease any portion of the Refusal Space, which offer
Landlord shall desire to accept, Landlord shall give written notice of the
said offer to Tenant ("Landlord's Refusal Notice"). The Landlord's Refusal
Notice shall set forth in reasonable detail the terms of the offer, including
a description of the space, the Base Monthly Rental (including escalations
thereof), condition of the space (i.e., as is, building standard construction,
tenant improvement allowances), taxes, maintenance costs and other
pass-throughs, term and any other material terms of the offer. Within ten
(10) days of receiving
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Landlord's Refusal Notice, Tenant may elect, by written notice to Landlord,
to accept the Refusal Space upon the terms and conditions stated in the
Landlord's Refusal Notice. Tenant's failure to make a timely election to
accept the specified space shall be deemed a rejection of the Refusal Space.
Upon Tenant's rejection or deemed rejection of the Refusal Space, Landlord
shall be free to accept the offer to lease and lease the space to a third
party pursuant to the terms thereof. Upon Tenant's acceptance of the Refusal
Space, the parties shall prepare and execute an amendment incorporating the
Refusal Space into the Lease subject to all of the terms, covenants, and
conditions herein, except as modified by the terms of the offer. The right
contained in this Section is personal to Xoom.com, Inc. and its Affiliates,
and such right shall not inure to the benefit of any assignee or subtenant of
Xoom.com, Inc., except for its Affiliates and such right shall be subject to
the provisions of Section 18.
(b) Tenant's rights under this Section are subject and
subordinate to and only to the rights of the existing tenants of the Building
which currently have expansion rights, rights of first refusal or rights of
first negotiation with respect to space on the Refusal Space. A list of said
existing tenants is set forth on SCHEDULE 1 attached hereto and made a part
hereof.
Notwithstanding the foregoing, Landlord shall have the right to
negotiate amendments to the Lease of any tenant in the Building to provide
for an extension of said tenant's expiration of Lease Term for a reasonable
period of time to facilitate said tenant's vacation of its Premises.
53. PARKING.
(a) Tenant shall lease two (2) parking stalls in the
Building's parking garage (the "Parking Garage") in connection with the
8th Floor, an additional two (2) parking stalls in connection with the
9th Floor, an additional (two) parking stalls in connection with the
19th Floor, an additional four (4) parking stalls in connection with the
12th and 13th Floors, an additional six (6) parking stalls in connection with
the 20th and 21st Floors and an additional two (2) parking stalls in
connection with the 22nd Floor, for an aggregate total of eighteen (18)
parking stalls (the "Parking Stalls"). If Tenant leases any additional full
floor space in the Building, Tenant shall be granted the option to lease up
to two (2) additional parking stalls for each additional full floor space.
(b) Tenant shall execute the standard form parking
lease for the Parking Garage with Landlord's third-party contractor (the
"Garage Operator") within ten (10) days after mutual execution of the Lease
(the "Parking Lease"). The lease term for a Parking Stall(s) shall commence
on the Term Commencement Date of the floor to which the Parking Stall(s) is
attributable. Tenant's use of the Parking Stalls shall subject to all other
terms and conditions contained in the Parking Lease, including without
limitation the then-current monthly rental rate per parking stall, as the
same may be adjusted from time to time by Landlord's third-party contractor.
Landlord agrees that Tenant, to the extent Tenant has a Parking Garage
monthly pass, shall have access to the Parking Garage twenty-four (24) hours
per day, seven (7) days a week. From time to time during the Term, Tenant
shall be entitled to decrease (on thirty (30) days' prior notice to the third
party parking operators with a copy to Landlord) or increase (on three (3)
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months' prior notice to such third party parking operator with a copy to
Landlord) its number of parking spaces up to the maximum number of Parking
Stalls specified above.
54. BICYCLE PARKING.
(a) Landlord shall cooperate to provide Tenant access
to bicycle parking in the Parking Garage, subject to the rights of the Garage
Operator under the terms of its lease for the Parking Garage. Any additional
compliance with applicable codes, regulations and law required as a result of
such bicycle parking shall be Tenant's obligation, including, but not limited
to fees and expenses in connection therewith.
(b) If Tenant provides bicycle parking in Tenant's
Premises, all bicycles are required to enter to and from the Building through
the Parking Garage. Tenant and Tenant's employees, agents or contractors may
only bring bicycles to and from the Premises via the freight elevator.
(c) In the event that Tenant or Tenant's employees,
agents or contractors bring bicycles to and from Tenant's Premises through
the lobby areas of the Building, as opposed to through the Parking Garage and
the freight elevator, Landlord shall provide written notice of such activity
to Tenant ("Bicycle Violation Notice"). After the fifth Bicycle Violation
Notice in any consecutive twelve (12) month period, Tenant shall be required
to reimburse Landlord for the cost of providing a security guard in the lobby
area in order to enforce Tenant's obligations under this Section. In the
event that a security guard is required pursuant to this Section, Landlord
and Tenant shall review the necessity for such guard after twelve (12) months
after the security guard is first required.
55. INTERNAL FIRE STAIRS. Tenant shall have the right to use
the internal stair cases and internal fire-stairs in the Building for travel
between the floors in the Premises, subject to any applicable governmental
law, regulation or code related restriction. Tenant shall be responsible for
any and all costs in connection with the installation of access code key pads
on each floor and all code related expenses if any.
56. DEDICATED ELEVATOR. Landlord shall provide Tenant with
access to one elevator in the annex portion of the Building that exclusively
services and provides direct access to the floors on which the Premises are
located, including, but not limited to the 22nd Floor. Notwithstanding
anything to the contrary contained herein, in the event that Tenant occupies
less than one hundred thousand (100,000) rentable square feet in the
Building, Tenant shall no longer be entitled to an elevator that exclusively
services Tenant's Premises. For purposes of this Section 56, space shall be
deemed "occupied" by Tenant if, and only if, such space is leased to Tenant
and, such space is not subject to a sublease or assignment by Tenant or any
other form of occupancy agreement between Tenant and any third party.
57. YEAR 2000. Landlord agrees that Landlord shall pay all
costs necessary to correct any problems, and will cause such problems to be
corrected, in the operation of the operating systems in the Building
resulting from any deficiencies in the computer software of the Building to
convert to dates after January 1, 2000. All such costs shall be excluded from
Expenses.
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IN WITNESS WHEREOF, the parties have executed this Lease on the
respective dates indicated below:
TENANT: LANDLORD:
Xoom.com, Inc., a OAIC Bush Street, LLC,
Delaware corporation a Delaware limited liability company
By: /s/ Chris Kitze By: /s/ Gregory Breskin
---------------------------- ------------------------------
Name: Chris Kitze Name: Gregory Breskin
-------------------------- -----------------------------
Its: Chairman Its: Vice President
--------------------------- -----------------------------
Date of Execution: 8/9/99 Date of Execution: Aug. 9, 1999
------------- --------------
By: /s/ John Harbottle By: /s/ Christine Reich
----------------------------- ---------------------------------
Name: John Harbottle Name: Christine Reich
--------------------------- -------------------------------
Its: CFO Its: President
---------------------------- --------------------------------
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EXHIBIT A
DIAGRAMS OF FLOOR PLANS
FOR 8TH, 9TH, 12TH, 13TH,
19TH, 20TH, 21ST, AND 22ND FLOORS
A-1
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EXHIBIT B
RULES AND REGULATIONS
1. The sidewalks, halls, passages, exits, entrances, shopping
malls, elevators, escalators 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, shopping malls, elevators, escalators 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. No tenant and no employee or invitee
of any tenant shall go upon the roof of the Building except such roof or portion
thereof as may be contiguous to the premises of a particular tenant and may be
designated in writing by Landlord as a roof deck or roof garden area; provided
that, so long as Tenant remains in occupancy of the 22nd Floor, the loggia area
on the 22nd Floor shall be designated a roof garden area for Tenant's exclusive
use.
2. No sign, placard, picture, name, advertisement or notice
visible from the exterior of any tenant's premises shall be inscribed, painted,
affixed or otherwise displayed by any tenant on any part of the Building without
the prior written consent of Landlord. Landlord will adopt and furnish to
tenants general guidelines relating to signs inside the Building on the office
floors. Each tenant shall conform to such guidelines, but may request approval
of Landlord for modifications, which approval will not be unreasonably withheld.
All approved signs or 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.
3. The Premises shall not be used for the storage of merchandise
held for sale to the general public or for lodging; provided that, the Premises
may be used for the incidental sale of merchandise to Tenant's employees of up
to Twenty-Five Thousand Dollars ($25,000) per year, subject to the rights of
other current and future tenants in the Building and subject to Tenant's
compliance with all applicable laws, including, without limitation, zoning laws,
with respect thereto. No cooking shall be done or permitted by any tenant on the
premises, except that use by the tenant of food and beverage vending machines
and Underwriters' Laboratory approved microwave ovens and 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.
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4. No tenant shall employ any person or persons other than
Landlord's janitorial service for the purpose of cleaning the premises, unless
otherwise approved by Landlord; provided, that, Tenant may contract for
additional janitorial services, subject to Landlord's reasonable approval
thereof. No person or persons other than those approved by Landlord shall be
permitted to enter the Building for the purpose of cleaning the same. No tenant
shall cause any unnecessary labor by reason of such tenant's carelessness or
indifference in the preservation of good order and cleanliness. Janitor service
will not be furnished on nights when rooms are occupied after 9:30 p.m. unless,
by prior arrangement with Landlord, service is extended to a later hour for
specifically designated rooms.
5. Landlord will furnish each tenant, free of charge, with two
keys to each door lock in its premises. Landlord may make a reasonable charge
for any additional keys. No tenant shall have any keys made. 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 consent of Landlord. The 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 the tenant.
6. The freight elevator shall be available for use by all tenants
in the Building, subject to such reasonable scheduling as Landlord in its
discretion shall deem appropriate. The persons employed to move such equipment
in or out of the Building must be acceptable to Landlord. Landlord shall have
the right to prescribe the weight, size and position of all equipment,
materials, furniture or other property brought into the Building. Heavy objects
shall, if considered necessary by Landlord, stand on wood strips of such
thickness as is necessary to properly distribute the weight. Landlord will not
be responsible for loss of or damage to any such property from any cause, and
all damage done to the Building by moving or maintaining such property shall be
repaired at the expense of the tenant.
7. 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 approval, use any
method of heating or air conditioning other than that supplied by Landlord.
8. 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.
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9. Landlord reserves the right to exclude from the Building
between the hours of 6 p.m. and 7 a.m. and at all hours on Saturdays, Sundays
and legal holidays all persons who do not present a pass signed by Landlord to
the Building. Landlord will furnish passes to persons for whom any tenant
requests the same in writing. Each tenant shall be responsible for all persons
for whom it requests passes and shall be liable to Landlord for all acts of such
persons. Landlord shall 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 the
case of invasion, mob, riot, public excitement or other circumstances rendering
such action advisable in Landlord's opinion, Landlord reserves the right to
prevent access to the Building during the continuance of the same by such action
as Landlord may deem appropriate.
11. The directories of the Building, located in the two lobby
areas, will be provided for the display of the name and location of tenants and
a reasonable number of the principal officers and employees of tenants (based on
a pro rata share between all of the tenants in the Building, the denominator of
which shall be the total directory space available in the two lobby areas), and
Landlord reserves the right to exclude any other names therefrom. Tenant shall
have the right to directory space in both of the lobby area directories, but in
no event shall Tenant have more than its pro rata share of directory space. Any
additional name which a tenant desires to have added to the directory shall be
subject to Landlord's approval and may be subject to a charge therefor.
12. 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 exterior window in the Building without the
prior consent of Landlord. If consented to by Landlord, such items shall be
installed on the office side of the standard window covering and shall in no way
be visible from the exterior of the Building.
13. Messenger services and suppliers of bottled water, food,
beverages, and other products or services shall be subject to such reasonable
regulations as may be adopted by Landlord. Landlord may establish a central
receiving station in the Building for delivery and pick-up by all messenger
services, and may limit delivery and pick-up at tenant premises to Building
personnel.
14. Each tenant shall see that the doors of its premises are
closed and locked and that all water faucets or apparatus, cooking facilities
and office equipment (excluding office equipment required to be operative at all
times) are shut off before the tenant or its employees leave the premises at
night, so as to prevent waste or damage, and for any default or carelessness in
this regard the tenant shall be responsible for any damage sustained by other
tenants or occupants of the Building or Landlord. On multiple-tenancy floors,
all tenants shall keep the doors to the Building corridors closed at all times
except for ingress and egress.
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15. The toilets, urinals, wash bowls and other rest room
facilities 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.
16. Except with the prior consent of Landlord, no tenant shall
sell, or permit the sale at retail, of newspapers, magazines, periodicals,
theater tickets or any other goods or merchandise to the general public in or on
the premises, nor shall any tenant carry on, or permit or allow any employee or
other person to carry on, the business of stenography, typewriting or any
similar business or from the premises for the service or accommodation of
occupants of any other portion of the Building, nor shall the premise of any
tenant be used for manufacturing of any kind, or any business or activity other
than that specifically provided for in such tenant's lease.
17. No tenant shall install any antenna, loudspeaker, or other
device on the roof or exterior walls of the Building.
18. There shall not be used in any portion of the Building, by any
tenant or its invitees, any hand trucks or other material handling equipment
except those equipped with rubber tires and side guards unless otherwise
approved by Landlord.
19. Each tenant shall store its refuse within its premises. No
material shall be placed in the refuse 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 refuse in the City and County of San
Francisco without being in violation of any law or ordinance governing such
disposal. All refuse disposal shall be made only through entryways and elevators
provided for such purposes and at such times as Landlord shall designate.
20. 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.
21. The requirements of the tenants will be attended to only upon
application by telephone or in person at the office of the Building. Employees
of Landlord shall not perform any work or do anything outside of their regular
duties unless under special instructions from Landlord.
22. Landlord may waive any one or more of these Rules and
Regulations for the benefit of any particular tenant or tenants, but no such
waiver by Landlord shall be construed as a wavier 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.
23. 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.
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24. 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.
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EXHIBIT C
Work Letter and Construction Agreement
THIS AGREEMENT supplements the Lease dated for reference
purposes only as of August 13, 1999 (the "Lease") executed concurrently
herewith by OAIC BUSH STREET, LLC, a Delaware limited liability company, as
Landlord, and Xoom.com, Inc., a Delaware corporation , as Tenant.
1. GENERAL.
(a) The purpose of this Work Letter and Construction
Agreement ("Work Letter") is to set forth how the Tenant Work (as defined
below) in the Premises (as defined in the Lease) are to be designed and
constructed, who will pay for the design and construction of the Tenant Work,
and the time schedule for completion of the Tenant Work.
(b) Except as otherwise defined in this Work Letter, all
capitalized terms utilized in this Work Letter shall have the meanings set forth
in the Lease.
(c) The provisions of the Lease, except where clearly
inconsistent or inapplicable to this Work Letter, are incorporated into this
Work Letter.
(d) Except for the Tenant Work and Base Building Work (as
defined below) to be constructed pursuant to this Work Letter, Tenant accepts
the Premises in their "AS IS" condition and acknowledges that it has had an
opportunity to inspect the Premises and the Building prior to signing the Lease
and finds them to be in satisfactory condition. Notwithstanding anything to the
contrary in the preceding sentence, Landlord hereby assumes full responsibility,
at its sole cost, for the removal, encapsulation or other maintenance of
asbestos which is encountered during the construction of Part I of the Base
Building Work and the Tenant Work, provided that the decision to remove,
encapsulate or perform other maintenance of such Hazardous Materials shall be
made at Landlord's sole discretion and Landlord shall notify Tenant in writing
upon substantial completion of Part I of the Base Building Work of the
location(s) of encapsulated Hazardous Materials.
2. PREPARATION OF PLANS; SELECTION OF DESIGNER/ARCHITECT.
(a) Tenant shall have the right to engage the services
of SMP/SHG Incorporated as Tenant's space planner ("Tenant's Space Planner")
and as Tenant's architect ("Tenant's Architect") for purposes of the Work
Letter, including the design and initial space planning of each respective
floor of the Premises which design shall address the tenant improvements,
exclusive of the Base Building Work, to be initially installed in each floor
of the Premises pursuant to this Work Letter (such tenant improvements are
referred to herein as the "Tenant Work"). Tenant and Tenant's Space Planner
shall take such action as is reasonably necessary and otherwise shall
cooperate with Landlord's architect, RMW Architects ("Landlord's Architect"),
in Tenant's Space Planner's preparation of a "hard line space/pricing plan"
for each floor of the Premises (collectively, the "Space Plan"), which shall
contain all of the information on SCHEDULE 1, attached hereto and made a part
hereof. Tenant's Space Planner
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shall complete and deliver for Landlord's review (i) an initial draft of the
Space Plan for the 12th Floor, 13th Floor, 19th Floor, 20th Floor and 21st
Floor, (ii) an initial draft of the Space Plan for the 22nd Floor, and (iii)
in the case of either an initial Sublessee Build Out or a Tenant Build Out
(as these terms are defined in Section 3 of the Lease) on the 8th Floor and
9th Floor, an initial draft of the Space Plan for the 8th Floor and 9th Floor
after the expiration of the Availability Notice Period (as defined in Section
3 of the Lease). Landlord, within ten (10) business days after its receipt of
the initial draft of a Space Plan for a particular floor in the Premises,
shall provide Tenant's Space Planner with its written approval or disapproval
thereof (with a statement of the specific reasons therefor in the event of
any such disapproval). Tenant's Space Planner, within five (5) business days
after receipt of Landlord's response, shall produce a final Space Plan for
said floor that shall reflect any comments/corrections proposed by Landlord.
(b) After Landlord's approval of the final Space Plan for
each respective floor of the Premises, Tenant's Architect shall have prepared
and shall have submitted the same to Landlord or its representative for its
review and approval, an initial draft of engineered mechanical and electrical
drawings and architectural working drawings, which show all doors, light
fixtures, electrical outlets, telephone outlets and other improvements to the
respective floor of the Premises beyond the demolition, asbestos abatement,
remediation and/or other maintenance (as set forth in SCHEDULE 2), to the extent
not already completed, and shell and core improvements to be provided by
Landlord as described in SCHEDULE 2 attached hereto (such demolition, asbestos
abatement and/or remediation and shell and core improvements are referred to
herein as the "Base Building Work"), as well as all wall finishes and floor
coverings (collectively, the "Tenant's Plans"). Landlord, within five (5)
business days after its receipt of the initial draft of the Tenant's Plans for a
particular floor in the Premises, shall provide Tenant's Architect with its
written approval or disapproval thereof (with a statement of the specific
reasons therefore in the event of such disapproval). Tenant's Architect shall
produce final Tenant's Plans for said floor of the Premises that shall reflect
any comments/corrections proposed by Landlord, and shall deliver four (4) copies
of the same to Landlord and Tenant for their final approval. All mechanical,
electrical and plumbing related design work in connection with the Tenant Work
must be completed by a consultant designated or approved in writing by Landlord
in Landlord's sole discretion.
(c) The parties acknowledge and agree that the Tenant
Work shown on the Tenant's Plans must (i) be compatible with the Base Building
Work and the design, construction and equipment of the Building, (ii) comply
with all applicable laws, rules, regulations and ordinances, including, without
limitation, the provisions of the American with Disabilities Act, 42 U.S.C.
Section 12101 et. seq. and any governmental regulations with respect thereto
(the "ADA"), Title 24 of the California Administrative Code ("Title 24") and
other similar federal, state and local laws and regulations, including, without
limitation, the requirements under the ADA for the purposes of "public
accommodations" (as that term is used in the ADA) and (iii) be approved by
Landlord.
(d) The term "Tenant Work" shall mean all improvements,
standard or special, shown on the Tenant's Plans. Tenant shall be responsible
for the suitability for the Tenant's needs and business of the design and
function of all the Tenant Work. Landlord's review and approval of any plans or
specifications shall not constitute, and Landlord shall not be deemed to have
made, a representation or warranty as to the compliance of the Tenant Work
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with any and all applicable state and local laws, statutes, codes, rules or
regulations including regulations or procedures promulgated by Landlord (the
"Laws") or as to the suitability of the Premises, or the Tenant Work for
Tenant's needs. Accordingly, notwithstanding the fact that any plans are
reviewed and/or approved by Landlord or its architect, engineers and
consultants, and notwithstanding any advice or assistance which may be
rendered to Tenant by Landlord or Landlord's architect, engineers and
consultants, Landlord shall have no liability whatsoever in connection
therewith and shall not be responsible for any omissions or errors contained
in such plans.
(e) Notwithstanding anything to the contrary contained
herein, in the event that there is any portion of the Tenant Work which Landlord
will require Tenant to remove at the end of the Lease Term, Landlord shall
notify Tenant in writing of such at the time that Landlord reviews the initial
draft of the Tenant's Plans for a particular floor pursuant to Section 2(b)
above. At the end of the Lease Term (as the same may be extended under the terms
of the Lease), Tenant shall remove said Tenant Work at Tenant's sole cost and
expense and repair and restore the Premises to their condition at the
commencement of the Lease.
3. BASE BUILDING WORK AS CONSTRUCTION BY LANDLORD.
(a) Promptly after the full execution and delivery of
this Lease by Landlord and Tenant, Landlord shall proceed to complete the Base
Building Work in each floor of the Premises; provided that Landlord shall
proceed to complete the Base Building Work on the 8th Floor and 9th Floor
promptly after the current tenant vacates said floors or, in the event Tenant
elects to sublease the 8th Floor and/or 9th Floor pursuant to Section 3 of the
Lease, after such subtenant vacates said floor(s). The "Base Building Work"
shall consist of only the items (the cost of which shall not be deducted from
the Tenant Improvement Allowance as hereafter defined) set forth in SCHEDULE 2.
As set forth on SCHEDULE 2 the Base Building Work shall be divided into Part I
and Part II. Part I of the Base Building Work shall be completed by Landlord
prior to the Premises Delivery Date for the applicable floor. Part II of the
Base Building Work shall be completed by Landlord concurrently with the
completion of the Tenant Work for the applicable floor, provided that Landlord
shall use reasonable efforts to not interfere with the completion of the Tenant
Work.
(b) Landlord shall give Tenant or shall cause its space
planner, architect or management company to give Tenant notice of the date on
which Part I of the Base Building Work is substantially completed with respect
to a particular floor. Tenant shall have three (3) business days following said
notice, to inspect said Base Building Work and supply Landlord with a written
list (the "Tenant Part I List") setting forth material objections with respect
to said Base Building Work, which list shall be subject to Landlord's reasonable
approval. In the event that no such Tenant Part I List is provided by Tenant
within said three (3) business day period, Tenant shall be deemed to have
accepted the Part I of Base Building Work for the particular floor. Landlord
shall use commercially reasonable efforts to complete all of the items on the
Tenant Part I List, as reasonably approved by Landlord, as expeditiously as
possible. Following Landlord's Architect's certification that all items which
are required to be completed in connection with the Part I of the Base Building
Work have been completed for said floor, Part I of the Base Building Work for
the particular floor shall be deemed "Substantially Complete",
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and Landlord shall have no further obligation with respect to completion of
Part I of the Base Building Work on said floor.
(c) Upon Substantial Completion of Part I of the Base Building
Work for a particular floor in the Premises, Landlord shall deliver said
floor, Part I of the Base Building Work and any additional completed Base
Building Work on said floor to Tenant (the "Premises Delivery Date"), and
Tenant shall accept said floor, Part I of the Base Building Work and any
additional completed Base Building Work on said floor from Landlord in their
presently existing, "as-is" condition. The Premises Delivery date for the
19th Floor shall be the date of the mutual execution of the Lease (the "19th
Floor Premises Delivery Date"); the Premises Delivery date for the 12th and
13th Floors shall be on or before September 1, 1999 (the "12th and 13th
Floors Premises Delivery Date"); the Premises Delivery date for the 20th and
21st Floors shall be on or before October 1, 1999 (the "20th and 21st Floors
Premises Delivery Date"), and; the Premises Delivery date for the 22nd Floor
shall be on or before June 1, 2000 (the "22nd Floor Premises Delivery Date").
With respect to the 8th and 9th Floor, in the case of a Sublessee Build Out
on either the 8th Floor or 9th Floor, the Premises Delivery Date shall be on
or before the expiration of the Availability Notice Period (as defined in
Section 3 of the Lease). In the case of an initial Tenant Build Out on the
8th Floor or 9th Floor, the Premises Delivery Date shall be on or before six
(6) weeks after the expiration of the Availability Notice Period. Each
Premises Delivery Date referenced above is subject to delay by an Event of
Force Majeure (as defined below)
(d) Prior to the completion by Tenant of all Tenant Work on a
particular floor and the occurrence of the Term Commencement Date for each
floor in the Premises, subject to an Event of Force Majeure, Landlord shall
substantially complete all Base Building Work for said floor. Landlord shall
give Tenant or shall cause its space planner, architect or management company
to give Tenant notice of the date on which the Base Building Work is
substantially completed with respect to a particular floor. Tenant shall have
three (3) business days following said notice, to inspect said Base Building
Work and supply Landlord with a written list (the "Tenant Base Building Work
List") setting forth material objections with respect to said Base Building
Work, which list shall be subject to Landlord's reasonable approval. In the
event that no such Tenant Base Building Work List is provided by Tenant
within said three (3) business day period, Tenant shall be deemed to have
accepted the Base Building Work for the particular floor. Landlord shall use
commercially reasonable efforts to complete all of the items on the Tenant
Part I List, as reasonably approved by Landlord, as expeditiously as
possible. Following Landlord's Architect's certification that all items which
are required to be completed in connection with the Base Building Work have
been completed for said floor, said Base Building Work shall be deemed
"Substantially Completed" and Landlord shall have no further obligation with
respect to completion of the Base Building Work on said floor. Upon
Substantial Completion of the Base Building Work on a particular floor,
Tenant shall accept said floor and the Base Building Work on said floor from
Landlord in their presently existing, "as-is" condition.
(e) Any failure of Landlord to attach a cold air equipment into
the HVAC system servicing the Premises shall not be deemed a breach of
Landlord's obligation, so long as such attachment is complete by April 1,
2000, and so long as said failure does not adversely affect the heat and free
air exchange in the Premises
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4. CONSTRUCTION.
(a) Promptly after the Tenant's Plans for each
respective floor in the Premises are approved by Landlord, Tenant shall (i)
enter into a construction contract, in the form of the contract attached
hereto as SCHEDULE 3 (the "OAIC Construction Contract"), with a contractor
reasonably satisfactory to Landlord and chosen from a list of approved
Contractors supplied by Landlord (the "Contractor"), pursuant to which the
Tenant Work shall be constructed, (ii) obtain or cause to be obtained all
necessary building permits and other governmental approvals in connection
with the Tenant Work, and (iii) promptly proceed with due diligence to cause
to be constructed and installed, as soon as reasonably practicable,
consistent with industry custom and practice, the Tenant Work indicated on
the Tenant's Plans. Landlord will provide to Tenant's Architect path of
travel drawings to the Premises only, wet sealed by Landlord's Architect
suitable for permitting. Landlord shall not be responsible for any delays in
the approval of the Tenant's Plans or the issuance of necessary permits and
approvals. Tenant hereby agrees that neither Landlord nor Landlord's
consultants shall be responsible for obtaining any building permit or other
approvals or certificate of occupancy for the Premises and that obtaining the
same shall be Tenant's responsibility; provided, however, that Landlord shall
cooperate with Tenant in executing permit applications and performing other
ministerial acts reasonably necessary to enable Tenant to obtain any such
permit or certificate of occupancy. No changes, modifications or alterations
in the Tenant's Plans may be made without the prior written consent of
Landlord, which consent may not be unreasonably withheld, provided the
requested change, modification or alteration does not adversely affect the
Building's structure, systems, equipment, security system or appearance. If
the requested change, modification or alteration adversely affects the
Building's structure, systems, equipment, security system or appearance, then
Landlord may withhold its consent thereto in Landlord's sole discretion.
(b) Notwithstanding anything to the contrary contained herein,
prior to commencing the Tenant Work, Tenant shall obtain one hundred percent
(100%) performance and labor and material payment bonds, in form and
substance satisfactory to Landlord, issued by a company acceptable to
Landlord, naming Landlord as an obligee and issued in respect of the contract
with the Contractor and each subcontractor.
(c) Trash removal in connection with the Tenant Work will be
done continually at Tenant's cost and expense. No trash, or other debris, or
other waste may be deposited at any time outside the Premises other than in
areas which Landlord designates for dumpsters or temporary consolidation of
trash prior to collection. If Tenant does not deposit its trash in accordance
with this Section 4(c), Landlord may remove it at Tenant's expense, which
expense shall equal the cost of removal plus twenty-five percent (25%) of
such costs as a management fee.
(d) Storage of Contractor's construction material, tools and
equipment shall be confined within the Premises and in areas designated for
such purpose by the general contractor and approved by Landlord. In no event
shall any materials or debris be stored outside of the Premises, except as
otherwise provided herein.
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(e) Landlord shall have the right to post in a conspicuous
location on Tenant's Premises, as well as record with the City and County of
San Francisco, a Notice of Nonresponsibility.
(f) Without limiting the generality of the foregoing, any work
to be performed outside of the Premises shall be coordinated with Landlord,
and shall be subjected to reasonable scheduling requirements of Landlord, and
Tenant shall coordinate all after-hours, weekend work and use of the elevator
with Landlord.
(g) During construction of the Tenant Work, there shall be no
charge for Tenant's or Tenant's space planner's, architect's, contractors' or
engineers' use of designated elevators, water, electricity, HVAC, or security
services during Building Hours. In the event that Tenant shall require said
services after Building Hours there shall be an after hours charge.
Currently, the costs for HVAC, elevator and security services outside of
Building Hours, are approximately sixty dollars ($60) per hour, thirty
dollars ($30) per hour, and thirty-five dollars ($35) per hour, respectively,
which costs are subject to adjustment by Landlord from time to time in
Landlord's discretion. In addition, in the event that Tenant shall require
parking stalls during the construction of the Tenant Work on a particular
floor, Tenant shall be entitled to enter into the parking agreements
described in Section 52 of the Lease prior to the Term Commencement Date for
said floor pursuant to a separate agreement with the third party contractor
operating the parking garage.
5. SUBSTANTIAL COMPLETION AND PUNCH LIST ITEMS.
(a) "Substantial Completion" as used in the Lease and
this Work Letter with respect to the Tenant Work shall mean that (i) the
applicable improvements are substantially complete in accordance with the
requirements of this Work Letter, (ii) the architect designing and
supervising such improvements has certified that such improvements are
substantially complete in accordance with the applicable plans and
specifications and the Landlord's Architect, if different from the design
architect, shall have concurred in such certification, (iii) to the extent
applicable the contractor performing such work has issued a notice of
completion under the applicable contract, (iv) to the extent applicable, a
temporary certificate of occupancy or other governmental approval has been
issued in connection with such work. A floor in the Premises may be deemed
Substantially Complete even though improvements in certain portions of the
Building outside the Premises have not been fully completed and even though
Tenant's personal property may have not been installed in the Premises.
Notwithstanding anything to the contrary contained herein, in no event shall
the date of Substantial Completion of the Tenant Work for any floor in the
Premises be later than the Estimated Term Commencement Date for such floor,
subject to extension due to Landlord Delay or Force Majeure.
(b) Within ten (10) business days after Tenant's Architect's
certification of Substantial Completion for a particular floor of the
Premises, Landlord shall supply to Tenant a written punch list (the "Tenant
Work Punch List") setting forth the additional corrective and/or completion
work with respect to the Tenant Work for said floor which Landlord believes
is required to be performed pursuant to the Tenant's Plans. In the event that
no such Tenant Work Punch List is provided by Landlord within said ten (10)
business day period, Landlord shall be deemed to have accepted the Tenant
Work for the particular floor. Tenant shall use
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commercially reasonable efforts to complete all of the items on the Tenant
Work Punch List as expeditiously as possible; and the Tenant Work Punch List
items shall not be deemed complete until so certified in writing by
Landlord's Architect.
(c) Notice of Completion: Copy of Record Set of Plans. Within
ten (10) days after completion of construction of the Tenant Work, Tenant
shall cause a Notice of Completion to be recorded in the office of the
Recorder of the County of San Francisco in accordance with Section 3093 of
the Civil Code of the State of California or any successor statute, and shall
furnish a copy thereof to Landlord upon such recordation. If Tenant fails to
do so, Landlord may execute and file the same on behalf of Tenant as Tenant's
agent for such purpose, at Tenant's sole cost and expense. At the conclusion
of construction, (i) Tenant shall cause the Contractor, (A) to update the
Tenant's Plans to reflect the completed construction, (B) to certify to the
best of their knowledge that the "record-set" of mylar as-built drawings
resulting from such update (which Tenant hereby agrees to have created) are
true and correct, which certification shall survive the expiration or
termination of this Lease, and (C) to deliver to Landlord two (2) sets of
copies of such record set of drawings within ninety (90) days following
issuance of a certificate of occupancy for the Premises, and (ii) Tenant
shall deliver to Landlord a copy of all warranties, guaranties, and operating
manuals and information relating to the improvements, equipment and systems
in the Premises.
6. COST OF DESIGN AND CONSTRUCTION.
(a) Tenant Improvement Allowance. Landlord shall bear
the cost of all Base Building Work, as set forth in this EXHIBIT C. In
addition, Landlord shall bear the cost of Tenant Work ("Tenant Work Cost") to
the extent such cost does not exceed an amount equal to the sum of Forty
Dollars ($40.00) per square foot of rentable area for the Tenant Work
allocable to the 8th Floor (a total of $1,009,320), Forty Dollars ($40.00)
per square foot of rentable area for the Tenant Work allocable to the 9th
Floor (a total of $1,041,680), Forty Dollars ($40.00) per square foot of
rentable area for the Tenant Work allocable to the 12th Floor (a total of
$1,041,640), Forty Dollars ($40.00) per square foot of rentable area for the
Tenant Work allocable to the 13th Floor (a total of $1,041,360), Ten Dollars
($10.00) per square foot of rentable area for the Tenant Work allocable to
the 19th Floor (a total of $241,570), Forty One Dollars ($41.00) per square
foot of rentable area for the Tenant Work allocable to the 20th Floor (a
total of $907,043), Forty One Dollars ($41.00) per square foot of rentable
area for the Tenant Work allocable to the 21st Floor (a total of $768,791),
and Forty One Dollars ($41.00) per square foot of rentable area for the
Tenant Work allocable to the 22nd Floor (a total of $750,874) (collectively,
the "Tenant Improvement Allowance"). In addition, Landlord shall provide
Tenant with an additional Five Thousand Dollars ($5,000) of Tenant
Improvement Allowance beyond the total of the amounts set forth above.
Notwithstanding anything to the contrary contained herein, the Tenant
Improvement Allowance allocated to the 8th Floor and 9th Floor are subject to
the provisions set forth in Section 3 of the Lease. In the event that the
Tenant Improvement Allowance allocable to each floor of the Premises is not
entirely exhausted by the Tenant Work Cost for the particular floor in the
Premises, Tenant shall be entitled to apply the remaining Tenant Improvement
Allowance for such floor towards the Tenant Work Cost of a different floor in
the Premises. Notwithstanding the foregoing and subject to the provisions of
Section 7 below, at least eighty percent (80%) of the Tenant Improvement
Allowance allocated to each floor of the Premises must be used towards the
Tenant Work Cost on the particular floor to which the allowance is
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allocated. In the event the Tenant Work Cost exceeds the Tenant Improvement
Allowance, Tenant shall bear the cost of such excess and shall pay such
excess. Landlord shall retain any and all unused portions of the Tenant
Improvement Allowance. The Tenant Improvement Allowance shall be only for the
following items and costs (collectively the "Tenant Improvement Allowance
Items"):
(1) The costs of preliminary space planning, the hard line space
plan and the Tenant's Plans for the Premises, and the cost of Landlord's
review thereof;
(2) All costs of obtaining building permits and other necessary
authorizations from all governmental authorities having jurisdiction;
(3) The cost of any changes to the Construction Drawings or
Tenant Work required by Code;
(4) Sales and use taxes and fees required under ADA, Title 24 or
such other similar federal, state or local laws;
(5) All other costs, if any, Landlord reasonably anticipates
Landlord will incur in connection with the construction of the Tenant Work;
and
(6) All direct and indirect costs of procuring and installing
the Tenant Work in the Premises, including any construction fee for overhead
and profit, a construction review fee charged by Landlord (i) in connection
with the 12th, 13th, 19th, 20th, 21st and 22nd Floors in the amount of three
percent (3%) of the total cost of the design and construction of the Tenant
Work (to which fee Tenant hereby consents), provided that said fee shall not
exceed One Hundred Fifty Thousand Dollars ($150,000), and (ii) in connection
with the 8th Floor and 9th Floor, in the amount of three percent (3%) of the
total cost of the design and constructions of the Tenant Work (to which fee
Tenant hereby consents (collectively, the "Construction Review Fee"), and all
reasonable costs and fees, including without limitation, architect's and
engineer's fees, incurred by Landlord in its review and approval of the
preliminary space planning, the hard line space plan and the Tenant's Plans
for the Premises and any amendments or modifications thereto, which costs and
fees shall be in addition to the Construction Review Fee. Landlord shall have
the right to pay itself the Construction Review Fee directly from the Tenant
Improvement Allowance without further authorization from Tenant.
(b) To the extent required under Section 8(b) below, Tenant
shall bear the cost of any increase in the cost of the design or construction
of the Tenant Work incurred by reason of (i) any Tenant Delay or (ii) any
Change Order requested by Tenant or any governmental agency following
preparation and approval of the final Tenant's Plans.
7. DISBURSEMENT OF TENANT IMPROVEMENT ALLOWANCE.
(a) During the construction of the Tenant Work, Landlord
shall make monthly disbursements of the Tenant Improvement Allowance for
Tenant Improvement Allowance Items for the benefit of Tenant and shall
authorize the release of monies for the benefit of Tenant as follows:
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(b) MONTHLY DISBURSEMENTS. On or before the first day of each
calendar month, as determined by Landlord, during the construction of the
Tenant Work (or such other date as Landlord may designate), Tenant shall
deliver to Landlord: (i) a request for payment of the "Contractor," as that
term is defined in Section 4(a) of this Work Letter, approved by Tenant, in a
form to be provided by Landlord, showing the schedule, by trade, of
percentage of completion of the Tenant Work in the Premises, detailing the
portion of the work completed and the portion not completed; (ii) invoices
from (i) the Contractor and (ii) all subcontractors, laborers, materialmen
and suppliers used by Tenant or Contractor (together with the Contractor,
"Tenant's Agents"), for labor rendered and materials delivered to the
Premises; (iii) executed mechanic's lien releases from all of Tenant's Agents
which shall comply with the appropriate provisions, as reasonably determined
by Landlord, of California Civil Code Section 3262(d); (iv) a check payable
to Landlord in the amount of Tenant's Share (as defined in Section 7(d)
below) of the particular amount of the payment requested by the Contractor,
(v) the information and documentation set forth on SCHEDULE 4 attached
hereto, and (vi) all other information reasonably requested by Landlord ((i),
(ii), (iii), (iv), (v) and (vi) are collectively referred to as a "Complete
Payment Request"). Tenant's request for payment shall be deemed Tenant's
acceptance and approval of the work furnished and/or the materials supplied
as set forth in Tenant's payment request. Thereafter, provided that Tenant
has fulfilled each and every covenant in this Work Letter to date, and Tenant
is not in default under the terms of this Work Letter or Lease, Landlord
shall deliver a check to Tenant made jointly payable to Contractor and Tenant
in payment of the lesser of: (A) the amounts so requested by Tenant, less a
ten percent (10%) retention (the aggregate amount of such retentions to be
known as the "FINAL RETENTION"), and (B) the balance of any remaining
available portion of the Landlord's Allowance (not including the Final
Retention), provided that Landlord does not dispute any request for payment
based on non-compliance of any work with the Plans, or due to any substandard
work, or for any other reason. Landlord's payment of such amounts shall not
be deemed Landlord's approval or acceptance of the work furnished or
materials supplied as set forth in Tenant's payment request. Payment shall be
made to Tenant within thirty (30) days after Landlord's receipt of a Complete
Payment Request.
(c) FINAL RETENTION. Subject to the provisions of this Work
Letter, a check for the Final Retention payable jointly to Tenant and
Contractor shall be delivered by Landlord to Tenant provided the following
conditions have been satisfied: (i) the construction of the Tenant Work has
been completed, (ii)Tenant has delivered to Landlord properly executed
mechanics lien releases in compliance with both California Civil Code Section
3262(d)(2) and either Section 3262(d)(3) or Section 3262(d)(4) from Tenant's
Agents or any other person or entity entitled to file a mechanic's lien,
(iii) Landlord has determined that no substandard work exists which adversely
affects the mechanical, electrical, plumbing, heating, ventilating and air
conditioning, life-safety or other systems of the Building, the curtain wall
of the Building, the structure or exterior appearance of the Building, or any
other tenant's use of such other tenant's leased premises in the Building,
(iv) Tenant has delivered to Landlord a certificate of occupancy for the
Premises, (v) Tenant has not done and has not permitted anything to be done
that would affect the coverage of any performance or labor and material
payment bonds required pursuant to Section 4(b) above, (vi) the information
and documentation set forth on SCHEDULE 4 attached hereto, (vii) Tenant
delivers to Landlord a certificate, in a form reasonably acceptable to
Landlord, certifying that the construction of the Tenant Work in the Premises
has been
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substantially completed, and (viii) Tenant has complied with all of the other
terms of the Work Letter, including, without limitation, Section 7(b).
(d) FINAL COSTS. Prior to the commencement of the construction
of the Tenant Work, and after Tenant has accepted all bids for the Tenant
Work, Tenant shall provide Landlord with a detailed breakdown, by trade, of
the final costs to be incurred or which have been incurred, as set forth more
particularly in Sections 6(a)(1) - (6), above, in connection with the design
and construction of the Tenant Work to be performed by or at the direction of
Tenant or the Contractor, which costs form a basis for the amount of the
Contract (the "FINAL COSTS"). Thereafter, in connection with each payment
requested by Tenant pursuant to Section 7(a) above, Tenant shall pay a
fraction (the "Tenants Share") of such payment, which fraction shall have the
Final Costs less the Tenant Improvement Allowance and the Construction Review
Fee as the numerator and the Final Costs as the denominator. By way of
example, if Tenant Improvement Allowance were $1,000 and the Final Costs were
$1,200, Tenant's share would be 1/6. In the event that, after the Final Costs
have been delivered by Tenant, to Landlord, the costs relating to the design
and construction of the Tenant Work shall change, any additional costs
necessary to such design and construction in excess of the Final Costs, shall
be paid by Tenant to Landlord immediately or at Landlord's option, Tenant
shall make payments for such additional costs out of its own funds, but
Tenant shall continue to provide Landlord with the documents described in
Section 7(a) of this Work Letter, above, for Landlord's approval, prior to
Tenant paying such costs.
(e) OTHER TERMS. Landlord shall only be obligated to make
disbursements from the Tenant Improvement Allowance to the extent costs are
incurred by Tenant for Tenant Improvement Allowance Items and disbursement of
the Landlord's Allowance shall be subject to the provisions of paragraphs
7(b) and (c) above.
8. CHANGES AND DELAYS.
(a) Tenant may request any change, addition or
alteration in the Tenant Work as shown on the final approved Tenant's Plans
(a "Change Order") by delivery of a written request therefor and complete
working drawings showing the proposed change, addition or alteration to
Landlord. Landlord shall not unreasonably withhold its consent to any such
Change Order, provided the requested change does not adversely affect the
Building's structure, systems, equipment, security system or appearance. If
the requested change adversely affects the Building's structure, systems,
equipment, security system or appearance, then Landlord may withhold its
consent to such Change Order in Landlord's sole discretion. Following receipt
of such request, Landlord shall promptly give Tenant a written description of
the changes in such Change Order, if any, required for approval thereof by
Landlord. The standards and conditions of Landlord's approval for Tenant's
Plans shall also apply to Change Orders.
(b) "Tenant Delay" shall include, but not be limited to, any
delay in the Rent Commencement Date for each respective floor of the Premises
or in the completion of the Tenant Work or Base Building Work resulting from
(i) a request of Tenant to delay the same, (ii) Tenant's failure to comply
with the provisions of this Work Letter, including failure to provide
information or give approvals within the time periods specified herein and
failure to pay any sums payable by Tenant within the time periods specified
herein, (iii) Tenant's default under
10
<PAGE>
Section 14(c) hereof, (iv) any other act or omission of Tenant, (iv) any
additional time, as reasonably determined by Landlord, required for ordering,
receiving, fabricating and/or installing items of material or other
components of the Tenant Work, including, without limitation, millwork, which
unreasonably delay Substantial Completion of the Tenant Work and which are
not used for construction of Building standard tenant improvement work in the
remainder of the Building, (v) the submission by Tenant of a request for any
Change Order following preparation and approval of the Tenant's Plans, (vi)
any additional time, as reasonably determined by Landlord, required for
implementation of any Change Order with respect to the Tenant Work, or (vii)
any delay caused by Tenant's Space Planner. Notwithstanding the foregoing
provisions of this Section 8(b), a Tenant Delay shall not include any delay
resulting from a Landlord Delay or a Force Majeure Event. In the event that a
Tenant Delay occurs, Tenant shall immediately pay to Landlord as additional
rent the total costs and any expenses occasioned by such delay, including,
without limitation, any costs and expenses attributable to increases in labor
or materials or incurred by Landlord to review and approve a Change Order.
Landlord must give Tenant written notice of claims of Tenant Delay within
five (5) days of the occurrence of the event on which such Tenant Delay claim
is based. If such notice is not provided within the said five (5) day period,
Landlord shall has no right to claim a Tenant Delay for any period prior to
five (5) days prior to the date on which such notice is given.
(c) "Landlord Delay" shall be any delay in the completion of the
Tenant Work resulting from (i) a request of Landlord to delay the same, (ii)
Landlord requirement of any Change Order to the Tenant Work following
commencement of the Base Building Work and any additional time required for
implementation of such Change Order, (iii) Landlord's failure to comply with
the provisions of this Work Letter, including failure to provide information
or give approvals within the time periods specified herein and failure to pay
any sums payable by Landlord within the time periods specified herein, (iv)
material and unreasonable interference by Landlord, its agents or contractors
with the completion of the Tenant Work, which interference objectively
precludes construction of Tenant Work in the Premises by any person, or which
interference relates to access by Tenant, its agents and contractors to the
Building and/or the Premises or any Building facilities (including loading
docks and freight elevators) or service (including temporary power and
parking areas) during normal construction hours, or the use thereof during
normal construction hours, (v) Landlord's failure to complete Part I of the
Base Building Work to Tenant by the designated Premises Delivery Date for a
particular floor, or (vi) Landlord's failure to complete Part II of the Base
Building Work to Tenant on or before Landlord's receipt of Tenant's
Architect's certification of Substantial Completion pursuant to Section 5(b)
above. Notwithstanding the foregoing, a Landlord Delay shall not include any
delay resulting from a Tenant Delay or a Force Majeure Event. Tenant must
give Landlord written notice of claims of Landlord Delay within five (5) days
of each day on which such Landlord Delay is claimed to have occurred. If such
notice is not provided within the said five (5) day period, Tenant shall lose
the right to receive a delay of the Term Commencement Date on a particular
floor for such day or days. Notwithstanding anything to the contrary
contained herein, any delay in completion of either Part I or Part II of the
Base Building Work resulting from the failure of Tenant to deliver those
plans required pursuant to Section 2 above within a time period so as not to
impede any design, demolition or construction work to be done by Landlord
shall not be deemed a Landlord Delay
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<PAGE>
(d) "Force Majeure Event" shall mean any delay in the Base
Building Work or the Tenant Work caused directly or indirectly, by reason of
acts of God, governmental restrictions, strikes, labor disturbances,
shortages of materials or supplies or any other cause or event beyond
Landlord's or Tenant's reasonable control. Unless any of the causes or events
listed above permanently renders completion of the Base Building Work or the
Tenant Work on a particular floor in the Premises impossible or
impracticable, however, such cause or event shall only suspend the time for
performance of, and shall not discharge or release the parties from, their
obligations hereunder.
9. INDEMNITY.
Tenant's indemnity of Landlord as set forth in Section 14
of this Lease shall also apply with respect to any and all costs, losses,
damages, injuries and liabilities related in any way to any act or omission
of Tenant or Tenant's Agents, or anyone directly or indirectly employed by
any of them, or in connection with Tenant's non-payment of any amount arising
out of the Tenant Work and/or Tenant's disapproval of all or any portion of
any request for payment. Such indemnity by Tenant, as set forth in Section 14
of this Lease, shall also apply with respect to any and all costs, losses,
damages, injuries and liabilities related in any way to Landlord's
performance of any ministerial acts reasonably necessary (i) to permit Tenant
to complete the Tenant Work, and (ii) to enable Tenant to obtain any building
permit or certificate of occupancy for the Premises.
10. REQUIREMENTS OF TENANT'S AGENTS.
Each of Tenant's Agents shall guarantee to Tenant and for
the benefit of Landlord that the portion of the Tenant Work for which it is
responsible shall be free from any defects in workmanship and materials for a
period of not less than one (1) year from the date of completion thereof.
Each of Tenant's Agents shall be responsible for the replacement or repair,
without additional charge, of all work done or furnished in accordance with
its contract that shall become defective within one (1) year after the later
to occur of (i) completion of the work performed by such contractor or
subcontractors and (ii) the Rent Commencement Date for the floor upon which
the work was done. The correction of such work shall include, without
additional charge, all additional expenses and damages incurred in connection
with such removal or replacement of all or any part of the Tenant Work,
and/or the Building and/or common areas that may be damaged or disturbed
thereby. All such warranties or guarantees as to materials or workmanship of
or with respect to the Tenant Work shall be contained in the Contract or
subcontract and shall be written such that such guarantees or warranties
shall inure to the benefit of both Landlord and Tenant, as their respective
interests may appear, and can be directly enforced by either Tenant covenants
to give to Landlord any assignment or other assurances which may be necessary
to effect such right of direct enforcement.
11. MEETINGS.
Commencing upon mutual execution of the Lease, Tenant shall
hold weekly meetings at a reasonable time with the Contractor regarding the
progress of the preparation of Plans and the construction of the Tenant Work,
which meetings shall be held at a location mutually designated by Landlord
and Tenant, and Landlord and/or its agents shall receive prior
12
<PAGE>
notice of, and shall have the right to attend, all such meetings, and, upon
Landlord's request, certain of Tenant's Agents shall attend such meetings. In
addition, minutes shall be taken at all such meetings, a copy of which
minutes shall be promptly delivered to Landlord. One such meeting each month
shall include the review of Contractor's current request for payment.
12. AMERICAN WITH DISABILITIES ACT AND SIMILAR ACTS.
Except as set forth in Section 2 of this Work Letter with
respect to the Base Building Work, Tenant shall reimburse Landlord upon
demand for any and all costs incurred by Landlord to comply with the
provisions of the ADA, Title 24 and other similar federal, state and local
laws and regulations, including, without limitation, any alterations required
under the ADA for the purposes of "public accommodations" (as that term is
used in the ADA), and alterations required under the ADA, Title 24 or such
other similar federal, state or local laws and regulations in any other
portion of the floor on which the Premises are located or any other portion
of the Building arising out of Tenant's specific use of the Premises, or any
aspect of Tenant's Work, other than customary ADA upgrades outside of the
Premises required in connection with customary and ordinary general office
uses.
13. EARLY ACCESS.
Tenant may, with Landlord's written consent which shall be
granted or withheld in Landlord's reasonable discretion, enter the premises
prior to the term commencement date of a particular floor in the premises
solely for the purposes of installing tenant's personal property and
equipment as long as such entry will not interfere with the orderly
construction and completion of the premises. Tenant shall notify Landlord of
its desired time(s) of entry and shall submit for Landlord's approval the
scope of the work to be performed and the name(s) of the contractor(s) who
will perform such work. Tenant shall have all applicable insurance and shall
comply with all building rules and regulations. Tenant hereby indemnifies and
agrees to protect, defend and hold Landlord, Landlord's property manager, any
mortgagee, ground lessor or beneficiary of a deed of trust related to the
premises or the building, and any officers, agents or employees of any
thereof, from and against any claims, liabilities or causes of action
(including claims for worker's compensation) of any nature whatsoever,
together with reasonable attorneys' fees for counsel of Landlord's choice,
arising out of or in connection with such entry onto the premises or the
installation of Tenant's personal property or equipment (including but not
limited to claims of breach of warranty, personal injury or property damage).
Landlord shall have the right, in Landlord's sole and exclusive discretion,
to settle, compromise, or otherwise dispose of any and all such suits, claims
and actions.
14. MISCELLANEOUS.
(a) Tenant's Representative. Tenant has designated Katherine
Andreasen as its sole representative with respect to the matters set forth in
this Work Letter, who shall have full authority and responsibility to act on
behalf of the Tenant as required in this Work Letter.
(b) Landlord's Representative. Landlord has designated Frank
Miskus as its sole representative with respect to the matters set forth in
this Work Letter, who, until further
13
<PAGE>
notice to Tenant, shall have full authority and responsibility to act on
behalf of the Landlord as required in this Work Letter.
(c) Tenant's Lease Default. Notwithstanding any provision to
the contrary contained in this Lease, if an event of default as described in
the Lease or 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 Landlord pursuant to the Lease, Landlord shall
have the right to withhold payment of all or any portion of the Tenant
Improvement Allowance and/or Landlord may cause any contractor to cease the
construction of the Premises (in which case, Tenant shall be responsible for
any delay in the Substantial Completion of the Base Building Work and/or the
Tenant Work caused by such work stoppage), and (ii) all other obligations of
Landlord under the terms of this Work Letter shall be suspended until such
time as such default is cured pursuant to the terms of this Lease (in which
case, Tenant shall be responsible for any delay in the Substantial Completion
of the Premises caused by such inaction by Landlord).
(d) Merger. Except as expressly set forth in this Work Letter
or in the Lease, Landlord has no other agreement with Tenant and has no other
obligation to do any work or pay any amounts with respect to the Premises.
Any other work in the Premises which may be permitted by Landlord pursuant to
the terms and conditions of the Lease shall be done at Tenant's sole cost and
expense and in accordance with the terms and conditions of the Lease.
(e) Applicability of Work Letter. This Work Letter shall not be
deemed applicable to any additional space added to the original Premises at
any time or from time to time, whether by any options under the Lease or
otherwise, or to any portion of the original Premises or any additions
thereto in the event of damage or destruction of the Premises, condemnation
of the Premises, or renewal or extension of the initial term of the Lease,
whether by any options under the Lease or otherwise, unless expressly so
provided in the Lease or any amendment or supplement thereto.
(f) Execution in Conjunction with Lease. This Work Letter is
being executed in conjunction with the Lease and is subject to each and every
term and condition thereof, including, without limitation, the limitations of
Landlord's liability set forth therein.
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IN WITNESS WHEREOF, the parties have executed this Work Letter on the
respective dates indicated below:
TENANT: LANDLORD:
Xoom.com, Inc., a OAIC Bush Street, LLC,
Delaware corporation a Delaware limited liability company
By: /s/ Chris Kitze By: /s/ Gregory Breskin
---------------------------- ------------------------------
Name: Chris Kitze Name: Gregory Breskin
---------------------------- ------------------------------
Its: Chairman Its: Vice President
---------------------------- ------------------------------
Date of Execution: 8/9/99 Date of Execution: Aug. 9, 1999
-------------- ---------------
By: /s/ John Harbottle By: /s/ Christine Reich
---------------------------- ------------------------------
Name: John Harbottle Name: Christine Reich
---------------------------- ------------------------------
Its: CFO Its: President
---------------------------- ------------------------------
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SCHEDULE 1
INFORMATION IN THE SPACE PLAN
1. Location and type of all partitions.
2. Location and type of all doors. Indicate hardware and provide
keying schedule.
3. Location and type of glass partitions, windows, and doors.
Indicate framing and reference full-height partitions.
4. Critical dimensions necessary for construction, with
indication of required clearances.
5. Location and types of all electrical items: outlets,
switches, telephone outlets and lighting.
6. Location and type of equipment that will require special
electrical requirements. Provide manufacturers'
specifications for use and operation, including heat output.
7. Location, weight per square foot, and description of any
heavy equipment or filing system.
8. Requirements for special air-conditioning or ventilation.
9. Location and type of plumbing.
10. Location and type of kitchen equipment.
11. Location, type and color of floor covering, wall covering,
paint and finishes.
DETAILS SHOWING
1. All millwork with verified dimensions of all equipment to be
built in.
2. Corridor entrance.
3. Bracing or support of special walls, glass partitions, etc.,
if desired.
If not included with the plans, Tenant's engineer will design
all support or bracing required at Tenant's expense.
ADDITIONAL INFORMATION
1. Provide Landlord with Title 24 energy calculations with
submittal of the Final Plans.
<PAGE>
SCHEDULE 2
BASE BUILDING WORK
Landlord and Tenant acknowledge and agree that no Base Building Work will be
required by Landlord in connection with the 19th Floor
PART I
1. Demolition of the 8th, 9th, 12th, 13th, 20th, 21st and 22nd floor of
the Premises; provided that, in the event that Tenant initially
elects a Sublessee Build Out for the 8th and/or 9th Floors pursuant
to Section 3 of this Lease, Landlord shall not be required to
perform any demolition work on the 8th and/or 9th Floor; provided
further that, in the event that Tenant initially elects a Sublessee
Build Out for the 8th and/or 9th Floors and later elects to proceed
with the Tenant Build Out pursuant to Section 3 of this Lease,
Landlord shall have six (6) weeks to complete the demolition on said
floor.
2. As set forth in Section 1(d) of this Work Letter, Landlord shall
remove, encapsulate or perform other maintenance of asbestos which is
encountered during the construction of Part I of the Base Building
Work, excluding the 19th Floor, provided that the decision to remove,
encapsulate or perform other maintenance of such Hazardous Materials
shall be made at Landlord's sole discretion. Tenant may request
additional information with respect to asbestos removal through the
Building management office.
3. In connection with the 22nd Floor, Landlord shall perform additional
work under this Part I substantially in accordance with the proposed
plan set forth on Exhibit A-1 attached hereto (the "22nd Floor
Proposed Plan") and the loggia window and door treatment conceptual
plan set forth on Exhibit A-2 attached hereto (the "22nd Floor
Loggia Window and Door Conceptual Plan").
4. All exterior windows, transoms and related hardware shall be operable,
excluding those windows which are permanently sealed.
5. Landlord shall deliver to Tenant within thirty (30) days of the Lease
Execution Date, the base Building specifications for the HVAC system.
6. In connection with the 21st Floor, Landlord shall also demolish the
existing railing in the former library area.
PART II
1. Landlord shall provide adequate electrical service, including main
breakers and transformers, as required, up to maximum of five (5)
watts per square foot.
2. Landlord shall provide the main sprinkler loop and branch distribution
for the Premises on an unoccupied basis.
<PAGE>
3. The Landlord shall supply the existing HVAC loop on the 8th Floor, 9th
Floor, 12th Floor and 13th Floor and install the HVAC loop on the 20th
Floor, 21st Floor and 22nd Floor. Tenant shall be responsible for all
distribution.
4. Landlord shall provide the main life safety loop on the 8th, 9th, 12th
Floor, 13th Floor, 20th Floor, 21st Floor, and 22nd Floor, including
devices as required for unoccupied space.
5. A men's restroom and women's restroom on each floor of the Premises,
excluding the 19th Floor, in a location, with designs and finishes,
all designated by Landlord in Landlord's sole discretion, shall
comply with Title 24, and ADA as required by the City of San
Francisco code.
<PAGE>
EXHIBIT A-1 TO SCHEDULE 2
DIAGRAM OF 22ND FLOOR PROPOSED PLAN
<PAGE>
EXHIBIT A-2 TO SCHEDULE 2
DIAGRAM OF 22ND FLOOR LOGGIA WINDOW AND DOOR CONCEPTUAL PLAN
<PAGE>
SCHEDULE 3
OAIC CONSTRUCTION AGREEMENT
[SEE ATTACHED]
<PAGE>
CONSTRUCTION AGREEMENT
BETWEEN
OWNER:
AND
CONTRACTOR:
CONTRACT NO.:
X ON CALL SINGLE PROJECT
- -- ---
JOB/LOCATION: ON CALL
------------------------------------------------------------------
1
<PAGE>
CONSTRUCTION AGREEMENT
PROJECT NAME: ___________________ (if for single project)
THIS CONSTRUCTION AGREEMENT (this "Agreement"), is made and entered into
as of the ____ day of _________, 1998, by and between __________, a _________
(the "Owner") and _____________, a ________________ (the "Contractor").
In consideration of the mutual covenants hereinafter set forth, and
other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
Capitalized terms which are used in this Agreement and not otherwise
defined in this Agreement shall have the meanings given to such terms in the
General Conditions. Unless otherwise specified, references herein to numbered
articles and paragraphs are to those in this Agreement. This Agreement shall
be referred to throughout the Contract Documents as the "Agreement". The
following terms shall have the meanings set forth below:
2
<PAGE>
1.1 "COMMENCEMENT DATE" shall mean the earlier of ____(ON CALL)___ or
the date fixed in a Notice to Proceed to be delivered by Owner to Contractor
after the date of this Agreement if this Agreement is for an individual
project or service. If this Agreement if for continuing (on-call) Work (as
defined hereafter) on multiple projects or continuing (on-call) services, the
Commencement Date shall be the date fixed in the job specific Work
Authorization forms delivered by Owner to Contractor after the date of this
Agreement. The Commencement Date shall be the date from which any deadlines
for completion of the Work or portions thereof shall be measured, provided,
however no notice to proceed and no Commencement Date may become effective
until after all applicable permits have been issued unless the Contractor,
any subcontractor, and/or any of their respective agents, representatives,
suppliers or any other person or entity directly or indirectly employed,
utilized and/or controlled by any of them are responsible for obtaining the
applicable permits.
1.2 "CONTRACT DOCUMENTS" shall mean this Agreement, the General
Conditions, any special, supplementary or other conditions set forth on
EXHIBIT B (collectively, "Special Conditions"), the Drawings, the
Specifications, all Addenda (except portions thereof relating purely to the
bidding form or bidding procedure), all Modifications and all other documents
enumerated on EXHIBIT A attached hereto. The Contract Documents collectively
form the Contract and all are fully a part thereof as if attached to this
Agreement or repeated herein.
1.3 "CONTRACT SUM" shall mean: As full compensation for Contractor's
performance of its Work (as defined hereafter) under this Agreement, Owner
will pay Contractor in accordance with the terms and conditions of this
Agreement, only the amount authorized in writing in accordance with the basis
of compensation and fees noted below; or as agreed to by Owner and
Contractor. Such compensation shall include all taxes incurred by Contractor
in its performance of its Work:
( ) Lump Sum. The sum of ___________________ Dollars ($ ),
3
<PAGE>
subject to additions and deductions as provided in the Contract Documents.
( ) Hourly Rate as set forth in the attached ADDENDUM 1, subject to
additions and deductions as provided in the Contract Documents.
( ) In accordance with the fees described in ADDENDUM 1, subject to
additions and deductions as provided in the Contract Documents.
(X) As detailed on job specific Work Authorization, subject to
additions and deductions as provided in the Contract Documents.
1.4 "CONTRACT TIME" shall have the meaning ascribed thereto in
Section 5.1 below.
1.5 "GENERAL CONDITIONS" shall mean the General Conditions of the
Contract for Construction attached hereto as EXHIBIT C.
1.6 "PROJECT" shall mean for Work at the following location(s):
_______(ON CALL)_______________________________________________________________
unless this Agreement is for continuing (on-call) Work (as defined hereafter)
on multiple project or continuing (on-call) services in which case the
Project shall mean the Work at the locations set forth in the job specific
Work Authorization form.
1.7 "NATURE OF PROJECT" this Agreement is for:
( ) An individual project or an individual service contract:
Project or contract name: ________________
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Owner's contract number: _______________
Owner's assigned job number: ____________
(X) Continuing (on-call) Work (as defined hereafter) on multiple
projects, or continuing (on-call) services. Each project or request for Work
must be individually described in the job specific Work Authorization on the
Owner approved form, which must include a description of (i) the location(s),
(ii) scope(s) of Work, (iii) timetables (i.e. Commencement Date, Substantial
Completion Dates and Milestone Dates), (iv) basis of compensation, and
(v) Authorization(s) to Proceed on the Owner approved form. The terms and
conditions of the agreement shall apply separately to each project or
service. One or more project(s) or service(s) may be in process at any time,
or during certain periods of time no project or service may be in process.
1.8 "SUBSTANTIAL COMPLETION DATE" shall be ___(ON CALL)____ if this
Agreement is for an individual project or service. If this Agreement if for
continuing (on-call) Work on multiple project or continuing (on-call)
services, the Substantial Completion Date shall be as set forth in the job
specific Work Authorization form. In either event, the Substantial Completion
Date is subject to adjustment in accordance with the Contract Documents.
1.9 "WORK" shall mean and include the totality of the obligations
imposed upon the Contractor by this Agreement and by all other provisions of
the Contract Documents, including, without limitation, the structures to be
built, the materials, equipment and supplies to be provided and the labor to
be performed pursuant to the Contract Documents as set forth on Exhibit A
attached hereto which are incorporated herein by reference.
5
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1.10 "MILESTONE DATES" shall be as set forth on Exhibit D attached
hereto unless this Agreement is for continuing (on-call) Work on multiple
projects or continuing (on-call) services in which case the Milestone Dates
shall be as set forth in the job specific Work Authorization form.
1.11 "SCHEDULE OF VALUES" shall allocate the entire Contract Sum among
the various portions of the Work, generally following the Uniform
Construction Index (CSI) cost analysis format as set forth on Exhibit J
attached hereto.
ARTICLE 2
PERFORMANCE OF THE WORK
2.1 The Contractor shall fully perform and complete the Work in
compliance with the terms and provisions of the Contract. In connection
therewith, the Contractor shall perform or cause to be performed all actions
and shall provide and pay for all materials, tools, equipment, supplies,
labor and professional and non-professional services, and shall perform all
other acts and supply all other things necessary to fully and properly
perform and complete the Work pursuant to the Contract Documents.
2.2 The Contractor shall be solely responsible for the construction
means, methods, techniques and procedures utilized to perform and complete
the Work.
ARTICLE 3
OWNER'S REPRESENTATIVE
3.1 The Owner's authorized representative (herein referred to as the
"Owner's Representative") shall be Ken Kuropatkin; provided, however, that
the Owner may, without liability to the Contractor, unilaterally amend this
Article from time to time by designating a
6
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different person or organization to act as its representative and so advising
the Contractor in writing, at which time the person or organization so
designated shall be the Owner's Representative for purposes of the Contract.
ARTICLE 4
THE ARCHITECT/ENGINEER
4.1 The Architect/Engineer for the Project (herein referred to as the
"A/E" or "Architect") is ___(ON CALL)_____, whose mailing address is
_______________, _________________ unless otherwise set forth in the job
specific Work Authorization, if applicable; provided, however, that the Owner
may, without liability to the Contractor, unilaterally amend this Article
from time to time by designating a different person or organization to act as
the A/E and so advising the Contractor in writing, at which time the person
or organization so designated shall be the A/E for the purposes of the
Contract.
ARTICLE 5
TIME OF COMMENCEMENT AND COMPLETION
5.1 The Contractor will commence the Work promptly on the Commencement
Date and shall substantially complete all Work on or before the Substantial
Completion Date (such period of time is herein referred to as the "Contract
Time") and in accordance with such interim milestone dates (herein referred
to as the "Milestones Dates") as may be specified in the Contract Documents.
The Contract Time and such Milestones Dates are of the essence of the
Contract.
5.2 If any Work is performed by the Contractor prior to the execution
of this Agreement based on receipt of a written Notice to Proceed, all such
Work performed shall be in accordance with and governed by the Contract
Documents.
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ARTICLE 6
CONTRACT SUM
6.1 Provided that the Contractor strictly and completely performs all
of its obligations under the Contract Documents in a timely manner, and
subject only to additions and deductions by Change Order or as otherwise
provided in the General Conditions, the Owner shall pay to the Contractor, at
the times and in the installments hereinafter specified, the Contract Sum, to
cover the Contractor's profit, general overhead and all costs and expenses of
any nature whatsoever (including, without limitation, taxes, labor and
materials), and any increases in said costs and expenses, incurred by the
Contractor in connection with the performance of the Work, all of which costs
and expenses shall be borne solely by the Contractor.
ARTICLE 7
APPLICATIONS FOR PAYMENT
7.1 The Contractor shall, on or before the fifth (5th) day of each
calendar month (the "Payment Application Date"), deliver to the Owner an
Application for Payment in accordance with the provisions of Article 9 of the
General Conditions. Each Application for Payment submitted by the Contractor
shall cover one calendar month, and shall cover a period commencing on the
first day of the previous month and ending on the last day of the previous
month. The Schedule of Values shall be used as a basis for the Contractor's
Applications for Payment and the review thereof by Owner. Each Application
for Payment shall include the Schedule of Values and be further broken down
by facility, labor and material, all as required by the Owner.
ARTICLE 8
8
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PROGRESS PAYMENTS AND FINAL PAYMENT
OF THE CONTRACT SUM
8.1 Based on the Contractor's Application for Payment, the Approved
Schedule of Values and the approval of the Application for Payment issued by
the Owner pursuant to Article 9 of the General Conditions, the Owner shall
make monthly payments to the Contractor on account of the Contract Sum. Such
monthly payment shall be made on or before the thirtieth (30th) day after
receipt by the Owner of the Contractor's Application for Payment, and of all
documentation, in proper form, to substantiate the amount owed, whichever is
later; provided, however, that the Owner shall have no obligation to make
payment as aforesaid if Owner withholds approval thereof as permitted under
Subparagraph 9.3.1 of the General Conditions or if the Contractor has not
submitted to the Owner with its Application for Payment all required
documentation. Each such monthly payment shall be in an amount equal to
ninety percent (90%) of the net amount allowed the Contractor for labor,
materials and equipment incorporated or used in the Work through the Payment
Application Date (or suitably stored at the Job Site and verified by material
invoice), as indicated in the Owner's approval of the Application for
Payment, after deducting any sums withheld by the Owner pursuant to the
Contract Documents and the aggregate of all previous payments to the
Contractor on account of the Contract Sum. Upon Substantial Completion of the
Work, as set forth in Subparagraph 1.12 of the General Conditions, the Owner
shall pay to the Contractor an amount necessary to increase the aggregate
payments theretofore made to the Contractor on account of the Contract Sum to
ninety percent (90%) of the Contract Sum, less such retainage as the Owner
shall determine is necessary for all incomplete Work, unsettled claims or
other matters for which the Owner is permitted to withhold under the General
Conditions.
8.1.1 All monthly payments approved by Owner in accordance with this
Agreement not paid on or before the thirtieth (30th) day after receipt by the
Owner of the Contractor's Application for Payment shall accrue interest at
the rate of Twelve Percent (12%) per year.
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8.2 Final payment, constituting the entire unpaid balance of the
Contract Sum, shall be paid by the Owner to the Contractor within forty-five
(45) days after approval by the Owner of the final Application for Payment in
accordance with the General Conditions; provided, however, that final payment
shall in no event be due unless and until the Contractor shall have complied
with all provisions of the Contract Documents, including those contained in
Subparagraph 9.4.2 of the General Conditions. In addition, defects in the
Work discovered prior to final payment shall be treated as non-conforming
Work and shall be corrected by the Contractor prior to final payment and not
treated as warranty items.
ARTICLE 9
CONTRACTOR'S REPRESENTATIONS,
WARRANTIES AND COVENANTS
9.1 The Contractor hereby represents and warrants to the Owner that:
(a) Contractor is duly licensed to observe and perform the terms,
covenants, conditions and other provisions on its part to be observed or
performed hereunder;
(b) Contractor is experienced and skilled in the construction and
work of the type described in or required by the Contract Documents;
(c) All equipment and materials used in connection with the Work
shall be new (except if otherwise required by the Specifications), and the
equipment, the materials and the Work shall be in accordance with industry
standards, free from faults and defects and shall strictly conform to the
Contract Documents; and
10
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9.2 The Contractor accepts the contractual relationship established
between Contractor and the Owner. Contractor shall furnish its best skill and
judgment and cooperate with the Owner in furthering the interests of the
Owner. Contractor shall furnish efficient business administration and
superintendence to perform the Work in a workmanlike manner consistent with
industry standards and consistent with the Specifications.
9.3 Contractor hereby represents, warrants and covenants that (i)
Contractor has provided nothing of material value to any employee, agent or
independent contractor of Owner or any of its affiliates in connection with
this Agreement or any other agreement between Contractor and Owner and (ii)
Contractor shall not at any time provide anything of material value to any
employee, agent or independent contractor of Owner or any of its affiliates
in connection with this Agreement or any other agreement between Contractor
and Owner. Contractor hereby acknowledges and intends that Owner shall rely
upon Contractor's representations, warranties and covenants contained in this
Section, and Contractor shall execute a certificate confirming the foregoing
at Owner's request.
ARTICLE 10
TERMINATION
10.1 Termination of the Contract by the Owner, with or without
cause, and by the Contractor are provided for in Article 15 of the General
Conditions. If the Owner terminates the Contract pursuant to Paragraph 15.2
of the General Conditions, and the unpaid balance of the Contract Sum exceeds
the costs and expenses incurred by or on behalf of the Owner in finishing the
Work, including compensation for any additional architectural, engineering,
management and administrative services, such excess shall, upon the
completion of the Work, be paid to the Contractor. If such costs exceed such
unpaid balance, the Contractor shall pay the difference to the Owner upon
demand.
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ARTICLE 11
MISCELLANEOUS
11.1 No notice or other communication will be deemed given unless
sent in any of the manners, and to the persons, specified in this Section.
All notices and other communications hereunder will be in writing and will be
deemed given (a) upon receipt if delivered personally (unless subject to
clause (b)) or if mailed by registered or certified mail, (b) at noon on the
date after dispatch if sent by overnight courier or (c) upon the completion
of transmission (which is confirmed by telephone or by a statement generated
by the transmitting machine) if transmitted by telecopy or other means of
facsimile which provides immediate or near immediate transmission to
compatible equipment in the possession of the recipient, in any case to the
parties at the following addresses or telecopy numbers (or at such other
address or telecopy number for a party as will be specified by like notice):
if to Contractor:
Attention:
Telecopy Number: ( )
Confirmation Number: ( )
or if to the Owner:
c/o Ocwen Federal Bank FSB
The Forum, Suite 400
1675 Palm Beach Lakes Boulevard
West Palm Beach, FL 33401
Attention: William H. Stolberg
Telecopy Number: 561 682-8275
Confirmation Number: 561 682-8182
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cc: Secretary
Telecopy Number:
-------------------
Confirmation Number:
---------------
cc Owner's Representative: Compass Management and Leasing, Inc.
1 Front Street, Suite 1200
San Francisco, CA 94111
Attention:
Telecopy Number:
Confirmation Number:
11.2 Contractor will not use Owner's or any of Owner's affiliates'
names, marks, logos or other designations for any reason (including, without
limitation, advertising, publicity and promotional materials) without Owner's
express prior written consent in each instance, and all such names, marks,
logos and other designations of Owner will at all times be and remain the
sole and exclusive property of Owner. The foregoing notwithstanding,
Contractor will have the right to include representations of the design of
the Project, including photographs of the exterior and interior, among
Contractor's promotional materials. The Owner agrees to provide professional
credit for the Contractor on the construction sign and in the promotional
materials for the Project, if any, in a form chosen by Owner.
11.3 No payment made under this Agreement shall be conclusive
evidence of the performance of this Agreement by Contractor, either wholly or
in part, and no payment will be construed to be an acceptance of, or to
relieve Contractor of liability for, Contractor's failure to perform its
duties and obligations under this Agreement in accordance with the terms of
this Agreement.
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11.4 This Agreement and the respective rights and obligations of the
parties hereto will be governed and construed in all respects in accordance
with the laws of the state where the Job Site is located, without regard to
its conflicts of laws provisions.
11.5 Contractor will at all times be an independent contractor and
nothing in this Agreement will at any time be construed so as to create the
relationship of employer and employee, principal and agent, partnership or
joint venture as between Contractor and Owner. Contractor acknowledges that
it will have no authority to bind Owner to any contractual or other
obligation.
11.6 All rights available to either party under this Agreement, or
allowed it by law or equity, are and will be cumulative and may be exercised
separately or concurrently and from time to time without waiver of any other
remedies. No party hereto will be deemed to waive any right, power or
privilege under this Agreement unless such waiver is expressed in a written
instrument signed by the waiving party. The failure of any party hereto to
enforce any provision of this Agreement will in no way be construed as a
waiver of such provision or a right of such party to thereafter enforce such
provision or any other provision of this Agreement.
11.7 The Contract constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements, understandings, representations, proposals, discussions and
communications, whether oral or in writing, between the parties with respect
to the subject matter of this Agreement. EXHIBIT A, EXHIBIT B, EXHIBIT C,
EXHIBIT D, EXHIBIT E, EXHIBIT F, EXHIBIT G, EXHIBIT H, EXHIBIT I, EXHIBIT J,
ADDENDUM 1, AND ADDENDUM 2 to this Agreement are each hereby incorporated
into this Agreement in their entirety by this reference.
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11.8 The Contract may not be amended or modified in any manner
except by a written agreement executed by each of the parties hereto.
11.9 If any provision of the Contract is held to be invalid or
unenforceable for any reason, such provision will be conformed to prevailing
law rather than voided, if possible, in order to achieve the intent of the
parties and, in any event, the remaining provisions of this Agreement will
remain in full force and effect and will be binding upon the parties hereto.
11.10 This Agreement may be executed in any number of counterparts,
each of which when so executed and delivered will be deemed an original, but
all of which will together constitute one and the same agreement.
11.11 The enumeration and headings contained in this Agreement are
for convenience of reference only and will not control or affect the meaning
or interpretation of any of the provisions of this Agreement.
11.12 In its performance of its duties and obligations under the
Contract, Contractor and its employees and subcontractors will at all times
fully comply with all federal, state and local laws, statutes, ordinances,
rules, regulations and orders.
11.13 THE PARTIES HERETO HEREBY KNOWINGLY AND VOLUNTARILY WAIVE ANY
RIGHT WHICH EITHER OR BOTH OF THEM WILL HAVE TO RECEIVE A TRIAL BY JURY WITH
RESPECT TO ANY CLAIMS, CONTROVERSIES OR DISPUTES WHICH WILL ARISE OUT OF THIS
AGREEMENT OR THE SUBJECT MATTER HEREOF. ANY SUCH CLAIMS OR CONTROVERSIES OR
DISPUTES SHALL BE HEARD BY A JUDGE.
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11.14 Unless the context of this Agreement otherwise clearly
requires, (i) references in this Agreement to the plural include the
singular, the singular the plural, the masculine the feminine, the feminine
the masculine and the part the whole and (ii) the word "or" will not be
construed as exclusive and the word "including" will not be construed as
limiting.
11.15 All employees of Contractor, whether performing their
functions at Contractor's place of business, the Job Site or elsewhere,
shall, at all times, be and remain employees of Contractor and shall not be
employees of Owner. Contractor shall pay all wages, salaries and other
amounts due to its employees who perform on Contractor's behalf under this
Agreement or any other agreement between Owner and Contractor, and Contractor
shall be solely responsible for all reports, payments and other obligations
respecting such employees, including, without limitation, those obligations
relating to social security, income tax withholding, unemployment
compensation and workers' compensation.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed the day and year first above written.
OWNER:
By: Compass Management and Leasing, Inc.
Its authorized representative
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
CONTRACTOR:
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
17
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LIST OF EXHIBITS
<TABLE>
<CAPTION>
<C> <S>
EXHIBIT A - List of Contract Documents
EXHIBIT B - Special Conditions
EXHIBIT C - General Conditions of the Contract for
Construction
EXHIBIT D - Milestone Dates
EXHIBIT E - Contractor's Guarantee to Owner
EXHIBIT F - Payment Bond
EXHIBIT G - Performance Bond
EXHIBIT H - Change Order Form
EXHIBIT I - Project Real Estate - Legal Description
EXHIBIT J - Schedule of Values
ADDENDUM 1 - Hourly Rate or Fee Schedule, if applicable
ADDENDUM 2 - Work Authorization Form
</TABLE>
18
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EXHIBIT A
LIST OF CONTRACT DOCUMENTS
19
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EXHIBIT B
SPECIAL CONDITIONS
C. Materials purchased by Owner
Certain Materials specified in the Contract Documents and to be incorporated
into the Work have been purchased by Owner. The cost for loading, transporting
and unloading these Materials at the Project site are included in the Contract
Sum. The list of materials purchased by the Owner is bound within this Agreement
and made apart of the Contract Documents between Owner and Contractor.
20
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EXHIBIT C
GENERAL CONDITIONS OF THE
CONTRACT FOR CONSTRUCTION
The General Conditions of the Contract for Construction is bound within this
Agreement and made apart of the Contract Documents between Owner and Contractor.
21
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================================================================================
GENERAL CONDITIONS
OF THE
CONTRACT FOR CONSTRUCTION
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1
DEFINITIONS
1.1 The Contract............................................................................................. 1
1.2 The Owner................................................................................................ 1
1.3 The Owner's Representative............................................................................... 1
1.4 The Contractor........................................................................................... 1
1.5 Subcontractor; Sub-subcontractor......................................................................... 2
1.6 The Job Site............................................................................................. 2
1.7 Work; Contract Time; Contract Sum........................................................................ 2
1.8 Provide.................................................................................................. 2
1.9 Plans.................................................................................................... 2
1.10 Specifications........................................................................................... 2
1.11 Substantial Completion................................................................................... 2
ARTICLE 2
THE CONTRACT DOCUMENTS
2.1 Execution, Intent and Interpretations.................................................................... 2
2.2 Copies Furnished, Ownership.............................................................................. 3
2.3 No Oral Waiver........................................................................................... 3
ARTICLE 3
OWNER
3.1 Easements................................................................................................ 4
3.2 Access................................................................................................... 4
ARTICLE 4
THE OWNER'S REPRESENTATIONS
4.1 Contractual Relationships................................................................................ 4
4.2 Role..................................................................................................... 4
ARTICLE 5
CONTRACTOR
5.1 Supervision and Construction Procedures.................................................................. 4
5.2 Materials and Equipment.................................................................................. 5
5.3 Warranty................................................................................................. 5
5.4 Taxes; Fees and Licenses; Royalties and Patents.......................................................... 5
5.5 Compliance with Laws..................................................................................... 6
5.6 Tests.................................................................................................... 6
5.7 Drawings................................................................................................. 6
5.8 Binders.................................................................................................. 7
5.9 Cleaning................................................................................................. 7
5.10 Start Up................................................................................................. 7
5.11 General.................................................................................................. 7
ARTICLE 6
SUBCONTRACTORS
6.1 General.................................................................................................. 7
6.2 Award of Subcontracts.................................................................................... 7
6.3 Subcontractual Relations................................................................................. 7
ARTICLE 7
SEPARATE CONTRACTS
7.1 Owner's Right to Award Separate Contracts................................................................ 8
7.2 Mutual Responsibility of Contractors..................................................................... 8
ARTICLE 8
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TIME
8.1 Definitions.............................................................................................. 9
8.2 Progress and Completion; Scheduling...................................................................... 9
8.3 Delays, Extensions of Time and Overtime.................................................................. 10
8.4 Temporary Suspension of Work............................................................................. 12
ARTICLE 9
PAYMENTS AND COMPLETION
9.1 Application for Payment; Passage of Title................................................................ 12
9.2 Approvals of Applications for Payment.................................................................... 12
9.3 Payments Withheld; Owner's Right to Make Direct Payments for Work; Failure of Payment.................... 13
9.4 Substantial Completion and Final Payment................................................................. 14
9.5 Beneficial Use and Occupancy; Partial Substantial Completion............................................. 15
ARTICLE 10
PROTECTION OF PERSONS AND PROPERTY
10.1 Responsibility for Safety and Health..................................................................... 16
10.2 Protection of Work and Property; Responsibility for Loss................................................. 17
10.3 Emergencies.............................................................................................. 17
10.4 Cleanup.................................................................................................. 18
10.5 Owner's Standards........................................................................................ 18
ARTICLE 11
INSURANCE
11.1 Insurance Provided by Owner.............................................................................. 18
11.2 Contractor's Insurance................................................................................... 18
11.3 Schedule of Insurance Coverages.......................................................................... 19
11.4 Contractors Equipment Policy............................................................................. 20
11.5 Release of Waiver........................................................................................ 20
11.6 Claims Made Policies..................................................................................... 20
11.7 Indemnification.......................................................................................... 21
ARTICLE 12
CHANGES IN THE WORK
12.1 Change Orders and Directives............................................................................. 21
12.2 Changes Requiring an Increase in Contract Sum............................................................ 22
12.3 Changes Requiring a Decrease in Contract Sum............................................................. 23
12.4 Disputes Regarding Changes............................................................................... 23
12.5 Audit Rights............................................................................................. 23
ARTICLE 13
CLAIMS
13.1 Claims for Extensions of Contract Time................................................................... 23
13.2 Claims for Increases in Contract Sum..................................................................... 23
13.3 Resolution of Claims..................................................................................... 24
13.4 No Other Claims.......................................................................................... 24
13.5 No Arbitration........................................................................................... 24
ARTICLE 14
UNCOVERING AND CORRECTION OF WORK;
OWNER'S RIGHT TO CARRY OUT WORK
14.1 Uncovering of Work....................................................................................... 24
14.2 Correction of Work....................................................................................... 24
14.3 Owner's Right to Carry Out Work.......................................................................... 25
14.4 Acceptance of Defective or Non-Conforming Work........................................................... 25
ARTICLE 15
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TERMINATION OF CONTRACT
15.1 Termination by Contractor................................................................................ 26
15.2 Termination by Owner for Cause........................................................................... 26
15.3 Termination by Owner Without Cause....................................................................... 27
ARTICLE 16
MISCELLANEOUS PROVISIONS
16.1 Governing Law............................................................................................ 27
16.2 Assignability; Successors and Assigns.................................................................... 27
16.3 Performance and Payment Bonds............................................................................ 27
16.4 Union Agreements......................................................................................... 27
16.5 General.................................................................................................. 28
16.6 Immigration Reform Control Act........................................................................... 28
16.7 Attorney's Fees.......................................................................................... 28
</TABLE>
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GENERAL CONDITIONS OF THE
CONTRACT FOR CONSTRUCTION
ARTICLE 1
DEFINITIONS
The following terms shall have the meanings set forth below in this Article
1. Any terms not otherwise defined in these General Conditions shall have the
meaning given to such terms in the Agreement.
1.1 THE CONTRACT. The Contract for Construction (referred to herein as the
"Contract") is the sum of all Contract Documents. It represents the entire and
integrated agreement between the Owner and the Contractor and supersedes all
prior negotiations, representations, understandings or agreements, either
written or oral. The Contract may be amended or modified only by a Modification.
1.1.1 CONTRACT DOCUMENTS. The Contract Documents are as defined
in the Agreement. The Contract Documents do not include bidding
documents, such as the Advertisement or Invitation to Bid, the
Instructions to Bidders, sample forms, the Contractor's Bid or
portions of Addenda relating to and to the extent that they may
relate to any of the bidding documents or bidding procedure.
1.1.2 ADDENDUM. An Addendum is a written or graphic instrument
issued by the Owner prior to the execution of the Agreement which
sets forth additions, deletions or other revisions to the Contract
Documents or clarifications thereof.
1.1.3 MODIFICATION. A Modification is any change or
modification to the Contract agreed to in writing by Owner and
Contractor. A Modification may be accomplished by: (a) a Change
Order; (b) a Directive or (c) any other written amendment to the
Contract signed by both parties. A Modification may be made only
after execution of the Agreement. No Directive shall be construed
as a Change Order or other Modification unless it expressly so
states.
1.1.4 CHANGE ORDER. A Change Order is a written Modification
executed by both parties (except in the event of a unilateral
Change Order as herein provided) and consisting of additions,
deletions or other changes to the Contract. A Change Order may be
accompanied by and/or may identify additional or revised Drawings,
sketches or other written instructions which become and form part
of the Contract Documents by virtue of the executed Change Order.
Except as otherwise provided in Subparagraph 1.1.5, a change in the
Work, or a change in the Contract Time or the Contract Sum shall
become the subject of a Change Order.
1.1.5 DIRECTIVE. A Directive is a written document issued by
the Owner and consisting of additions, deletions, clarifications or
other written instructions issued by the Owner with respect to the
performance of the Work or the activities of the Contractor on the
Job Site or the property of the Owner. A Directive may include, but
shall not be limited to, a bulletin, an engineering change or other
orders or instructions. Directives may become the subject of a
Change Order, either singularly or collectively. Directives shall
become the subject of a Change Order if they involve a Change in
the Work or a change in the Contract Time or the Contract Sum.
1.2 THE OWNER. The Owner is the person or entity identified as such in
the Agreement. The term "Owner", whenever it appears in the Contract
Documents, means the Owner and/or the Owner's Representative acting on behalf
or for the benefit of the Owner (except as otherwise specified in the
Contract Documents or as the context otherwise requires); provided, however,
that with respect to any provisions of the Contract which require the
Contractor to provide insurance for the protection of the Owner or to release
the Owner from, or waive, any claims the Contractor may have against it, the
term "Owner" shall mean the Owner and the Owner's Representative, and the
parent, related, affiliated and subsidiary companies or partnerships of the
Owner (if any) and the officers, directors, shareholders, agents, employees,
partners and assigns of each, and shall, to the extent applicable partners,
include the parent, related, affiliated and subsidiary companies of the
Owner's Representative and the officers, directors, shareholders, agents,
employees and assigns of each.
1.3 THE OWNER'S REPRESENTATIVE. The Owner's Representative is the
person or entity designated from time to time by the Owner to act as its
representative as identified in Article 3 of the Agreement or the most
current Modification thereto.
1.4 THE CONTRACTOR. The Contractor is the person or entity identified as
such in the Agreement. The Contractor shall so designate a sufficient number
of Project representatives that there shall be at least one authorized
1
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representative on the Job Site at all times during which the Work is being
performed including, without limitation, a project manager (herein referred
to as the "Project Manager") who shall at all times have authority to act (in
all capacities necessary for the Work) for and bind the Contractor.
1.5 SUBCONTRACTOR; SUB-SUBCONTRACTOR.
1.5.1 A Subcontractor is a person or entity having a direct
contract with the Contractor to perform any of the Work at the Job
Site or to supply any materials or equipment to be incorporated in,
or utilized in connection with, the Work.
1.5.2 A Sub-subcontractor is a person or organization having a
direct or indirect contract (on any tier) with a Subcontractor to
perform any of the Work at the Job Site or to supply any materials
or equipment to be incorporated in, or utilized in connection with,
the Work.
1.6 JOB SITE. The Job Site shall mean the area in which the Work is to
be performed and such other areas as may be designated by the Owner for the
storage of the Contractor's materials and equipment.
1.7 WORK; CONTRACT TIME; CONTRACT SUM. The Work, the Contract Time and
the Contract Sum are as defined in the Agreement.
1.8 PROVIDE. Except as the context otherwise requires, the term
"provide" means to furnish, fabricate, complete, deliver, install and erect,
including all labor, materials, equipment, apparatus, appurtenances and
expenses necessary to complete in place, ready for operation or use under the
terms of the Specifications.
1.9 PLANS Wherever the words "Plan" or "Plans" are used in the Contract
Documents, they shall be construed as having the same meaning as Drawing or
Drawings (as referred to in the Agreement).
1.10 SPECIFICATIONS. The Specifications shall include those referred to
in the Agreement.
1.11 SUBSTANTIAL COMPLETION. Substantial Completion shall occur when
Owner, in Owner's reasonable discretion, certifies that all construction is
sufficiently complete in accordance with the Contract Documents so that the
Owner may, if it so elects, occupy and use the Work or designated portion
thereof for the purpose for which it was intended.
ARTICLE 2
THE CONTRACT DOCUMENTS
2.1 EXECUTION, INTENT AND INTERPRETATIONS
2.1.1 The Contractor warrants and represents that, in executing
the Agreement and undertaking the Work, it has not relied upon any
oral inducement or representation by the Owner, the Owner's
Representative or any of their officers or agents as to the nature
of the Work, the Job Site, the Project conditions or otherwise.
2.1.2 Execution of the Contract by the Contractor is a
representation by the Contractor that the Contact Documents are
sufficient to have enabled the Contractor to determine the cost of
the Work described therein and that the Contract Documents are
sufficient to enable Contractor to construct the Work described
therein, and otherwise to fulfill all of its obligations hereunder,
including, but not limited to, Contractor's obligation to construct
the Work for an amount not in excess of the Contract Sum on or
before the date(s) of Substantial Completion for the Work or
designated portion(s) thereof established in the Agreement.
The Contractor further acknowledges and declares that it has
visited and, as an experienced and prudent contractor, carefully
examined the Job Site, including all existing structures, and is
fully familiar with all of the conditions thereon affecting the
same. In connection therewith, Contractor specifically represents
and warrants to Owner that it has, by careful examination,
satisfied itself as to: (a) the nature, location, and character of
the Project and the Job Site, including the conditions of the Job
Site and all structures and obstructions thereon, both natural and
man-made; (b) the nature, location, and character of the general
area in which the Project is located, including its climatic
conditions, available labor supply and labor costs, and available
equipment supply and equipment costs; and (c) the quality and
quantity of all materials, supplies, tools, equipment, labor, and
professional services necessary to complete the Work in the manner
and within the cost and time frame required by the Contract
Documents.
The Contractor further acknowledges that it shall be solely
responsible for understanding the location of subsurface lines,
cables, pipes and water as well as the conditions and
characteristics of all subsoils based upon a careful review, as a
prudent and experienced Contractor, of reports as
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provided by professionals affiliated with the Project, and that it
has made all reasonable interpretations, as an experienced and
prudent Contractor, of such reports, in combination with a review
of the Job Site conditions, to complete the Work as per the
Contract Documents.
In connection with the foregoing, and having carefully
examined all Contract Documents, as aforesaid, and having visited
the Job Site, the Contractor acknowledges and declares that it has
no knowledge of any discrepancies, omissions, ambiguities, or
conflicts in said Contract Documents and that if it becomes aware
of any such discrepancies, omissions, ambiguities, or conflicts, it
will promptly notify Owner and Architect of such matters.
Further, Contractor recognizes that care is required under
urban site construction circumstances with respect to safety,
protection of pedestrians, cleanliness of the site, health and
other laws, and protection of existing utilities, adjacent streets
and property. In arriving at the Contract Sum and the Contract
Time, Contractor has, as an experienced and prudent contractor,
exercised its best judgment and expertise to include the impact of
such circumstances upon the Contract Sum and the Contract Time.
2.1.3 The Contract Documents include all items necessary for the
proper execution and completion of the Work by the Contractor. The
Work shall consist of all items specifically included in the
Contract Documents as well as additional items of work which an
experienced and prudent contractor would include along with that
which is specified in order to complete the Work in accordance with
the Contract Documents. The Contract Documents are complementary,
and what is required by any one Contract Document shall be as
binding as if required by all. Contractor acknowledges that any
differences between the requirements of the Drawings and the
Specifications or any differences noted within the Drawings
themselves or within the Specifications themselves and have been
referred to the Owner and Architect by Contractor prior to the
submission of bids and have been clarified to the satisfaction of
the Contractor. If any such differences or conflicts were not
called to the Owner's and Architect's attention prior to submission
of bids, the Architect and/or the Owner shall decide which of the
conflicting requirements will govern based upon the most stringent
of the requirements, and, subject to the approval of the Owner, the
Contractor shall perform the Work at no additional cost and/or time
to the Owner in accordance with the Architect's and/or Owner's
decision. Subject to confirmation or approval by the Owner, large
scale Drawings take precedence over smaller scaled Drawings,
figured dimensions on the Drawings take precedence over scaled
dimensions, and noted items on the Drawings take precedence over
graphic representations.
2.1.4 All discrepancies and ambiguities in the Contract
Documents shall be interpreted so as to result in quality and
complete performance. Where variances occur between the drawings
and the specifications or within either document itself, or between
Contract Documents and site conditions, they shall be brought, in
writing to the immediate attention of the Architect and the Owner.
In case of discrepancies between Contract Documents, the Contractor
shall secure written instructions from the Architect and the Owner
before proceeding with the Work affected by omissions or
discrepancies. The Contractor shall assume full responsibility for
proceeding with such work without approval from the Architect and
the Owner including, but not limited to, the duty to remove such
work and correct any consequences of such removal.
2.1.5 When more than one material, brand or process is
specified for a particular item of Work, the choice shall be the
Contractor's. Contractor may, after notifying the Architect and
Owner, select the one it considers to be the best. Approval by
Architect or Owner of materials, suppliers, processes or
Subcontractors does not imply a waiver of any Contract requirements
including, without limitation, Contractor's warranty.
2.2 COPIES FURNISHED; OWNERSHIP. All Contract Documents and copies
thereof furnished by the Owner or the Owner's Representative are and shall
remain the Owner's property. They are not to be published or used by the
Contractor on any other project and, with the exception of one complete set
for the Contractor, are to be returned to the Owner upon completion of the
Work.
2.3 NO ORAL WAIVER. The provisions of this Contract cannot be amended,
modified, varied or waived in any respect except by a Modification signed by
the Owner and the Contractor. The Contractor is hereby given notice that no
person has authority to orally waive, or to release the Contractor from, any
of the Contractor's duties or obligations under or arising out of this
Contract. Any waiver, approval or consent granted to the Contractor shall be
limited to those matters specifically and expressly stated thereby to be
waived, approved or consented to and shall not relieve the Contractor of the
obligation to obtain any future waiver, approval or consent. Despite any
prior waiver, approval or consent as to any particular matter, the
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Owner may at any time require strict compliance with the Contract Documents
as to any succeeding obligation respecting the same matter or as to any other
matter.
ARTICLE 3
OWNER
3.1 EASEMENTS. The Owner shall obtain and pay for any easements
required for permanent structures.
3.2 ACCESS The Owner A/E, and governmental inspectors, shall at all
times have access to the Work at each and every stage of preparation and
progress. The Contractor shall provide facilities for such access.
ARTICLE 4
THE OWNER'S REPRESENTATIONS
4.1 CONTRACTUAL RELATIONSHIPS. Nothing contained in the Contract
Documents shall create any contractual relationship between the Owner's
Representative and the Contractor; provided, however, that the Owner's
Representative shall be deemed to be a third party beneficiary of those
obligations of the Contractor to the Owner's Representative as imposed by the
Contract Documents, (including, but not limited to, the Owner's
Representative's rights pursuant to Paragraph 7.2 and Articles 10 and 11 of
these General Conditions).
4.2 ROLE Except as otherwise provided in the Contract Documents, and
until the Contractor is notified in writing to the contrary, all actions to
be taken by, all approvals, notices, consents, directions and instructions to
be given by, all notices and other matters to be delivered to, all
determinations and decisions to be made by and, in general, all other action
to be taken by, or given to, the Owner shall be taken, given and made by, or
delivered or given to, the Owner's Representative in the name of and on
behalf of the Owner; provided, however, that the Owner (and not the Owner's
Representative) shall be solely obligated to the Contractor for all sums
required to be paid by the Owner to the Contractor hereunder. If the Owner's
Representative is an organization, then it shall, in turn, act through such
person or persons as it may designate in writing from time to time. Only
those so designated are authorized to grant on behalf of the Owner any
approval, consent or waiver with respect to the Contract Documents or the
Work, or to otherwise act for the Owner in any capacity whatsoever.
ARTICLE 5
CONTRACTOR
5.1 SUPERVISION AND CONSTRUCTION PROCEDURES
5.1.1 The Contractor shall supervise and direct the Work using
its best skill and attention. The Contractor shall be solely
responsible for all construction means, methods, techniques,
sequences, coordination, scheduling (subject to Article 8) and
procedures for all cleanup and for all safety and weather
precautions and programs in connection with the Work.
5.1.2 The superintendent and project manager selected by the
Contractor shall be subject to Owner's approval, which approval
will not be unreasonably denied, and shall be approved in writing
by Owner. If, for any reason and at any time, the services of the
superintendent and/or project manager selected by Contractor and
approved by Owner are no longer available, then the Contractor
shall not select a substitute superintendent and/or project manager
without the prior written consent of the Owner in accordance with
this paragraph.
5.1.3 The Contractor shall be fully responsible to the Owner
for the acts and omissions of its employees and of all
Subcontractors and Sub-subcontractors and their agents and
employees, and all other persons performing any of the Work in the
same manner as if they were the acts and omissions of persons
directly employed by the Contractor.
5.1.4 The Contractor shall not be relieved of its obligations
to perform the Work in accordance with the Contract Documents
either by the activities or duties of the Owner in its
administration of the Contract, including any inspections or tests
required or performed under Paragraph 5.6, or by approvals or other
similar
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action with regard to shop drawings or submittals (of any type), or
by the activities of persons other than the Contractor with respect
to the Project. Further, notwithstanding the fact that a dispute,
controversy or other question may have arisen between the parties
hereto relating to the execution or progress of the Work, the
interpretation of the Contract Documents, the payment of any
monies, the delivery of any materials or any other matter
whatsoever, the Contractor shall not be relieved of its obligations
to pursue the Work diligently under the Contract Documents pending
the determination of such dispute, controversy or other question.
5.1.5 The Contractor shall establish and maintain bench marks and all
other grades, lines and levels necessary for the Work, report
errors and inconsistencies to the Owner and A/E before commencing
Work, and, if applicable, review the placement of the building(s)
and permanent facilities on the Job Site with the Owner and A/E
after all lines are staked out and before foundation Work is
started. Any encroachments made by Contractor or its Subcontractors
or Sub-subcontractors (of any tier) on adjacent properties due to
construction as revealed by an improvement or other survey shall be
the sole responsibility of the Contractor (except for encroachments
arising from errors and omissions in the Contract Documents not
reasonably discoverable by Contractor), and Contractor shall
correct such encroachments within thirty (30) days of the
improvement survey (or as soon thereafter as reasonably possible),
at Contractor's sole cost and expense, either by the removal of the
encroachment (and subsequent reconstruction on the Project site) or
agreement with the adjacent property owner(s) (in form and
substance satisfactory to Owner in its sole discretion) allowing
the encroachments to remain.
5.2 MATERIALS AND EQUIPMENT.
5.2.1 The Contractor shall submit to Owner, in a form
acceptable to Owner, a submittal log which will outline the
requirements of each submittal of materials or equipment by the
architectural division breakdown, including status dates of
delivery of such materials or equipment.
5.2.2 Materials shall conform to manufacturer's standards in
effect at the date of execution of the Agreement and shall be
installed in strict accordance with manufacturer's directions. The
Contractor shall, reasonably require by Owner or Architect, furnish
satisfactory evidence as to the kind and quality of all materials.
After the Contract Documents are executed, if it becomes necessary
for the Contractor to substitute a material or product of a
different brand or manufacturer in lieu of that specified,
Contractor shall submit a written request to the owner for approval
of such proposed substitutions. Each request for substitution shall
be accompanied by complete descriptive literature and performance
data upon the specified item and the proposed substitution, plus
any samples as may be required by the Owner. Each proposed
substitution shall require the written approval of the Owner before
its incorporation into the Work, which shall not constitute
authorization or approval of a change in the Contract Sum or
Contract Time. The Contractor shall submit requests for
substitution as soon as practicable after the need for the
substitution is determined to allow for adequate consideration of
such request and to minimize delay in the progress of the Work.
5.3 WARRANTY. The Contractor represents and warrants to the Owner that
all materials and equipment furnished under the Contract shall be new unless
otherwise specified, and that all Work shall be (i) of good quality, free
from faults and defects, and (ii) in conformance with the Contract Documents.
All Work not so conforming to these standards shall be considered defective.
This warranty is not limited by the provisions of Paragraph 14.2 of these
General Conditions or Article 9 of the Agreement. All warranties and
guarantees from Subcontractors or Sub-subcontractors (including
manufacturers) shall be assignable to the Owner regardless of whether it is
so stated therein, and the Contractor agrees to assign all such warranties
and guarantees to the Owner and deliver them pursuant to Subparagraph 9.4.2.
The Contractor's obligations under this Paragraph shall survive the
expiration or sooner termination of the Contract.
5.4 TAXES; FEES AND LICENSES; ROYALTIES AND PATENTS.
5.4.1 The Contractor shall pay, or cause to be paid, all import
duties and sales, consumer, use, excise, value added and ad valorem
taxes required to be paid in connection with the Work or upon
materials, tools or equipment brought to the Job Site or used in
the Work. If any of the foregoing taxes are not paid in a timely
manner, the Owner may withhold the amount of any such taxes from
any amounts owing to the Contractor under the Contract Documents,
submit the amount so withheld to the appropriate taxing authority
on behalf of the Contractor or its Subcontractors or
Sub-subcontractors and offset said amount against the Contract Sum.
5.4.2 The Contractor shall secure and pay for all governmental
fees, permits and licenses which
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the Owner is not specifically required to provide and pay for under
the Contract Documents. The Contractor shall secure and pay for all
temporary utility connection required to perform the Work,
including, without limitation, electrical power, gas and water.
5.4.3 The Contractor shall pay all royalties and license fees
incident to the use of any invention, design, process or device
which is the subject of patent rights, copyrights or other
proprietary rights held by others, all of which shall be deemed
included in the Contract Sum. The Contractor shall not unlawfully
use or install any patented or copyrighted article and shall
indemnify the Owner from and against any and all actions, suits,
judgments, losses, costs or expenses, including attorneys' fees,
arising out of any claims for infringement of, or otherwise related
to, any patent rights or copyrights. In the event of any injunction
or legal action arising out of any such infringement which has the
effect of delaying the Work, the Owner may require the Contractor
to substitute such other articles of like kind as will make it
possible to proceed with and complete the Work, and all costs and
expenses occasioned thereby shall be borne by the Contractor.
5.5 COMPLIANCE WITH LAWS. The Contractor shall, at its cost and
expense, comply with each and every federal, state and local law, ordinance,
code, rule and regulation, as well as the lawful order or decree of any
public or quasi-public authority, bearing on the performance and not the
design (unless Contractor, any Subcontractor, and/or any of their respective
agents, representatives, suppliers or any other person or entity directly or
indirectly employed, utilized and/or controlled by any of them prepared the
design)of the Work specifically including, but not limited to, those
specified in Subparagraph 10.1.2 and all applicable building codes. The
Contractor shall review the Contract Documents, as an experienced and prudent
contractor, in order to determine whether they are in accordance with all
building laws, codes and regulations. Contractor shall immediately provide
written notice to Architect and Owner of any building laws, codes or
regulations that the Contract Documents are in violation of and that
Contractor knows of or should, as an experienced and prudent contractor, know
of. The Contractor shall not violate any zoning, set back or other location
requirements of law, or of any recorded covenants. If Contractor performs the
Work or any portion thereof in violation of any laws, statutes, ordinances,
building codes or rules and regulations without express prior written
approval from Architect and Owner, Contractor shall be fully and solely
responsible for such Work and all costs and expenses attributable thereto.
5.6 TESTS
5.6.1 If the Contract Documents, or any laws, ordinances,
rules, regulations or any orders or decrease of any public or
quasi-public authority having jurisdiction, or common practice in
the industry, require or dictate that the Contractor have any
portion of the Work inspected, tested or approved, the Contractor
shall advise the Owner in a timely manner (in writing, if
practicable) of its readiness and of the date arranged so that the
Owner may observe such inspection, testing or approval. The
Contractor shall bear all costs of such inspections, tests and
approvals except as otherwise specified in the Contract Documents.
5.6.2 The Owner may require any special inspection, testing or
approval of the Work not included under Subparagraph 5.7.1, or any
more stringent inspection, testing or approval thereof, in which
event it shall instruct the Contractor to order such inspection,
testing or approval, and the Contractor shall advise the Owner in a
timely manner (in writing, if practicable) as in Subparagraph
5.7.1. If such inspection or testing reveals any failure of the
Work or the performance thereof to comply with the requirements of
the Contract Documents, or reveals any defect in the Work, the
Contractor shall bear the costs of such inspection or testing and
all costs to correct the Work to the satisfaction of the Owner,
which, if incurred by the Owner, may be deducted or offset by the
Owner against any amounts then or thereafter due to the Contractor.
If such inspection or testing proves that the Work was performed
properly, the Owner shall bear the costs of such inspection or
testing.
5.6.3 Required certificates of inspection, testing or approval
shall be secured by the Contractor and promptly delivered by it to
the Owner.
5.7 DRAWINGS. Shop Drawings for architectural, structural, mechanical
and electrical work shall be submitted for approval to the A/E and a copy of
all such submissions shall be provided simultaneously to the Owner.
Contractor shall maintain an accurate record of all deviations from the
approved shop Drawings and the Plans and the Specifications which occur in
the Work as actually constructed, and shall submit to the A/E for approval
two (2) sets (one to be reproducible) of complete information, including
descriptions, drawings, sketches, marked prints and similar data, indicating
the "as-built" conditions. Contractor shall keep "record" and shop drawings
up to date as the Work progresses and shall at all times keep such up-to-date
drawings available to Owner and A/E at the Work site. Submission of all
"record" drawings to Owner is required prior to Contractor's Application for
Final Payment.
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5.8 BINDERS. The Contractor shall assemble for approval by the A/E and the
Owner three (3) complete copies in loose leaf binders of all operating and
maintenance data for all equipment and machinery, if any, installed as a part
of the Work.
5.9 CLEANING. The Contractor shall be responsible for damaged or broken
glass and at completion of the Work shall replace such damaged or broken
glass. The Contractor shall perform the following final cleaning at
completion of the Work, as applicable: (a) removal of all temporary
protections; (b) removal of all marks, stains, fingerprints and other soil or
dirt from all surfaces and other work; (c) removal of all spots, mortar,
plaster, soil and paint from ceramic tile, marble, and other finish materials
and from all surfaces and other work; (d) cleaning of all fixtures,
cabinetwork and equipment, removal of all stains, paint, dirt, and dust and
leave same in an undamaged and new condition; and (e) cleaning of all
surfaces and other work in accordance with recommendations of the
manufacturer.
5.10 START UP. After Substantial Completion, the Contractor shall perform
or assist Owner in the start-up of all Equipment and other mechanical
operations and systems included as a part of the Work.
5.11 GENERAL. The duties and responsibilities of the Contractor as set
forth in this Article 5 are in addition to, and not in lieu of, other duties
and responsibilities of the Contractor enumerated elsewhere in the Contract
Documents.
ARTICLE 6
SUBCONTRACTORS
6.1 GENERAL. Nothing contained in the Contract Documents shall create any
contractual relationship between the Owner or the Owner's Representative and
any Subcontractor or Sub-subcontractor. However, it is acknowledged that the
Owner and Owner's Representative are intended third party beneficiaries of
the obligations of the Subcontractors and Sub-subcontractors related to the
Work and the Project.
6.2 AWARD OF SUBCONTRACTS. The Contractor shall, prior to awarding any
subcontract, notify the Owner in writing of the names of all Subcontractors
proposed for the several parts of the Work and shall include with any such
notice the completed insurance information form and any insurance
certificates required by this Contract for any proposed Subcontractor. The
Owner may also require such lists and information regarding any proposed
Sub-subcontractors. The Contractor shall also advise the Owner in writing of
any Subcontractor or Sub-subcontractor with which it shares any business
relationship or financial interest, and of the nature and extent of any such
relationship or interest. No Subcontractor or Sub-subcontractor shall be
engaged if objected to by the Owner; provided, however, that if the Owner
does not take exception to a Subcontractor or Sub-subcontractor in writing
within fifteen (15) days of its receipt of such notification, such
Subcontractor or Sub-subcontractor shall be deemed acceptable to the Owner.
The Owner shall not be liable to the Contractor in any manner arising out of
the Owner's objection to a proposed Subcontractor or Sub-subcontractor. The
Contractor shall not terminate the employment of a Subcontractor or
Sub-subcontractor engaged in the Work prior to the expiration of that
subcontract without good cause shown and the Owner's prior approval after
reasonable notice of the Contractor's intent to so terminate. If any
Subcontractor withdraws, becomes insolvent or otherwise incapacitated,
abandons the Work or is dismissed by Contractor, then Contractor shall
promptly submit a substitute Subcontractor to Owner for Owner's approval,
which approval shall not be unreasonably withheld. If Owner rejects any
proposed substitute Subcontractor, Owner will provide Contractor with Owner's
reason for such rejection. All costs incurred by Contractor in replacing any
Subcontractor shall be borne by Contractor. The Contractor shall provide the
Owner with copies of each subcontract with the subcontractor within ten (10)
days after execution of the subcontract by the Contractor. If the Owner
provides Contractor with a list of pre-approved Subcontractors prior to bid,
the Owner may elect to reject a listed Subcontractor and that portion of the
Contractor's bid relating thereto. In that event, Owner shall be liable for
the difference in cost between the bid of the original Subcontractor and that
of the Subcontractor hired to perform the Work. If the Owner provides no such
pre-approved list, Owner may elect to reject any Subcontractor proposed by
Contractor and shall be liable for the difference in cost between the bid of
the originally proposed Subcontractor and that of the Subcontractor hired to
perform the work only if Owner's rejection is unreasonable or arbitrary.
6.3 SUBCONTRACTUAL RELATIONS.
6.3.1 All subcontracts and sub-subcontracts shall be in writing.
Each subcontract and sub-subcontract shall contain a reference to
this Contract and shall incorporate the terms and conditions hereof
to the full extent applicable to the portion of the Work covered
thereby. Each Subcontractor must agree, for the benefit of the
Owner, to be bound by, and to require each of its Sub-subcontractors
to be bound by, such terms and conditions to the full extent
applicable to its portion of the Work. In addition, each
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Subcontract and sub-subcontract must: (i) require that the Work
be performed in strict accordance with the requirements of the
Contract Documents; (ii) waive all rights that the
subcontractor or sub-subcontractor may have against the Owner for
damages caused by fire or other perils covered by the property
insurance required by the Contract Documents; (iii)
require the subcontractor or sub-subcontractor to carry and
maintain insurance of the types and in the amounts required of
Contractor by the Contract; (iv) require the subcontractor or
sub-subcontractor to furnish such certificates and waivers as the
Owner, any lender or title insurer may reasonably request,
including waivers of mechanics', labor and materialmens' lien
rights to the extent permitted by law; and (v) provide that the
subcontract is freely assignable by Contractor to Owner and its
assigns.
6.3.2 Each subcontract awarded hereunder by Contractor is hereby
assigned by Contractor to Owner; provided, however, that such
assignment is effective only after termination of the Contract by
Owner (in whole or in part) and only as to those subcontracts
which the Owner affirmatively accepts by notifying the
Subcontractor in writing. Upon the acceptance of a particular
subcontract by Owner, (i) Contractor will promptly furnish to Owner
the original signed copy of the subcontract and (ii) Owner
shall only be required to compensate the designated Subcontractor
for compensation accruing for Work done or materials delivered
from and after the date on which Owner accepts the Subcontract.
Contractor shall be solely responsible for promptly paying all sums
due and owing by Contractor to the designated Subcontractor for
work performed or material supplied prior to Owner's acceptance of
the applicable Subcontract.
6.3.3 Contractor shall be solely and fully responsible for the
payment of all Subcontractors and all other persons or entities
directly or indirectly employed by the Contractor, whether or not
such persons or entities are entitled to assert mechanics' lien,
equitable lien or labor and materialmens' lien rights against the
property of Owner or the Work. If Contractor fails to make payment
to any Subcontractors, Owner will have the right to make payment
directly to such subcontractors for the amount claimed to be due by
such party, and the amount of any such payment may be charged to
Contractor (which Contractor will promptly pay) or deducted from the
amount due or to become due contractor under the Contract.
ARTICLE 7
SEPARATE CONTRACTS
7.1 OWNER'S RIGHT TO AWARD SEPARATE CONTRACTS. The Owner reserves the right
to award other contracts in connection with the Project or other work on the
Job Site on any terms and conditions which the Owner may from time to time
determine in its sole discretion (hereinafter referred to as "Separate
Contracts"; and such other Contractors are hereinafter referred to as
"Separate Contractors").
7.2 MUTUAL RESPONSIBILITY OF CONTRACTORS.
7.2.1 The Contractor shall afford all Separate Contractors and the
Owner reasonable opportunity for the introduction and storage of their
materials and equipment and for the execution of their work and shall
properly cooperate, connect and coordinate the Work with such other work
as shall be in the best interest of the Project as reasonably determined
by the Owner.
7.2.2 If the execution or result of any part of the Work depends upon
any work of the Owner or of any Separate Contractor, the Contractor
shall, prior to proceeding with the Work, inspect and promptly
report to the Owner in writing any apparent discrepancies or
defects in such work of the Owner or of any Separate Contractor
that render it unsuitable for the proper execution or result
of any part of the Work. Failure of the Contractor to so inspect
and report shall constitute an acceptance of the Owner's or
Separate Contractor's work as fit and proper to receive the Work,
except as to defects which may develop in the Owner's or Separate
Contractor's work after completion of the Work and which the
Contractor could not have discovered by its inspection prior to the
completion of the Work.
7.2.3 Should the Contractor cause damage to the work or property of the
Owner or of any Separate Contractor on the Project, or to other work
on the Job Site, or delay or interfere with the Owner's or any
Separate Contractor's work, the Contractor shall be liable for the
same; and, in the case of a Separate Contractor, the Contractor
shall attempt to settle said claim with such Separate Contractor
prior to such Separate
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Contractor's institution of litigation or other proceedings against
the Contractor. If so requested by the parties to the dispute, the
Owner may, but shall not be obligated to, arbitrate the dispute, in
which event the decision of the Owner shall be final and binding on
the parties to the dispute.
7.2.4 Should any Separate Contractor cause damage to the Work or to
the property of the Contractor or cause delay or interference with the
Contractor's performance of the Work, the Contractor shall present to
such Separate Contractor any claims it may have as a result of such
damage, delay or interference (with an information copy to the
Owner) and shall attempt to settle its claim against such Separate
Contractor prior to the institution of litigation or other
proceedings against said such Separate Contractor. If so requested by
the parties to the dispute, the Owner may, but shall not be obligated to,
arbitrate the dispute, in which event the decision of the Owner shall be
final and binding on the parties to the dispute. In no event shall the
Contractor seek to recover from the Owner or the Owner's Representative,
and the Contractor hereby represents that it will not seek to recover
from them, any costs, expenses or losses incurred by the Contractor as a
result of any damage to the Work or property of the Contractor or any
delay or interference caused or allegedly caused by any Separate
Contractor.
7.2.5 If a dispute arises between the Contractor and any Separate
Contractors as to the responsibility for cleaning as required by the
Contract Documents, the Owner may clean and charge the cost thereof to
the responsible contractor, or apportion it among the several responsible
contractors, as the Owner shall reasonably determine to be just.
ARTICLE 8
TIME
8.1 DEFINITIONS.
8.1.1 Whenever the word "day" is used in the Contract Documents, it
shall mean a calendar day unless otherwise specifically provided.
8.2 PROGRESS AND COMPLETION; SCHEDULING.
8.2.1 All times and dates stated in the Contract Documents
including, without limitation, the Commencement Date, Milestone Dates,
the Substantial Completion Date, and all dates and times for the
delivery and installation of materials and equipment, are of the
essence of the Contract.
8.2.2 The Contractor shall begin the Work on the Commencement Date
and shall perform the Work diligently, expeditiously and with adequate
resources so as to meet all Milestones and complete all the Work within
the Contract Time. The scheduling of the Work shall be performed and
monitored by the Contractor utilizing a reasonable method to be chosen
by the Owner. The Contractor (and its Subcontractors, if the Owner
requires) shall prepare a construction time schedule (the "Schedule")
setting forth the times by which each significant segment of the Work
must be commenced and completed and the schedule pursuant to which the
Work must be performed in order for the Work to be completed on time.
The Schedule shall be subject to Owner's approval. In addition, the
Contractor (and its Subcontractors, if the Owner requires) shall
furnish all scheduling information requested by the Owner (in such form
and detail as requested for the particular portion of the Work and as
approved by Owner) within two (2) weeks of the Owner's request and
shall attend such meetings concerning scheduling as the Owner may call
from time to time. The Contractor shall comply with the Schedule or
Schedules established by it and approved by the Owner. With respect to
any portion of the Work for which a Schedule has not been established,
the Contractor shall commence such portion of the Work within three (3)
days of the date on which the Owner directs such commencement and shall
thereafter prosecute and complete the same with all due diligence or as
otherwise directed by the Owner. Neither the scheduling information
submitted by the Contractor or its Subcontractors, the acceptance or
approval thereof by the Owner nor the establishment or implementation
of, or failure to establish or implement, a Schedule by the Owner shall
relieve the Contractor of its obligation to perform and complete the
Work in a timely manner or to otherwise perform in accordance with the
Contract Documents.
8.2.3 The Contractor shall update the Schedule every two weeks to
reflect any authorized changes in the Contract Time and
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shall provide a chart showing the progress of each separate segment of
the Work and any new projected completion date(s).
8.2.4 Float or slack time associated with any one chain of
activities is defined as the amount of time between earliest start
date and latest start date or between earliest finish date and
latest finish date for such activities, as set forth in an approved
Schedule (assuming the critical path method is used), including any
revision or updates thereto. Float or slack time is not for the
exclusive use or benefit of either the Owner or the Contractor.
However, if float time associated with any chain of activities is
expended but not exceeded by any actions attributable to the Owner,
the Contractor shall not be entitled to an extension in the Contract
Time.
8.3 DELAYS, EXTENSIONS OF TIME AND OVERTIME.
8.3.1 If the Contractor is delayed at any time in progress of the
Work solely by (i) an act or neglect of the Owner or Architect, an
employee of either or a separate contractor employed by Owner or
(ii) by a Force Majeure Event, then the Contract Time may be
extended as is necessary to reflect the length of the delay actually
and directly caused by such occurrence; provided, however, that no
claim by the Contractor for an extension of time for any such delay
shall be considered unless made in accordance with Paragraph 13.1
below. For the purposes of the Contract, the term "Force Majeure
Event" shall mean fire, flood, earthquake, strike (provided the
strike does not arise from the actions or inactions of Contractor,
any Subcontractor, and/or any of their respective agents,
representatives, suppliers or any other person or entity directly or
indirectly employed, utilized and/or controlled by any of them) or
other Act of God not caused or permitted by Contractor and which
could not have been anticipated by Contractor. The Contractor shall,
in the event of any occurrence likely to cause a delay, cooperate in
good faith with the Architect and Owner to minimize and mitigate the
impact of any such occurrence and do all things reasonable under the
circumstances to achieve this goal. Contractor understands and
agrees that, regardless of the cause of any delay and whether or not
any extension of time may be agreed to in connection therewith,
Contractor shall continue to prosecute all Work not affected by said
delay and, with respect to such portion or portions of the Work as
may be so affected, Contractor shall use its best efforts to
minimize the effect of said delay. The foregoing terms and
provisions of this Paragraph 8.3.1 notwithstanding, in no event and
under no circumstances will the Contract Time be extended in the
event of any delay caused by (i) an act or neglect or the fault of
Contractor, any Subcontractor, any Sub-subcontractor and/or any of
their respective agents, employees, representatives, suppliers or
any other person or entity directly or indirectly employed, utilized
and/or controlled by any of them, (ii) intentionally omitted, (iii)
delays in transportation, (iv) lack of supplies or unavailability of
specific mechanical elements or (v) labor disputes within the work
force of Contractor, any Subcontractor, and/or any of their
respective agents, representatives, suppliers or any other person or
entity directly or indirectly employed, utilized and/or controlled
by any of them unless such labor disputes are not the result of the
actions or inactions of Contractor, any Subcontractor, and/or any of
their respective agents, representatives, suppliers or any other
person or entity directly or indirectly employed, utilized and/or
controlled by any of them.
8.3.2 No change in the Work, whether by way of alteration or
addition to the Work, shall be the basis of an extension in the
Contract Time unless and until such alteration or addition has been
authorized by a Change Order executed and issued in accordance with
and in strict compliance with the requirements of the Contract
Documents. Any claim for increased cost for delay shall be asserted
in accordance with the provisions of Paragraph 13.1 unless the time
is extended in writing by the Owner. This requirement is of the
essence of the Contract Documents. Accordingly, no course of conduct
or dealings between the parties, nor express or implied acceptance
of alterations or additions to the Work, and no claim that the Owner
has been unjustly enriched by an alteration or addition to the Work,
whether or not there is in fact any such unjust enrichment, shall be
the basis for any claim to an increase in the Contract Sum or an
extension in the Contract Time.
8.3.3 Notwithstanding any other term or provision of the Contract
to the contrary, if Contractor fails to achieve Substantial
Completion of any phase of the Work on or before the expiration of
the Contract Time for any reason other than the occurrence of a
Force Majeure Event, Contractor shall pay to Owner the following as
liquidated delay damages the sum of $____N/A______ for each calendar
day for which Substantial Completion shall not have occurred on or
before the expiration of
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the Contract Time ("Delay Damages") (if this Agreement if for
continuing (on-call) Work on multiple projects or continuing (on-call)
services, the Delay Damages shall be as set forth in the Owner
approved Work Authorization form). It is hereby expressly agreed by
Contractor that the Delay Damages to which Owner is entitled under
this Paragraph 8.3.3 are a reasonable forecast of just compensation
for the harm that would be caused by Contractor's failure to achieve
Substantial Completion by the expiration of the Contract Time, but do
not compensate Owner for any other damages of any type or kind,
including without limitation any damages related to or in connection
with Contractor's failure to fully and properly perform the Contract
Documents or any damages resulting from ______________ (if this
Agreement if for continuing (on-call) Work on multiple projects or
continuing (on-call) services, this information shall be as set forth
in the Owner approved Work Authorization form).
8.3.4 All Delay Damages will be due and payable immediately upon
Owner's demand therefor, and all Delay Damages that remain unpaid
shall bear interest from the date of demand until paid at the
maximum lawful rate, or if there is no applicable maximum lawful
rate, at the rate of 12% per annum. Owner shall have the right, but
not the obligation, to set off all Delay Damages against any amounts
due from Owner to Contractor, including without limitation any
retainage amounts.
8.3.5 In addition to the Delay Damages, Owner shall at all times
be entitled to all of its remedies under the Contract Documents and
at law and in equity, including, without limitation, the recovery of
damages related to or in connection with Contractor's failure to
fully and properly perform the Contract Documents or any damages
resulting from _________________ (if this Agreement if for
continuing (on-call) Work on multiple projects or continuing
(on-call) services, this information shall be as set forth in the
Owner approved Work Authorization form).
8.3.6 Whenever the Work falls behind schedule due to the fault of
the Contractor, the Contractor shall, to the extent necessary to
meet said schedule, increase its labor force and/or provide
overtime, extra shifts, Saturday, Sunday and/or holiday work, and
shall have each Subcontractor do likewise, all at no additional cost
to or compensation from the Owner. Further, the Owner shall have the
right to deduct or offset against any amounts then or thereafter due
to the Contractor, or to be reimbursed by the Contractor for, any
additional costs the Owner may incur as a direct result of said
increase in labor force or overtime, extra shifts, Saturday, Sunday
and/or holiday work.
8.3.7 The Owner may, in its sole discretion and for any reason,
direct the Contractor to accelerate the schedule of performance by
providing overtime, extra shifts, Saturday, Sunday and/or holiday
work and/or by having all or any Subcontractors or
Sub-subcontractors designated by the Owner provide overtime, extra
shifts, Saturday, Sunday and/or holiday work.
8.3.7.1 In the event of overtime, extra shifts, Saturday,
Sunday or holiday work by the Contractor's own forces
pursuant to this Subparagraph 8.3.7, the Owner's sole and
exclusive obligation to the Contractor (except as
hereinafter provided) on account thereof shall be to
reimburse the Contractor for the direct cost to the
Contractor of the premium time (or shift differential for
any extra shifts) for all labor utilized by the Contractor
in such overtime, extra shifts, Saturday, Sunday or holiday
work (but not for the straight time costs of such labor),
together with any Social Security and state or Federal
unemployment insurance taxes in connection with such
premium time (or shift differential for any extra shifts).
8.3.7.2 In the event of overtime, extra shifts, Saturday,
Sunday or holiday work by a Subcontractor pursuant to this
Subparagraph 8.3.7, the Owner's sole and exclusive
obligation to the Contractor (except as hereinafter
provided) on account thereof shall be to reimburse the
Contractor for the direct cost to the Subcontractor for the
premium time (or shift differential for any extra shifts)
of all labor utilized in such overtime, extra shifts,
Saturday, Sunday or holiday work (but not for the straight
time costs of such labor), together with any Social
Security and state or Federal unemployment insurance taxes,
benefits and mark up in connection with such premium time.
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8.4 TEMPORARY SUSPENSION OF WORK. The Owner shall have the authority to
suspend the Work, in whole or in part, for such periods and such reasons as
it may deem necessary or desirable, in its sole discretion, including without
limitation: (a) unsuitable weather; (b) other conditions considered
unfavorable for the suitable prosecution of the Work; (c) special events
and/or (d) other conditions considered adverse to the best interests of the
Owner. Any such suspension shall be in writing to the Contractor. The
Contractor shall immediately obey such orders of the Owner and shall not
resume the Work until so ordered in writing by the Owner. The Contractor
shall be entitled to an extension of the Contract Time not to exceed the
length of time that the Work was suspended provided the claim is submitted in
accordance with Paragraph 13.1 and the suspension is not due to an act or
omission of the Contractor, any Subcontractor or Sub-subcontractor.
ARTICLE 9
PAYMENTS AND COMPLETION
9.1 APPLICATION FOR PAYMENT; PASSAGE OF TITLE.
9.1.1 The "Payment Application Date" shall be that day of each
Calendar month designated in Section 7.1 of the Agreement when the
Contractor shall deliver the "Application for Payment", as hereinafter
defined, to the Owner.
9.1.2 The "Application for Payment" shall be an invoice prepared
by the Contractor and submitted to the Owner in accordance with the
Contract Documents. It shall show in detail all monies properly
payable to the Contractor in accordance with the Approved Schedule
of Values, including those items of labor, materials and equipment
used or incorporated in the Work (and, if the Owner has agreed in
advance in writing, suitably stored at the Job Site) through and
including the Payment Application Date. The Application for Payment
shall have, as attachments, (a) conditional mechanics' lien releases
from the Contractor and all applicable Subcontractors,
Sub-subcontractors and suppliers with respect to materials supplied
and services provided for which current payment is requested, (b)
unconditional mechanics' lien releases from the Contractor and all
applicable Subcontractors, Sub-subcontractors and suppliers with
respect to materials supplied and services provided for which
payment by the Owner was made pursuant to the previous Application
for Payment (provided that if a required payment has not been made
by Owner pursuant to the terms of this Agreement for any previous
month, Contractor shall attach conditional lien releases from the
Contractor and all applicable Subcontractors, Sub-subcontractors and
suppliers for which payment has not been made pursuant to this
Agreement and, upon receipt of the required payment, Contractor
shall immediately deliver to Owner unconditional mechanics' lien
releases) and (c) such other evidence of performance of the Work,
the costs thereof and payment therefor as the Owner may deem
necessary or desirable. The submission of the foregoing waivers and
other evidence shall be express conditions precedent to Owner's
obligation to make payment and to Contractor's entitlement to
payment. All such mechanics' lien releases shall be subject to the
approval of the Owner and shall comply with the laws of the state
where the Project is located, as amended from time to time. The date
of coverage and total dollar amount of the mechanics' liens released
shall be provided on all such releases.
9.1.3 The Contractor warrants that title to all Work, materials
and equipment covered by an Application for Payment shall pass to
the Owner, free and clear of all liens, claims, security interests
or encumbrances, upon the sooner occurrence of: (a) the delivery of
any such materials or equipment to the Job Site and incorporation
into the Work; or (b) the tender of payment of the applicable
Application for Payment by the Owner to the Contractor; and that no
Work, materials or equipment covered by an Application for Payment
shall have been acquired, whether by the Contractor or by any
Subcontractor or Sub-subcontractor, subject to an agreement under
which an interest therein or an encumbrance thereon is retained by
the seller or otherwise imposed by the Contractor or such other
person. The passage of title to the Owner as provided herein shall
not alter or limit the obligations and duties of the Contractor with
respect to the Work and the materials or equipment incorporated
therein or used in connection therewith as set forth in the Contract
Documents.
9.2 APPROVALS OF APPLICATIONS FOR PAYMENT.
9.2.1 If the Contractor has submitted an Application for Payment in
the manner prescribed in the Contract Documents, the Owner shall, with
reasonable promptness, approve the same (or such portions thereof
covering amounts it determines to be properly due) or shall state in
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writing its reasons for withholding its approval (whether of all or a
part).
9.2.2 The Owner's approval of an Application for Payment shall
not constitute a representation by the Owner that the conditions
precedent to the Contractor's entitlement to payment have been
fulfilled, nor shall approval of an Application for Payment by the
Owner be deemed a representation by the Owner: (a) that it has made
exhaustive or continuous on-site inspections to check the quality or
quantity of the Work; (b) that it has reviewed the construction
means, methods, techniques, sequences, coordination or procedures,
or the cleanliness of the Job Site, or the safety precautions and
programs, in connection with the Work; (c) that it has made any
examination to ascertain how or for what purpose the Contractor has
used the monies previously paid on account of the Contract Sum.
9.2.3 No approval of an Application for Payment, progress payment
or any beneficial, partial payment or any partial or entire use or
occupancy of the Project by the Owner shall constitute an acceptance
of any Work which is not in accordance with the Contract Documents;
and regardless of approval of an Application for Payment by the
Owner, the Contractor shall remain totally obligated and liable for
the performance of the Work in strict compliance with the Contract
Documents.
9.2.4 Subject to the Owner's rights to deduct, offset or withhold
as set forth in these General Conditions, after the Owner has
approved an Application for Payment, in whole or in part, it shall
make payment of the amount approved to the Contractor as provided in
the Contract Documents.
9.3 PAYMENTS WITHHELD; OWNER'S RIGHT TO MAKE DIRECT PAYMENTS FOR WORK;
FAILURE OF PAYMENT.
9.3.1 The Owner may withhold its approval of an Application for
Payment, in whole or in part, or nullify the whole or any part of an
approval previously given, if Owner reasonably determines that the
Application for Payment covers portions of the Work which have not, in
fact, been completed, or that it includes amounts for claims
allegedly made but not actually made (or subsequently withdrawn),
and/or for which payment is not then due or if, and to the extent that
Owner deems it necessary or desirable, to protect itself against
loss or damage due to: (a) defective Work not remedied; (b)
Subcontractor or Sub-subcontractor or other third-party claims or
liens or reasonable evidence indicating such probable third-party
claims or liens; (c) failure or alleged failure of the Contractor
to make payments to Subcontractors (or of Subcontractors to make
payments to Sub-subcontractors) as required by the Contract Documents,
or failure to provide lien waivers; (d) inability, or reasonable doubt
as to the ability, of the Contractor to complete the Work within the
Contract Time, for the unpaid balance of the Contract Sum or within the
estimates prepared by the Contractor and submitted to and approved
by the Owner; (e) damage to the Owner or a Separate Contractor;
(f) unsatisfactory prosecution of the Work by the Contractor, its
Subcontractors or Sub-subcontractors; (g) failure of the Contractor to
maintain the Job Site in a clean and safe condition; (h) failure of the
Contractor to meet any other monetary obligation imposed upon it
pursuant to the Contract Documents or (i) failure of the Contractor
to comply with any other provision of the Contract Documents.
9.3.2 The Owner, after giving the Contractor notice, may make
payments on account of labor, materials and/or equipment for the Work
directly to any or all of the Subcontractors, Sub-subcontractors or
persons entitled to the same in lieu of paying the Contractor therefor
or make joint payment to any such person and the Contractor. Any
amounts so paid shall be credited against the Contract Sum. No such
payment shall create any relationship between the recipient thereof
and the Owner, nor any duty on the part of the Owner. The Contractor
shall cooperate with the Owner to facilitate any such direct payments
and shall provide such evidence as the Owner may request for purposes
of determining any amount to be so paid. If the Owner elects to make
such payments as a result of a failure on the part of the Contractor to
perform in accordance with the Contract, or as a result of a request
from the Contractor that the Owner make such payments, then the Owner
may deduct the amount of its administrative costs incurred in making
said such payments from the Contract Sum or render an invoice to
the Contractor for such administrative costs, which invoice the
Contractor shall promptly pay.
9.3.3 If the Owner does not pay the Contractor within seven days,
after the date established in the Contract Documents the amount
certified by the Architect, for reasons other than a default by
Contractor or the Work in question has been rejected by any
governmental authority, the Owner, or any lender of the Owner, then
the Contractor may, upon seven additional days written notice to the
Owner, stop the Work until payment of the amount owing has been
received. The Contract Time shall be extended
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appropriately and the Contract Sum shall be increased by the amount
of the Contractor's reasonable costs of shut-down, delay and
start-up, which shall be accomplished as provided in Article 8.
Notwithstanding the foregoing, the Contractor may not stop Work
during the pendency of a bona fide dispute between Owner and
Contractor, provided any sums in dispute claimed by the Contractor
are placed in escrow or the Owner's lender, if any, agrees to
withhold and pay said disputed sums when the dispute is resolved.
9.4 SUBSTANTIAL COMPLETION AND FINAL PAYMENT.
9.4.1 On the Date of Substantial Completion, the Contractor shall
prepare and submit to the Owner a list of items to be completed
and/or corrected ("punch-list" items) and its final bill, including
itemized projected amounts for any portions of the Work not yet
completed. The failure to include any items on such "punch-list"
shall not alter the responsibility of the Contractor to complete
and/or correct the Work in accordance with the Contract Documents.
When the Owner, on the basis of an inspection, confirms the
notification from the Contractor that the Work is Substantially
Completed or, without being notified by the Contractor, determines
that the Work is Substantially Completed, the Owner shall prepare
and deliver to the Contractor a Certificate of Substantial
Completion which may state the responsibilities of the Owner and the
Contractor for maintenance, heat, utilities and insurance and shall
list the items determined by the Owner to require completion or
correction as applicable, and fix the time within which the
Contractor shall complete or correct the items listed and submit to
the Owner all documents and other matters required by the Contract
Documents to be submitted by the Contractor upon completion of the
Work. The Certificate of Substantial Completion shall constitute a
demand for a formal billing (including all costs, claims or fees for
any outstanding Change Orders, or any other matter which the
Contractor has not previously waived pursuant to the General
Conditions, and itemized projections for any incomplete Work), and
the Contractor shall be deemed conclusively to have waived the right
to payment of any such item, fee or cost of any kind not billed to
the Owner within thirty (30) days of delivery to the Contractor of
the Certificate of Substantial Completion. The issuance of the
Certificate of Substantial Completion shall not constitute a waiver
of any rights of the Owner, including without limitation the right
to those retainages permitted by the Contract Documents. If the
Contractor does not complete and/or correct the "punch-list" items
listed in the Certificate of Substantial Completion within the time
fixed therein, the Owner shall have the right to accomplish the same
and deduct or offset all costs thereof against any amounts then or
thereafter due to the Contractor. If the amounts then or thereafter
due to the Contractor are not sufficient to cover such costs, the
Contractor shall pay the difference to the Owner. The Owner's
decision as to the Date of Substantial Completion shall be final and
binding.
9.4.2 Within a reasonable time following the Owner's receipt of
written notification from the Contractor that the Work is ready for
final inspection and acceptance, and receipt of the final
Application for Payment, the Owner shall make such inspection and,
when the Work is found to be acceptable under the Contract Documents
and the Contract fully performed, shall approve the final
Application for Payment; provided, however, that neither the final
payment nor any retention shall become due until the Contractor
submits to the Owner: (a) evidence of payment in a form approved by
the Owner, that all payrolls, bills for materials, supplies and
equipment and other indebtedness connected with the Work for which
the Owner or its property might in any way be responsible have been
paid in full or otherwise satisfied; (b) consent of sureties, if
any, to final payment; (c) all Contract Documents (except one set
thereof to be retained by the Contractor), including a complete set
of as-built and record documents (as defined in and to the extent
required by the Specifications); (d) such other data as the Owner
reasonably may require establishing payment or satisfaction of all
obligations of the Contractor in connection with the Work including
receipts of final satisfaction and releases and waivers of liens and
releases of any and all claims by the Contractor, Subcontractors and
Sub-subcontractors, conforming in all material respects with the
laws of the state where the Project is located and evidencing
performance of the Work in accordance with the Contract Documents;
(e) a release of the Owner and its insurers from and against any
claims under the insurance required to be provided by the Owner
hereunder (except to the extent of any claims theretofore timely
filed which are owing but unpaid) and a release of the Owner from
and against any claims between the Contractor and a separate
contractor; (f) any governmental certificates required by the
Contract Documents or otherwise to evidence compliance of the
Contractor and the Work with applicable laws, ordinances, rules,
codes and regulations and the Contract Documents and (g) warranties,
guarantees, assignments thereof, and maintenance or other manuals,
required by the
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Specifications in the forms approved by the Owner, in favor of the
Owner and such other persons as the Owner may direct. The submission
of all of the foregoing is an express condition precedent to
Contractor's entitlement to final payment.
9.4.3 The making of final payment shall not constitute a waiver
of any claims or rights by the Owner.
9.4.4 The acceptance of final payment by Contractor shall
constitute a waiver of all claims by the Contractor and shall
constitute a general release of the Owner and the Owner's
Representative by the Contractor.
9.4.5 If at any time any Subcontractor or Sub-subcontractor
refuses to furnish any release, satisfaction or waiver of lien
required at any time by the Owner under Paragraphs 9.1, 9.3 or 9.4,
or files a claim of lien against the Owner or any of the Owner's
property, the Contractor shall, if requested by the Owner and at the
Contractor's expense, furnish and record a Mechanic's Lien Release
Bond (separate and apart from any other bond provided by the
Contractor hereunder) that is in full compliance with the
then-current laws, rules, regulations and ordinances of the state
and the locality where the Project is located. If any Subcontractor
or Sub-subcontractor serves a Stop Notice (bonded or otherwise) on
Owner, Contractor shall, if requested by Owner and at Contractor's
expense, furnish a Stop Notice Release Bond (separate and apart from
any other bond provided by the Contractor hereunder) that is in full
compliance with the then-current laws, rules, regulations and
ordinances of the state and the locality where the Project is
located. The Contractor authorizes the Owner, and shall cause its
Subcontractors and Sub-subcontractors to authorize the Owner, to
check directly with any suppliers of labor and material with respect
to any item chargeable to the Owner's property, to confirm balances
due and to obtain sworn statements and waivers of lien, all if the
Owner so elects. If any lien remains unsatisfied after all payments
are made to the Contractor, the Contractor shall reimburse the Owner
upon Owner's demand the full amount of all monies that the Owner may
be compelled to pay in discharging such lien, including all costs
and attorneys' fees.
9.5 BENEFICIAL USE AND OCCUPANCY; PARTIAL SUBSTANTIAL COMPLETION.
9.5.1 The Owner and its lessees and separate contractors may
occupy or use any completed or partially completed portion of the
Work at any stage of construction regardless of whether the Contract
Time has expired (hereinafter sometimes referred to as "Partial
Occupancy"). Such Partial Occupancy may commence whether or not the
applicable portion of Work is substantially complete.
9.5.2 In the event of Partial Occupancy, the Contractor shall
promptly secure endorsement from its insurance carrier(s), consent
from its surety(ies), if any, and consent from public authorities
having jurisdiction over the Work permitting Partial Occupancy.
9.5.3 In the event of Partial Occupancy before substantial
Completion as provided above, the Contractor shall cooperate with
the Owner in making available for the Owner's use and benefit such
building services as heating, ventilating, cooling, water, lighting,
telephone, elevators and security for the portion or portions to be
occupied, and if the work required to furnish such services is not
entirely completed at the time the Owner desires to occupy the
aforesaid portion or portions, the Contractor shall make every
reasonable effort to complete such Work or make temporary provisions
for such Work as soon as possible so that the aforementioned
building services may be put into operation and use.
9.5.4 In the event of Partial Occupancy prior to Substantial
Completion, mutually acceptable arrangements shall be made between
the Owner and Contractor in respect of the operation and cost of
necessary security, maintenance and utilities, including heating,
ventilating, cooling, water, lighting and telephone services and
elevators. The Owner shall assume proportionate and reasonable
responsibility for the cost of the above services reduced by any
savings to contractor for such services realized by reason of
Partial Occupancy. Further, mutually acceptable arrangements shall
be made between the Owner and Contractor in respect of insurance and
damage to the Work. Contractor's acceptance of arrangements proposed
by Owner in respect of such matters shall not be unreasonably
withheld, delayed or conditioned.
9.5.5 In each instance, when the Owner elects to exercise its right
of Partial Occupancy as described herein, Owner will give Contractor
and Architect advance written notice of its election to take the
portion or portions involved, and immediately prior to Partial
Occupancy, the Owner, Contractor and Architect shall jointly inspect
the area to be occupied or portion of the Work to be used to
determine and record the conditions of the same.
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9.5.6 It shall be understood, however, that Partial Occupancy shall
not: (i) constitute acceptance of any Work, (ii) relieve the
Contractor for responsibility for loss or damage because of or
arising out of defects in, or malfunctioning of, any Work, material
or equipment, nor from any other unfulfilled obligations or
responsibilities under the Contract Documents or (iii) commence any
warranty period under the Contract Documents; provided that
Contractor shall not be liable for ordinary wear and tear resulting
from such Partial Occupancy and provided further that warranty of
the portions of the Work and systems utilized only for that portion
of the Work receiving Partial Occupancy shall commence on the date
of Partial Occupancy.
9.5.7 Subject to the terms and conditions provided herein, if the
Contractor claims that delay or additional cost is involved because
of Partial Occupancy by the Owner, Contractor shall make such Claim
as provided elsewhere in the Contract Documents.
ARTICLE 10
PROTECTION OF PERSONS AND PROPERTY
10.1 RESPONSIBILITY FOR SAFETY AND HEALTH.
10.1.1 The Contractor shall be responsible for initiating,
maintaining and supervising safety and anti-substance abuse
precautions and programs in connection with the Work, and shall
provide all protection to prevent injury to all persons involved in
any way in the Work and all other persons, including without
limitation, the employees, agents, guests, visitors, invitees and
licensees of the Owner who may visit or be affected thereby. These
precautions shall include, but in no event be limited to: the
posting of danger signs and personal notification to all affected
persons of the existence of a hazard of whatever nature; the
furnishing and maintaining of necessary traffic control barricades
and flagman services; the use, or storage, removal and disposal of
required explosives or other hazardous materials only under the
supervision of qualified personnel and after first obtaining
permission of all applicable governmental authorities; and the
maintenance of adequate quantities of both hose and operable fire
extinguishers at the Job Site. The Contractor shall set forth in
writing its safety and anti-substance abuse precautions and programs
in connection with the Work and, if requested by the Owner, submit
the same to the Owner for review. The Owner may, but shall not be
obligated to, make suggestions and recommendations to the Contractor
with respect thereto.
10.1.2 All Work and not design (unless Contractor, any
Subcontractor, and/or any of their respective agents,
representatives, suppliers or any other person or entity directly or
indirectly employed, utilized and/or controlled by any of them
prepared the design), whether performed by the Contractor, its
Subcontractors or Sub-subcontractors, or anyone directly or
indirectly employed by any of them, and all equipment, appliances,
machinery, materials, tools and like items incorporated or used in
the Work, shall be in compliance with, and conform to: (a) all
applicable laws, ordinances, rules, regulations and orders of any
public, quasi-public or other governmental authority relating to the
safety of persons and their protection against injury, specifically
including, but in no event limited to, the Federal Occupational
Safety and Health Act of 1970, as amended, and all rules and
regulations now or hereafter in effect pursuant to said Act; and (b)
all codes, rules, regulations and requirements of the Owner and its
insurance carriers relating thereto. In the event of conflicting
requirements, the more stringent shall govern.
10.1.3 The Contractor shall designate a responsible member of its
organization at the Job Site as the Project Safety Officer, whose
duties it shall be to enforce the Contractor's safety and
anti-substance abuse programs, to assure compliance with
Subparagraph 10.1.2 and to prevent accidents. This person shall be
the Contractor's Project Manager unless otherwise designated in
writing by the Contractor and approved by the Owner. The Contractor
shall further cause each of its Subcontractors and
Sub-subcontractors to designate a responsible supervisory
representative to assist the Contractor's Project Safety Officer
representative in the performance of his or her duties as aforesaid.
10.1.4 Should the Contractor fail to provide a safe area for the
performance of the Work or any portion thereof, the Owner shall have
the right, but not the obligation, to suspend Work in the unsafe
area. All costs of any nature (including overtime pay) resulting
from the suspension, by
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whomsoever incurred shall be borne by the Contractor.
10.1.5 The Contractor shall provide to each worker on the Job Site
the proper safety equipment for the duties being performed by that
worker and will not permit any worker on the Job Site who fails or
refuses to use the same. The Owner shall have the right, but not the
obligation, to order the Contractor to send a worker home for the
day or to discharge a worker for his or her failure to comply with
safe practices or anti-substance abuse policies, with which order
the Contractor shall promptly comply.
10.1.6 The Contractor shall indemnify the Owner from and against any
and all liability, public or private, penalties, contractual or
otherwise, losses, damages, costs, attorneys' fees, expenses,
causes of action, claims or judgments resulting either in whole or
in part from any failure of the Contractor, its Subcontractors or
Sub-subcontractors or anyone directly or indirectly employed by
any of them or for whose acts any of them may be liable, to comply
with the provisions of Paragraph 10.1. The Contractor shall not
be relieved of its responsibilities under this Paragraph 10.1
should the Owner act or fail to act pursuant to its rights
hereunder, nor shall the Owner thereby assume, nor be deemed to
have assumed, any responsibilities otherwise imposed upon the
Contractor by this Contract in any manner whatsoever.
10.2 PROTECTION OF WORK AND PROPERTY; RESPONSIBILITY FOR LOSS.
10.2.1 The Contractor shall, throughout the performance of the
Work, maintain adequate and continuous protection of all Work
and temporary facilities against loss or damage from whatever
cause, shall protect the property of the Owner and third parties
from loss or damage from whatever cause arising out of the
performance of the Work and shall comply with the requirements
of the Owner and its insurance carriers and with all applicable
laws, codes, rules and regulations with respect to the
prevention of loss or damage to property as a result of fire or
other hazards. The Owner may, but shall not be required to,
make periodic patrols of the Job Site as a part of its normal
security program. In such event, however, the Contractor shall not
be relieved of its aforesaid responsibilities.
10.2.2 Until final acceptance of the Work by the Owner pursuant to
Paragraph 9.4 (unless and to the extent otherwise set forth in a
Certificate of Substantial Completion) the Contractor shall
have full and complete charge and care of and, except as otherwise
provided in this Subparagraph 10.2.2, shall bear all risk of loss
of, and injury or damage to, the Work or any portion thereof
(specifically including Owner-furnished supplies, equipment or
other items to be utilized in connection with, or incorporated
in, the Work) from any cause whatsoever. The Contractor shall
rebuild, repair, restore and make good all losses of, and
injuries or damages to, the Work or any portion thereof before
final acceptance of the Work. Such rebuilding, repair or
restoration shall be at the Contractor's sole cost and expense
unless the loss, injury or damage requiring such rebuilding,
repair or restoration: (a) is directly due to errors in the
Contract Documents which were not discovered by the Contractor and
which the Contractor could not have discovered through the
exercise of due diligence; (b) is caused by the Owner (unless (i)
the Contractor has waived its rights of subrogation against the
Owner on account thereof as provided in the Contract Documents,
or (ii) such loss or damage would be covered by any policy or
policies of insurance which the Contractor is required to
maintain hereunder, whether the Contractor actually maintains
such insurance or not, or (iii) is otherwise covered by a policy
or policies of insurance maintained by the Contractor, whether
or not required hereunder); or (c) is caused by a hazard against
which the Owner is required to insure under the provisions of
Article 11 hereof; provided, however, that if the loss, injury or
damage would not have occurred but for an act or omission of the
Contractor, any of its Subcontractors of Sub-subcontractors or
anyone directly or indirectly employed by any of them or for whose
acts any of them may be liable, the rebuilding, repair or
restoration shall be at the Contractor's cost and expense to the
extent of the deductible on said insurance.
10.3 EMERGENCIES. In any emergency affecting the safety of persons or
property, or in the event of a claimed violation of any federal or state
safety or health law or regulation, arising out of or in any way connected
with the Work or its performance, the Contractor shall act immediately to
prevent threatened damage, injury or loss or to remedy said violation,
whichever is applicable, failing which the Owner may immediately take
whatever action it reasonably deems necessary, including, but not limited to,
suspending the Work as provided in Paragraph 8.4. The Owner may deduct or
offset any and all costs or expenses of whatever nature, including attorneys'
fees, paid or incurred by the Owner in taking such option against any sums
then or thereafter due to the Contractor. The Contractor shall indemnify the
Owner against any and all costs of or expenses incurred pursuant to this
Paragraph 10.4. If the Contractor shall be entitled to any additional
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compensation or extension of time claimed on account of emergency work not
due to the fault or neglect of the Contractor or its Subcontractors or
Sub-subcontractors, it shall be handled as a claim as provided in Article 13.
10.4 CLEANUP. The Contractor shall at all times keep the Job Site clean
and free from accumulation of waste materials or rubbish (including, without
limitation, hazardous waste) caused by or during the performance of the Work
and shall continuously throughout performance of the Work remove and dispose
of all such materials from the Job Site and the Project. The Owner may
require the Contractor to comply with such standards, means and methods of
cleanup, removal or disposal as the Owner may make known to the Contractor.
In the event the Contractor fails to keep the Job Site clean and free from
such waste or rubbish, or to comply with such standards, means and methods,
the Owner may take such action and offset any and all costs or expenses of
whatever nature paid or incurred by the Owner in undertaking such action
against any sums then or thereafter due to the Contractor. The Contractor
shall notify the Owner in advance of the generation, importation, storage,
transportation, excavation or disposal, of any hazardous waste, toxic
materials to contaminants of any type in connection with the Project.
10.5 OWNER'S STANDARDS. The Owner reserves the right, but assumes no
duty, to establish and enforce standards, and to change the same from time to
time, for the protection of persons and property, with which the Contractor
shall comply, and to review the efficiency of all protective measures taken
by the Contractor. The exercise of or failure to exercise any or all of these
acts by the Owner shall not relieve the Contractor of its duties and
responsibilities under this Contract, and the Owner shall not thereby assume,
not be deemed to have assumed, any such duties or responsibilities of the
Contractor.
ARTICLE 11
INSURANCE
11.1 INSURANCE PROVIDED BY OWNER. The contractor, its subcontractors and
sub-subcontractors hereby waive all rights which they, or any of them, may at
any time, have against the Owner, the Owner's Representative, their respective
parent companies and partnerships, the subsidiary, related and affiliated
companies and partnerships of each and the officers, directors, agents,
employees, partners, and assigns of each, for damages caused by fire or other
perils to the extent covered by the insurance provided by the Owner (but not
their entitlement to any proceeds thereof).
11.2 CONTRACTOR'S INSURANCE.
11.2.1 Contractor shall, without in any way altering Contractor's
liability under the Contract or applicable law, obtain, pay for and
maintain insurance for the coverages and amounts of coverage not
less than those set forth below in the Schedule of Insurance
Coverages (Paragraph 11.2) with insurers licensed to do business in
the jurisdiction in which the Project is located and shall provide
to Owner certificates issued by such insurance companies
satisfactory to Owner to evidence such coverage before any Work
commences at the job site. Such certificates shall provide that
there shall be no termination, nonrenewal, modification or
expiration of such coverage without thirty (30) days' prior written
notice to Owner (except in the case of non-payment of premium, in
which case the certificate must require at least ten (10) days'
prior written notice to Owner before the coverage is terminated
(Contractor represents and warrants that it shall not default on
its obligation to make any premium payments). In the event of any
failure by Contractor to comply with the provisions of this
Paragraph 11.2, (i) Owner may, at its option, on notice to
Contractor, suspend the Contract for cause until there is full
compliance with this Paragraph 11.2 and/or terminate the Contract
for cause or (ii) Owner may purchase such insurance at Contractor's
expense, provided that Owner shall have no obligation to do so and
if Owner shall do so, Contractor shall not be relieved of or
excused from the obligation to obtain and maintain such insurance
amounts and coverages. Contractor shall provide to Owner a
certified copy of any and all applicable insurance policies upon
request of the Owner. Timely renewal certificates will be provided
to Owner as coverage renews.
11.2.2 The Indemnitees shall be named as additional insureds on each
insurance policy required by this Article 11 (other than workers'
compensation insurance) through an endorsement thereto which
provides for no different coverage to the Indemnitees than to the
Contractor. The additional insured endorsements shall provide the
following: (i) that the coverages afforded the additional insureds
will be primary insurance for the additional insureds with respect
to claims arising out of operations performed by or on behalf of the
Contractor, (ii) that the coverages afforded the additional insureds
shall not exclude claims asserted by the Contractor's employees,
(iii) that if the additional insureds have other insurance which is
applicable to a loss, such other insurance will be on an excess or
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contingent basis, (iv) that the amount of the insurance company's
liability under the insurance policy will not be reduced by the
existence of such other insurance and (v) that the additional
insureds will be given not less than thirty (30) days prior written
notice of the material modification or cancellation thereof (except
in the case of non-payment of premium, in which case the
endorsements must require at least ten (10) days' prior written to
notice to the Indemnitees before the coverage is materially modified
or canceled (Contractor represents and warrants that it shall not
default on its obligation to make any premium payments). Before any
Work commences at the job site, Contractor shall provide to Owner
certificates of insurance satisfactory to Owner to evidence
Contractor's compliance with the requirements of this Paragraph
11.2.2, The Indemnitees shall not, by reason of their inclusion as
additional insureds or otherwise, have any liability for the
payments of any deductibles or premiums.
11.2.3 Insurance of the types required of Contractor hereunder shall
be provided by all Subcontractors, or provided by Contractor on behalf
of all Subcontractors, to cover their operations performed under the
Contract Documents. Contractor shall be held responsible for any
modification in these insurance requirements as they apply to
Subcontractors. Contractor shall maintain Certificates of Insurance
from all Subcontractors, enumerating, among other things, the
waivers in favor of, and insured status of, the Indemnitees, as
required herein, and make them available to Owner upon request.
11.2.4 In the event Contractor fails to obtain the required
certificates of insurance from any Subcontractor and a claim is made
or suffered, the Contractor shall indemnify, defend and hold
harmless Owner, Owner's constituent partners, the parent companies
and affiliates of Owner and of any constituent partner, and
Architect and, to the extent applicable, their respective
shareholders, officers, directors, agents and employees parties from
any and all claims for which the required insurance would have
provided coverage. This indemnity obligation is in addition to any
other indemnity obligation provided in the Contract.
11.2.5 The term "Subcontractor(s)" for the purposes of
this Article 11 shall include all Subcontractors and
Sub-subcontractors.
11.3 SCHEDULE OF INSURANCE COVERAGES.
11.3.1 WORKERS' COMPENSATION.
Workers' Compensation Statutory Limits
Employer's Liability $500,000
The policy shall include a Waiver of Subrogation in favor of the
Indemnitees.
11.3.2 COMMERCIAL GENERAL LIABILITY.
Bodily Injury/Property $1,000,000 each
Damage occurrence, or
(occurrence Basis) equivalent, subject to
a $2,000,000 general
aggregate applicable
to the Project
This policy shall be on a form acceptable to Owner and shall include
the following coverages:
11.3.2.1 Premises/Operations
11.3.2.2 Independent Contractors
11.3.2.3 Completed Operations (This coverage shall be
renewed by the original insurance company or provided by
another insurance company so that coverage is maintained for
a period of not less than two years following the acceptance
of Contractor's Work)
11.3.2.4 Broad Form Contractual Liability specifically
in support of, but not limited to, the Indemnity sections of
the Contract
11.3.2.5 Broad Form Property Damage
11.3.2.6 Personal Injury Liability with employees and
contractual exclusions removed
11.3.2.7 Delete Exclusions relative to Collapse,
Explosion and Underground Property Damage Hazards
11.3.3 COMPREHENSIVE AUTOMOBILE LIABILITY.
11.3.3.1 Bodily Injury
$1,000,000 per person
$1,000,000 per accident
11.3.3.2 Property Damage
$1,000,000 per accident,
or equivalent
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This policy shall be on a standard form written to cover all
owned, hired and non-owned automobiles.
11.3.4 UMBRELLA EXCESS LIABILITY INSURANCE.
Bodily Injury/ $5,000,000 per occurrence
Property Damage $5,000,000 aggregate
(Occurrence Basis)
This policy shall be written on an umbrella excess basis above
coverages as described in 11.3.1, 11.3.2 and 11.3.3 above. In addition,
the policy shall be endorsed to provide defense coverage obligations
and shall follow the form of the underlying coverages.
11.3.5 BUILDER'S RISK INSURANCE. Contractor shall maintain, at its
sole expense, all-risk builder's risk insurance as follows:
11.3.5.1 Contractor shall carry completed value from
builder's risk property insurance (subject to a deductible
per loss not to exceed $2,500.00) upon the entire Work for
100% of the full replacement cost value thereof (100%
includes additional costs of architectural and engineering
services in the event of a loss). This policy shall include
the interests of the Owner and the other Indemnitees,
Contractor, and Subcontractors in the work as named
insureds, as their interests may appear, and shall be on an
"All Risk" basis for physical loss or damage including,
without limitation, fire, flood, earthquake, subsidence,
hail, theft, vandalism and malicious mischief and shall
include coverage for portions of the Work while it is
stored off the site or is in transit. This policy shall
provide, by endorsement or otherwise, that Contractor shall
be solely responsible for the payment of all premiums under
the policy, and that Owner and the other Indemnitees shall
have no obligation for the payment thereof, notwithstanding
that Owner and the other Indemnitees are named as insureds
under the policy. Any insured loss or claim of loss shall
be adjusted by the Owner and any settlement payments shall
be made payable to the Owner as trustee for the insureds,
as their interests may appear, subject to the requirements
of any applicable mortgage clause. Upon the occurrence of
an insured loss or claim of loss, monies received will be
held by Owner who shall make distribution in accordance
with an agreement to be reached in such event between Owner
and Contractor, If the parties are unable to agree between
themselves on the settlement of the loss, such dispute
shall be submitted to a court of competent jurisdiction to
determine ownership of the disputed amounts but the Work of
the Project shall nevertheless progress during such period
of dispute without prejudice to the rights of any party to
the dispute. The Contractor shall be responsible for any
loss within the deductible area of the policy.
11.3.6 BROAD FORM BOILER AND MACHINERY INSURANCE. Contractor shall
maintain, at its sole expense, such boiler and machinery insurance as
may be required by the Contract Documents or by law.
11.4 CONTRACTOR'S EQUIPMENT POLICY. Any such insurance policy covering
Contractor's or its Subcontractors' or Sub-subcontractors' equipment against
loss by physical damage shall include an endorsement waiving the insurer's
right of subrogation against the Indemnitees. Such insurance shall be
Contractor's and its Subcontractors' sole and complete means of recovery for
any such loss. Should Contractor or its Subcontractors choose to self-insure
this risk, it is expressly agreed that the Contractor and its Subcontractors
hereby waive any claim for damage or loss to said equipment in favor of the
Indemnitees.
11.5 RELEASE OF WAIVER--Contractor hereby releases, and shall cause its
Subcontractors to release, Owner and the other Indemnitees from any and all
claims or causes of action whatsoever which Contractor and/or its
Subcontractors might otherwise possess resulting in or from or in any way
connected with any loss covered or which should have been covered by
insurance, including the deductible portion thereof, maintained and/or
required to be maintained by Contractor and/or its Subcontractors pursuant to
the Contract Documents.
11.6 CLAIMS MADE POLICIES.. With respect to any of the insurance policies
provided by Contractor pursuant to the Contract Documents which are "Claims
made" policies, in the event that at any time such policies are canceled or
not renewed, Contractor shall provide a substitute insurance policy(ies) with
terms and conditions and in amounts which comply with the terms of the
Contract Documents and which provides for retroactive coverage to the date of
cancellation or non-renewal to fill any gaps in coverage which may exist due
to the cancellation or non-renewal of the prior "claims made" policies. With
respect to all "claims made" policies which are renewed, Contractor shall
provide coverage retroactive to the date of
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commencement of the Work in said renewed policy. All said substitute or
renewed "claims made" policies shall be maintained in full force and effect
for the longer of (I) two (2) years from the date of completion of the Work
or (ii) as otherwise required by the Contract Documents. A certificate
evidencing continuation of such policies shall be submitted with the final
Application of Payment as required by Article 9.1.2. Nothing herein shall
affect the continuing effectiveness of the indemnity clauses in the Contract
Documents..
11.7 INDEMNIFICATION. With the exception that this Paragraph 11.7 shall
in no event be construed to require indemnification by Contractor to a
greater extent than permitted under the public policy of the state where the
Project is located, Contractor shall indemnify, defend (if required by Owner
and with Counsel selected by Owner), and hold Owner, and the Owner's
Representative, the parent, subsidiary, related and affiliated companies or
partnerships of each and the officers, directors, agents, employees, partners
and assigns of each, harmless from and against any and all claims, demands,
suits, judgments, losses or expenses of any nature whatsoever (including
actual attorney's fees) ("Claims") arising directly or indirectly, in whole
or in part, from or out of any:
(a) Act or omission of Contractor, its officers, directors, agents,
employees, any contractor, subcontractor or subconsultant of any
tier, anyone directly or indirectly employed by any of them or
anyone for whose acts any of them may be liable;
(b) Personal injury, including but not limited to, bodily injury,
emotional injury, sickness or disease, or death to persons,
including but not limited to any employees or agents of Contractor,
Owner or any independent contractor, subcontractor or
sub-subcontractor and/or damage to property of anyone (including
loss of use thereof), caused or alleged to be caused in whole or in
part by any negligent act or omission of Contractor, or anyone
directly or indirectly employed or engaged by Contractor,
contracting or subcontracting by or under Contractor, or anyone or
whose acts Contractor may be liable, regardless of whether such
personal injury or damage is caused in part by a party indemnified
hereunder;
(c) Penalties imposed on account of the violation of any law, order,
citation, rule, regulation, standard, ordinance or statute, caused
by the action or inaction of Contractor, anyone directly or
indirectly employed or engaged by Contractor or contracting or
subcontracting by or under Contractor or anyone for whose acts
Contractor may be liable;
(d) Infringement of any patent, trademark, or copyright, or violation of
trade secret or other proprietary right by any structure or
equipment, contracted, modified or incorporated by or on behalf of
the Owner pursuant to this Contract;
(e) Any failure of Contractor or any of its subcontractors or
subconsultants of any tier to perform and complete the Work in
strict compliance with the Contract Documents (unless such failure
has been specifically and expressly waived by the Owner in writing);
(f) Failure of Contractor to comply with the insurance provisions of
this Paragraph 11.7;
(g) Any breach by Contractor of any of its duties, obligations or
representations and warranties contained in the Contract. The
indemnification provisions of this Paragraph 11.7 shall extend to
Claims occurring after this Contract is terminated as well as while
it is in force. Such indemnity provisions apply regardless of any
active and/or passive negligent act by omission or Owner, its
agents, independent contractors or employees. Contractor, however,
shall not be obligated under this Contract to indemnify Owner for
claims arising from the sole negligence or willful misconduct of
Owner or its agents, employees or independent contractors who are
directly responsible to Owner, or for defects in design furnished by
such persons. The indemnities set forth in this Paragraph 11.7 shall
not be limited by the insurance requirements contained herein. The
provisions of this paragraph shall survive the expiration or sooner
termination of the Contract.
ARTICLE 12
CHANGES IN THE WORK
12.1 CHANGE ORDERS AND DIRECTIVES. The Owner may, without affecting the
validity of the Contract Documents or any term or condition thereof, issue
Change Orders or Directives or give other orders and instructions regarding
the Work which may have the effect of ordering extra work or other changes in
the Work by altering, adding to or deducting from the Work, modifying the
method or manner of its performance or otherwise (herein sometimes referred
to as "Changes in the Work"). In any such event, the Contract Sum shall,
where applicable, be increased or decreased in the manner hereinafter set
forth; provided, however, that if the Contractor should proceed with a
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Change in the Work upon an oral order, by whomsoever given, it shall
constitute a waiver by the Contractor of any claim for an increase in the
Contract Sum or extension of the Contract Time on account hereof. All Changes
in the Work shall be performed in accordance with the Contract Documents.
12.2 CHANGES REQUIRING AN INCREASE IN CONTRACT SUM. If any Change in the
Work will result in an increase in the Contract Sum, the Owner shall have the
right to require the performance thereof on a lump sum basis, a unit price
basis or a time and material basis, all as hereinafter more particularly
described.
12.2.1 LUMP SUM BASIS. If the Owner elects to have any Change in the
Work performed on a lump sum basis, its election shall be based on a
lump sum proposal which shall be submitted by the Contractor to the
Owner within the time established by the Owner in the Owner's request
therefor. The Contractor's proposal shall be itemized and segregated
by labor and materials for the various components of the Change in
the Work and shall be accompanied by signed proposals of any
Subcontractors or Sub-subcontractors who will perform any portion of
the Change in the Work and of any persons who will furnish materials
or equipment for incorporation therein. The portion of the proposal
relating to labor, whether by the Contractor's forces or those of
its Subcontractors or Sub-subcontractors, may only include
reasonably anticipated gross wages of Job Site labor, including
foremen, who will be directly involved in the Change in the Work,
plus payroll costs (including Social Security, federal or state
unemployment insurance taxes and fringe benefits in connection with
such labor required by union and/or trade agreements if applicable)
and up to ten percent (10%) of such anticipated gross wages, but not
payroll costs, as overhead and profit for any such entity actually
performing the Change in the Work or a portion thereof. The portion
of the proposal relating to materials may only include the
reasonably anticipated direct costs to the Contractor, its
Subcontractors or Sub-subcontractors of materials to be purchased
for incorporation in the Change in the Work, plus transportation and
applicable sales or use taxes, and up to ten percent (10%) of said
direct material costs as overhead and profit for the entity actually
supplying the materials. The proposal may further include the
Contractor's or its Subcontractor's or Sub-subcontractor's
reasonably anticipated direct rental costs in connection with the
Change in the Work (either actual rates or discounted local
published rates), plus up to six percent (6%) thereof as overhead
and profit for the entity actually incurring such costs. If any of
the items included in the lump sum proposal are covered by unit
prices contained in the Contract Documents, the Owner may elect to
use these unit prices in lieu of the similar items included in the
lump sum proposal, in which event an appropriate deduction will be
made in the lump sum amount prior to the application of any allowed
overhead and profit percentages. No overhead and profit shall be
applied to any unit prices.
12.2.2 INTENTIONALLY OMITTED.
12.2.3 TIME AND MATERIAL BASIS. If the Owner elects to have the
Change in the Work performed on a time and material basis, the same
shall be performed, whether by the Contractor's forces or the forces
of any of its Subcontractors or Sub-subcontractors, at actual cost to
the entity performing the Change in the Work (without any charge for
administration, clerical expense, supervision or superintendence of
any nature whatsoever, except foremen directly involved in the
Change in the Work, or the cost, use or rental of small tools
defined as tools with a cost or value of less than $1,000, or
equipment owned by the Contractor or any of its related or
affiliated companies), plus ten percent (10%) of gross wages
(excluding payroll costs) of Job Site labor and direct material
costs and six percent (6%) of rental costs (other than small tools
defined as tools with a cost or value of less than $1,000, or
equipment owned by the Contractor or any of its related or
affiliated companies) as the total overhead and profit. The
Contractor shall submit to the Owner daily time and material
tickets, to include the identification number assigned to the Change
in the Work, the location and description of the Change in the Work,
the classification, names and social security numbers of labor
employed, the materials used, the equipment rented (not tools) and
such other evidence of cost as the Owner may require. The Owner may
require authentication of all time and material tickets and invoices
by persons designated by the Owner for such purpose. The failure of
the Contractor to secure any required authentication shall, if the
Owner elects to treat it as such, constitute a waiver by the
Contractor of any claim for the cost of that portion of the Change
in the Work covered by a non-authenticated ticket or invoice;
provided, however, that the authentication of any such ticket or
invoice by the Owner shall not constitute an acknowledgment by the
Owner that the items thereon were reasonably required for the Change
in the Work.
12.2.4 The Owner shall have no obligation or liability on account of
a Change in the Work except as specifically provided in this Paragraph
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12.2. If the Contractor fails to render any proposal within ten (10)
days after the date of the Owner's request pursuant to this
Paragraph 12.2 or such longer period of time established by the
Owner in its request, the Owner may issue a unilateral Change Order
for any such Change in the Work giving the Owner's reasonable
estimate of the cost of the Change, which shall become automatically
binding upon the Contractor. Overhead and profit, as allowed under
this Paragraph 12.2, shall be deemed to cover all costs and expenses
of any nature whatsoever including, without limitation, those for
clean-up, protection, supervision, estimating, field operations,
impacts, inefficiency, extended (Job Site and home office) overhead,
unabsorbed (Job Site and home office) overhead, delays, acceleration
(actual or constructive), ripple effect, small tools and security,
which the Contractor or any of its Subcontractors of
Sub-subcontractors may incur in the performance of or in connection
with a Change in the Work and which are not otherwise specifically
recoverable by them pursuant to this Paragraph 12.2.
12.2.5 The Work pursuant to this Contract shall be performed by the
Contractor at no extra cost to the Owner despite any order from the
Owner which designates or contemplates a portion of the Work as a
Change in the Work.
12.3 CHANGES REQUIRING A DECREASE IN CONTRACT SUM. If any Change in the
Work will result in a decrease in the Contract Sum, the Owner may request a
quotation by the Contractor of the amount of such decrease for use in
preparing a Change Order. The Contractor's quotation shall be forwarded to
the Owner within ten (10) days after the date of the Owner's request of such
longer period of time established by the Owner therein and, if acceptable to
the Owner, shall be incorporated in the Change Order. If not acceptable, the
parties shall make every reasonable effort to agree as to the amount of such
decrease, which may be based on a lump sum properly itemized, on unit prices
stated in the Contract Documents and/or on such other basis as the parties
may mutually determine. If the parties are unable to so agree, the amount of
such decrease shall be the total of the estimated reduction in the actual
cost of the Work, as determined by the Owner's Representative in its
reasonable judgment. If the Contractor fails to render any proposal within
the time required herein, the Owner may issue a unilateral deductive Change
Order giving the Owner's reasonable estimate of the deductive Change, which
shall become automatically binding upon the Contractor.
12.4 DISPUTES REGARDING CHANGES. If any dispute should arise between the
parties with respect to an increase or decrease in the Contract Sum as a
result of a Change in the Work, the Contractor shall not suspend performance
of any such Change in the Work or the Work itself unless otherwise so ordered
by the Owner in writing. The Owner may, however, notify the Contractor of its
determination regarding any such Change and, in the case of an increase, may
thereafter pay to the Contractor up to 50% of the Owner's reasonable estimate
of the value of the Change in the Work as its sole obligation with respect to
any such Change pending resolution of the dispute. The Contractor shall
thereafter be subject to the terms of Paragraph 13.2 regarding its claims for
any difference.
12.5 AUDIT RIGHTS. Where the Work performed is done pursuant to payment
based upon a negotiated, time and material or cost plus basis, then the
Contractor shall afford, access to the Owner at all reasonable times to any
accounting books and records, correspondence, instructions, invoices,
receipts, vouchers, memoranda and other records of any kind relating to the
Work, all of which each of them shall maintain for a period of at least four
(4) years from and after the Date of Substantial Completion. The Contractor
shall make the same available for inspection, copying and audit, in
accordance with general accepted accounting standards, within three (3) days
following notification to the Contractor of the Owner's intent to audit,
failing which any claims for an increase in the Contract Sum and/or extension
of the Contract Time, as applicable, shall be waived.
ARTICLE 13
CLAIMS
13.1 CLAIMS FOR EXTENSIONS OF CONTRACT TIME. No claim by the Contractor
for an extension of the Contract Time or any Milestones shall be considered
unless made in accordance with this Paragraph 13.1. The Contractor shall not
be entitled to any extension of the Contract Time or any milestones as a
result of any cause unless it shall have given written notice to the Owner
pursuant to Paragraph 16.3, within fourteen (14) days following the
commencement of each such condition or cause of the occurrence and probable
duration thereof. The Contractor hereby waives any claims for any such
extensions not timely made in accordance herewith.
13.2 CLAIMS FOR INCREASES IN CONTRACT SUM. Except as otherwise provided
in Paragraph 12.2, no claim by the Contractor for an increase in the Contract
Sum shall be considered unless made in accordance with this Paragraph. The
Contractor shall give the Owner written notice of any such claim not later
than fourteen (14) days after the occurrence of the event giving rise to the
claim (including, without limitation, any Owner determination pursuant to
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Paragraph 12.4), but (except in the event of emergencies pursuant to
Paragraph 10.3) prior to the incurring of any expenses by the Contractor.
Failure to give such notice shall constitute a waiver of the claim including,
but not limited to, any and all damages, cost, impacts, inefficiency,
extended overhead, unabsorbed overhead, ripple effect, or expenses of any
nature whatsoever which the Contractor, or its Subcontractors or
Sub-subcontractors, may suffer or incur. Claims shall be made in writing and
shall identify the instructions or other circumstances that are the basis of
the claim and shall set forth the Contractor's best estimate of the dollar
amount claimed. No claim shall be considered by the Owner if the Contractor
has otherwise waived its rights to file a claim pursuant to the Contract
Documents..
13.3 RESOLUTION OF CLAIMS.. The Architect will review Claims and within
ten (10) days after receipt of a Claim will either (i) reject the Claim in
whole or in part, (ii) recommend approval of the Claim in whole or in part,
(iii) request the claimant provide additional information in support of the
Claim, or (iv) suggest a compromise. The Architect's action under the
preceding sentence shall be promptly reported to the Owner and the
Contractor. If a Claim is not resolved after consideration of the foregoing
and of any further evidence provided to the Architect, the claimant shall be
entitled to pursue its Claim in any lawful manner, subject to any limitations
contained in the Contract Documents, if any. The foregoing notwithstanding,
none of Architect's decisions or recommendations with respect to Claims or
any other matters will be binding on Owner or Contractor unless Owner and
Contractor otherwise mutually agree in writing.
13.4 NO OTHER CLAIMS. The parties acknowledge that the provisions of
Paragraphs 13.1 and 13.2 are included herein for the purpose of fixing and
limiting the time within which, and the manner in which claims must be made;
and that Paragraphs 13.1 and 13.2 do not grant to the Contractor any right to
increase in the Contract Sum, or extensions in the Contract Time or any
Milestones, not otherwise permitted or provided by the other terms and
provisions of the Contract Documents.
13.5 NO ARBITRATION. Owner and Contractor hereby agree that no claims or
disputes between Owner and Contractor arising out of or relating to the
Contract Documents or a breach thereof shall be decided by any arbitration
proceeding including, without limitation, any proceeding under the Federal
Arbitration Act (9 U.S.C. Sections 1-14), or any applicable state arbitration
statute, except that in the event that Owner is subject to an arbitration
proceeding related to the Project, Contractor consents to being joined in the
arbitration proceeding if Contractor's presence is required or requested by
Owner for complete relief to be accorded in the arbitration proceeding.
ARTICLE 14
UNCOVERING AND CORRECTION OF WORK;
OWNER'S RIGHT TO CARRY OUT WORK
14.1 UNCOVERING OF WORK.
14.1.1 If any portion of the Work should be covered contrary to the
instructions or request of the Owner or the requirements of the
Contract Documents, the Contractor shall, if required by the Owner,
uncover such portions of the Work for the Owner's observation and
shall replace such Work, all at the Contractor's sole expense.
14.1.2 If any portion of the Work should be covered prior to a
specific request for observation or instruction by the Owner, the
Owner may request to see such Work, and it shall be uncovered by the
Contractor. If such Work is found to be in accordance with the
Contract Documents and without defect, the cost of uncovering and
replacement shall, by appropriate Change Order, be charged to the
Owner. If such work is found to be defective or not in accordance
with the Contract Documents, the Contractor shall bear such costs;
provided, however, that if it is found that the condition was caused
by a Separate Contractor employed as provided in Article 7, the
Contractor shall have the right to seek reimbursement of the costs
it incurs as aforesaid from said Separate Contractor.
14.2 CORRECTION OF WORK.
14.2.1 The Owner shall have the authority to reject any portion of
the Work which is defective or does not conform to the Contract
Documents, and the Contractor shall promptly correct all Work so
rejected by the Owner, whether observed before or after the Date of
Substantial Completion and whether or not fabricated, installed or
completed. In order that such corrective work shall not interrupt or
delay the Owner's schedule for completion of the Project or, if
applicable, disturb the occupants of the completed Project, the
Contractor shall perform such work according to a schedule therefor
established by the Owner (which may provide that the same be
performed on overtime, shift
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work, Saturdays, Sundays and/or holiday), utilizing in the
performance thereof such manpower as is necessary to complete the
corrective Work in accordance with said schedule. The Contractor
shall bear all costs of correcting such rejected Work, including,
without limitation, compensation for any additional architectural
and engineering services made necessary thereby.
14.2.2 If, within one (1) year after the Date of Substantial
Completion of the Work or within such longer period of time as may
be prescribed by law or by the terms of any applicable warranty or
guarantee required by the Contract Documents, any of the Work is
found to be defective or not in accordance with the Contract
Documents, the Contractor shall correct it promptly after receipt of
written instructions to that effect from the Owner unless the Owner
has previously given the Contractor a written acceptance of such
condition.
14.2.3 The Contractor shall remove from the Job Site all Work
which is defective or non-conforming and not corrected under
Paragraph 5.3 or Subparagraphs 14.2.1 or 14.2.2 unless removal is
waived by the Owner.
14.2.4 The Contractor shall bear the cost of making good all work
of Separate Contractors (and any of the Owner's other structures or
facilities) destroyed or damaged by such removal or correction.
14.2.5 If the Contractor does not remove such uncorrected
defective or non-conforming Work within a reasonable time fixed by
written instructions to that effect from the Owner, the Owner may
remove it and store the materials and equipment at the expense of
the Contractor. If the Contractor does not pay the cost of such
removal and storage within ten (10) days thereafter, the Owner may,
upon ten (10) additional days written notification to the
Contractor, sell such materials and equipment at public or private
sale and account to the Contractor for the net proceeds thereof,
after deducting all the costs that should have been borne by the
Contractor, including compensation for any additional architectural
and engineering services and attorneys' fees made necessary thereby.
If such proceeds of sale do not cover all costs which the Contractor
should have borne, the difference shall be deducted or offset
against any amounts then or thereafter due to the Contractor. If the
amounts then or thereafter due to the Contractor are not sufficient
to cover such difference, the Contractor shall, upon demand, pay the
same to the Owner. The obligations of the Contractor under this
Subparagraph 14.2.5 shall be in addition to, and not in limitation
of, any obligations imposed on it by law, by any other provision of
this Contract or by any warranty or guarantee under this Contract.
14.2.6 If the Contractor fails to correct any defective or
non-conforming Work, the Owner may correct it in accordance with
Paragraph 14.3. In the event of a defect found after final
acceptance of the Work by the Owner which the Contractor is
obligated to correct pursuant to Subparagraph 14.2.2, the Owner may,
at its option, after giving the Contractor an opportunity to correct
such defect, cause such corrective work to be performed by others
and charge the Contractor with the cost thereof. Such charge shall
be due and payable by the Contractor upon demand. The Contractor's
obligations under this Paragraph 14.2 shall survive the expiration
or sooner termination of this Contract.
14.3 OWNER'S RIGHT TO CARRY OUT WORK. If the Contractor defaults or
neglects to carry out the Work in accordance with the Contract Documents or
fails to perform any provision of this Contract, and such default, neglect or
non-performance shall continue for a period of 48 hours after written
notification thereof from the Owner (or if such default, neglect or
non-performance cannot be reasonably remedied within such 48-hour period, and
Contractor does not (in the sole determination of Owner) undertake in good
faith the remedy of the same within said period and thereafter proceed
diligently to completion), then the Owner may, without prejudice to any other
remedy the Owner may have, make good such deficiencies; provided, however,
that in the event of an emergency, as reasonably determined by the Owner, no
notification shall be required. The Owner shall have the right to take
possession of such portion of the Job Site as will enable it to make good
such deficiencies and, in connection therewith, to utilize the materials,
equipment, tools, construction equipment and machinery of the Contractor
located on the Job Site. If the Owner makes good any such deficiencies, the
costs of correcting the same, including compensation for additional
architectural and engineering service made necessary by such default, neglect
or non-performance, shall be deducted or offset against any amounts then or
thereafter due to the Contractor. If the amounts then or thereafter due to
the Contractor are not sufficient to cover such costs, then the Contractor
shall, upon demand, pay the difference to the Owner.
14.4 ACCEPTANCE OF DEFECTIVE OR NON-CONFORMING WORK. If the Owner
prefers to accept defective or non-conforming Work, it may do so instead of
requiring its removal and correction, in which case an appropriate amount
shall be deducted or offset against any amounts then or thereafter due to the
Contractor; or, if the said appropriate amount of offset is determined after
final payment (or if there is not then or thereafter due to the
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Contractor an amount sufficient to cover the deduction or offset available to
the Owner), the Contractor shall, upon demand, pay the appropriate amount (or
the difference after offset, as applicable) to the Owner.
ARTICLE 15
TERMINATION OF CONTRACT
15.1 TERMINATION BY CONTRACTOR. If the Owner should, without notifying
the Contractor of its cause for doing so, fail or refuse to approve an
Application for Payment or make payment thereon for a period of Twenty Five
(25) days after the same is required to be approved or paid pursuant to the
Contract Documents, then the Contractor shall have the right, as its sole and
exclusive remedy and upon Seven (7) days prior written notice to the Owner,
to terminate this Contract and recover from the Owner payment for all unpaid
Work executed up to the date of termination, including any proven loss of
reasonable profits sustained, based upon the percentage of Work completed
through the date of termination. If the Owner shall cure its said default
within such fourteen (14) day period, then the Contractor's notice of
termination shall thereby be rendered ineffective, and this Contract shall
continue in full force and effect. Prior to termination as aforesaid, the
Contractor shall not delay or suspend the Work in whole or in part. The
Contractor may not terminate this Contract on the grounds that the cause
given by the Owner for failing or refusing to pay is not in accordance with
fact or law, it being understood and agreed that the Contractor's sole remedy
in such event shall be to seek money damages. The Contractor acknowledges
that it can be adequately compensated by such money damages for any breach of
this Contract which may be committed by the Owner. Accordingly, and except as
hereinabove provided, the Contractor expressly agrees that no default, act or
omission of the Owner shall entitle the Contractor to cancel, rescind or
terminate this Contract or suspend or abandon its performance of the Work.
15.2 TERMINATION BY OWNER FOR CAUSE.
15.2.1 If the Contractor should become insolvent, file any
bankruptcy proceedings, make a general assignment for the benefit of
creditors, suffer or allow appointment of a receiver, refuse, fail
or be unable to make prompt payment to Subcontractors, disregard
applicable laws, ordinances, governmental orders or regulations or
the instructions of the Owner, or if the Contractor should otherwise
be guilty of a violation of, or in default under, any provision of
the Contract, then the Owner may, without prejudice to any other
right or remedy available to the Owner and after giving the
Contractor and its surety, if any, three (3) days' written notice,
terminate the Contract and the employment of the Contractor on the
Project, take possession of the Job Site and of all materials,
equipment, tools, construction equipment and machinery thereon owned
by the Contractor and finish the Work by whatever method the Owner
may deem expedient. In addition, without terminating this Contract
as a whole, the Owner may, under any of the circumstances set forth
above, terminate any portion of this Contract (by reducing, in such
manner as the Owner deems appropriate, the scope of the Work to be
performed by the Contractor) and complete the portion of this
Contract so terminated in such manner as the Owner may deem
expedient, taking possession of such part of the Job Site and
utilizing such materials, equipment, tools, construction equipment
and machinery owned by the Contractor as may be necessary to
accomplish the same. The Contractor hereby grants to the Owner the
further right: (a) to enter upon any premises or property other than
the Job Site in order to take possession of any materials, tools,
equipment, machinery or other items intended for incorporation in
the Work (or any portion thereof) or for use in the performance
thereof and (b) to receive an assignment of such subcontracts as the
Owner deems necessary or desirable at the time of termination of
this Contract or a portion thereof.
15.2.2 If this Contract is terminated pursuant to Subparagraph
15.2.1, the Contractor shall not be entitled to receive any further
payment until the Work is completed, and the Owner shall have the
same right to retain monies owing to the Contractor as it would have
to retain such monies from and against final payments. Upon the
completion of the Work, the Owner shall make payment to the
Contractor, or the Contractor shall reimburse the Owner, as the case
may be, as provided in Article 10 of the Agreement. If a portion of
this Contract is terminated pursuant to Subparagraph 15.2.1, such
termination shall not be treated as a reduction in the scope of the
Work pursuant to Article 12. Rather, in such event, the Owner shall
deduct or offset against any monies then or thereafter due to the
Contractor an amount determined by the Owner to be adequate to cover
all costs and expenses it will incur in performing, or cause to be
performed, the portion of this Contract so terminated. If the
Owner's costs and expenses prove to be less than the amount deducted
or offset, the Contractor shall be entitled to the difference unless
otherwise provided herein. If the amount then or thereafter due to
the Contractor is less than the amount to be deducted or offset
and/or if the Owner's costs
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and expenses prove to exceed the amount deducted or offset, the
Contractor shall pay the difference to the Owner upon demand.
15.2.3 The remedies provided to the Owner in this Paragraph 15.2
are in addition to, and not in lieu of, any other rights or remedies
available to the Owner under the Contract Documents, at law or in
equity. In the event of any breach of this Contract by the
Contractor, and whether or not this Contract is terminated by the
Owner, the Contractor shall be liable for all damages, losses, costs
and expenses incurred by the Owner as a result thereof.
15.3 TERMINATION BY OWNER WITHOUT CAUSE. Without limitation to the
provisions of Paragraph 15.2, the Owner shall have the right at any time,
upon not less than seven (7) days notice to the Contractor to terminate this
Contract without cause and/or for the Owner's convenience. Upon receipt of
such notice of termination, the Contractor shall forthwith discontinue the
Work and remove its equipment and employees from the Job Site. In the event
of termination under this Paragraph 15.3, the Contractor shall have the
right, as its sole and exclusive remedy, to recover from the Owner payment
for all unpaid Work executed up to the date of termination. In addition,
without terminating this Contract as a whole, the Owner may, for its
convenience, terminate a portion of this Contract (by reducing, in such
manner as the Owner deems appropriate, the scope of the Work to be performed
by the Contractor), in which event such termination of a portion of this
Contract shall be treated as a reduction in the scope of the Work pursuant to
Article 12.
ARTICLE 16
MISCELLANEOUS PROVISIONS
16.1 GOVERNING LAW. This Contract shall be governed by, and construed in
accordance with, the laws of where the Project is located, to the exclusion
of the rules of conflicts of laws of the state where the Project is located.
16.2 ASSIGNABILITY; SUCCESSORS AND ASSIGNS.
16.2.1 This Contract may be assigned by Owner at any time without
Contractor's consent; without limiting the generality of the
foregoing, all warranties and guarantees in favor of Owner under the
Contract Documents may be assigned without Contractor's consent by
Owner to any party designated by Owner and such assignee may
directly enforce any such warranty or guarantee. The Contractor
shall not assign this Contract in whole or in part without the
written consent of the Owner, which consent the Owner may withhold
in its sole discretion; nor shall this Contract be assignable by the
Contractor by operation of law. The Contractor shall not assign any
monies due or to become due to it hereunder without the prior
written consent of the Owner.
16.2.2 The Owner and the Contractor each binds itself and, to the
extent permitted herein, its successors and assigns, to the other
party and, to the extent permitted herein, the other party's
successors and assigns, in respect to all covenants, agreement and
obligations contained in the Contract Documents.
16.3 PERFORMANCE AND PAYMENT BONDS. Unless waived or otherwise agreed by
the Owner, the Contractor shall furnish before commencing any Work hereunder,
and under each continuing (on-call) Work on multiple projects or continuing
(on-call) services as set forth in the Owner approved Work Authorization
Forms, (and if directed by the Owner shall require all or certain of its
Subcontractors to furnish) a bond covering the faithful performance of this
Contract (or any such subcontract), as revised or modified from time to time,
and a bond covering the payment of all obligations arising thereunder in full
compliance with applicable law each in the full Contract Sum, as revised or
Modified from time to time, and with such sureties as may be approved by the
Owner. If such bonds, or either of them, are stipulated in the bidding
documents or in the Contract Documents, the premium therefor shall be paid by
the Contractor (or appropriate Subcontractors); but if required or increased
in amount pursuant hereto subsequent to award of Contract or due to Changes
in the Work, the premium therefor shall be reimbursed by the Owner. The
Contractor shall deliver promptly, and in any event no later than ten (10)
days after notice of award, to the Owner any required bonds or amendments
thereto. The Contractor's failure to timely obtain and deliver the required
bonds or amendments thereto shall constitute cause for the Owner to terminate
this Contract (or for the Contractor to terminate any subcontract). The Owner
shall not be obligated to respond to, and the Contractor shall assure that
the Owner is not sent any job status inquiries from the Contractor, any
surety, or any of their accountant or independent auditors.
16.4 UNION AGREEMENTS. Except as otherwise set forth in this Agreement
including but not limited to paragraph 8.3, regardless of the expiration of
any collective bargaining agreement during the term of this Contract which
may affect the Contractor in any of its activities including, without
limitation, with respect to the Work or the Project, the Contractor is
obligated to man the job and properly and timely perform the Work in a
diligent manner. Upon notification of expected or actual labor disputes or
job disruption arising out of any such collective bargaining negotiations,
the expiration of any union or
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trade agreement or any other cause, the Contractor and its Subcontractors and
Sub-subcontractors shall cooperate with the Owner concerning any legal,
practical or contractual actions to be taken by the Owner in response thereto
and shall perform any actions requested by the Owner to eliminate, neutralize
or mitigate the affects of such actions on the progress of the Work and the
impact of such actions on the public access to the Owner's facilities. It is
the Contractor's obligation, at the Contractor's own cost and expense, to
take all steps available to prevent any persons performing the Work from
engaging in any disruptive activities such as strikes, picketing, slowdowns,
job actions or work stoppages of any nature or ceasing to work due to
picketing or other such activities, which steps shall include, without
limitation, execution of an appropriate project agreement with appropriate
unions prohibiting all such activities on or about the Project.
Notwithstanding any such occurrences, the Contractor shall not be relieved of
its obligation to man the job and properly and timely perform the Work in a
diligent manner.
16.5 GENERAL.
16.5.1 The captions of divisions, sections, articles, paragraphs,
subparagraphs, clauses and the like in the Contract Documents are
for convenience only and shall in no way define the content or
limit the meaning or construction of the wording of the divisions,
sections, articles, paragraphs, subparagraphs, clauses and the
like. The parties agree that the Contract Documents shall not be
construed more strictly against any party regardless of the
identity of their drafter.
16.5.2 Unless otherwise specified, article, paragraph and
subparagraph references appearing in these General Conditions are to
articles, paragraphs and subparagraphs herein.
16.5.3 Wherever this Contract obligates the Contractor to
"indemnify" the Owner, such obligations shall include, but shall
not be limited by, the following: (i) the Contractor shall
indemnify the Owner and Owner's Representative, the parent,
related, affiliated and subsidiary companies of each, and the
officers, directors, agents, employees and assigns of each;
(ii) the Contractor shall defend (if requested by the Owner)
and hold each indemnitee harmless; (iii) in the event of any such
requested defense, the Owner may choose its legal counsel
and control the litigation including, without limitation,
determining legal strategy, settlement strategy and whether or not
to file any appeals; (iv) the Contractor shall not raise a defense
to its obligation to indemnify any comparative or contributing
negligence of any of those indemnified pursuant to any such
provision, it being understood and agreed that no such
comparative or contributing negligence shall relieve the
Contractor from its liability to so indemnify or entitle the
Contractor to any contribution, either directly or indirectly
by those indemnified; (v) no indemnification obligation hereunder
shall be limited in any way to any limit on the amount or type of
damage, compensation or benefits payable by or for the Contractor
or any Subcontractor or any Sub-subcontractor under any Worker's
Compensation Act, disability benefit acts or other employee benefit
acts and (vi) in all such indemnity provisions shall survive
the expiration or sooner termination of this Contract.
16.5.4 Unless otherwise specifically provided herein, the Owner
may withhold any consents, approvals or waivers required of it
pursuant to this Contract in its discretion, which consent shall not
be unreasonably withheld.
16.6 IMMIGRATION REFORM CONTROL ACT. All Contractors, Subcontractors and
Sub-subcontractors must adhere to the Immigration Reform Control Act of 1986
and shall maintain I-9 forms regarding all employees. It is not the Owner's
obligation to insure compliance with this law, however, the Owner reserves
the right to inspect and copy the Contractor's records in this regard upon
request.
16.7 ATTORNEY'S FEES. Any other terms of this Agreement to the contrary
notwithstanding, the parties agree that if any action or proceeding is
commenced by either party to enforce their rights under this Agreement or to
collect damages as a result of the breach of any of the provisions of this
Agreement, the prevailing party in such action or proceeding, shall be
entitled to recover all reasonable costs and expenses, including, without
limitation, reasonable attorneys' fees and court costs, including the costs
of expert witnesses and consultants, in addition to any other relief awarded
by the court.
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EXHIBIT D
MILESTONE DATES
(the Milestone Dates for continuing (on-call) Work on multiple projects or
continuing (on-call) services shall be described in the job specific Work
Authorization form)
EXHIBIT D, Milestone Dates, is bound within this Agreement and made apart of
the Contract Documents between Owner and Contractor.
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EXHIBIT E
CONTRACTOR'S GUARANTEE TO OWNER
In consideration of the above referenced Contract and pursuant to the
provisions thereof, the undersigned hereby guarantees to the Owner, its
successors and assigns, any and all Work which the undersigned has contracted
to perform, or cause to be performed, pursuant to the above referenced
Contract against any defects in workmanship, materials and/or equipment. Such
Work is defined in the Contract Documents.
In addition to the foregoing guarantee, the undersigned agrees to repair
and/or, at the option of the Owner, replace at its own cost and expense any
or all of the aforesaid Work that within a period of one (1) year from the
date of acceptance thereof by the Owner (or such longer period of time as may
be prescribed by law or otherwise specified in the Contract Documents) may
prove to be defective in workmanship, material and/or equipment or in any way
not be in strict accordance and compliance with the Contract Documents,
together with any adjacent structures or facilities which have been displaced
or damaged by so doing or which may have been damaged as a result of any
defect in workmanship, material and/or equipment or the failure of the Work
to comply with the Contract Documents. All such repairs and/or replacements
shall be performed in accordance with all agreements, terms, conditions,
covenants and provisions of the Contract Documents pursuant to which the said
Work was performed, except that such repairs and/or replacements shall be
without cost to the Owner, its successors or assigns, or to any related
company of the Owner.
Should the undersigned fail to perform its obligations under this Guarantee
promptly after being given notice of a defect by the Owner, then the Owner
may, at its option, perform such corrective work or cause it to be performed
by others and charge the undersigned with the cost
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thereof; provided, however, that if, in the sole judgment of the Owner, an
emergency exists as a result of any such defect which, in the Owner's
opinion, requires more immediate corrective action than the undersigned is
able to provide, then the Owner may, without notice to the undersigned,
perform such corrective work or cause it to be performed by others and charge
the undersigned with the cost thereof.
CONTRACTOR
Dome Construction Corporation Local Representative to be contacted for service:
By:_____________________
Name: Name: John Robertson, Vice President
Title: Address: 80 Carolina Street
San Francisco, California 94103-5116
Date:_____________________ Telephone Number (415) 864-6140
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EXHIBIT F
PAYMENT BOND
(If this Agreement is for continuing (on-call) Work on multiple projects or
continuing (on-call) services, a separate Payment Bond shall be
issued for each job specific project or service)
KNOW ALL MEN BY THESE PRESENTS, That we ______________________ as Principal
(Contractor) and as Surety, are held and firmly bound unto ___________ as
Obligee (OWNER), in the penal sum of _____________________________ DOLLARS
($__________) for the payment of which sum we jointly and severally bind
ourselves, our heirs, assigns, executors, administrators and successors
firmly by these presents.
THE CONDITION of the obligation is such that, whereas Contractor has entered
into a Contract with OWNER dated _______________ which Contract is hereto
attached and expressly made a part hereof to perform the following work:
NOW, THEREFORE, if the Contractor shall pay promptly and in full the claims
of all persons, firms, partnerships, corporations or others, supplying labor,
material, services, utilities or equipment in connection with the prosecution
of the work provided for in the Contract and any and all modifications,
additions or alterations of the Contract that may hereafter be made, and
shall fully indemnify and hold harmless the OWNER from all loss, liability
costs, damage penalty and attorney's fees or expenses for all taxes,
insurance premiums, any and all applicable contributions, allowances or other
payments or deductions however termed, required by statute or labor union
agreement, including voluntary payment thereof by the OWNER necessary to
insure orderly prosecution of work or other items or services in connection
with the Contract to be supplied or performed which OWNER may suffer by
reason of failure to do so and shall fully reimburse and repay the OWNER all
outlay and expense which the OWNER may incur in making good any such failure,
then this obligation shall be void; otherwise, it shall remain in full force
and effect.
25
<PAGE>
The Surety and the Contractor further agree that any changes, modifications,
additions or alterations which may be made in the terms of the Contract or in
the scope or character of the work to be done thereunder, or any extensions
of the Contract or in due time for completion thereof any change in the
manner, time or amount of a payment as provided therein, or other forbearance
on the part of either the OWNER or Contractor to the other, shall not in any
way release the Contractor and the Surety, or either of them, their heirs,
assigns, executors, administrators and successors from their liability
thereunder, nor affect the obligations of any of them hereunder, notice to
Surety of any such changes, modifications, additions, extensions or
forbearance being hereby expressly waived by the Surety.
The Surety and the Contractor further agree that this bond shall insure to
the benefit of, and may be sue directly upon by any person, firm or
corporation furnishing labor, material services, utilities or equipment, in
the prosecution of the work provided for in the Contract, or any
modifications, additions or alterations thereto, or who has the right to
establish a lien or claim against OWNER or OWNER's property, premises or
improvements or any funds accrued, or to accrue, from OWNER.
The sum of this Payment Bond is in addition to the sum of the Performance
Bond being executed concurrently herewith.
IN WITNESS HEREOF, the parties have executed this instrument under their
several seals this _____ day of ________________, 19___.
____________________________________ ________________________________________
CONTRACTOR CORPORATE SURETY
____________________________________ ________________________________________
Address Address
____________________________________ ________________________________________
By:_________________________________ By:_____________________________________
(SEAL) (SEAL)
26
<PAGE>
EXHIBIT G
PERFORMANCE BOND
(If this Agreement is for continuing (on-call) Work on multiple projects or
continuing (on-call) services, a separate Performance Bond shall
be issued for each job specific project or service)
KNOW ALL MEN BY THESE PRESENTS, That we ______________________ as Principal
(Contractor) and as Surety, are held and firmly bound unto _________________
as Obligee (OWNER), in the penal sum of ____________________________ DOLLARS
($___________) for the payment of which sum we jointly and severally bind
ourselves, our heirs, assigns, executors, administrators and successors
firmly by these presents.
THE CONDITION of the obligation is such that, whereas Contractor has entered
into a Contract with OWNER dated _______________ which Contract is hereto
attached and expressly made a part hereof to perform the following work:
NOW, THEREFORE, if the Contractor shall well and truly perform and fulfill
all the undertakings, covenants, terms, conditions and agreements of the
Contract and any extensions thereof that may be granted by the OWNER, and
during the term of any warranty required under the Contract, and shall also
well and truly perform and fulfill all the undertakings, covenants, terms,
conditions and agreements of any and all modifications, additions or
alterations of the Contract that may hereafter be made, and shall also fully
indemnify and hold harmless the OWNER from all loss, liability costs, damage
penalty and attorneys' fees which OWNER may incur by reason of failure to
well and truly keep and perform each, every and all of the terms and
conditions of said Contract as modified, amended, altered or added to on the
part of Contractor to be kept and performed, including but not limited to
completion within the time specified of all work covered by said Contract,
performance of all obligations, and guarantees of Contractors and shall fully
reimburse and repay the OWNER all outlay and
27
<PAGE>
expense which the OWNER may incur in making good any such failure, then this
obligation shall be void; otherwise it shall remain in full force and effect.
The Surety further agrees that whenever Contractor shall be, and is declared
by OWNER to be, in default under the Contract (and said default shall be
construed to be any breach of any of the provisions of the Contract on the
part of the Contractor) the Surety shall promptly remedy the default, or will
complete the Contract in accordance with its terms and conditions and shall
fully indemnify and hold harmless the OWNER from all costs, damages and
expenses which may arise thereafter (including reasonable attorney's fees)
and which the OWNER may suffer by reason of Surety's failure to do so.
The Surety and the Contractor further agree that any changes, modifications,
additions or alterations which may be made in the terms of the Contract or in
the scope or character of the work to be done thereunder, or any extensions
of the Contract, or in the time for completion thereof, any change in the
manner, time or amount or payment as provided therein, or other forbearance
on the part of either the OWNER or Contractor to the other, shall not in any
way release the Contractor and the Surety, or either of them, their heirs,
assigns, executors, administrators and successors, from their liability
hereunder, nor affect the obligations of any of them hereunder, notice to
Surety of any such modifications, additions, extensions or forbearance being
hereby expressly waived by the Surety.
The sum of this Performance Bond is in addition to the sum of the Payment
Bond being executed concurrently herewith.
IN WITNESS HEREOF, the above parties have executed this instrument under
their several seals this ____ day of __________________, 19___.
____________________________________ ________________________________________
CONTRACTOR CORPORATE SURETY
____________________________________ ________________________________________
Address Address
28
<PAGE>
____________________________________ ________________________________________
By:_________________________________ By:_____________________________________
(SEAL) (SEAL)
29
<PAGE>
EXHIBIT H
CHANGE ORDER
The "Change Order", AIA DOCUMENT G701, fourteenth edition, April 1987, is not
bound within this Agreement, but is made apart of the Contract Documents
between Owner and Contractor.
30
<PAGE>
EXHIBIT I
LEGAL DESCRIPTION
(If this Agreement is for continuing (on-call) Work on multiple projects or
continuing (on-call) services, a separate Legal Description shall
be attached to the Owner approved Work Authorization
Form for each job specific project or service)
The Legal Description is bound within this Agreement and made a part of the
Contract Documents between Owner and Contractor.
31
<PAGE>
LEGAL DESCRIPTION
225 BUSH STREET
CITY AND COUNTY OF SAN FRANCISCO
STATE OF CALIFORNIA
PARCEL ONE:
Beginning at the point formed by the intersection of the southerly line of
Bush Street with the westerly line of Sansome Street; Running thence
southerly along said line of Sansome Street 137 feet 6 inches; thence at a
right angle westerly 206 feet and 3 inches; thence at a right angle northerly
137 feet and 6 inches to the southerly line of Bush Street; thence at a right
angle easterly along said line of Bush Street 206 feet and 3 inches to the
point of beginning.
Being a portion of 50 Vara Block No. 56.
PARCEL TWO:
Beginning at a point on the southerly line of Bush Street, distant thereon
206 feet and 3 inches westerly from the westerly line of Sansome Street;
running thence westerly along said line of Bush Street 68 feet and 9 inches;
thence at a right angle southerly 137 feet and 6 inches; thence at a right
angle easterly 68 feet and 9 inches; thence at a right angle northerly
137 feet and 6 inches to the point of beginning.
Being a portion of 50 Vara Block No. 56.
PARCEL THREE:
Beginning at a point which is perpendicularly distant 245 feet westerly from
the westerly line of Sansome Street and perpendicularly distant 254 feet
southerly from the southerly line of Bush Street; running thence northerly
and parallel with the westerly line of Sansome Street 16 feet and 6 inches;
thence at a right angle westerly 30 feet; thence at a right angle southerly
16 feet and 6 inches; thence at a right angle easterly 30 feet to the point
of beginning.
Being a portion of 50 Vara Block No. 56.
PARCEL FOUR:
An exclusive easement appurtenant to parcels one, two and three above, as more
particularly described in the deed recorded December 18, 1973, in Book B835,
Page 939, official records, Instrument No. W-38605, affecting the following
described real property:
Beginning at a point on the southerly line of Bush Street, distant thereon
275 feet westerly from the point of intersection of said southerly line of
Bush Street and the westerly line of Sansome Street; running thence westerly
along said southerly line of Bush Street 25 feet; thence at a right angle
southerly 154 feet to a point perpendicularly distant 121 feet, more or less,
from the northerly line of Sutter Street; thence at a right angle easterly
25 feet; thence at a right angle northerly 154 feet to said southerly line of
Bush Street and the point of beginning.
Being a portion of 50 Vara Block No. 56.
<PAGE>
EXHIBIT J
SCHEDULE OF VALUES
The above Schedule of Values is to be allocated by building and division before
submission of the first Application for Payment as mutually agreed to by Owner
and Contractor.
32
<PAGE>
ADDENDUM 1
HOURLY RATE OR FEE SCHEDULE
(for continuing (on-call) Work on multiple projects or
continuing (on-call) services, the hourly rate or fee
schedule shall be as set forth in the job specific Work
Authorization)
33
<PAGE>
ADDENDUM 2
WORK AUTHORIZATION FORM
(an Owner approved Work Authorization Form shall be
issued for each project for continuing (on-call)
Work on multiple projects or continuing
(on-call) services)
34
<PAGE>
WORK AUTHORIZATION FORM
TO
CONSTRUCTION AGREEMENT
(The Work Authorization Form to Construction Agreement is only applicable if the
Agreement (as defined below), is for continuous on-call work on multiple
projects or continuous on-call services)
This Work Authorization Form to Construction Agreement ("Work Authorization")
which supplements the Construction Agreement dated _____________ ("Construction
Agreement"), is made and entered into as of the _________ day of _____________,
1998, by and between _____________ ("Owner") and _____________ ("Contractor").
ARTICLE I
CERTAIN DEFINITIONS
1.1 "WORK AUTHORIZATION #": _____________
1.2 "COMMENCEMENT DATE" shall mean the earlier of the _____________ or
the date fixed in a Notice to Proceed to be delivered by Owner to Contractor
after the date of this Work Authorization form.
1.3 "CONTRACT SUM" shall mean:
( ) Lump Sum. The sum of _____________ Dollars
($_____________), subject to additions and deductions as provided in the
Contract Documents.
( ) Hourly Rate as set forth in the attached ADDENDUM 1,
subject to additions and deductions as provided in the Contract Documents.
( ) In accordance with the fees described in ADDENDUM 1,
subject to additions and deductions as provided in the Contract Documents.
1.4 "PROJECT" shall mean Work at the following location(s): ____________
______________________________________________________________________________.
The Legal Description for the location(s) is set forth on Exhibit 1.
1.5 "INFORMATION ON PROJECT" this Agreement is for:
Project or Contract Name: _____________
Owner's Contract Number: _____________
1
<PAGE>
Owner's Assigned Job Number: _____________
1.6 "SUBSTANTIAL COMPLETION DATE" shall mean: _________________________.
1.7 "MILESTONE DATES" shall mean: _______________________________________
_______________________________________
_______________________________________
_______________________________________
1.8 "OWNER'S REPRESENTATIVE" for the Project is: __________________
(if different than set forth in the Construction Agreement)
__________________
__________________
__________________
1.9 "CONTRACTOR'S REPRESENTATIVE" for the Project is __________________
(if different that set forth in the Construction Agreement)
__________________
__________________
__________________
1.10 "A/E" for the Project is: __________________
(if different that set forth in the Construction Agreement)
__________________
__________________
__________________
1.11 "CONTRACT DOCUMENTS" shall mean this Work Authorization Form, the
Construction Agreement, the General Conditions, any special supplementary or
other conditions as set forth on Exhibit 2 (collectively "Special
Conditions"), the Drawings, the Specifications, all Addenda (except portions
thereof relating purely to the bidding form or bidding procedure), all
modifications and all other documents enumerated on Exhibit 3 attached
hereto. The Contract Documents collectively form the Contract and are fully
apart thereof as if attached to this Work Authorization Form or repeated
herein.
ARTICLE II
BONDING
2.1 A Payment Bond is required as set forth in Exhibit 4.
2.2 A Performance Bond is required as set forth in Exhibit 5.
ARTICLE III
DELAY DAMAGES
3.1 Delay Damages pursuant to Section 8.3.3 of the General Conditions of
the Contract for Construction shall be _____________ Dollars ($_____________)
for each calendar day
2
<PAGE>
for which Substantial Completion shall not have occurred on or before the
expiration of the Contract Time.
3.2 Delay Damages pursuant to Section 8.3.3 of the General Conditions of
the Contract for Construction do not compensate Owner for any other damages
of any type or kind, including without limitation any damages related to or
in connection with Contractor's failure to fully and properly perform the
Contract Documents or any damages resulting from _____________.
3.3 Pursuant to Section 8.3.5 of the General Conditions of the Contract
for Construction, in addition to Delay Damages under Section 8.3.3 of the
General Conditions of the Contract for Construction, Owner shall at all times
be entitled to all of its remedies under the Contract Documents and at law
and in equity, including, without limitation, the recovery of damages related
to or in connection with Contractor's failure to fully and properly perform
the Contract Documents or any damages resulting therefrom.
ARTICLE IV
MISCELLANEOUS
4.1 A fully executed copy of this Work Authorization hereby authorizes
the Contractor to proceed with the Work as set forth herein and described in
the Contract Documents.
4.2 By executing this document, Contractor acknowledges that - for the
purposes of any applicable Mechanics Lien Law - the Project described in this
document constitutes a separate work of improvement from other Projects
described in other Work Authorizations issued pursuant to the Construction
Contract.
4.3 Contractor shall inform all its consultants, suppliers and other
agents: (i) that the Project described in this Authorization constitutes a
separate work of improvement from other Projects on which they may have
performed Work for Contractor pursuant to the Contract, (ii) that they must
file a new Preliminary Notice to be entitled to lien rights on account of
Work on the Project described in this Work Authorization and (iii) Owner may
file a separate Notice of Completion for the Project described herein at
completion of any construction/installation of Work on this Project.
4.4 Contractor shall provide Owner with subcontractors' and
materialmans' acknowledgments, which indicate that they have been so informed.
4.5 This Work Authorization sets forth the terms and conditions for the
Project set forth herein only. The terms and conditions for other continuing
(on-call) Work on multiple projects or continuing (on-call) services shall be
set forth in separate Work Authorization form(s).
3
<PAGE>
4.6 Except as set forth herein or as a necessary corollary to this Work
Authorization, all terms, conditions and promises of the Construction
Agreement not inconsistent with the terms, conditions and provisions of this
Work Authorization shall remain in full force and effect and are hereby
reaffirmed by the parties. The terms used herein but not defined in the
foregoing Work Authorization shall have all of the meanings ascribed to such
terms in the Construction Agreement. This Work Authorization may be executed
in multiple counterparts.
OWNER: CONTRACTOR:
- ---------------------------------- -----------------------------------
By: By:
------------------------------- --------------------------------
Title: Title:
---------------------------- -----------------------------
Date: Date:
----------------------------- ------------------------------
4
<PAGE>
LIST OF EXHIBITS
EXHIBIT 1 - Legal Description
EXHIBIT 2 - Special Conditions
EXHIBIT 3 - List of Contract Documents
EXHIBIT 4 - Payment Bond
EXHIBIT 5 - Performance Bond
ADDENDUM 1 - Hourly Rate or Fee Schedule, if applicable
5
<PAGE>
EXHIBIT 1
LEGAL DESCRIPTION
The Legal Description is bound within this Agreement and made a part of the
Contract Documents between Owner and Contractor.
6
<PAGE>
EXHIBIT 2
SPECIAL CONDITIONS
[A. Materials purchased by Owner
Certain Materials specified in the Contract Documents and to be incorporated
into the Work have been purchased by Owner. The cost for loading, transporting
and unloading these Materials at the Project site are included in the Contract
Sum. The list of materials purchased by the Owner is bound within this Agreement
and made apart of the Contract Documents between Owner and Contractor.]
7
<PAGE>
EXHIBIT 3
LIST OF CONTRACT DOCUMENTS
8
<PAGE>
EXHIBIT 4
PAYMENT BOND
(If this Agreement is for continuing (on-call) Work on multiple projects
or continuing (on-tall) services, a separate Payment Bond shall
be issued for each job specific project or service)
KNOW ALL MEN BY THESE PRESENTS, That we _____________ as Principal
("Contractor") and as Surety, are held and firmly bound unto _____________ as
Obligee ("Owner"), in the penal sum of _______________________________ DOLLARS
($_____________) for the payment of which sum we jointly and severally bind
ourselves, our heirs, assigns, executors, administrators and successors,
firmly by these presents.
THE CONDITION of the obligation is such that, whereas Contractor has entered
into a Contract with Owner dated _____________ which Contract is hereto
attached and expressly made a part hereof to perform the following work:
NOW, THEREFORE, if the Contractor shall pay promptly and in full the claims
of all persons, firms, partnerships, corporations or others, supplying labor,
material, services, utilities or equipment in connection with the prosecution
of the work provided for in the Contract and any and all modifications,
additions or alterations of the Contract that may hereafter be made, and
shall fully indemnify and hold harmless the Owner from all loss, liability
costs, damage penalty and attorney's fees or expenses for all taxes,
insurance premiums, any and all applicable contributions, allowances or other
payments or deductions however termed, required by statute or labor union
agreement, including voluntary payment thereof by the Owner necessary to
insure orderly prosecution of work or other items or services in connection
with the Contract to be supplied or performed which Owner may suffer by
reason of failure to do so and shall fully reimburse and repay the Owner all
outlay and expense which the Owner may incur in making good any such failure,
then this obligation shall be void; otherwise, it shall remain in full force
and effect.
The Surety and the Contractor further agree that any changes, modifications,
additions or alterations which may be made in the terms of the Contract or in
the scope or character of the work to be done thereunder, or any extensions
of the Contract or in due time for completion thereof any change in the
manner, time or amount of a payment as provided therein, or other forbearance
on the part of either the Owner or Contractor to the other, shall not in any
way release the Contractor and the Surety, or either of them, their heirs,
assigns, executors, administrators and successors from their liability
thereunder, nor affect the obligations of any of them hereunder, notice to
Surety of any such changes, modifications, additions, extensions or
forbearance being hereby expressly waived by the Surety.
9
<PAGE>
The Surety and the Contractor further agree that this bond shall insure to
the benefit of, and may be sue directly upon by any person, firm or
corporation furnishing labor, material services, utilities or equipment, in
the prosecution of the work provided for in the Contract, or any
modifications, additions or alterations thereto, or who has the right to
establish a lien or claim against Owner or Owner's property, premises or
improvements or any funds accrued, or to accrue, from Owner.
The sum of this Payment Bond is in addition to the sum of the Performance
Bond being executed concurrently herewith.
IN WITNESS HEREOF, the parties have executed this instrument under their
several seals this _______ day of _____________, 19__.
____________________________________ ________________________________________
CONTRACTOR CORPORATE SURETY
____________________________________ ________________________________________
Address Address
____________________________________ ________________________________________
By:_________________________________ By:_____________________________________
(SEAL) (SEAL)
10
<PAGE>
EXHIBIT 5
PERFORMANCE BOND
(If this Agreement is for continuing (on-call) Work on multiple projects
or continuing (on-call) services, a separate Performance Bond
shall be issued for each job specific project or service)
KNOW ALL MIEN BY THESE PRESENTS, That we _____________ as Principal
("Contractor") and as Surety, are held and firmly bound unto _____________ as
Obligee ("Owner"), in the penal sum of __________________________
DOLLARS($_____________) for the payment of which sum we jointly and severally
bind ourselves, our heirs, assigns,. executors, administrators and successors
firmly by these presents.
THE CONDITION of the obligation is such that, whereas Contractor has entered
into a Contract with Owner dated ______________ which Contract is hereto
attached and expressly made a part hereof to perform the following work:
NOW, THEREFORE, if the Contractor shall well and truly perform and fulfill
all the undertakings, covenants, terms, conditions and agreements of the
Contract and any extensions thereof that may be granted by the Owner, and
during the term of any warranty required under the Contract, and shall also
well and truly perform and fulfill all the undertakings, covenants, terms,
conditions and agreements of any and all modifications, additions or
alterations of the Contract that may hereafter be made, and shall also fully
indemnify and hold harmless the Owner from all loss, liability costs, damage
penalty and attorneys' fees which Owner may incur by reason of failure to
well and truly keep and perform each, every and all of the terms and
conditions of said Contract as modified, amended, altered or added to on the
part of Contractor to be kept and performed, including but not limited to
completion within the time specified of all work covered by said Contract,
performance of all obligations, and guarantees of Contractors and shall fully
reimburse and repay the Owner all outlay and expense which the Owner may
incur in making good any such failure, then this obligation shall be void;
otherwise it shall remain in fun force and effect.
The Surety further agrees that whenever Contractor shall be, and is declared
by Owner to be, in default under the Contract (and said default shall be
construed to be any breach of any of the provisions of the Contract on the
part of the Contractor) the Surety shall. promptly remedy the default, or
will complete the Contract in accordance with its terms and conditions and
shall fully indemnify, defend, and hold harmless the Owner from all costs,
damages and expenses which may arise thereafter (including reasonable
attorney's fees) and which the Owner may suffer by reason of Surety's failure
to do so.
11
<PAGE>
The Surety and the Contractor further agree that any changes, modifications,
additions or alterations which may be made in the terms of the Contract or in
the scope or character of the work to be done thereunder, or any extensions
of the Contract, or in the time for completion thereof, any change in the
manner, time or amount or payment as provided therein, or other forbearance
on the part of either the Owner or Contractor to the other, shall not in any
way release the Contractor and the Surety, or either of them, their heirs,
assigns, executors, administrators and successors, from their liability
hereunder, nor affect the obligations of any of them hereunder, notice to
Surety of any such modifications, additions, extensions or forbearance being
hereby expressly waived by the Surety.
The sum of this Performance Bond is in addition to the sum of the Payment
Bond being executed concurrently herewith.
IN WITNESS WHEREOF, the parties have executed this instrument under their
several seals this _______ day of _____________, 19__.
____________________________________ ________________________________________
CONTRACTOR CORPORATE SURETY
____________________________________ ________________________________________
Address Address
____________________________________ ________________________________________
By:_________________________________ By:_____________________________________
(SEAL) (SEAL)
12
<PAGE>
ADDENDUM 1
HOURLY RATE OR FEE SCHEDULE
13
<PAGE>
EXHIBIT D
COMMENCEMENT DATE MEMORANDUM
THIS MEMORANDUM is entered into as of ____________ __, 199_ by and
between OAIC Bush Street, LLC., ("Landlord"), and ________________________, a
______________ ("Tenant"), with respect to that certain Office Lease dated as of
____________ __, 1999 (the "Lease") respecting certain premises (the "Premises")
located at 225 Bush Street, San Francisco, California.
Pursuant to Paragraph 2(a) of the Lease, Landlord and Tenant hereby
confirm and agree that the Rent Commencement Date (as defined in the Lease) is
____________ __, 199_ and that the Expiration Date (as defined in the Lease) is
__________________.
This Memorandum supplements, and shall be a part of, the Lease.
IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered
this Memorandum as of the day and year first above written.
TENANT: LANDLORD:
<TABLE>
<CAPTION>
Xoom.com, Inc., OAIC Bush Street, LLC,
a Delaware limited liability company
<S> <C>
By: ___________________________________ By:_________________________________
Name:__________________________________ Name:_______________________________
Its:___________________________________ Its:________________________________
</TABLE>
D-1
<PAGE>
EXHIBIT E
TENANT ESTOPPEL CERTIFICATE
TO: ___________________________
___________________________
___________________________
Attn: _____________________
Re: Lease, dated as of ___________, 19__, between ________________,
a ___________, as tenant ("Tenant"), and ___________________, a
_______________ , as landlord ("Landlord"), covering certain
premises known by the street address _____________, in the City
of _______________, County of ______________, State of
_____________ (the "Leased Premises"), as amended as noted on
attached Schedule A (collectively, the "Lease")
Gentlemen:
The undersigned Tenant hereby represents, warrants and certifies to
_______________________ ("[LANDLORD/BUYER/LENDER]") that:
1. The Lease has not been modified, changed, altered or amended in
any respect, either orally or in writing, except as may be indicated on
Schedule A annexed hereto, and constitutes the entire agreement between
Tenant and Landlord affecting Tenant leasing of the Leased Premises. A true
and correct copy of the Lease is attached as Schedule B. The Lease is in full
force and effect and is not subject to any contingencies or conditions not
set forth in the Lease.
2. The term of the Lease commenced on __________________ and will
expire on __________________; the Tenant has ___ successive options to renew
the Lease term, each for an additional period of ___ years.
3. The monthly base rent payable by Tenant under the Lease is
$_______________. Tenant has paid all fixed and additional rent and other
sums which are due and payable under the Lease through the date hereof, and
Tenant has not made and will not make any prepayments of fixed rent for more
than one month in advance. There are no presently unexpired rental
concessions or abatements due under the Lease except as set forth on Schedule
A annexed hereto. Tenant has no credits, offsets, abatements, defenses,
counterclaims or deductions against any rental or other payments due under
the Lease or with respect to its
<PAGE>
performance of the other terms and conditions of the Lease, and has asserted
no claims against Landlord.
4. Tenant has paid to Landlord as a security deposit in the amount
of $___________. Tenant has not made any other the payments to Landlord as a
security deposit, advance or prepaid rent.
5. Landlord has completed, and, if required under the Lease, paid
for, any and all tenant work required under the Lease and Tenant has accepted
the Leased Premises. Tenant is not entitled to any further payment or credit
for tenant work.
6. To Tenant's best knowledge, Landlord is not in default in the
performance of any of the terms of the Lease, nor is there now any fact or
condition which, with notice or lapse of time or both, will become such a
default. Tenant has not delivered to Landlord any notice of default with
respect to the Landlord's obligations under the Lease.
7. Tenant is in actual possession of the entire Leased Premises
and, to Tenant best knowledge, is not in any respect in default under any of
the terms and conditions of the Lease, nor is there now any fact or condition
which, with notice or lapse of time or both, will become such a default.
Tenant has not received from Landlord any notice of default with respect to
the Tenant obligations under the Lease.
8. Tenant has not assigned, transferred, mortgaged or otherwise
encumbered its interest under the Lease, nor subleased any of the Leased
Premises, nor permitted any person or entity to use the Leased Premises,
except as otherwise indicated on Schedule A annexed hereto.
9. Except as expressly provided in the Lease, Tenant
(i) does not have any right to renew or extend the term of the
Lease,
(ii) does not have any right to cancel or surrender the Lease
prior to the expiration of the term of the Lease,
(iii) does not have any option or rights of first refusal or
first offer to purchase or lease all or any part of the Leased Premises
or the real property of which the Leased Premises are a part,
(iv) does not have any right, title or interest with respect
to the Leased Premises other than as lessee under the Lease, and
(v) does not have any right to relocate into other property
owned by Landlord or any of Landlord's affiliates.
<PAGE>
10. There has not been filed by or against Tenant a petition in
bankruptcy, voluntary or otherwise, any assignment for the benefit of
creditors, any petition seeking reorganization or arrangement under the
bankruptcy laws of the United States, or any state thereof, or any other
action brought under said bankruptcy laws with respect to Tenant
11. If Tenant is required to provide insurance coverage under the
Lease, Tenant has not given or received written notice that Tenant insurance
coverage will be canceled or will not be renewed.
12. To Tenant's best knowledge, all systems, elements and
components of the Leased Premises are in good working order and repair and
sound operating condition. To Tenant's best knowledge, Tenant's use and
occupancy of the Leased Premises complies with all applicable building,
zoning, land use, environmental, anti-pollution, health, fire, safety, access
accommodations for the physically handicapped, subdivision, energy and
resource conservation and similar laws, statutes, rules, regulations and
ordinances, and all covenants, conditions and restrictions applicable to the
Leased Premises. Tenant has not received any notice, citation or other claim
alleging any violation of any such law, statute, rule, regulation, ordinance,
covenant, condition or restriction.
13. To the best knowledge of Tenant, any and all brokerage and
leasing commissions relating to and/or resulting from Tenant's execution and
delivery of the Lease and occupancy of the Leased Premises have been paid in
full.
14. The individual executing this Tenant Estoppel Certificate on
behalf of Tenant represents and warrants that __he has the power and the
authority to execute this Tenant Estoppel Certificate on behalf of Tenant.
15. [LANDLORD/BUYER/LENDER] has advised Tenant that
[LANDLORD/BUYER/LENDER] will rely upon the truth of this certification in
acquiring the Leased Premises. This Tenant Estoppel Certificate shall inure
to the benefit of [LANDLORD/BUYER/LENDER] and its respective nominees,
successors, assigns, participants and designees and shall be binding upon
Tenant and its successors and assigns.
Dated this ____ day of _______________, 199_.
Tenant
_________________, a ____________
By: _____________________________
<PAGE>
EXHIBIT F
SUBORDINATION, ATTORNEMENT AND NONDISTURBANCE AGREEMENT
F-1
<PAGE>
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SUBORDINATION, ATTORNMENT AND
NONDISTURBANCE AGREEMENT
BETWEEN
SALOMON BROTHERS REALTY CORP.
("BENEFICIARY")
AND
XOOM.COM, INC.
("TENANT")
DATED AS OF AUGUST ______, 1999
RECORD AND RETURN TO:
Latham & Watkins
885 Third Avenue, Suite 1000
New York, New York 10022-4802
Attention: Brian Krisberg, Esq.
(L&W File No. 024582-0091)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
SUBORDINATION, ATTORNMENT AND
NONDISTURBANCE AGREEMENT
THIS AGREEMENT, made as of August _____, 1999 (the "EFFECTIVE
DATE"), by and between SALOMON BROTHERS REALTY CORP. a New York corporation
having an address at 388 Greenwich Street, 11th Floor, New York, New York 10013
("BENEFICIARY"), and XOOM.COM, INC., a Delaware corporation, having an address
at 300 Montgomery Street, Suite 300, San Francisco, California 94104 (which
address is subject to change on the 19th Floor Term Commencement Date as set
forth in the Lease and more fully provided for in Paragraph 20 below)
("TENANT").
W I T N E S S E T H :
WHEREAS, Beneficiary is the owner and holder of that certain
Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, dated as of April 4, 1998, made by OAIC Bush Street, LLC, a Delaware
limited liability company, as trustor, to Chicago Title Insurance Company, as
trustee, for the benefit of Beneficiary, and recorded in the Office of the Clerk
of San Francisco County on ____________________, 1998 as Document No.
_______________ (said deed of trust, as the same may hereafter be amended,
increased, renewed, refinanced, consolidated, restated, replaced, combined,
supplemented, substituted, spread, severed, extended and/or otherwise modified,
being hereinafter collectively, referred to as the "DEED OF TRUST"), encumbering
the land located in the City and County of San Francisco, State of California,
which land is more particularly described on EXHIBIT "A" annexed hereto and made
a part hereof, and the buildings, improvements, and other items of property more
fully described in the Deed of Trust (such land, buildings, improvements and
other property being hereinafter referred to collectively as the "MORTGAGED
PREMISES");
WHEREAS, Tenant has entered into a lease with the aforesaid
OAIC Bush Street, LLC, as landlord ("LANDLORD"), dated as of August ______, 1999
(the "LEASE"), by which Landlord demised to Tenant a portion of the Mortgaged
Premises (the "LEASED PREMISES");
WHEREAS, a true and complete copy of the Lease has been
delivered to Beneficiary by Tenant, the receipt of which is hereby acknowledged;
WHEREAS, Beneficiary, as a condition to making the loan(s)
secured by the Deed of Trust, required that all leases affecting the Mortgaged
Premises be and continue to be subordinate in every respect to the Deed of
Trust;
WHEREAS, Beneficiary and Tenant desire to confirm the
subordination of the Lease to the Deed of Trust and to provide for the
nondisturbance of Tenant by Beneficiary as set forth herein;
<PAGE>
WHEREAS, the Work Letter, as defined in the Lease, requires
Landlord to contribute certain funds toward Tenant's initial improvements, as
more fully described in such Work Letter (the "LANDLORD'S TI CONTRIBUTION");
WHEREAS, the Lease requires Tenant to provide a security
deposit in the form of a letter of credit in the initial amount of $4,500,000,
subject to reduction from time to time in accordance with the Lease (the "LETTER
OF CREDIT"), which Tenant is simultaneously herewith delivering to Beneficiary,
and which Letter of Credit is an Acceptable Letter of Credit, as defined below;
NOW, THEREFORE, in consideration of the covenants and
agreements contained herein, and intending to be legally bound, Beneficiary and
Tenant agree as follows:
1. The Lease, its terms and conditions, and the lien thereof
(if any) now are and shall at all times continue to be subject and
subordinate to the Deed of Trust (including all advances made thereunder),
and the lien thereof. The provisions of this Agreement shall be
self-operative, and no further instrument shall be necessary to effectuate
the terms hereof. Nevertheless, Tenant, upon request, shall execute and
deliver any certificate or other instrument that Beneficiary may reasonably
request to confirm the subordination by Tenant referred to above.
2. Tenant certifies that (a) the Lease is presently in full
force and effect and unmodified, and represents the entire agreement between
Landlord and Tenant with respect to the Mortgaged Premises or any portion
thereof; (b) no rental payable under the Lease has been paid more than one
(1) month in advance of its due date; (c) no event has occurred that
constitutes a default under the Lease by Landlord or Tenant or that, with the
giving of notice, the passage of time, or both, would constitute such a
default; (d) as of the Effective Date, Tenant has no charge, defense, lien,
claim, counterclaim, offset or setoff under the Lease or against any amounts
payable thereunder; and (e) all conditions to the effectiveness or continuing
effectiveness of the Lease required to be satisfied as of the Effective Date
have been satisfied.
3. The terms and conditions of the Lease constitute a primary
inducement to Beneficiary to enter into this Agreement. Accordingly, Tenant
agrees that Tenant shall not cancel, surrender, terminate or assign (other
than an assignment that does not require Landlord's consent under the Lease),
or enter into any agreement to cancel, surrender, terminate or assign (other
than an assignment that does not require Landlord's consent under the Lease),
the Lease in a manner or circumstance not expressly provided for under the
Lease, without the prior written approval of Beneficiary. Any cancellation,
surrender, termination or assignment of the Lease made in a manner or
circumstance not expressly permitted under the Lease without Beneficiary's
prior written approval shall not bind Beneficiary or any Successor (as
defined below). Tenant shall not amend or modify the Lease, or agree to amend
or modify the Lease, without Beneficiary's consent, except that, as between
Beneficiary and Tenant, Beneficiary's prior approval shall not be required
for any amendment to the Lease that does not (a) modify the rent, the term,
Landlord's obligations, or any other material term of the Lease, or (b)
otherwise materially decease Tenant's obligations or Landlord's rights under
the Lease. The preceding sentence is not intended to limit any of Landlord's
covenants relating to the Lease under the Deed of Trust or under any document
secured by the Deed of Trust.
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<PAGE>
4. In the event of any default on the part of Landlord,
arising out of or accruing under the Lease, whereby the validity or the
continued existence of the Lease might be impaired or terminated by Tenant,
or Tenant might have a claim for partial or total eviction or abatement of
rent, Tenant shall not pursue any of its rights with respect to such default
or claim, and no notice of termination of the Lease as a result of such
default shall be effective, unless and until Tenant has given written notice
of such default or claim to Beneficiary at the address set forth herein, or
Beneficiary's successor or assign whose name and address previously shall
have been furnished to Tenant in writing (but not later than the time that
Tenant notifies Landlord of such default or claim) and granted to Beneficiary
a reasonable time, which shall be not less than the greater of (i) the period
of time granted to Landlord under the Lease, or (ii) thirty (30) days, after
the giving of such notice by Tenant to Beneficiary, to cure or to undertake
the elimination of the basis for such default or claim, after the time when
Landlord shall have become entitled under the Lease to cure the cause of such
default or claim; it being expressly understood that (a) if such default or
claim cannot reasonably be cured within such cure period, Beneficiary shall
have such additional period of time to cure same as shall be reasonably
necessary, so long as it continues to pursue such cure with reasonable
diligence and continuity, and (b) Beneficiary's right to cure any such
default or claim shall not be deemed to create any obligation for Beneficiary
to cure or to undertake the elimination of any such default or claim.
Notwithstanding anything to the contrary in the Lease, Tenant shall not
terminate the Lease on account of any default or breach by Landlord in
funding the Landlord's TI Contribution, but this shall not limit (a) Tenant's
other rights and remedies against Landlord in such event or (b) Tenant's
right of offset as against Successor, as more fully provided for below. This
paragraph shall not limit Tenant's rights under the Lease to give notice of
and thereafter cure any Water Leak or Communications Failure, and it shall
not be necessary for Tenant to provide Beneficiary with a copy of any Water
Leak Notice or Communication Failure Notice before exercising Tenant's right
to cure any Water Leak or Communication Failure as described in paragraph 8
of the Lease. Before Tenant may exercise any right of offset provided for in
the Lease on account of any Water Leak or Communication Failure, however,
Tenant shall provide Beneficiary with simultaneous copies of Tenant's demand
for reimbursement and all subsequent notices to Landlord contemplated by
paragraph 8 of the Lease.
5. As long as (i) the Lease shall have been executed and
delivered; (ii) Tenant shall have delivered the Letter of Credit to
Beneficiary; (iii) the Lease shall be in full force and effect, and (iv)
Tenant is in compliance with the terms of this Agreement and no default by
Tenant exists under the Lease which continues after receipt of written notice
thereof, to the extent Tenant is expressly entitled to same under the Lease,
beyond applicable cure periods (conditions "i" through "iv," collectively,
the "NONDISTURBANCE CONDITIONS"), Beneficiary shall not name Tenant as a
party defendant in any action for foreclosure of the Deed of Trust or other
enforcement thereof (unless required by law), nor shall the Lease be
terminated by Beneficiary in connection with or by reason of foreclosure or
other proceedings for the enforcement of the Deed of Trust or by reason of a
transfer of Landlord's interest in the Mortgaged Premises or under the Lease
pursuant to a conveyance in lieu of foreclosure (or similar device) (any of
the foregoing, a "FORECLOSURE"), nor shall Tenant's use or possession of the
Leased Premises be interfered with or disturbed by Beneficiary, unless
Landlord would have had such right if the Deed of Trust had not been made.
3
<PAGE>
6. If Landlord's interest in the Mortgaged Premises or under
the Lease is terminated by reason of a Foreclosure (the party succeeding to
the Landlord's interest in the Mortgaged Premises being hereinafter refereed
to, together with such party's successors and assigns, as "SUCCESSOR"), then
upon Successor's succeeding to Landlord's interest in the Mortgaged Premises
or under the Lease, Tenant shall be bound to Successor, and, except as
provided in this Agreement, Successor shall be bound to Tenant, under all the
terms, covenants and conditions of the Lease for the balance of the term
thereof remaining, with the same force and effect as if Successor were
Landlord, and Tenant does hereby agree to attorn to Successor, including
Beneficiary if it be the Successor, as Tenant's landlord; affirm Tenant's
obligations under the Lease; and make payments of all sums due under the
Lease to Successor. Such attornment, affirmation and agreement shall be
effective and self-operative without the execution of any further
instruments. Notwithstanding the foregoing, Tenant shall not be obligated to
attorn to Successor unless and until Successor shall, if requested by Tenant,
have confirmed in writing (pursuant to documentation reasonably satisfactory
to Successor) that Successor has succeeded to and assumed all obligations of
Landlord under the Lease (including obligations relating to the Letter of
Credit but excluding obligations relating to Landlord's TI Contribution,
subject to Tenant's right of offset as provided for herein), subject however
to Section 10 of this Agreement. Tenant waives the provisions of any statute
or rule of law now or hereafter in effect that may give or purport to give
Tenant any right or election to terminate or otherwise adversely affect the
Lease or the obligations of Tenant thereunder by reason of any Foreclosure.
7. As an additional material inducement to Beneficiary to
enter into this Agreement, Tenant agrees that if Landlord is the subject of
any proceeding (a "BANKRUPTCY PROCEEDING") under the provisions of the
Bankruptcy Code, 11 U.S.C. Section 101 ET SEQ., as in effect, or as hereafter
amended, or under the provisions of any successor statute thereto
(collectively, the "CODE"), then Tenant shall take all actions reasonably
necessary to retain possession of the Leased Premises (whether or not
Landlord, pursuant to the Code or otherwise, attempts to reject the Lease) so
as to enable Tenant to continue to lease and occupy the Leased Premises on
all or substantially all terms of the Lease. During any Bankruptcy Proceeding
Tenant shall, unless the Lease has already been terminated in accordance with
its terms and the terms of this Agreement: (i) not terminate the Lease except
in accordance with the Lease and this Agreement; (ii) not give up possession
of the Leased Premises (if Tenant is already in such possession); and (iii)
if Tenant is not yet in possession of the Leased Premises prior to the
commencement of the Bankruptcy Proceeding, then Tenant shall take all steps
reasonably necessary to cooperate with Beneficiary in attempting to obtain
possession of the Leased Premises for Tenant provided that (a) Beneficiary
exercises its reasonable efforts (excluding the making of any payments to, or
for the benefit of, Landlord or its estate, or to any other party, which
payments Beneficiary is not otherwise required to make under this Agreement)
to obtain possession of the Leased Premises for Tenant, and (b) Beneficiary
notifies Tenant that Beneficiary reasonably believes that it will be able to
obtain such possession for Tenant on or before a date that is within one
hundred twenty (120) days after such proceeding commenced. If Tenant does not
obtain possession of the Leased Premises within one hundred twenty (120) days
after commencement of such proceeding, or Beneficiary fails to comply with
clauses (a) and (b) above, then Tenant shall have no further obligations
under this paragraph to cooperate with Beneficiary in obtaining possession of
the Leased Premises and Tenant may terminate the Lease.
4
<PAGE>
8. If (i) Landlord becomes the subject of a Bankruptcy
Proceeding, and Landlord, as debtor-in-possession, or any trustee, as
successor-in-interest to Landlord, obtains an order of the bankruptcy court
or other court of competent jurisdiction authorizing the rejection of the
Lease in accordance with Section 365 of the Code, or the Lease is otherwise
terminated in such Bankruptcy Proceeding, and (ii) thereafter, Beneficiary or
any other person shall acquire title to the Mortgaged Premises through
Foreclosure or by any other means (including a sale of the Mortgaged Premises
pursuant to the Code), then the person so acquiring title to the Mortgaged
Premises shall also be a "SUCCESSOR" for all purposes of this Agreement. If
the Lease is terminated or rejected in or as a result of a Bankruptcy
Proceeding, then:
A. Upon request made by Tenant to Successor within
thirty (30) days after Tenant receives notice from Successor that Successor
has obtained title to the Mortgaged Premises, and provided that immediately
prior to such Lease rejection or termination the Nondisturbance Conditions
were satisfied and at the time of such request Tenant is in possession of the
Leased Premises, Successor, if and to the extent that it has the legal right
and power to do so (without incurring any expenses or liabilities that are
not reimbursed), shall enter into a new lease with Tenant upon the same terms
and conditions as were contained in the Lease, except that (x) the
obligations and liabilities of such Successor under any such new lease shall
be subject to the terms and conditions of this Agreement, and (y) the
expiration date of such new lease shall coincide with the original expiration
date of the Lease (a "NEW LEASE").
B. Upon Successor's written request of Tenant made
within sixty (60) days after Successor has acquired title to the Mortgaged
Premises, Tenant shall execute a New Lease with Successor, and shall attorn
to Successor, and Successor shall recognize Tenant, as tenant, so as to
establish direct privity between Successor and Tenant.
9. Notwithstanding anything to the contrary in the Lease, any
New Lease, or this Agreement, any Successor shall not (a) be subject to any
credits, offsets, defenses, claims, counterclaims or demands that Tenant
might have against any prior landlord (including, without limitation,
Landlord), unless the same are expressly provided for in the Lease; (b) be
bound by any previous modification or amendment of the Lease (except as
expressly provided in Section 3) or by any rent or additional rent that
Tenant might have paid for more than one month in advance of its due date to
any prior landlord, unless such modification or prepayment shall have been
made with Beneficiary's prior written consent (except as expressly provided
in Section 3); (c) be liable for any accrued obligation, act or omission of
any prior landlord (including, without limitation, Landlord), whether prior
to or after Foreclosure; (d) be bound by any covenant to undertake or
complete any improvement to the Mortgaged Premises or the Leased Premises, to
pay Landlord's TI Contribution to Tenant, or to otherwise reimburse or pay
Tenant for the cost of any improvements to the Mortgaged Premises or the
Leased Premises, but this shall not limit Tenant's right of offset with
respect to unpaid Landlord's TI Contribution as provided for below; (e) be
required to account for any security deposit other than (i) the Letter of
Credit and (ii) any security deposit actually delivered to Successor; or (f)
be required to abide by any provisions for the diminution or abatement of
rent, unless same are expressly provided for in the Lease. If Landlord is
obligated, but fails, to pay Landlord's TI Contribution, then as Successor's
sole liability and obligation on account of such failure by Landlord,
Successor shall allow Tenant to abate any rent otherwise payable under the
Lease until such time as Tenant, through such
5
<PAGE>
abatement, shall have recovered the entire amount that Landlord was obligated
to pay but did not on account of Landlord's TI Contribution. Successor shall
have no other liability or obligations to Tenant on account of any failure by
Landlord to pay Landlord's TI Contribution. Notwithstanding the foregoing,
any Successor shall be subject to any claims of Tenant arising from any
default by Landlord under the express terms of the Lease (other than default
in payment of Landlord's TI Contribution, which default is addressed
elsewhere in this Agreement) provided that such default is reasonably curable
by Beneficiary or Successor and then only to the extent that Tenant shall
have promptly notified Beneficiary, pursuant to Section 3, of the (alleged)
default by Landlord and thereafter Beneficiary shall have failed to cure such
default when and as permitted by this Agreement; provided, however, that
under such circumstances Successor's obligation shall consist solely of
allowing Tenant the right to offset against rent to the extent of actual
damages (as determined by a court) that accrued after the date of Tenant's
notice to Beneficiary and such liability shall in all events be subject to
Section 10.
10. Notwithstanding anything to the contrary in this Agreement,
the Lease, or any New Lease, if Successor acquires Landlord's interest in the
Mortgaged Premises, then Successor's liability for its obligations under the
Lease (or any New Lease) and this Agreement shall be limited to Successor's
interest in the Mortgaged Premises and the proceeds of sale and casualty
insurance proceeds. Tenant shall not look to any other property or assets of
Successor or the property or assets of any of the partners, shareholders,
directors, officers and principals, direct and indirect, of Successor in
seeking either to enforce Successor's obligations under the Lease (or any New
Lease) and this Agreement or to satisfy a judgment for Successor's failure to
perform such obligations.
11. If and to the extent that the Lease or any provision of law
shall entitle Tenant to notice of any deed of trust, Tenant acknowledges and
agrees that this Agreement shall constitute said notice to Tenant of the
existence of the Deed of Trust.
12. This Agreement may not be modified except by an agreement
in writing signed by the parties hereto or their respective successors in
interest. This Agreement shall inure to the benefit of and be binding upon
the parties hereto (and shall benefit any Successor), and the heirs,
representatives, successors and assigns of the foregoing.
13. Nothing contained in this Agreement shall in any way impair
or affect the lien created by the Deed of Trust or modify the terms thereof.
By executing and delivering this Agreement, Beneficiary shall not be deemed
to have (i) waived any default under the Deed of Trust, (ii) modified the
Deed of Trust in any manner, or (iii) except as expressly provided in Section
5, waived any rights or remedies it possesses under the Deed of Trust or
otherwise.
14. Tenant agrees and confirms that this Agreement satisfies
any condition or requirement in the Lease or otherwise relating to the
granting of a nondisturbance agreement, including, without limitation, the
provisions of the Article of the Lease entitled "Subordination and
Nondisturbance." Tenant further agrees that if there is any inconsistency
between the terms and provisions hereof and the terms and provisions of the
Lease relating to nondisturbance by Beneficiary, the terms and provisions
hereof shall be controlling.
6
<PAGE>
15. Tenant acknowledges that it has notice that the Lease and
the rent and all other sums due thereunder have been assigned by Landlord to
Beneficiary. If Beneficiary notifies Tenant of Beneficiary's election under
the Deed of Trust or any other loan document to collect rent and all other
sums due under the Lease, and demands that Tenant pays same to Beneficiary (a
"REDIRECTION NOTICE"), Tenant agrees that it will honor such Redirection
Notice and pay its rent and all other sums due under the Lease directly to
Beneficiary or as directed by Beneficiary, notwithstanding any contrary
claims, directions, or instructions by Landlord.
16. Notwithstanding anything to the contrary in the Lease, the
Lease is hereby modified as follows as it relates to the Letter of Credit:
A. An "ACCEPTABLE ISSUER" means a commercial bank:
(a) that has an office in San Francisco, California, or New York, New York,
at which the Letter of Credit may be presented for payment; (b) whose
commercial paper is rated P-1 or better by Moody's (or, if Moody's does not
rate such issuer's commercial paper, then an equivalent rating from Standard
& Poor's, Duff & Phelps, or Fitch); and (c) that is otherwise reasonably
satisfactory to Beneficiary and Landlord.
B. An "ACCEPTABLE LETTER OF CREDIT" means a Letter of
Credit that: (a) provides that it may be drawn upon by Beneficiary; (b)
provides that Beneficiary may assign it to any assignee of the Loan, all
without charge to the assignor; (c) is issued by an Acceptable Issuer; (d) is
otherwise reasonably satisfactory to Beneficiary in all respects; and (e)
otherwise fully complies with the Lease.
C. Any Letter of Credit must at all times be an
Acceptable Letter of Credit. Beneficiary may draw upon the Letter of Credit
if both of the following occur: (1) the issuer of the Letter of Credit ceases
to be an Acceptable Issuer for any reason; and (2) Beneficiary has not
received a replacement Acceptable Letter of Credit within 30 days after the
occurrence of "1." Beneficiary shall hold the drawn funds in an
interest-bearing account at a bank satisfactory to Beneficiary in all
respects. Beneficiary shall notify Landlord and Tenant of the bank and bank
account where such proceeds are held. Interest shall be released periodically
to Tenant and reported as Tenant's income. Tenant shall deliver a "W-9" form
with respect to such interest and if Tenant fails to do so, then the funds
shall be held in a non-interest-bearing account. If Beneficiary thereafter
receives an Acceptable Letter of Credit, then Beneficiary shall return the
proceeds of the original Letter of Credit and all interest accrued thereon
(to the extent not previously released) to Tenant.
D. To the extent that the Lease permits or requires
Tenant to deliver to Landlord any extension, amendment, or replacement for
the Letter of Credit, or documentation to restore the amount of the Letter of
Credit after the Letter of Credit has been drawn, or permits Tenant to
deliver any document reducing the amount of the Letter of Credit (any of the
foregoing, an "LC MODIFICATION"), Tenant shall deliver such LC Modification
to Beneficiary (and simultaneously provide a copy of such LC Modification to
Landlord), when and as Tenant is required to deliver such LC Modification to
Landlord under the Lease. Delivery of an LC Modification to Landlord shall
not be sufficient. If Beneficiary has not received any LC Modification when
and as Tenant is required to deliver it to Landlord under the Lease, then
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<PAGE>
Beneficiary may draw upon the entire Letter of Credit on Landlord's behalf,
and hold the proceeds as the Security Deposit under the Lease in accordance
with the terms of the Lease. Beneficiary shall not be bound by any LC
Modification that reduces the amount of the Letter of Credit except for any
such reduction expressly permitted by the Lease.
E. In addition to any right for Beneficiary to
otherwise draw upon the Letter of Credit under this Agreement, to the extent,
and only to the extent, that the Lease permits Landlord to draw upon the
Letter of Credit and/or apply the proceeds of any draw of the Letter of
Credit, Beneficiary may draw upon the Letter of Credit in place of Landlord,
but only if an Event of Default has occurred under the Loan and Beneficiary,
or a receiver acting on Beneficiary's behalf, has activated Beneficiary's
assignment of rents or otherwise commenced to collect rents from the
Mortgaged Premises.
F. Under any circumstances not otherwise expressly
provided for in this Agreement, Beneficiary shall not draw upon the Letter of
Credit unless Landlord directs Beneficiary to do so. If Beneficiary
wrongfully draws upon the Letter of Credit when directed to do so by
Landlord, then Tenant's sole claim shall be against Landlord, and Beneficiary
shall have no liability to Tenant if Landlord was not entitled to make such
drawing. If such drawing is proven to have been wrongful, then Beneficiary
shall with reasonable promptness cooperate in releasing the proceeds thereof
against a corresponding and simultaneous reinstatement of the amount of the
Letter of Credit.
G. To the extent that the Lease allows Landlord to
retain any proceeds of a draw under the Letter of Credit or to apply such
proceeds against Tenant's obligations to Landlord, Beneficiary shall (as
between Beneficiary and Landlord) be entitled to retain such proceeds, but
Tenant shall be entitled to full credit for any such proceeds retained by
Beneficiary, as if such proceeds were being retained by Landlord. Unless and
until the Lease allows Landlord to retain any proceeds of a draw under the
Letter of Credit or to apply such proceeds against Tenant's obligations to
Landlord, neither the Letter of Credit nor any proceeds thereof shall be
available with respect to Landlord's obligations to Beneficiary. (As between
Landlord and Beneficiary, Beneficiary's application of any proceeds held by
Beneficiary shall be governed by a separate written agreement between them.)
H. To the extent that the Lease requires Landlord to
return the Letter of Credit to Tenant, Beneficiary shall be responsible to
Tenant for returning the Letter of Credit to Tenant, provided that if Tenant
is entitled to such return of the Letter of Credit because Tenant has
delivered a replacement Letter of Credit, or a cash Security Deposit, then
Beneficiary shall not be obligated to release the Letter of Credit unless and
until Beneficiary has received such replacement Letter of Credit or cash
Security Deposit and it complies with all the then requirements of the Lease.
Notwithstanding the foregoing, if Tenant believes that Tenant is entitled to
the return of the Letter of Credit, but Landlord disagrees and directs
Beneficiary not to return the Letter of Credit to Tenant, then Beneficiary
shall have no liability to Tenant, and Tenant shall resolve such dispute
solely with Landlord.
I. If Beneficiary assigns the Deed of Trust, then
Beneficiary shall assign the Letter of Credit to the same assignee, and cause
such assignee to assume all
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<PAGE>
obligations under this Agreement. If a Foreclosure occurs, then Beneficiary
shall assign the Letter of Credit to Successor and cause Successor to assume
Landlord's obligations relating to the Letter of Credit under the Lease. (If
Successor fails or refuses to do so, then Beneficiary shall either continue
to hold the Letter of Credit in accordance with this Agreement, or return it
to Tenant.) Upon any such assignment and assumption (or upon Beneficiary's
return of the Letter of Credit to Tenant), all rights and obligations of
Beneficiary, including those relating to the Letter of Credit, shall
terminate.
J. If Landlord has repaid the Loan in full in cash
(including all sums secured by the Mortgage), then Beneficiary shall assign
(at Tenant's expense) and deliver the undrawn portion of the Letter of Credit
and any unapplied proceeds of the Letter of Credit (together, the "SECURITY")
to Landlord (or as Landlord shall direct), who shall then be responsible for
returning the Security to Tenant when and as required by the Lease. Upon such
assignment and delivery of the Security, all liability of Beneficiary with
respect to the Security shall terminate and Beneficiary shall have no
responsibility for Landlord's (mis)application of the Security. As between
Landlord and Tenant, in the event of any transfer of title or refinancing of
the Mortgaged Premises, Landlord shall be responsible for causing the
Security to be delivered to the replacement lender or cash purchaser of the
Mortgaged Premises and shall provide Tenant with such evidence of such
transfer as Tenant shall reasonably request. Notwithstanding anything to the
contrary in the Lease, if Landlord fails to provide such evidence to Tenant
within 30 days after Tenant's request, then Tenant may offset rent under the
Lease until such time as Tenant has thereby offset an amount equal to the
Security. If and when Landlord thereafter provides Tenant with reasonable
evidence that the Security is being held by the new Landlord (or its lender
in accordance with an Agreement in the form of this Agreement), Tenant shall
pay Landlord the amount previously offset. This paragraph shall survive the
termination of this Agreement.
17. Tenant acknowledges that Landlord has designated
Beneficiary (or Beneficiary's assignee of whom Tenant shall have received
notice from Beneficiary) as a party that must be designated in Tenant's
insurance policies (and certificates and other evidence thereof) as an
additional insured (for liability insurance) or under a "lender's loss
payable" endorsement (for property insurance).
18. Tenant acknowledges that this Agreement constitutes the
notice described in the Article of the Lease entitled "Notice to Mortgagee;
Financial Statement," and that Tenant has notice of Beneficiary's address as
contemplated by such Article of the Lease.
19. Tenant shall provide Beneficiary with simultaneous copies
of all notices given by Tenant to Landlord pursuant to the Section of the
Lease relating to Tenant's Option to Extend. If Beneficiary notifies Tenant
in writing that an Event of Default has occurred under the Loan, then
Beneficiary may, at its option, participate in any arbitration proceeding
under such Section, which participation may be to the exclusion of, and in
place of, Landlord.
20. All notices, demands or requests made pursuant to, under,
or by virtue of this Agreement must be in writing and mailed to the party to
whom the notice, demand or request is being made by certified or registered
mail, return receipt requested, at its address set forth above.
9
<PAGE>
A copy of all notices to Beneficiary shall also be sent to Latham & Watkins,
885 Third Avenue, Suite 1000, New York, New York 10022-4802, Attention:
Brian Krisberg, Esq. A copy of all notices to Tenant shall also be sent to any
one copy recipient, if any, as Tenant shall designate from time to time by
notice under this paragraph. Any party may change the place that notices and
demands are to be sent by written notice delivered in accordance with this
Agreement. Beneficiary shall not be deemed to be on notice of the occurrence
of the 19th Floor Term Commencement Date (and the related change of Tenant's
address under the Lease) unless and until Landlord or Tenant shall have
provided Beneficiary with written notice that the 19th Floor Term
Commencement Date has occurred. Beneficiary may rely on any such notice
received from Landlord.
21. This Agreement shall be governed by the laws of the State
of California. If any term of this Agreement or the application thereof to
any person or circumstances shall to any extent be invalid or unenforceable,
the remainder of this Agreement or the application of such term to any person
or circumstances other than those as to which it is invalid or unenforceable
shall not be affected thereby, and each term of this Agreement shall be valid
and enforceable to the fullest extent permitted by law.
22. Each party shall execute and deliver, upon the request of
the other, such documents and instruments (in recordable form, if requested)
as may be necessary or appropriate to fully implement or to further evidence
the understandings and agreements contained in this Agreement. This Agreement
may be executed in any number of counterparts.
[THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK; SIGNATURES
OF THE PARTIES HERETO FOLLOW HEREAFTER.]
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto caused this
Agreement to be duly executed as of the Effective Date.
TENANT: BENEFICIARY:
- ------- ------------
XOOM.COM, INC. SALOMON BROTHERS REALTY
CORP.
By: _______________________________ By: ________________________________
Name: ________________________ Name: __________________________
Title: ________________________ Title: Authorized Representative
By: _______________________________
Name:
Title: ________________________
<PAGE>
LANDLORD HEREBY AGREES TO AND CONSENTS TO THE FOREGOING AGREEMENT AND
EXPRESSLY DIRECTS TENANT TO COMPLY WITH ANY REDIRECTION NOTICE GIVEN BY
BENEFICIARY TO TENANT PURSUANT TO THE FOREGOING AGREEMENT, NOTWITHSTANDING
ANY CONTRARY CLAIMS, DIRECTIONS, OR INSTRUCTIONS BY LANDLORD.
BY: LANDLORD
--------
OAIC BUSH STREET, LLC
By: _______________________________
Name:
Its: __________________________
By: _______________________________
Name:
Its: __________________________
<PAGE>
STATE OF NEW YORK )
)ss.:
COUNTY OF NEW YORK )
On the ___ day of August, 1999, before me, the undersigned, personally
appeared ________________________, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person whose name is subscribed
to the within instrument and acknowledged to me that he/she executed the same
in his/her authorized capacity, and that by his/her signature on the
foregoing instrument the entity upon behalf of which the person acted,
executed such instrument.
Witness my hand and official seal.
--------------------------
NOTARY PUBLIC
[Seal]
STATE OF CALIFORNIA )
)ss.:
COUNTY OF SAN FRANCISCO )
On the ___ day of August, 1999, before me, the undersigned, personally
appeared ________________________, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person whose name is subscribed
to the within instrument and acknowledged to me that he/she executed the same
in his/her authorized capacity, and that by his/her signature on the
foregoing instrument the entity upon behalf of which the person acted,
executed such instrument.
Witness my hand and official seal.
--------------------------
NOTARY PUBLIC
[Seal]
<PAGE>
STATE OF FLORIDA )
)ss.:
COUNTY OF ________________ )
On the ___ day of August, 1999, before me, the undersigned, personally
appeared ________________________, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person whose name is subscribed
to the within instrument and acknowledged to me that he/she executed the same
in his/her authorized capacity, and that by his/her signature on the
foregoing instrument the entity upon behalf of which the person acted,
executed such instrument.
Witness my hand and official seal.
--------------------------
NOTARY PUBLIC
[Seal]
<PAGE>
EXHIBIT "A"
Description of Mortgaged Premises
<PAGE>
SCHEDULE 1
225 BUSH STREET
OPTIONS
<TABLE>
<CAPTION>
SUITE --RENT DATES-- NOTICE DATE EXTENSION
NO. TENANT NAME EXPIRE EXTENSION EXTENSION COMMENTS
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
100 STAPLES
120 NEW TENANT
130 NEW TENANT
140 NEW TENANT
150 NEW TENANT
160 NEW TENANT
- -----------------------------------------------------------------------------------------------------------------------------------
Mezzanine East - See Ste 100
- -----------------------------------------------------------------------------------------------------------------------------------
5/8/2007-
200 IKON 05/08/08 8/8/2007 05/08/13 5 yr @ FMV w/9-12 Mos notice
- -----------------------------------------------------------------------------------------------------------------------------------
300 GEIGER INTERNATIONAL 09/30/01
311 DILLINGHAM AND MURPHY 03/24/00
Automatic 6
Mo Renewal
330 NEXT GENERATION 11/26/03
10/31/2001-
339 MCI METRO ACCESS TRAN 08/30/02 12/31/2001 6/30/07 5 yr @ FMV w/6-8 Mos notice
340 URBAN DATA TECHNOLOGY 11/30/01
350 EVERY CHILD CAN LEARN 11/30/01
353 K-III DIRECTORY CORP 04/30/02
360 METRO COPY 07/13/01
CONSULTANTS IN
370 ENGINEERING 02/28/02
9/30/2000- 5 yr @ 95% FMV w/9-12 Mos
380 INTERNEX INFORMATION 09/30/01 12/31/2000 9/30/08 notice
- -----------------------------------------------------------------------------------------------------------------------------------
400 CHEVRON (HAMBRECHT) 06/30/00
12/31/02-
400 HAMBRECHT & QUIST 12/31/03 3/31/03 12/31/08 5 yr @ FMV w/9-12 Mos notice
- -----------------------------------------------------------------------------------------------------------------------------------
3/31/2012-
500 SAN FRANCISCO FOUNDATION 03/31/13 6/31/2012 3/31/18 5 yr @ FMV w/9-12 Mos notice
- -----------------------------------------------------------------------------------------------------------------------------------
600 DILLINGHAM & MURPHY 07/31/07
- -----------------------------------------------------------------------------------------------------------------------------------
7/31/2001-
700 SF NEIGHBORHOOD LEGAL 10/31/02 10/31/2001 10/31/07 5 yr @ FMV w/12-15 Mos notice
770 BLDG OFFICE
780 MOK, SHEN & COMPANY 05/31/01
790 DILLINGHAM & MURPHY 07/31/02
- -----------------------------------------------------------------------------------------------------------------------------------
800 NEW TENANT
- -----------------------------------------------------------------------------------------------------------------------------------
900 NEW TENANT
- -----------------------------------------------------------------------------------------------------------------------------------
1/31/2008-
1000 DEGENKOLB ENGINEERS 01/31/07 3/31/2008 1/31/13 5 yr @ FMV w/9-12 Mos notice
- -----------------------------------------------------------------------------------------------------------------------------------
9/30/2008-
1100 SMP 09/30/08 3/31/2008 9/30/13 5 yr @ FMV w/6-12 Mos notice
- -----------------------------------------------------------------------------------------------------------------------------------
1200 NEW TENANT
- -----------------------------------------------------------------------------------------------------------------------------------
1300 NEW TENANT
- -----------------------------------------------------------------------------------------------------------------------------------
1401 BECHTEL 11/30/01
1402 BECHTEL 11/30/01
1470 APPLIED BUSINESS TECH 07/31/01
1470 BECHTEL 11/30/01
07/31/05-
1439 STEVEN ISAACS, CPA 07/31/03 10/31/05 07/31/06 3 yr @ FMV w/9-12 Mos notice
1453 NATURE AMERICA & 01/09/08
1480 APPLIED BUSINESS TECH 07/31/01
6/30/01-
1480 JEWISH COMMUNITY 06/30/02 9/30/01 6/30/07 5 yr @ FMV w/9-12 Mos notice
- -----------------------------------------------------------------------------------------------------------------------------------
6/30/2007-
1500 PRUESS WALKER 06/30/08 9/30/2007 6/30/13 5 yr @ FMV w/9-12 Mos notice
- -----------------------------------------------------------------------------------------------------------------------------------
4/31/03- 5 yr @ 95% FMV w/9-12 Mos
1600 REGENT BUSINESS CENTER 07/31/04 10/31/03 7/31/09 notice
- -----------------------------------------------------------------------------------------------------------------------------------
8/14/2008-
1700 ENVIRONMENTAL SCIENCE 08/14/07 11/13/2008 8/14/12 5 yr @ FMV w/9-12 Mos notice
1770 ZEVNIK HORTON 07/31/03
- -----------------------------------------------------------------------------------------------------------------------------------
8/7/2003-
1800 AMERICAN ARBITRATION 08/07/04 11/7/2003 6/7/07 3 yr @ FMV w/9-12 Mos notice
- -----------------------------------------------------------------------------------------------------------------------------------
1900 NEW TENANT
- -----------------------------------------------------------------------------------------------------------------------------------
2000 NEW TENANT
- -----------------------------------------------------------------------------------------------------------------------------------
2100 NEW TENANT
- -----------------------------------------------------------------------------------------------------------------------------------
2200 NEW TENANT
- -----------------------------------------------------------------------------------------------------------------------------------
Total
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SUITE TERMINATION EXPANSION 1ST RIGHTS
NO. TENANT NAME TERMINATION COMMENTS EXPANSION COMMENTS 1ST RIGHTS COMMENTS
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
100 STAPLES
120 NEW TENANT
130 NEW TENANT
140 NEW TENANT
150 NEW TENANT
160 NEW TENANT
- ------------------------------------------------------------------------------------------------------------------------------------
Mezzanine East - See Ste 100
- ------------------------------------------------------------------------------------------------------------------------------------
200 IKON
- ------------------------------------------------------------------------------------------------------------------------------------
300 GEIGER INTERNATIONAL
TT must notify LL. TT to pay
$100,000 discounted for a
period of one year at the rate
equal to the interest payable
on a 10 year US Treasure Bill
as of 7/31/01. TT to vacate Must take 759 SF (6th floor
8/1/01 7/31/02. 1/1/00 phone switch)
311 DILLINGHAM AND MURPHY
330 NEXT GENERATION If services to space are
interrupted for 15 days
consecutively such that TT is
reasonably prevented from
serving its customers other
than the fault of Tenant, TT
may terminate lease.
339 MCI METRO ACCESS TRAN
340 URBAN DATA TECHNOLOGY
350 EVERY CHILD CAN LEARN
353 K-III DIRECTORY CORP
360 METRO COPY
CONSULTANTS IN
370 ENGINERING
N/A Any Contiguous
380 INTERNEX INFORMATION Space on 3
- ------------------------------------------------------------------------------------------------------------------------------------
400 CHEVRON (HAMBRECHT)
400 HAMBRECHT AND QUIST
- ------------------------------------------------------------------------------------------------------------------------------------
500 SAN FRANSISCO FOUNDATION
- ------------------------------------------------------------------------------------------------------------------------------------
TT must notify LL. TT to pay
$100,000 discounted for a
period of one year at the rate
equal to the interest payable
on a 10 year US Treasure Bill
as of 7/31/01. TT to vacate Must take 759 SF (6th floor
600 DILLINGHAM & MURPHY 8/1/01 7/31/02. 1/1/00 phone switch)
- ------------------------------------------------------------------------------------------------------------------------------------
700 SF NEIGHBORHOOD LEGAL
770 BLDG OFFICE
780 MOK, SHEN & COMPANY
TT must notify LL. TT to pay
$100,000 discounted for a
period of one year at the rate
equal to the interest payable
on a 10 year US Treasure Bill
as of 7/31/01. TT to vacate Must take 759 SF (6th floor
790 DILLINGHAM & MURPHY 8/1/01 7/31/02. 1/1/00 phone switch)
- ------------------------------------------------------------------------------------------------------------------------------------
800 NEW TENTANT
- ------------------------------------------------------------------------------------------------------------------------------------
900 NEW TENANT
- ------------------------------------------------------------------------------------------------------------------------------------
1000 DEGENKOLB ENGINEERS
- ------------------------------------------------------------------------------------------------------------------------------------
1100 SMP
- ------------------------------------------------------------------------------------------------------------------------------------
1200 NEW TENANT
- ------------------------------------------------------------------------------------------------------------------------------------
1300 NEW TENANT
- ------------------------------------------------------------------------------------------------------------------------------------
1401 BECHTEL
1402 BECHTEL
1470 APPLIED BUSINESS TECH
1470 BECHTEL TT to give 180 days notice.
7/31/01-7/31/03 TT to pay $8,334.
1439 STEVEN ISAACS, CPA
1453 NATURE AMERICA &
1480 APPLIED BUSINESS TECH
LL received bonified 3rd party
off. LL to give to Jewish
1480 JEWISH COMMUNITY Ste 1453 Community first.
- ------------------------------------------------------------------------------------------------------------------------------------
1500 PRUSEE WALKER
- ------------------------------------------------------------------------------------------------------------------------------------
1600 REGENT BUSINESS CENTER Entire 15th Floor
- ------------------------------------------------------------------------------------------------------------------------------------
1700 ENVIRONMENTAL SCIENCE
1770 ZEVNIK HORTON
- ------------------------------------------------------------------------------------------------------------------------------------
1800 AMERICAN ARBITRATION
- ------------------------------------------------------------------------------------------------------------------------------------
1900 NEW TENANT
- ------------------------------------------------------------------------------------------------------------------------------------
2000 NEW TENANT
- ------------------------------------------------------------------------------------------------------------------------------------
2100 NEW TENANT
- ------------------------------------------------------------------------------------------------------------------------------------
2200 NEW TENANT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 4
ADDITIONAL MONTHLY DISBURSEMENT REQUIREMENTS
1. General Contractors Sworn Statement (Standard AIA format).
This statement should cover all the work for which funds have been
disbursed to date, paid or to be paid in conjunction with this
request.
2. Owners Sworn Statement (Standard AIA format).
This statement should cover all the work for which funds have been
disbursed to date, paid or to be paid in conjunction with this
request.
3. Fully executed AIA G702 application for payment form, which is to be
signed by the general contractor, the architect/engineer, and the
Tenant.
4. Detailed construction and or project budget showing the original
budget amount, any reallocations, the new budget amount, total funds
disbursed to date, the current disbursement request and the balance
required to finish the project on a line item basis.
5. Change Order requests outlining the changes to be made to the
construction budget along with supporting documentation. These
requests are not to be incorporated into the current draw request.
They are a separate package to be sent for the approval of Landlord.
6. General contractor's and subcontractors unconditional lien waivers for
all prior disbursements and their conditional waivers for the payment
currently requested.
7. Invoices to substantiate the full amount of funds being requested.
Please note that purchase orders must be accompanied by an invoice.
They are not payable on their own.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-START> JUL-01-1999 JAN-01-1999
<PERIOD-END> SEP-30-1999 SEP-30-1999
<CASH> 54,575 75,408
<SECURITIES> 2,000 123,516
<RECEIVABLES> 1,563 4,032
<ALLOWANCES> (195) (554)
<INVENTORY> 322 518
<CURRENT-ASSETS> 5,857 3,746
<PP&E> 2,640 9,216
<DEPRECIATION> (569) (1,573)
<TOTAL-ASSETS> 66,874 389,072
<CURRENT-LIABILITIES> 6,013 12,951
<BONDS> 0 0
0 0
0 0
<COMMON> 75,606 407,670
<OTHER-SE> (14,369) (32,980)
<TOTAL-LIABILITY-AND-EQUITY> 66,874 389,072
<SALES> 4,865 19,903
<TOTAL-REVENUES> 4,865 19,903
<CGS> 1,965 7,456
<TOTAL-COSTS> 0 183
<OTHER-EXPENSES> 9,228 36,995
<LOSS-PROVISION> 252 502
<INTEREST-EXPENSE> 0 90
<INCOME-PRETAX> (6,392) (18,614)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (6,392) (18,614)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,339) (6,742)
<EPS-BASIC> (0.33) (0.40)
<EPS-DILUTED> (0.33) (0.40)
</TABLE>
