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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to Commission File No. 0-25131
INFOSPACE.COM, INC.
(Exact name of Registrant as specified in its charter)
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Delaware 91-1718107
(State or other jurisdiction (I.R.S. Employer)
incorporation or organization) Identification Number)
15375 N.E. 90th Street
Redmond, Washington 98052
(Address of principal executive
offices) (Zip Code)
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Registrant's telephone number, including area code: (425) 602-0600
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Securities registered pursuant to Section 12 (b) of the Act:
None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, par value $.0001 per share
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 [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing price of Common Stock on February 29, 2000,
as reported by Nasdaq, was approximately $12.8 billion. Shares of voting stock
held by each officer and director and by each person who owns 5% or more of the
outstanding voting stock have been excluded in that such persons may be deemed
to be affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
As of February 29, 2000, 108,288,253 shares of the registrant's Common Stock
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates certain information by reference from the definitive
proxy statement for the Annual Meeting of Stockholders tentatively scheduled
for May 22, 2000, (the "Proxy Statement").
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TABLE OF CONTENTS
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Part I
Item 1. Business................................................................................ 3
Factors Affecting Our Operating Results, Business Prospects and Market Price of Stock.. 16
Item 2. Properties.............................................................................. 28
Item 3. Legal Proceedings....................................................................... 29
Item 4. Submission of Matters to a Vote of Security Holders..................................... 30
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters................... 31
Item 6. Selected Consolidated Financial Data.................................................... 33
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations... 34
Item 7a. Quantitative and Qualitative Disclosures About Market Risk.............................. 46
Item 8. Financial Statements and Supplementary Data............................................. 48
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.... 75
Part III
Item 10. Executive Officers and Directors of the Registrant...................................... 75
Item 11. Executive Compensation.................................................................. 75
Item 12. Security Ownership of Certain Beneficial Owners and Management.......................... 75
Item 13. Certain Relationships and Related Transactions.......................................... 75
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K......................... 76
Signatures ....................................................................................... 78
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ITEM 1. BUSINESS
Overview
InfoSpace is a global Internet information infrastructure services company.
InfoSpace provides enabling technologies to Web sites, merchants and wireless
devices. Our affiliates utilize and distribute these services via PCs and a
network of wireless and other non-PC devices including PCs, cellular phones,
pagers, screen telephones, television set-top boxes, online kiosks, and
personal digital assistants. We have relationships with AT&T Wireless, GTE,
USWEST, Intel, Ericsson, Nokia, NeoPoint, Sprint, Mitsui and Acer America.
InfoSpace's affiliate network also consists of more 2,500 Web sites that
include AOL, Microsoft, Disney/InfoSeek's GO Network, NBC's Snap, Lycos, Go2Net
Inc., DoubleClick, Dow Jones (The Wall Street Journal Interactive Edition) and
ABC LocalNet, among others.
Our Infrastructure Services
We have developed a scalable, flexible technology platform that enables us to
deliver a broad, integrated suite of services to Web sites, merchants and
wireless carriers. All of our consumer, merchant and wireless services utilize
the same core technology platform within the same operational infrastructure.
Our consumer services are designed for the end user and are distributed through
wireless devices and Web sites. These services include four main components:
(1) unified communication services, including device-independent email and
instant messaging; (2) information services, such as integrated directory,
news, and lifestyle information; (3) community services, including the "sticky"
services such as online address books and calendars; and (4) the ability to
offer collaboration services, including real-time document sharing. We target
merchant services to local merchants (including service-based merchants such as
restaurants and dry cleaners) and distribute these services through our
relationships with the regional bell operating companies (RBOCs), merchant
banks and other financial institutions and other local media networks,
including newspapers and television and radio stations. These services include
commerce services such as online storebuilding and technology that promotes
merchant services. We target wireless services to mobile users, whether on a
cellular phone, personal digital assistant (or PDA), pager or other non-PC
device, and distribute these services through our relationships with wireless
carriers and device manufacturers. These services include the ability to
conduct secure commerce using single-click buying, integrated information
services such as real-time stock quotes and traffic reports, and services that
manage users' lives, including online address books and calendars.
We design our infrastructure services to be highly flexible and customizable,
enabling affiliates to select from among our broad range of consumer, merchant
and wireless services. One of our principal strengths is our internally
developed technology, which enables us to easily and rapidly add new affiliates
and distribution partners by employing a distributed, scalable architecture
adapted specifically to our Internet-based infrastructure services. We help our
affiliates and distribution partners build and maintain their brands by
delivering our consumer, merchant and wireless services with the look and feel
and navigation features specific to each affiliate's delivery platform and
format, including the growing number of emerging wireless devices.
We have built an extensive distribution network through our direct sales
force and through reseller channels. Our reseller channels are based on
distribution agreements with online advertising networks, such as DoubleClick
and Flycast, who offer both our consumer and merchant services to their network
of thousands of Web sites, reseller agreements with RBOCs, including BellSouth,
SBC, Bell Atlantic and USWEST, merchant banks and other local media networks
who provide our services to local merchants. We also work with wireless
carriers such as AT&T Wireless, Airtouch, USWest and GTE, device manufacturers
such as Nokia, Ericsson and Neopoint, and software developers such as AvantGo,
who offer our wireless portal services to mobile users.
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Consumer Services
Information Services
We provide information of broad appeal to users of wireless devices and PCs,
including maps, directories, financial data, traffic reports, sports, news and
entertainment. In most cases, we receive regular data feeds from our content
providers and store the content on our Web servers in order to maintain its
reliability and increase its accessibility. In other cases, our proprietary
technology allows Web users to transparently access content that is stored
directly on the content provider's system. In either case, our technology
enables us to integrate heterogeneous content from multiple sources and make it
appear as if it comes from one source, which is then delivered to our
affiliates. Our technology pulls the information dynamically into a Web page or
device output display that maintains the look and feel and navigation features
of each affiliate's Web site or wireless device.
We have acquired rights to third-party content pursuant to more than 85
license agreements, typically having terms of one to five years. The license
agreements require the content provider to update content on a regular basis,
the frequency of which varies depending on the type of content. In certain
arrangements, the content provider pays us a carriage fee for syndication of
its content to our network of affiliates. In other instances, we share with the
content provider advertising revenues attributable to end-user access of the
provider's content. For certain of our content, including our core directory
and map content, we pay a one-time or periodic fee or fee per content query to
the content provider. We typically enter into nonexclusive arrangements with
our content providers. However, in certain instances we have entered into
exclusive relationships, which may limit our ability to enter into additional
content agreements.
For our directory services, we integrate our yellow pages and white pages
information with each other and utilize yellow pages category headings in
combination with a natural word search feature to provide a user-friendly
interface and navigation vehicle within our directory services. We also
typically include maps and directions for addresses included in our directory
services. We further enhance the relevance and accuracy of responses to user
queries by employing a radial search feature to our directory services, which
allows users to specify the geographic scope within a radial distance of a
specific address, rather than more conventional methods of searching by zip
code or city and county.
In addition to our directory services, we distribute other valuable
information of broad appeal with everyday significance, such as classifieds,
news, travel and city guide information, real-time stock quotes and financial
information, Web directories and entertainment.
Our future success will depend on our ability to continue to integrate and
distribute information services of broad appeal. Our ability to maintain our
relationships with content providers and to build new relationships with
additional content providers is critical to the success of our business.
Community and Communications Services
We offer an extensive and integrated platform of consumer services that
includes community services and communication services.
Community-building services that we offer our affiliates include the "sticky"
services that are designed to keep a user on an affiliates' site. These include
personalized Web-based address books and calendars, personal home pages, online
chat and message boards.
We also offer unified communication services including device-independent
email and instant messaging. We integrate these services into the community-
building services we offer, making it easy for users to send email and instant
messages directly from their address book from any device and also view "buddy
lists" on any device.
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Our Affiliate Network
We offer our infrastructure services to wireless device manufacturers such as
Nokia and Ericcson, wireless carriers such as GTE and USWEST and wireless
service providers such as AvantGo. Our PC-based affiliate network now consists
of over 2,500 portals and affinity sites, including 4 of the top 5 most
trafficked sites, according to Media Metrix. In addition, we believe our
affiliate network now reaches over 88% of all Internet users based on data as
of December 31, 1999, provided by Media Metrix.
Our consumer services revenue is derived from advertising, licensing fees and
guaranteed transaction fees in lieu of revenue share.
Merchant Services
Our merchant services give merchants the ability to create, promote, sell and
distribute their products and services across multiple channels through our
broad distribution network. We have reseller agreements with RBOCs, including
BellSouth, SBC, Bell Atlantic and USWEST, merchant banks and other local media
networks, such as newspapers, who provide our services to local merchants
worldwide.
Based on a broad platform of technology, we can deliver a broad array of
merchant services such as:
. the online delivery to any device of promotions that can be used online
and offline;
. single-click buying from any Web site directly from a wireless device;
. Page Express, which enables local merchants to create a Web presence;
. StoreBuilder, which enables merchants to build online stores;
. ActivePromotion, which enables merchants to create targeted product
promotions and distribute them across our network; and
. ActiveShopper, which provides an open marketplace where consumers can
find, research and purchase products from our merchant network.
With our acquisition of Prio, Inc. in February 2000, we can now integrate
online promotion technologies with an offline merchant's existing credit card
processing infrastructure, bridging the gap between the online and offline
worlds. Our enhanced commerce infrastructure will be designed to target and
deliver online promotions to consumers on their wireless devices or while they
are looking for goods and services on Web sites. To take advantage of the
promotion, the user can purchase the goods online, through a catalog or at a
physical retail store.
Through our recently announced acquisition of Millet Software
(PrivacyBank.com), we believe we will be able to provide a server-based
technology that enables wireless Internet devices to become commerce-enabled
devices by giving mobile users the ability to press one key to make on-the-spot
purchases from virtually any Web site. This is possible through a patent-
pending secure technology that provides an automated process for completing
payment forms, eliminating the need to continually enter in payment or shipping
information, register at sites or enter any specific passwords.
Buyers can also purchase multiple products from multiple merchants, using our
shopping cart that provides the convenience of single-click purchasing.
Currently, over 350,000 merchants use our merchant service offerings.
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Wireless Services
Our wireless services are comprised of an integrated suite of wireless portal
services that provide mobile users with relevant information services, such as
real-time stock quotes and traffic reports, the ability to conduct secure
commerce transactions from a wireless device, including single-click buying,
communication services such as device-independent instant messaging and email,
personalization capabilities and location-based services that enable users to
search for location-based information, such as the restaurant closest to the
mobile user's current location.
As a result of our acquisition of Saraide, we will have relationships with
over 24 wireless carriers worldwide including British Telecom, Cellnet,
Dutchtone, Panafon, J-Phone, Omnitel and Libertel.
Our wireless services are distributed through the following wireless
carriers, device manufacturers and software providers.
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Wireless Carriers AT&T Wireless, Airtouch, Sprint, GTE, USWEST
Wireless Software application
developers AvantGo, JP Systems, WolfeTech, Phone.com
Wireless Device Manufacturers Nokia, Ericcson and Neopoint
Pagers Motorola
Web Appliances Intel
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Our platform of wireless services includes:
. Form-filling instant buying technology, which allows mobile users to
press a single key to conduct transactions from virtually any Web site.
. Promotions technology, which allows mobile users to find and receive
real-time promotions on wireless devices from retailers and service-based
merchants, such as dry cleaners and restaurants, that can be used online
and offline. To take advantage of the promotion, the user can either
purchase the goods online, go to the retail store or simply utilize the
service. Promotions are seamlessly matched and automatically credited to
the user's credit card statement through secure back-end transaction
processing.
. Location-based directory services, that enable mobile users to search for
information, such as finding an Italian restaurant closest to where they
are when they conduct the search.
. Secure wireless commerce through a collaboration with VeriSign to deliver
a broad range of services aimed at facilitating trusted and secure
commerce applications across the wired and wireless Internet. By
incorporating VeriSign's strengths in Internet authentication, validation
and payment services, we will be able to offer a broad range of secure
services tailored to the wireless market.
Our wireless Internet services are device-independent and provide a platform
which enables our wireless carriers to support HDML and SMTP and a variety of
emerging protocols such as WAP, VXML and PQA's for Palm VII. Our services are
compatible with a variety of gateway technologies including WAP gateways from
Nokia, Phone.com and Ericsson.
Our wireless services are private-labeled for each carrier, preserving the
brand of the carrier and their relationship with their customer and helping to
create a barrier to switch. Revenues are primarily generated from the carrier
and include licensing fees, per subscriber/per month fees in the United States
and per query/per message fees in Europe. In addition, we receive commerce
revenue for the transactions completed on the wireless devices.
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International Expansion
We intend to capitalize on what we perceive to be a significant opportunity
for our services in international markets. We currently maintain offices in the
United States, Canada and India and have a joint venture in the United Kingdom.
Our wholly-owned subsidiary, InfoSpaceCanada.com, was formed in early 1999 and
has affiliate relationships with canada.com, a leading Canadian Web site and
search engine, as well as AOL Canada, MSN Canada and Sprint Canada.
InfoSpace.com India was formed as a result of our December 1999 acquisition
of privately-held Zephyr Software and its wholly owned subsidiary, Zephyr
Software (India) Private Limited.
In 1998, we entered into a joint venture with Thomson Directories Limited to
form TDL InfoSpace to replicate our content, community and commerce services in
Europe. TDL InfoSpace has targeted the United Kingdom as its first market, and
content services were launched in the third quarter of 1998. Under the license
agreement between Thomson and TDL InfoSpace, Thomson licenses its U.K.
directory information database to TDL InfoSpace. Under the Web site services
agreement between Thomson and TDL InfoSpace, Thomson also sells Internet yellow
pages advertising for the joint venture through its local sales force. Under
our license agreement with TDL InfoSpace, we license our technology and provide
hosting services to TDL InfoSpace.
Under the joint venture agreement, each of us and Thomson is obligated to
negotiate with TDL InfoSpace and the other party to jointly offer private label
solutions in other European countries prior to offering such services
independently or with other parties.
With our acquisition of Saraide.com, Inc. in March 2000, we intend to expand
our wireless services into Europe, Japan and Canada. We are currently
investigating additional international opportunities, but have no specific
plans to enter any particular market at this time. The expansion into
international markets involves a number of risks. See "Factors Affecting Our
Operating Results, Business Prospects and Market Price of Our Stock--Our
International Expansion Plans Involve Risks" for a description of these risks.
Revenue Sources
We have derived substantially all of our revenues for our consumer, merchant,
and wireless services from national and local advertising, licensing fees,
commerce transaction fees, and guaranteed transaction fees in lieu of revenue
share.
Advertising
National Advertising
Throughout our consumer services, we sell banner advertisements based on
costs per thousand impressions (CPMs) and other CPM-based national advertising.
Our national advertising agreements generally have terms of less than six
months and guarantee a minimum number of impressions. Actual CPMs depend on a
variety of factors, including, without limitation, the degree of targeting, the
duration of the advertising contract and the number of impressions purchased,
and are often negotiated on a case-by-case basis. Because of these factors,
actual CPMs may fluctuate. Our guarantee of minimum levels of impressions
exposes us to potentially significant financial risks, including the risk that
we may fail to deliver required minimum levels of user impressions, in which
case we typically continue to provide advertising without compensation until
such levels are met.
Local Internet Yellow Pages Advertising
We generate a basic Internet yellow pages listing free of charge for all U.S.
local business listings. Similar to traditional yellow pages industry
practices, we generate revenues by selling enhancements to this
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basic listing. Internet yellow pages advertising agreements provide for terms
of one year with costs to the local advertisers ranging from $50 to $300 or
greater per year, depending on the types of enhancements selected.
Licensing Fees
We receive licensing fees from some of our consumer, merchant and wireless
services. Licensing fees are derived from the distribution of our consumer
services to many of the affiliates in our network. Licensing fees from merchant
services are derived through our reseller relationships with wireless carriers,
device manufacturers, RBOCs, merchant banks and other local media networks, and
include per store/per month fees and per service/per month fees. Licensing
agreements for our consumer and merchant services generally range from one to
three years in duration.
Commerce Fees
We generate commerce fees from links and completed transactions through our
merchant services delivered on wireless devices and the PC. Under our merchant
services arrangements, merchants agree to pay us a commission-based transaction
fee when a user clicks-through to their site and purchases a product. These
commissions typically range from 5 to 25 percent of the purchase amount. These
fees are generally paid to us monthly or quarterly, after the merchant has
collected its payment from the user.
Guaranteed Transaction Fees
We have agreements with some affiliates and merchants under which they agree
to pay us guaranteed transaction fees. These arrangements are individually
negotiated and have a range of specially adapted features involving various
compensation structures. These are often based on the range and extent of
customization rather than on CPMs. These arrangements vary in terms and
duration, but generally have longer terms than arrangements for our CPM-based
advertising. In some of these arrangements, we may also receive transaction
revenues when transactions exceed the guaranteed minimum payments. If the
merchant offers a commerce opportunity in its promotion, we may derive
transaction revenues based on the number of transactions made through the
promotion.
We also have arrangements with wireless carriers, device manufacturers and
software providers whereby we receive guaranteed transaction fees as well as
transaction revenues on a per-subscriber and per-query basis on existing
devices, such as pagers, in excess of the guaranteed minimum payments.
We generate a significant amount of our revenues from advertising and
guaranteed transaction fees from our affiliates who use our consumer services,
which involves a number of risks. For additional information about these risks,
see "Factors Affecting Our Operating Results, Business Prospects and Market
Price of Our Stock--We Rely on Advertising and Transaction Revenues," "--
Advertisers May Not Adopt the Internet as an Advertising Medium" and "--Our
Advertising Arrangements Involve Risks."
Technology and Infrastructure
One of our principal strengths is our internally developed technology, which
we have designed specifically for our Internet-based consumer, merchant and
wireless services. Our technology architecture features specially adapted
capabilities to enhance performance, reliability and scalability, consisting of
multiple proprietary software modules that support the core functions of our
operations. Our technology includes Web Server Technology, Database Technology,
a Web Scraping Engine, Gateway Technology and database network infrastructure.
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Web Server Technology
We designed our Web Server Technology to enable rapid development and
deployment of information over multiple platforms and formats. It incorporates
an automated publishing engine that dynamically builds a page to conform to the
look and feel and navigation features of each affiliate. Our wireless Internet
services are device-independent and provide a platform which enables our
wireless carriers to support HDML and SMTP and a variety of emerging protocols
such as WAP, VXML and PQA's for Palm VII. Our services are compatible with a
variety of gateway technologies including WAP gateways from Nokia, Phone.com
and Ericsson.
Our Web Server Technology includes other features designed to optimize the
performance of our information infrastructure services, including:
. an HTML compressor that enables modifications of file content to reduce
size, thereby reducing download time for users;
. an "Adaptive Keep-Alive" feature that maximizes the time during which
client server connections are kept open, based on current server load,
thereby increasing user navigation and Web site traversal speed; and
. a Proxy Server that provides the capability for real-time integration and
branding of content that resides remotely with third-party content
providers.
Database Technology
We have developed proprietary database technology to address the specific
requirements of our business strategy and information infrastructure services.
We designed our Co-operative Database Architecture to function with a high
degree of efficiency within the unique operating parameters of the Internet, as
opposed to commonly used database systems that were developed prior to the
widespread acceptance of the Internet. The architecture is tightly integrated
with our Web Server Technology and incorporates the following features:
Our Heterogeneous Database Clustering allows disparate data sources to be
combined and accessed through a single uniform interface, regardless of data
structure or content. These clusters facilitate database bridging, which allows
a single database query to produce a single result set containing data
extracted from multiple databases, a vital component of our ability to
aggregate content from multiple sources. Database clustering in this manner
reduces dependence on single data sources, facilitates easy data updates and
reduces integration efforts. In addition, our pre-search and post-search
processing capabilities enable users to modify search parameters in real time
before and after querying a database.
Our Dynamic Parallel Index Traversal mechanism utilizes the search parameters
supplied by the user to determine the appropriate database index (from among
multiple indices) to efficiently locate the data requested. Further, an index
compression mechanism allows us to achieve an efficient balance between disk
space and compression/decompression when storing or accessing data.
In a response to a database query, conventional databases access previously
displayed results in order to display successive results to a given query, thus
increasing response time by performing redundant operations. Our Automatic
Query State Recovery mechanism decreases response time by maintaining the state
of a query to allow the prompt access of successive results. This feature is
particularly important, for example, when an end-user query retrieves a large
number of results.
We incorporate a natural word search interpreter, which successfully utilizes
familiar category and topic headings traditional to print directory media to
generate relevant and related results to information queries. By incorporating
a familiar navigation feature into our services, we believe we provide end
users with a more intuitive mechanism to search for and locate information.
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For our merchant services we have developed a comprehensive enterprise-wide
data warehouse. This data warehouse contains information relating to merchants,
products, services, users, customers, profiles, storefronts, purchases, site
traffic and metrics. The aggregation of this information in one place allows us
to leverage our development efforts and reduce redundant information.
Web Scraping Engine
We have developed our Web Scraping Engine to allow data from a variety of
sources on the Internet to be retrieved, parsed and presented as a single
virtual database result, either in real-time or at predetermined intervals. Our
State Machine-Based Profiling system catalogs the data on each source site,
which is later accessed by our Web Scraping Engine for real-time retrieval.
Data results can be internally cached to reduce network traffic and deliver the
fastest possible results to the end user.
The Web Scraping Engine has numerous applications, one of which is collecting
real-time information from multiple sources in a manner that eliminates the
need for a data provider to perform any local modifications. This technology is
currently being applied in the price comparison feature of our ActiveShopper
merchant service. Various other potential uses of the technology have been
identified, including the collection and real-time updating of event data such
as concert information, performing arts schedules and sporting events, and the
aggregation of classified listings, such as employment listings from corporate
Web sites.
Gateway Technology
Our Gateway Technology allows us to take content from one source protocol and
forward it to a device destination that does not include any of the hardware or
software necessary for establishing an Internet connection. The content can be
sent directly or may have some processing performed before transmission to the
destination. This can be used for a single message, or multiple messages sent
on a timed basis such as weather, stock quotes, news and horoscopes. Messages
may be sent to a single user or group of users.
Data Network Infrastructure
We maintain a carrier-class data network center designed to ensure high-level
performance and reliability of our information services. We connect directly to
the Internet from our facilities in Redmond, Washington through redundant,
dedicated DS-3 communication lines provided by multiple telecommunication
service providers. Our hardware resides in a secure climate-controlled room. As
we expand our operations, we expect to locate server facilities at various
strategic geographic locations.
With the acquisitions of Prio and Saraide, we have data centers in Mountain
View, California serving the promotions technology, Dallas, Texas serving
wireless customers in North America, and Papendrecht, Netherlands serving
wireless customers in Europe.
Product Development
We believe that our technology platform is essential to successfully
implement our strategy of expanding our affiliate network, acquiring value-
added content to add to our consumer, merchant and wireless services, expanding
internationally and into other services and maintaining the attractiveness and
competitiveness of our private label solutions. We have invested significant
time and resources in creating our proprietary technology. Product development
expenses were $3.2 million for the year ended December 31, 1999, $1.2 million
for the year ended December 31, 1998 and $383,000 for the year ended December
31, 1997.
Rapidly changing technology, evolving industry standards, evolving customer
demands and frequent new product and service introductions characterize our
market. See "Factors Affecting Our Operating Results, Business Prospects and
Market Price of Our Stock--Rapid Technological Change Affects Our Business" for
a discussion of certain risks in this regard.
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Intellectual Property
Our success depends significantly upon our proprietary technology. To protect
our proprietary rights, we rely on a combination of copyright and trademark
laws, patents, trade secrets, confidentiality agreements with employees and
third parties and protective contractual provisions. All of our employees have
executed confidentiality and nonuse agreements that transfer any rights they
may have in copyrightable works or patentable technologies to us. In addition,
prior to entering into discussions with potential content providers and
affiliates regarding our business and technologies, we generally require that
such parties enter into a nondisclosure agreements with us. If these
discussions result in a license or other business relationship, we also
generally require that the agreement setting forth the parties' respective
rights and obligations include provisions for the protection of our
intellectual property rights. For example, our standard affiliate agreement
provides that we retain ownership of all patents and copyrights in our
technology and requires our customers to display our copyright and trademark
notices.
"InfoSpace" is a registered trademark of ours. We also have applied for
registration of certain other service marks and trademarks, including
"InfoSpace.com " "ActiveShopper" and the "InfoSpace" logo in the United States
and in other countries, and will seek to register additional service marks and
trademarks, as appropriate. We may not be successful in obtaining the service
marks and trademarks that we have applied for. As of March 1, 2000 we have
filed 23 U.S. patent applications relating to various aspects of our technology
for querying and developing databases, for developing and constructing web
pages, for electronic commerce for on-line directory services and for web
scraping. With the acquisition of PrivacyBank, we obtain rights to several
additional pending patent applications. During January 2000, we received
notification of an issued patent for commerce infrastructure services on the
Internet and wireless devices. The patent covers private-label commerce
solutions and tracking the purchase of products, services and information on
the Internet and on wireless devices. We are preparing additional patent
applications on other features of our technology. We have instituted a formal
patent program and anticipate on-going patent application activity in the
future. Patents with respect to our technology may not be granted, and, if
granted, patents may be challenged or invalidated. In addition, issued patents
may not provide us with any competitive advantages and may be challenged by
third parties.
Despite our efforts to protect our proprietary rights, unauthorized parties
may copy aspects of our products or services or obtain and use information that
we regard as proprietary. The laws of some foreign countries do not protect
proprietary rights to as great an extent as do the laws of the United States.
In addition, others could possibly independently develop substantially
equivalent intellectual property. If we do not effectively protect our
intellectual property, our business could suffer.
Companies in the Internet services industry have frequently resorted to
litigation regarding intellectual property rights. We may have to litigate to
enforce our intellectual property rights, to protect our trade secrets or to
determine the validity and scope of other parties' proprietary rights. From
time to time, we have received, and may receive in the future, notice of claims
of infringement of other parties' proprietary rights. Any such claims could be
time-consuming, result in costly litigation, divert management's attention,
cause product or service release delays, require us to redesign our products or
services or require us to enter into royalty or licensing agreements. These
royalty or licensing agreements, if required, may not be available on
acceptable terms or at all. If a successful claim of infringement were made
against us and we could not develop non-infringing technology or license the
infringed or similar technology on a timely and cost-effective basis, our
business could suffer. See "Item 3. Legal Proceedings."
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Competition
We operate in the Internet information infrastructure services market, which
is extremely competitive and is rapidly changing. Our current and prospective
competitors include many large companies that have substantially greater
resources than we have. We believe that the primary competitive factors in the
market for Internet information infrastructure services are:
. the ability to provide information of broad appeal, which is likely to
result in increased user traffic and increase the brand name value of the
Web sites and wireless devices to which the services are provided;
. the ability to meet the specific information and service demands of a
particular Web site or wireless device;
. the cost-effectiveness and reliability of the consumer, merchant or
wireless information services;
. the ability to provide consumer, merchant or wireless information
services that are attractive to advertisers and end users;
. the ability to achieve comprehensive coverage of a particular category of
information or services; and
. the ability to integrate related information to increase the utility of
the consumer, merchant or wireless information services offered.
We compete, directly or indirectly, in the following ways, among others:
. our directory services compete with AnyWho? (a division of AT&T), GTE
SuperPages, Switchboard, ZIP2 (which was acquired by Compaq), various
RBOCs' directory services, infoUSA's Lookup USA, City Search's Sidewalk
and Yahoo! Yellow Pages and White Pages;
. other information services we provide, such as classifieds, horoscopes
and real-time stock quotes, compete with specialized content providers;
. our U.K. joint venture competes with British Telecom's YELL service and
Scoot (UK) Limited in directory services; Inktomi and Autonomy in
infrastructure services, Excite, Yahoo! and MSN in syndication;
Shopguide, Shopsmart and Yahoo! shopping for merchant services and
various specialized content providers for information services;
. our community and communication services compete with services offered by
Internet portals such as AOL, Yahoo!, and Excite, as well as specialized
content service providers such as Hotmail;
. our merchant services compete with e-tailers such as Amazon.com, portals
such as AOL, Yahoo! and MSN and merchant aggregators such as Big Step and
Microsoft's Bcentral; and
. our wireless services compete with portals such as AOL, Yahoo!, MSN and
Lycos, and with specialized content providers.
We expect that in the future we will experience competition from other
Internet services companies and providers of Internet software, including
Microsoft, Yahoo!, AOL, Excite, Disney/Infoseek, Lycos, Go2Net's MetaCrawler
and NBC's Snap. Some of these companies are currently customers of ours, the
loss of which could harm our business. We may also face increased competition
from traditional media companies expanding onto the Internet.
Many of our current customers have established relationships with certain of
our current and potential future competitors. If our competitors develop
information infrastructure services that are superior to ours or that achieve
greater market acceptance than ours, our business will suffer.
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Governmental Regulation
Because of the increasing use of the Internet, the government may adopt laws
and regulations relating to the Internet, addressing issues such as user
privacy, pricing, content, taxation, copyrights, distribution and product and
services quality.
Recent concerns regarding Internet user privacy has led to the introduction
of federal and state legislation to protect Internet user privacy. In addition,
the Federal Trade Commission has initiated investigations and hearings
regarding Internet user privacy which could result in rules or regulations that
could adversely affect our business. As a result, we could become subject to
new laws and regulations that could limit our ability to conduct targeted
advertising, or to distribute or collect user information.
European legislation to protect Internet user privacy has not heretofore
greatly impacted us. European countries may seek to more strictly enforce such
legislation, which may prevent us from offering some or all of our services in
some European countries.
We may be subject to provisions of the Federal Trade Commission Act that
regulate advertising in all media, including the Internet, and require
advertisers to substantiate advertising claims before disseminating
advertising. The Federal Trade Commission has the power to enforce this Act. It
has recently brought several actions charging deceptive advertising via the
Internet and is actively seeking new cases involving advertising via the
Internet.
We may also be subject to the provisions of the recently enacted
Communications Decency Act. This Act imposes substantial monetary fines and/or
criminal penalties on anyone who distributes or displays certain prohibited
material over the Internet. Although some court decisions have cast doubt on
the constitutionality of this Act, it could subject us to substantial
liability.
These or any other laws or regulations that may be enacted in the future
could have several adverse effects on our business. These effects include:
. we may be subject to substantial liability, including fines and criminal
penalties;
. we could be prevented from offering certain products or services; and
. the growth in Internet usage could be substantially limited.
Government regulation may present a risk to our business. See "Factors
Affecting Our Operating Results, Business Prospects and Market Price of Our
Stock--We May Become Subject to Government Regulation."
Employees
As of February 29, 2000, we had 330 employees. As of March 15, 2000, with the
acquisition of Saraide.com, we had over 450 employees. None of our employees is
represented by a labor union, and we consider our employee relations to be
good. Competition for qualified personnel in our industry is intense,
particularly for software development and other technical staff and for
personnel with experience in wireless services. We believe that our future
success will depend in part on our continued ability to attract, hire and
retain qualified personnel. See "Factors Affecting Our Operating Results,
Business Prospects and Market Price of Our Stock--We Need to Manage Our Growth
and Maintain Procedures and Controls" and "--We Depend on Key Personnel" and
"--We Need to Hire Additional Personnel."
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Executive Officers
The following table sets forth certain information as of February 29, 2000
with respect to our executive officers:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Naveen Jain......................... 40 Chief Executive Officer and Chairman
of the Board
Ashok Narasimhan.................... 51 President, Merchant Services
Arif Janjua......................... 44 President, Consumer Services
Ellen B. Alben...................... 37 Senior Vice President, Legal and
Business Affairs and Secretary
Tammy D. Halstead................... 36 Vice President, Acting Chief
Financial Officer and Chief
Accounting Officer
Randy Massengale.................... 42 Senior Vice President, Human
Resources
</TABLE>
Naveen Jain founded InfoSpace in March 1996. Mr. Jain has served as our Chief
Executive Officer since its inception, as its President since its inception to
November 1998 and as its sole director from its inception to June 1998, when he
was appointed Chairman of the Board upon the Board's expansion to five
directors. From June 1989 to March 1996, Mr. Jain held various positions at
Microsoft Corporation, including Group Manager for MSN, Microsoft's online
service. From 1987 to 1989, Mr. Jain served as Software Development Manager for
Tandon Computer Corporation, a PC manufacturing company. From 1985 to 1987, Mr.
Jain served as Software Manager for UniLogic, Inc., a PC manufacturing company
and from 1982 to 1985, he served as Product Manager and Software Engineer at
Unisys Corporation/Convergent Technologies, a computer manufacturing company.
Mr. Jain holds a B.S. from the University of Roorkee and a M.B.A. from St.
Xavier's School of Management.
Ashok Narasimhan joined InfoSpace in February 2000 as President of Merchant
Services. He founded Prio, Inc. in March 1996 and served as Chairman and Chief
Executive Officer. InfoSpace acquired Prio in February 2000. During the seven
years prior to forming Prio, he was part of the core management team of
VeriFone, where he served as Vice President of Product Development. Prior to
VeriFone, he was the founding Chief Executive Officer of the computer
businesses of Wipro, the largest computer, software and information technology
company in India. He holds B.S. and a M.B.A. from Indian Institute of
Management, associated with the Sloan School of Management at MIT.
Arif Janjua joined InfoSpace.com, Inc. in December 1999 as President of
Consumer Services. From February 1999 to November 1999, he was General Manager
of North American operations at Saraide. Prior to Saraide, from 1995 to 1999,
he was a Vice President at A.T. Kearney, a global management consulting firm,
where he led the firm's high technology practice. Prior to that, Mr. Janjua was
Director of Business Operations at a leading graphics semiconductor firm, S3,
where he had marketing responsibility for all desktop products. From 1991 to
1994, Mr. Janjua was a senior manager with Gemini Consulting, specializing in
the communications and computer industry. From 1985 to 1989, Mr. Janjua was
Director of Marketing at the Imaging and Graphics Division of Gould
Electronics. From 1981 to 1985, Mr. Janjua was Product Marketing Manager at
International Imaging Systems. He holds a B.S and M.S. in Electrical
Engineering from University of Windsor, Canada and an M.B.A. from University of
California, Berkeley.
Ellen B. Alben joined InfoSpace in May 1998 as Vice President, Legal and
Business Affairs and Secretary, and became a Senior Vice President in September
1999. From April 1997 to May 1998, she was a senior attorney with Perkins Coie
LLP. From September 1996 to April 1997, Ms. Alben served as a consultant to
Paragon Trade Brands, Inc., a private-label diaper manufacturer, and as special
securities counsel to companies raising private financing. From September 1995
through June 1996, she served as Vice President, General Counsel and Secretary
of Paragon Trade Brands. Paragon Trade Brands filed for bankruptcy protection
under Chapter 11 of the Bankruptcy Code in January 1997. From July 1994 to
September 1995, she served as Senior Associate Counsel of The Hillhaven
Corporation, a nursing home
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provider, and from June 1993 to July 1994 she served as Associate Counsel of
Hillhaven. Prior to joining Hillhaven, Ms. Alben was in private practice,
specializing in corporate securities, finance, and mergers and acquisitions.
She holds a B.A. from Duke University and a J.D. from Stanford Law School.
Tammy D. Halstead joined InfoSpace in July 1998 as Corporate Controller. In
December 1998, she was appointed Vice President and Chief Accounting Officer,
and in November 1999 she became Acting Chief Financial Officer. From March 1997
to June 1998, she worked at the Seattle office of USWeb Corporation, an
Internet professional services firm, where she served as Director of Finance
and Administration and later as Vice President, Finance and Administration.
From April 1996 to March 1997, she was the Director of Finance and
Administration at Cosmix, Inc., which was acquired by USWeb Corporation in
March 1997. From December 1993 to February 1996, she served as Controller of
ConnectSoft, Inc., a software development company. Prior to joining
ConnectSoft, Inc., she spent eight years in private industry with a division of
Gearbulk Ltd., an international shipping company, and in public accounting with
Ernst & Whinney (now Ernst & Young LLP). She holds a B.A. in Business
Administration from Idaho State University and is a licensed CPA.
Randy Massengale joined InfoSpace in December 1998 as Vice President of Human
Resources and became Senior Vice President of Human Resources in September
1999. From 1992 to 1998 he was employed by Microsoft Corporation in human
resources as Director of Diversity. From 1985 to 1992 he was employed by John
Fluke Manufacturing Company Inc., a provider of general purpose electronic test
and measurement equipment located in Everett, Washington. Prior to that he
worked as a Recruiter for Intel Corp. and as Senior Human Resources Specialist
at Tektronix Inc. Mr. Massengale holds a B.A. degree from Lewis and Clark
College and a M. S. in Management from Antioch University.
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<PAGE>
FACTORS AFFECTING OUR OPERATING RESULTS,
BUSINESS PROSPECTS AND MARKET PRICE OF STOCK
In addition to other information in this report, investors evaluating us and
our business should carefully consider the following risk factors. These risks
may impair our operating results and business prospects and the market price of
our stock. This report contains forward-looking statements that involve risks
and uncertainties. These forward-looking statements include, but are not
limited to, statements regarding our business and growth strategy, the expected
demand for and benefits of our Internet information infrastructure services for
our affiliates, advertisers, content providers and distribution partners
anticipated benefits from the business and technologies we have acquired or
intend to acquire, future carriage fees, increased advertising and public
relations expenditures, increased operating expenses and the reasons for such
increases, expected operating losses, increased product development
expenditures, increased costs of revenues, increased product development
expenses, increased sales and marketing expenses, increased general and
administrative expenses, anticipated capital equipment expenditures and
anticipated cash needs. Forward-looking statements are subject to known and
unknown risks, uncertainties and other factors that may cause our and the
strategic Internet services industry's actual results, levels of activity,
performance, achievements and prospects to be materially different from those
expressed or implied by such forward-looking statements. The risks set forth
below and elsewhere in this report could cause actual results to differ
materially from those projected.
We Have a Limited Operating History and a History of Losses.
We have a limited operating history, which makes it difficult to evaluate our
business and prospects. We have incurred net losses from our inception in March
1996 through December 31, 1999. At December 31, 1999, we had an accumulated
deficit of approximately $35.7 million. We expect to incur operating losses on
a quarterly basis in the future. Our prospects must be considered in light of
the risks, expenses and difficulties frequently encountered by companies in
their early stage of development, particularly companies in new and rapidly
evolving markets such as Internet services. To address the risks we face and to
be able to achieve and sustain profitability, we must, among other things:
. develop and maintain strategic relationships with potential affiliates,
distribution partners and content providers;
. identify and acquire the rights to additional content, technology and
services;
. successfully integrate new features with our consumer, merchant and
wireless services;
. expand our sales and marketing efforts, including relationships with
third parties to sell our merchant services;
. maintain and increase our affiliate, distribution and advertiser base;
. successfully expand into international markets;
. retain and motivate qualified personnel; and
. successfully respond to competitive developments.
If we do not effectively address the risks we face, our business will suffer
and we may not sustain profitability. See "Selected Consolidated Financial
Data" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Our Financial Results Are Likely to Fluctuate.
Our financial results have varied on a quarterly basis and are likely to
fluctuate substantially in the future. These fluctuations may be caused by
several factors, many of which are beyond our control. These factors include:
. the addition or loss of affiliates;
. variable demand for our consumer, merchant and wireless services by our
affiliates;
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<PAGE>
. the cost of acquiring and the availability of content, technology and
services;
. the growth and overall level of demand for consumer, merchant and
wireless services;
. our ability to attract and retain advertisers, content providers,
affiliates and distribution partners;
. seasonal trends in Internet usage and advertising placements;
. the amount and timing of fees we pay to our affiliates to include our
information services on their Web sites and wireless devices;
. the productivity of our direct sales force and the sales forces of our
distribution partners;
. the amount and timing of increased expenditures for expansion of our
operations, including the hiring of new employees, capital expenditures
and related costs;
. our ability to continue to enhance, maintain and support our technology;
. the result of litigation that is currently ongoing against InfoSpace, or
any litigation that is filed against us in the future;
. our ability to attract and retain personnel;
. our ability to successfully integrate and manage newly acquired
companies;
. the introduction of new or enhanced services by us, our affiliates or
distribution partners, or other companies that compete with us or our
affiliates;
. price competition or pricing changes in Internet information
infrastructure services, such as ours;
. technical difficulties, system downtime, system failures or Internet
brown-outs;
. political or economic events and governmental actions affecting Internet
operations or content; and
. general economic conditions and economic conditions specific to the
Internet.
If one or more of these factors or other factors occur, our business could
suffer.
In addition, because InfoSpace.com only began operations in March 1996, and
because the market for Internet infrastructure services such as ours is new and
evolving, it is very difficult to predict future financial results. We plan to
significantly increase our sales and marketing, research and development and
general and administrative expenses in the year 2000. Our expenses are
partially based on our expectations regarding future revenues and estimated
expenses from our acquisitions, which are largely fixed in nature, particularly
in the short term. As a result, if our revenues in a period do not meet our
expectations, our financial results will likely suffer.
Pending and Potential Acquisitions Involve Risks.
We have acquired complementary technologies or businesses in the past, and
intend to do so in the future. Acquisitions may involve potentially dilutive
issuances of stock, the incurrence of additional debt and contingent
liabilities or large one-time write-offs and amortization expenses related to
goodwill and other intangible assets. Any of these factors could adversely
affect our results of operations or stock price. Acquisitions involve numerous
risks, including:
. difficulties in assimilating the operations, products, technology,
information systems and personnel of the acquired company;
. diverting management's attention from other business concerns;
. impairing relationships with our employees, affiliates, advertisers,
content providers and distribution partners;
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<PAGE>
. being unable to maintain uniform standards, controls, procedures and
policies;
. entering markets in which we have no direct prior experience; and
. losing key employees of the acquired company.
We may not be able to successfully integrate the technology and personnel we
have acquired or the other businesses, technologies or personnel that we
acquire in the future. We and the businesses acquired by us may require
substantial additional capital, and there can be no assurance as to the
availability of such capital when needed, nor as to the terms on which such
capital might be made available to us. We have retained, and may in the future
retain, existing management of acquired companies or technologies, under the
overall supervision of our senior management. The success of the operations of
these acquired companies and technologies will depend, to a great extent, on
the continued efforts of the management of the acquired companies.
We Need to Manage Our Growth and Maintain Procedures and Controls.
We have rapidly and significantly expanded our operations and anticipate
further significant expansion to accommodate expected growth in our customer
base and market opportunities. We have increased the number of employees from
15 at January 1, 1998 to 330 at February 29, 2000. As of March 15, 2000, with
the acquisition of Saraide, we have over 450 employees. We now have offices in
Redmond, Washington, San Francisco and Mountain View, California, New York City
and Rochester, New York, and Toronto, Canada, With the acquisition of Saraide,
we have added offices in San Mateo, California, Dallas, Texas, Ottawa, Canada,
Papendrecht, Netherlands, and London, UK. This expansion has placed, and is
expected to continue to place, a significant strain on our management and
operational resources. We do not have experience managing multiple offices with
multiple facilities and personnel in disparate locations. As a result, we may
not be able to effectively manage our resources, coordinate our efforts,
supervise our personnel or otherwise successfully manage our resources. We have
recently added a number of key managerial, technical and operations personnel
and we expect to add additional key personnel in the near future. We also plan
to continue to significantly increase our employee base. These additional
personnel may further strain our management resources.
Our relationships with affiliates and distribution partners, content
providers and advertisers are subject to frequent change. Prior to implementing
procedures and controls in this area, these changes were often informal. In
particular, we may have failed to perform our obligations under certain
commercial contracts that may have been modified or terminated by verbal
agreement. We believe that any failure to perform our obligations was not
significant. This practice of the modification or termination of past written
agreements by verbal agreement has resulted, and may result in the future, in
disputes regarding the existence, interpretation and circumstances regarding
modification or termination of commercial contracts. We are currently involved
in litigation with Internet Yellow Pages, Inc., a direct marketing company with
which we had a cooperative sales relationship, and have received other claims.
If our relationships with affiliates and distribution partners, content
providers and advertisers evolve in an adverse manner, if we get into
contractual disputes with affiliates and distribution partners, content
providers or advertisers or if any agreements with such persons are terminated,
our business could suffer. See "Business--Legal Proceedings."
The rapid growth of our business has strained our ability to meet customer
demands and manage the growing number of affiliate relationships. In addition,
our affiliate relationships are also growing in their size and complexity of
services. As a result of the growth in the size, number, and complexity of our
relationships we may be unable to meet the demands of our customer
relationships, which could result in the loss of customers, subject us to
penalties under our affiliate agreements and harm our business reputation.
To manage the expected growth of our operations and personnel, we must
continue maintaining and improving or replacing existing operational,
accounting and information systems, procedures and controls.
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<PAGE>
Further, we must manage effectively our relationships with various Internet
content providers, distribution partners, wireless carriers, advertisers,
affiliates and other third parties necessary to our business. If we are unable
to manage growth effectively, our business could suffer. See "--We Are Subject
to Pending Legal Proceedings," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business--Employees" and "--
Our Executive Officers."
We Rely on Advertising and Transaction Revenues.
We derive a significant amount of our revenues from the sale of national and
local advertisements, transaction fees and promotions from our affiliates who
use our consumer services, and we expect this to continue for the first half of
2000. Our ability to increase and diversify our revenues will depend upon a
number of factors, including the following:
. the acceptance of the Internet as an advertising medium by national and
local advertisers;
. the acceptance and regular use of our information infrastructure services
by a large number of users who have demographic characteristics that are
attractive to advertisers;
. the availability of attractive advertising space within our private label
solutions;
. the ability of our business development and sales personnel to
effectively sell our broad suite of consumer, merchant and wireless
services;
. the development of the Internet as an attractive platform for electronic
commerce;
. the use of our integrated merchant tools by small and medium sized online
and offline merchants;
. the adoption of our wireless services and solutions by wireless carriers
and device manufacturers; and
. the use of our information services by subscribers on their wireless
devices.
We Rely on Our Relationships with Affiliates.
We will be able to continue generating revenues from advertising, transaction
fees and promotions only if we can secure and maintain distribution for our
information infrastructure services on acceptable commercial terms through a
wide range of affiliates. In particular, we expect that a limited number of our
affiliates, including, America Online, Inc., or AOL, its CompuServe and Digital
City divisions and its Netscape Communications subsidiary and Microsoft
Network, LLC will account for a substantial portion of our affiliate traffic.
Our distribution arrangements with our affiliates typically are for limited
durations of between six months and two years and automatically renew for
successive terms thereafter, subject to termination on short notice. We cannot
assure you that such arrangements will not be terminated or that such
arrangements will be renewed upon expiration of their terms. We generally share
with each affiliate a portion of the revenues generated by advertising on the
Web pages that deliver our content services. We pay carriage fees to certain
affiliates, including AOL. These relationships may not be profitable or result
in benefits to us that outweigh the costs of the relationships. In addition, if
we lose a major affiliate, we may be unable to timely or effectively replace
the affiliate with other affiliates with comparable traffic patterns and user
demographics. The loss of any major affiliate could harm our business.
Advertisers May Not Adopt the Internet as an Advertising Medium.
Most advertising agencies and potential advertisers, particularly local
advertisers, have only limited experience advertising on the Internet and have
not devoted a significant portion of their advertising expenditures to Internet
advertising. As the Internet evolves, advertisers may find Internet advertising
to be a less effective means of promoting their products and services relative
to traditional methods of advertising and may not continue to allocate funds
for Internet advertising. In addition, advertising on the Internet is at a much
earlier stage of development in international markets compared to the United
States.
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Fluid and intense competition in the sale of advertising on the Internet has
led different vendors to quote a wide range of rates and offer a variety of
pricing models for various advertising services. As a result, we have
difficulty projecting future advertising revenues and predicting which pricing
models advertisers will adopt. For example, if many advertisers based their
advertising rates on the number of click throughs from our information services
to their Web pages, instead of solely on the number of impressions received,
our revenues could decrease. There are no widely accepted standards for the
measurement of the effectiveness of Internet advertising, and standards may not
develop sufficiently to support Internet advertising as a significant
advertising medium. We typically base our advertising rates on the number of
impressions received, and our advertising customers may not accept our
measurements or such measurements may contain errors.
Industry analysts and others have made many predictions concerning the growth
of the Internet as a commercial medium. Many of these historical predictions
have overstated the growth of the Internet and should not be relied upon. This
growth may not occur or may occur more slowly than estimated. In addition, if a
large number of consumers use "filter" software programs that limit or remove
advertising from the Web, advertisers may choose not to advertise on the
Internet. If the commercial use of the Internet does not develop, or if the
Internet does not develop as an effective and measurable medium for
advertising, our business will suffer. See "Business--Advertising."
We Rely on a Small Number of Customers.
We derive a substantial portion of our revenues from a small number of
customers. We expect that this will continue in the foreseeable future.
Our top ten customers represented 57% of our revenues in 1999 and 48% of our
revenues for 1998. In particular, 800-U.S. Search, Inc. accounted for
approximately 21% of our revenues for the years ended December 31, 1999 and
1998. If we lose any of these customers, including 800-U.S. Search in
particular, or if any of these customers are unable or unwilling to pay us
amounts that they owe us, our financial results will suffer.
Our Advertising Arrangements Involve Risks.
We typically sell national advertisements pursuant to short-term agreements
of less than six months. As a result, our national advertising customers could
cancel these agreements, change their advertising expenditures or buy
advertising from our competitors on relatively short notice and without
penalty. Because we derive, and expect to continue to derive, a large portion
of our consumer services revenues from sales of national advertising, these
short-term agreements expose us to competitive pressures and potentially severe
fluctuations in our financial results.
In addition, we typically guarantee our national advertising customers a
minimum number of impressions or click throughs by Web users. These
arrangements expose us to potentially significant risks. If we fail to deliver
these minimum levels, we typically have to provide free advertising to the
customer until the minimum level is met, which could harm our financial
results.
We occasionally guarantee the availability of advertising space in connection
with promotion arrangements and content agreements. In addition, we
occasionally provide customized advertising campaigns for advertisers and agree
with certain advertisers that we will not accept advertising from any other
customer within a particular subject matter. All of these arrangements subject
us to certain risks. These risks include:
. our potential inability to meet the guarantees we make to our customers;
. our allocation of resources to create customized advertising that may not
result in successful advertisements;
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<PAGE>
. a requirement to forego advertising from potential customers whose
advertisements would conflict with those of other customers; and
. a potential limitation on availability of additional advertising space.
Any of these results could harm our financial results.
We Depend on Third Parties for Content.
We typically do not create our own content. Rather, we acquire rights to
information from more than 85 third-party content providers, and our future
success is critically dependent upon our ability to maintain relationships with
these content providers and enter into new relationships with other content
providers.
We typically license content under short-term arrangements that do not
require us to pay royalties or other fees for the use of the content. However,
we do enter into revenue-sharing arrangements with certain content providers,
and we pay certain content providers a one-time fee, a periodic fee or a fee
for each query from Web users. In the future, we expect that certain of our
content providers will likely demand a greater portion of advertising revenues
or increase the fees that they charge us for their content. If we fail to enter
into and maintain satisfactory arrangements with content providers, our
business will suffer. See "--We Need to Manage Our Growth and Maintain
Procedures and Controls."
We Depend on Key Personnel.
Our performance depends on the continued services of our executive officers
and other key personnel, particularly within our merchant services and wireless
services business areas. We maintain key person life insurance on Naveen Jain,
our Chief Executive Officer, in the amount of $5.0 million. We do not maintain
key person life insurance policies on any of our other employees. If we lose
the services of any of our executive officers or other key employees, our
business could suffer. See "Business--Employees" and "--Executive Officers."
We Need to Hire Additional Personnel.
Our future success depends on our ability to identify, attract, hire, train,
retain and motivate highly skilled technical, managerial, sales and marketing
and business development personnel. We intend to hire a significant number of
technical, sales and marketing, business development and administrative
personnel during the next year. Our services and the industries to which we
provide our services are relatively new, particularly with respect to our
wireless and merchant services. As a result, qualified technical personnel with
relevant experience to our business are scarce and therefore difficult to
recruit. If we fail to successfully attract, assimilate and retain a sufficient
number of qualified technical, managerial, sales and marketing, business
development and administrative personnel, our business could suffer.
Our International Expansion Plans Involve Risks.
A key component of our strategy is expanding our operations into
international markets. We have entered into a joint venture agreement with
Thomson Directories Limited to replicate our content, community and commerce
services in Europe. The joint venture, TDL InfoSpace (Europe) Limited, has
targeted the United Kingdom as its first market, and it launched content
services in the third quarter of 1998. Under the joint venture agreement, each
of us is obligated to negotiate with TDL InfoSpace and the other party to
jointly offer content, community and commerce services in other European
countries prior to offering such services independently or with other parties.
In March 1999, we began providing content, community and commerce services to
Canadian affiliates through our wholly-owned subsidiary, InfoSpaceCanada.com.
We expect to launch InfoSpace.com India in 2000 to provide comprehensive
localized consumer, merchant and wireless services to the Indian market. In
addition, with our acquisition of Saraide, we expect to expand our wireless
services into Europe, Japan and Canada.
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To date, we have limited experience in developing and syndicating localized
versions of our information infrastructure services internationally, and we may
not be able to successfully execute our business model in these markets. In
addition, international markets experience lower levels of Internet usage and
Internet advertising than the United States. We rely on our business partner in
Europe for U.K. directory information and local sales forces and may enter into
similar relationships if we expand into other international markets.
Accordingly, our success in these markets will be directly linked to the
success of our business partners in such activities. If our business partners
fail to successfully establish operations and sales and marketing efforts in
these markets, our business could suffer. See "Business--International
Expansion."
In addition, we face a number of risks inherent in doing business in
international markets, including, among others:
. unexpected changes in regulatory requirements;
. potentially adverse tax consequences;
. export controls relating to encryption technology;
. tariffs and other trade barriers;
. difficulties in staffing and managing foreign operations;
. changing economic conditions;
. exposures to different legal standards (particularly with respect to
intellectual property and distribution of information over the Internet);
. burdens of complying with a variety of foreign laws;
. fluctuations in currency exchange rates; and
. seasonal reductions in business activity during the summer months in
Europe and certain other parts of the world.
If any of these risks occur, our business could suffer.
Our Business Is Highly Competitive.
We operate in the Internet information infrastructure services market, which
is extremely competitive and is rapidly changing. Our current and prospective
competitors include many large companies that have substantially greater
resources than we have. We believe that the primary competitive factors in the
market for Internet information infrastructure services are:
. the ability to provide information and services of broad appeal, which is
likely to result in increased user traffic and increase the brand name
value of the Web sites and wireless devices to which the services are
provided;
. the ability to meet the specific information and service demands of a
particular Web site or wireless devices;
. the cost-effectiveness and reliability of the consumer, merchant and
wireless information services;
. the ability to provide consumer, merchant and wireless information
services that are attractive to advertisers and end users;
. the ability to achieve comprehensive coverage of a particular category of
information or services; and
. the ability to integrate related information to increase the utility of
the consumer, merchant and wireless information services offered.
We compete, directly or indirectly, in the following ways, among others:
. our directory services compete with AnyWho? (a division of AT&T), GTE
SuperPages, Switchboard, ZIP2 (which was recently acquired by Compaq),
various RBOCs' directory services, infoUSA's Lookup USA, City Search
Sidewalk and Yahoo! Yellow Pages and White Pages;
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. other information services we provide, such as classifieds, horoscopes
and real-time stock quotes, compete with specialized content providers;
. our U.K. joint venture competes with British Telecom's YELL service and
Scoot (UK) Limited in directory services; Inktomi and Autonomy in
infrastructure services, Excite, Yahoo! and MSN in syndication;
Shopguide, Shopsmart and Yahoo! shopping for merchant services and
various specialized content providers for information services;
. our community services compete with services offered by Internet portals
such as AOL, Yahoo! and Excite, as well as specialized content service
providers such as Hotmail;
. our merchant services compete with e-tailers such as Amazon.com, portals
such as AOL, Yahoo! and MSN, and merchant aggregators such as Big Step
and Microsoft's Bcentral; and
. our wireless commerce services compete with portals such as AOL, Yahoo!,
MSN and Lycos, and with specialized content providers.
We expect that in the future we will experience competition from other
Internet services companies and providers of Internet software, including
Microsoft, Yahoo!, AOL, Excite, Disney/Infoseek, Lycos, Go2Net's MetaCrawler
and NBC's Snap. Some of these companies are currently customers of ours, the
loss of which could harm our business. We may also face increased competition
from traditional media companies expanding onto the Internet.
Many of our current customers have established relationships with certain of
our current and potential future competitors. If our competitors develop
Internet information infrastructure services that are superior to ours or that
achieve greater market acceptance than ours, our business will suffer.
Our Business Relies on the Performance of Our Systems.
Our success depends, in part, on the performance, reliability and
availability of our consumer, merchant and wireless services. Our revenues
depend, in large part, on the number of users that access our consumer,
merchant and wireless services. Our computer and communications hardware is
currently located at our main headquarters in Redmond, Washington.
With the acquisitions of Prio and Saraide, we will have data centers in
Mountain View, California serving the promotions technology, Dallas, Texas
serving wireless customers in North America, and Papendrecht, Netherlands
serving wireless customers in Europe. None of our data centers are currently
redundant. Our success on a global basis will depend in part on our ability to
create carrier class infrastructure systems and build network operations
centers worldwide that can support the delivery of integrated consumer,
merchant and wireless services and the expected growth of these services. We
may be unable to develop or successfully manage the infrastructure necessary to
meet current demands for reliability and scalability of our systems.
The Company has entered into Service Level Agreements with certain merchant
services distributors including merchant banks and most of our wireless
customers. These agreements call for system up times, 24/7 support and include
penalties for non-performance. We may be unable to fulfill these commitments,
which would subject us to penalties under our agreements, harm our reputation
and could result in the loss of customers and distributors, which would harm
our business.
Our systems and operations could be damaged or interrupted by fire, flood,
power loss, telecommunications failure, Internet breakdown, break-in,
earthquake and similar events. We do not have a formal disaster recovery plan,
and we do not carry business interruption insurance that is adequate to
compensate us for all the losses that may occur. In addition, systems that use
sophisticated software may contain bugs, which could also interrupt service.
Any system interruptions resulting in the unavailability of our consumer,
merchant and wireless services would reduce the volume of users able to access
our
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consumer, merchant and wireless services and the attractiveness of our service
offerings to our affiliates, advertisers and content providers, which could
harm our business.
Our Industry Is Experiencing Consolidation.
The Internet industry has recently experienced substantial consolidation. For
example, AOL has acquired Netscape and has agreed to acquire Time-Warner, At
Home has acquired Excite, and Compaq has acquired ZIP2. We expect this
consolidation to continue. These acquisitions could affect us in a number of
ways, including:
. companies from whom we acquire content could be acquired by one of our
competitors and stop licensing us content;
. our customers could be acquired by one of our competitors and stop buying
advertising from us; and
. our customers could merge with other customers, which could reduce the
size of our customer base.
This consolidation in the Internet industry could harm our business.
We Are Subject to Pending Legal Proceedings.
From time to time we have been, and expect to continue to be, subject to
legal proceedings and claims in the ordinary course of our business, including
claims of alleged infringement of third-party trademarks and other intellectual
property rights by us. Such claims, even if not meritorious, could require the
expenditure of significant financial and managerial resources, which could harm
our business.
On February 8, 2000, we reached a settlement with an alleged former employee.
Under the terms of the settlement, the alleged employee received a cash payment
of $10.5 million.
On December 15, 1999, a complaint was filed against us by a former employee
alleging claims for breach of contract, fraud, negligent misrepresentation, and
promissory estoppel. The former employee contends he agreed to work for us on
the basis of certain misrepresentation, that he entered into an agreement with
the Company that entitles him to an option to purchase 150,000 shares of the
Company's common stock, and that he was terminated without cause. The former
employee is seeking the right to purchase the shares of stock, unspecified
compensatory and punitive damages, and litigation costs and attorney's fees.
On December 23, 1998, we filed a complaint against Internet Yellow Pages,
Inc., or IYP, and Greg Crane, asserting claims for (a) account stated, (b)
breach of contract, and (c) fraud. IYP has asserted counterclaims against us
for breach of contract, fraud, extortion and violation of the Consumer
Protection Act (RCW 19.86), and seeks relief consisting of $1,500,000 and other
unquantified money damages, punitive damages, treble damages and attorney's
fees.
We believe we have meritorious defenses to all of these claims against us.
Nevertheless, litigation is inherently uncertain, and we may not prevail in
these suits.
We had discussions with a number of individuals in the past regarding
employment by us and also hired and subsequently terminated a number of
individuals as employees or consultants. Furthermore, primarily during our
early stage of development, our procedures with respect to the manner of
granting options to new employees were not clearly documented. As a result of
these factors, and in light of the receipt of the above claims, we have in the
past received, and may in the future receive, similar claims from one or more
individuals asserting rights to acquire shares of our stock or to receive cash
compensation. We cannot predict whether such future claims will be made or the
ultimate resolution of any currently outstanding or future claim See "Item
3. Legal Proceedings."
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We Rely on Internally Developed Software and Systems.
We have developed custom software for our network servers and our private
label solutions. This software may contain undetected errors, defects or bugs.
Although we have not suffered significant harm from any errors or defects to
date, we may discover significant errors or defects in the future that we may
or may not be able to fix. We must expand and upgrade our technology,
transaction-processing systems and network infrastructure if the volume of
traffic on our Web site or our affiliates' Web sites increases substantially.
In addition, as we continue to expand our merchant and wireless services, we
may have to significantly modify our systems. We could experience periodic
temporary capacity constraints, which may cause unanticipated system
disruptions, slower response times and lower levels of customer service. We may
be unable to accurately project the rate or timing of increases, if any, in the
use of our consumer, merchant and wireless services or expand and upgrade our
systems and infrastructure to accommodate these increases in a timely manner.
Any inability to do so could harm our business.
Rapid Technological Change Affects Our Business.
Rapidly changing technology, evolving industry standards, evolving customer
demands and frequent new product and service introductions characterize our
market. Our market's early stage of development exacerbates these
characteristics. Our future success depends in significant part on our ability
to develop and introduce compelling services on a timely and competitive basis
and to improve the performance, content and reliability of our consumer,
merchant and wireless services in response to both the evolving demands of the
market and competitive product offerings. Our efforts in these areas may not be
successful. If a large number of affiliates adopt new Internet technologies or
standards, we may need to incur substantial expenditures modifying or adapting
our enabling technologies and Internet information infrastructure services.
We Rely on the Internet System Infrastructure.
Our success depends, in large part, on other companies maintaining the
Internet system infrastructure. In particular, we rely on other companies to
maintain a reliable network backbone that provides adequate speed, data
capacity and security and to develop products that enable reliable Internet
access and services. If the Internet continues to experience significant growth
in the number of users, frequency of use and amount of data transmitted, the
Internet system infrastructure may be unable to support the demands placed on
it, and the Internet's performance or reliability may suffer as a result of
this continued growth. In addition, the Internet could lose its commercial
viability as a form of media due to delays in the development or adoption of
new standards and protocols to process increased levels of Internet activity.
Any such degradation of Internet performance or reliability could cause
advertisers to reduce their Internet expenditures. If other companies do not
develop the infrastructure or complementary products and services necessary to
establish and maintain the Internet as a viable commercial medium, or if the
Internet does not become a viable commercial medium or platform for
advertising, promotions and electronic commerce, our business could suffer.
We Receive Information that May Subject Us to Liability.
We obtain content and commerce information from third parties. When we
integrate and distribute this information over the Internet, we may be liable
for the data that is contained in that content. This could subject us to legal
liability for such things as defamation, negligence, intellectual property
infringement and product or service liability. Many of the agreements by which
we obtain content do not contain indemnity provisions in favor of us. Even if a
given contract does contain indemnity provisions, these provisions may not
cover a particular claim. We carry general business insurance, however, this
coverage may be inadequate.
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In addition, individuals whose names appear in our yellow pages and white
pages directories have occasionally contacted us. These individuals believed
that their phone numbers and addresses were unlisted, and our directories are
not always updated to delete phone numbers or addresses when they are changed
from listed to unlisted. While we have not received any claims from these
individuals, we may receive claims in the future. Any liability that we incur
as a result of content we receive from third parties could harm our financial
results.
Our Networks Face Security Risks.
Even though we have implemented security measures, our networks may be
vulnerable to unauthorized access by hackers or others, computer viruses and
other disruptive problems. Someone who is able to circumvent security measures
could misappropriate our proprietary information or cause interruptions in our
Internet operations. Internet and online service providers have in the past
experienced, and may in the future experience, interruptions in service as a
result of the accidental or intentional actions of Internet users, current and
former employees or others. We may need to expend significant capital or other
resources protecting against the threat of security breaches or alleviating
problems caused by breaches. Although we intend to continue to implement
industry-standard security measures, persons may be able to circumvent the
measures that we implement in the future. Eliminating computer viruses and
alleviating other security problems may require interruptions, delays or
cessation of service to users accessing Web pages that deliver our content
services, any of which could harm our business. See "Business--Technology and
Infrastructure--Data Network Infrastructure".
Users of online commerce services are highly concerned about the security of
transmissions over public networks. Concerns over security and the privacy of
users may inhibit the growth of the Internet and other online services
generally, and the Web in particular, especially as a means of conducting
commercial transactions. As we expand our merchant services, we intend to rely
on encryption and authentication technology licensed from third parties to
provide the security and authentication necessary to securely transmit
confidential information, such as member profiles and customer credit card
numbers. Users could possibly circumvent the measures we take to protect
customer transaction data. To the extent that our activities involve the
storage and transmission of proprietary information, such as credit card
numbers, security breaches could damage our reputation and expose us to a risk
of loss or litigation and possible liability. Any compromise of our security
could harm our business.
We May Be Unable to Adequately Protect or Enforce Our Intellectual Property
Rights.
Our success depends significantly upon our proprietary technology. To protect
our proprietary rights, we rely on a combination of copyright and trademark
laws, patents, trade secrets, confidentiality agreements with employees and
third parties and protective contractual provisions. Despite our efforts to
protect our proprietary rights, unauthorized parties may copy aspects of our
products or services or obtain and use information that we regard as
proprietary. In addition, others could possibly independently develop
substantially equivalent intellectual property. If we do not effectively
protect our intellectual property, our business could suffer.
Companies in the computer industry have frequently resorted to litigation
regarding intellectual property rights. We may have to litigate to enforce our
intellectual property rights, to protect our trade secrets or to determine the
validity and scope of other parties' proprietary rights. From time to time, we
have received, and we may receive in the future, notice of claims of
infringement of other parties' proprietary rights. Any such claims could be
time-consuming, result in costly litigation, divert management's attention,
cause product or service release delays, require us to redesign our products or
services or require us to enter into royalty or licensing agreements. These
royalty or licensing agreements, if required, may not be available on
acceptable terms or at all. If a successful claim of infringement were made
against us and we could not develop non-infringing technology or license the
infringed or similar technology on a timely and cost-effective basis, our
business could suffer. See "Business--Intellectual Property" and "Item 3. Legal
Proceedings."
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We May Become Subject to Governmental Regulation.
Because of the increasing use of the Internet, the government may adopt laws
and regulations with regard to the Internet covering issues such as user
privacy, pricing, content, taxation, copyrights, distribution and product and
services quality. For a description of certain risks relating to government
regulation, see "Business--Governmental Regulation."
We May Require Additional Funding.
Although we believe that our cash reserves and cash flows from operations
will be adequate to fund our operations for at least the next 12 months, such
sources may be inadequate. Consequently, we may require additional funds during
or after such period. Additional financing may not be available on favorable
terms or at all. If we raise additional funds by selling stock, the percentage
ownership of our then current stockholders will be reduced. If we cannot raise
adequate funds to satisfy our capital requirements, we may have to limit our
operations significantly. Our future capital requirements depend upon many
factors, including, but not limited to:
. the rate at which we expand our sales and marketing operations;
. the amount and timing of fees paid to affiliates to include our consumer,
merchant and wireless services on their site or service;
. the extent to which we expand our consumer, merchant and wireless
services;
. the extent to which we develop and upgrade our technology and data
network infrastructure;
. the occurrence, timing, size and success of acquisitions;
. the cash requirements of entities we have acquired;
. the number and amount of investments we make in privately held technology
companies;
. the rate at which we expand internationally; and
. the response of competitors to our service offerings.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources."
Management Owns a Large Percentage of Our Stock.
As of February 29, 2000, our officers, directors and affiliated persons
beneficially owned approximately 38% of our common stock. Naveen Jain, our
Chief Executive Officer, currently beneficially owns approximately 29% of our
common stock. As a result, our officers, directors and affiliated persons may
effectively be able to:
. elect, or defeat the election of, our directors;
. amend or prevent amendment of our Certificate of Incorporation or Bylaws;
. effect or prevent a merger, sale of assets or other corporate
transaction; and
. control the outcome of any other matter submitted to the stockholders for
vote.
Our public stockholders may have little control over the outcome of such
transactions. Management's stock ownership may discourage a potential acquirer
from making a tender offer or otherwise attempting to obtain control of
InfoSpace, which in turn could reduce our stock price or prevent our
stockholders from realizing a premium over our stock price.
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Our Stock Price Has Been and May Continue to be Volatile.
The trading price of our common stock has been and is likely to continue to
be highly volatile. Since we began trading on December 15, 1998, our stock
price has ranged from $7.50 to $277.00. Our stock price could be subject to
wide fluctuations in response to factors such as the following:
. actual or anticipated variations in quarterly results of operations;
. the addition or loss of affiliates, distribution partners or content
providers;
. announcements of technological innovations, new products or services by
us or our competitors;
. changes in financial estimates or recommendations by securities analysts;
. conditions or trends in the Internet and online commerce industries;
. changes in the market valuations of other Internet, online service or
software companies;
. our announcements of significant acquisitions, strategic partnerships,
joint ventures or capital commitments;
. additions or departures of key personnel;
. sales of our common stock;
. general market conditions; and
. other events or factors, many of which are beyond our control.
In addition, the stock market in general, and the Nasdaq National Market and
the market for Internet and technology companies in particular, have
experienced extreme price and volume fluctuations that have often been
unrelated or disproportionate to the operating performance of these companies.
These broad market and industry factors may materially and adversely affect our
stock price, regardless of our operating performance. The trading prices of the
stocks of many technology companies are at or near historical highs and reflect
price-earnings ratios substantially above historical levels. These trading
prices and price-earnings ratios may not be sustained.
You Should Not Rely on Forward-looking Statements.
You should not rely on forward-looking statements in this report. This report
contains forward-looking statements that involve risks and uncertainties. We
use words such as "anticipates," "believes," "plans," "expects," "future,"
"intends," "may," "will," "should," "estimates," "predicts," "potential,"
"continue," and similar expressions to identify such forward-looking
statements. Forward-looking statements are subject to known and unknown risks,
uncertainties and other factors that may cause our results and the Internet
information infrastructure services industry results, levels of activity,
performance, achievements and prospects to be materially different from those
expressed or implied by such forward-looking statements. These risks,
uncertainties and other factors include, among others, those identified under
"Factors Affecting Our Operating Results, Business Prospects and Market Price
of Stock" and elsewhere in this report.
Item 2. Properties
Prior to the acquisitions of Saraide and Prio, our principal administrative,
engineering, marketing and sales facilities total approximately 16,864 square
feet and are located in Redmond, Washington. Under the current lease, which
commenced on July 13, 1998, and expires on August 31, 2003, we pay a monthly
base rent of $19,775 through August 2001 and $22,030 during the final two years
of the lease. We have both the right to extend the term of this lease for an
additional 60 months and the right of first opportunity on adjacent expansion
space. Under this right of first opportunity we have expanded into an
additional 6,587 square foot space at a rate of $7,875 per month under a
sublease that expires on April 30, 2000. We will be relocating to significantly
larger facilities in the second quarter of 2000 under a lease for a new
principal administrative, engineering, marketing and sales facility located in
Bellevue, Washington totaling approximately
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108,000 square feet. Under the five-year lease which is projected to commence
in May 2000, we will pay a monthly base rent of $199,783 per month during the
first two years, $208,864 per month during the second two years and $217,864
per month during the final year. We maintain a sales office housed in an
approximately 2,271-square-foot space in San Francisco, California under a
lease that expires on November 30, 2001 with a monthly base rent of $5,299. We
also maintain a sales office in New York City for 1,900 square feet with a
monthly base rent of $3,667, under a lease that expires April 2004. Under the
lease at our former location in Redmond, we paid an aggregate rent of $28,840
for the first seven months of 1998 and an aggregate rent of $49,440 during
1997. We do not own any real estate.
With the acquisitions of Saraide and Prio, we now have facilities in Mountain
View, California, San Mateo, California, Dallas, Texas, Ottawa, Canada,
Papendrecht, Netherlands and London, UK.
Substantially all of our computer and communications hardware is located at
our facilities in Redmond, Washington and we also lease redundant network
facilities at two locations in the Seattle, Washington area under a month-to-
month agreement and an agreement that expires in July 2001. We intend to
install additional hardware and high-speed Internet connections at a location
outside the West Coast as well as in the United Kingdom to support our joint
venture, TDL InfoSpace.
Our systems and operations at these locations are vulnerable to damage or
interruption from fire, flood, power loss, telecommunications failure, break-
ins, earthquake and similar events. See "Factors Affecting Our Operating
Results, Business Prospects and Market Price of Our Stock--Our Business Relies
on the Performance of Our Systems."
Item 3. Legal Proceedings
From time to time we have been, and expect to continue to be, subject to
legal proceedings and claims in the ordinary course of our business, including
claims of alleged infringement of third-party trademarks and other intellectual
property rights by us. These claims, even if not meritorious, could require the
expenditure of significant financial and managerial resources.
On December 15, 1999, a complaint was filed against us on behalf of a former
employee in federal court in New Jersey alleging claims for breach of contract,
breach of the covenant of good faith and fair dealing, fraud, negligent
misrepresentation, and promissory estoppel. The former employee contends he
agreed to work for InfoSpace on the basis of certain misrepresentations, that
he entered into an agreement with us that entitles him to an option to purchase
150,000 shares of our common stock, and that he was terminated without cause.
The former employee seeks (1) the right to purchase 150,000 shares of our
common stock, (2) unspecified compensatory and punitive damages, and (3)
litigation costs and attorney's fees. On January 31, 2000, we answered the
complaint, denying the claims. Discovery is ongoing, and trial is set for
September 2000. We are currently investigating the claims at issue and believe
we have meritorious defenses to such claims. Nevertheless, litigation is
uncertain and we may not prevail in this suit.
On February 18, 1999, a former consultant filed a complaint in the Superior
Court for Santa Clara County, California alleging, among other things, that he
had the right in connection with his consulting to the Company to purchase
56,924 shares of our common stock. We settled this lawsuit in September 1999.
Under the settlement, the former consultant was permitted to purchase 33,012
shares of our common stock at a price of $.05 per share.
On January 26, 1999, Civix-DDI, LLC filed a complaint in the U.S. District
Court in Colorado against us and 19 other defendants for infringement of two
patents relating to electronic mapping systems. In July 1999 we settled this
litigation by entering into a license agreement for these patents, pursuant to
which we made a single lump sum royalty payment.
On December 23, 1998, we initiated litigation against Internet Yellow Pages,
Inc. ("IYP") by filing suit in United States District Court for the Western
District of Washington. On February 3, 1999, we served a first amended
complaint on IYP and Greg Crane, an agent of IYP, in which we asserted claims
for
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(a) account stated, (b) breach of contract, and (c) fraud. On March 5, 1999,
IYP answered our complaint in the Washington action, and asserted claims for
breach of contract, fraud, extortion and Consumer Protection Act violations.
IYP seeks relief consisting of $1,500,000 and other unquantified money damages,
treble damages under the CPA, and attorneys' fees. Discovery is ongoing. We are
currently investigating the claims at issue and believe we have meritorious
defenses to such claims. Nevertheless, litigation is uncertain and we may not
prevail in these suits. Trial is set for April 2000, but the parties are
finalizing an agreement to dispose of the case through a streamlined mini-trial
before a federal magistrate.
On December 7, 1998, a complaint was filed against us on behalf of an alleged
former employee in Superior Court for Suffolk County in the Commonwealth of
Massachusetts alleging that he was terminated without cause and that he entered
into an agreement with us that entitles him to an option to purchase 4,000,000
shares of our common stock or 10% of our equity. We settled this lawsuit in
February 2000. Under the settlement, we made a cash payment of $10.5 million.
On April 16, 1998, one of our former employees filed a complaint in the
Superior Court for Santa Clara County, California alleging, among other things,
that he had the right in connection with his employment to purchase shares of
our common stock representing up to 5% of our equity as of an unspecified date.
We settled this lawsuit in February 1999. Under the settlement, we made a cash
payment of $4.5 million.
We had discussions with a number of individuals in the past regarding
employment by us and also hired and subsequently terminated a number of
individuals as employees or consultants. Furthermore, primarily during our
early stage of development, our procedures with respect to the manner of
granting options to new employees were not clearly documented. As a result of
these factors, and in light of the receipt of the above claims, we have in the
past received, and may in the future receive, similar claims from one or more
individuals asserting rights to acquire shares of our stock or to receive cash
compensation. We cannot predict whether such future claims will be made or the
ultimate resolution of any currently outstanding or future claim.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
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PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
Market for Our Common Stock
Our common stock has traded on the Nasdaq National Market under the symbol
"INSP" since December 15, 1998, the date of the initial public offering. Prior
to that time, there was no public market for our common stock. The following
table sets forth the range of high and lows sales prices for the Company's
Common Stock for the periods indicated:
<TABLE>
<CAPTION>
High Low
-------- --------
<S> <C> <C>
For the quarter ended:
December 31, 1999.......................................... $ 108.50 $ 19.375
September 30, 1999......................................... $ 29.469 $18.4375
June 30, 1999.............................................. $36.3125 $ 17.625
March 31, 1999............................................. $24.8125 $ 7.125
December 31, 1998 (from December 15, 1998)................. $ 13.00 $ 3.75
</TABLE>
The Company has never declared, nor has it paid, any cash dividends on its
Common Stock. The Company currently intends to retain its earnings to finance
future growth and, therefore, does not anticipate paying any cash dividends on
its Common Stock in the foreseeable future.
As of March 15, 2000, the approximate number of stockholders of record of
Common Stock was 397. See "Factors Affecting Our Operating Results, Business
Prospects and Market Price of Stock--Our Stock Price Has Been and May Continue
to be Volatile."
Recent Sales of Unregistered Securities
Since October 1, 1999 we issued and sold unregistered securities as follows:
(a) In connection with our acquisition of INEX Corporation, on October
14, 1999, we issued 185,226 shares of our common stock to some of the
former shareholders of INEX in exchange for their shares of capital stock
in INEX. InfoSpace.com Canada Holdings Inc., our wholly owned indirect
subsidiary, issued 540,001 Exchangeable Shares to some of the former
shareholders of INEX in exchange for their shares of capital stock of INEX.
The Exchangeable Shares are exchangeable on a one-to-one basis into shares
of our common stock. The shares of our common stock and the Exchangeable
Shares were issued pursuant to exemptions from registration under the
Securities Act of 1933, as amended (the "Securities Act") under Section
3(a)(10) of the Securities Act.
(b) In connection with our acquisition of Union-Street.com, Inc., on
October 14, 1999, we issued 873,294 shares of our common stock to the
former shareholders of Union-Street.com, Inc. in exchange for all of the
outstanding capital stock of Union-Street.com. We issued these shares
pursuant to an exemption from registration pursuant to Section 4(2) of the
Securities Act.
(c) In connection with our acquisition of eComLive, Inc., on December 16,
1999, we issued 711,248 shares of our common stock to the former
stockholders of eComLive in exchange for all outstanding shares and options
to purchase shares of eComLive, Inc. We issued these shares pursuant to an
exemption from registration under Section 4(2) of the Securities Act.
(d) In connection with our acquisition of Zephyr Software Inc., on
December 29, 1999, we issued 333,912 shares of our common stock to the
former stockholders of Zephyr Software in exchange for all of the
outstanding shares of capital stock of Zephyr Software. We issued these
shares pursuant to an exemption from registration under Section 4(2) of the
Securities Act.
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No underwriters were used in connection with these sales and issuances.
Report of Offering of Securities and Use of Proceeds Therefrom
In December 1998, we completed a firm commitment underwritten initial public
offering of, 23,000,000 shares (the "Shares") of our Common Stock, including
3,000,000 shares related to the underwriter's over-allotment option, at a price
of $3.75 per share (as adjusted for two-for-one stock splits effected by the
Company in May 1999 and January 2000). The Shares were registered with the
Securities and Exchange Commission pursuant to a Registration Statement on Form
S-1 (No. 333- 62323), which was declared effective on December 15, 1998. After
deducting underwriting discounts and commissions and offering expenses, we
received net proceeds of approximately $77,800,000.
Pending their use, we have invested the net proceeds from our initial public
offering in short- and long-term investments in order to meet anticipated cash
needs for future working capital. We invested our available cash principally in
high-quality corporate issuers and in debt instruments of the U.S. Government
and its agencies. We have used the net proceeds of our initial public offering
for general corporate purposes, including for working capital, and to a lesser
extent, to acquire assets from Active Voice Corporation, to invest in a variety
of private and early stage public Internet companies and to make settlement
payments in connection with litigation.
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Item 6. Selected Consolidated Financial Data
The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," our Consolidated Financial Statements and Notes
thereto and other financial information included elsewhere in this report.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1999 1998 1997 1996
-------- -------- ------- ------
(in thousands, except
per share data)
<S> <C> <C> <C> <C>
Consolidated Statements of Operations
Data:
Revenues................................ $ 36,907 $ 9,623 $ 1,743 $ 199
Cost of revenues........................ 5,259 1,635 419 96
-------- -------- ------- ------
Gross profit............................ 31,648 7,988 1,324 103
Operating expenses:
Product development................... 3,189 1,245 383 149
Sales and marketing................... 23,695 6,286 1,477 257
General and administrative............ 9,688 4,575 944 234
Amortization of intangibles........... 3,223 710 64 --
Acquisition and related charges ...... 13,250 2,800 -- --
Other--non-recurring charges ......... 11,359 4,500 137 --
-------- -------- ------- ------
Total operating expenses............ 64,404 20,116 3,005 640
-------- -------- ------- ------
Loss from operations.................... (32,756) (12,128) (1,681) (537)
Other income, net....................... 11,074 434 20 21
Equity in loss from joint venture....... (12) (125) -- --
-------- -------- ------- ------
Net loss ............................... $(21,694) $(11,819) $(1,661) 516
======== ======== ======= ======
Basic and diluted net loss per share.... $ (0.23) $ (0.22) $ (0.04) $(0.01)
======== ======== ======= ======
Shares used in computing basic net loss
per share.............................. 93,566 54,847 44,114 37,530
======== ======== ======= ======
Shares used in computing diluted net
loss per share......................... 93,566 54,847 44,341 37,530
======== ======== ======= ======
</TABLE>
<TABLE>
<CAPTION>
December 31,
-------------------------------
1999 1998 1997 1996
-------- -------- ------ ------
(in thousands)
<S> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and short-term investments ............. $154,176 $ 87,334 $ 358 $ 693
Working capital.............................. 164,603 86,342 424 788
Total assets................................. 352,571 103,005 1,514 1,139
Total stockholders' equity................... 331,627 94,724 792 1,000
</TABLE>
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
You should read the following discussion and analysis in conjunction with
"Selected Consolidated Financial Data" and our Consolidated Financial
Statements and Notes thereto included elsewhere in this report. In addition to
historical information, the following discussion contains certain forward-
looking statements that involve known and unknown risks and uncertainties, such
as statements of our plans, objectives, expectations and intentions. You should
read the cautionary statements made in this prospectus as being applicable to
all related forward-looking statements wherever they appear in this prospectus.
Our actual results could differ materially from those discussed in the forward-
looking statements. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed below and in the section
entitled "Factors Affecting Our Operating Results, Business Prospects and
Market Price of Stock," as well as those discussed elsewhere herein. See
"Factors Affecting Our Operating Results, Business Prospects and Market Price
of Stock--You Should Not Rely on Forward-Looking Statements." You should not
rely on these forward-looking statements, which reflect only our opinion as of
the date of this report. We do not assume any obligation to revise forward-
looking statements.
Overview
InfoSpace.com, Inc. is a global Internet information infrastructure services
company. InfoSpace provides enabling technologies and Internet services to Web
sites, merchants and wireless devices. We began operations in March 1996.
During the period from inception through December 31, 1996, we had
insignificant revenues and were primarily engaged in the development of
technology for the aggregation, integration and distribution of Internet
content and the hiring of employees. In 1997, we expanded our operations,
adding business development and sales personnel in order to capitalize on the
opportunity to generate Internet advertising revenues. We began generating
material revenues in 1997 with our consumer services. Revenue in 1998 was also
primarily generated through our consumer services. Throughout 1999, we have
expanded our information infrastructure services to enhance our consumer,
merchant and wireless services. The following provides greater detail on each
of our service offerings:
Consumer Services: We provide information of broad appeal to users of
wireless devices and PC's including directories, sports, news and
entertainment, financial data and traffic reports. We also offer an integrated
platform of consumer services that includes community building services such as
online address books, calendars, online chat and message boards and
communication services including device independent e-mail and instant
messaging. Our consumer services are designed for the end user and are
distributed through wireless devices and Web sites.
Revenues from our consumer services are generated from advertising, licensing
fees and guaranteed transaction fees in lieu of revenue share.
Merchant Services: We provide comprehensive end-to-end merchant services and
an extensive distribution network that includes regional bell operating
companies (known as RBOCs), merchant banks and other local media networks. Our
end-to-end merchant services give merchants the ability to create, promote,
sell and distribute their products and services across multiple channels
through our broad distribution network. We have extensive reseller agreements
with RBOCs, including BellSouth, SBC, Bell Atlantic, GTE and USWEST, merchant
banks such as American Express and other local media networks such as
newspapers and television and radio stations who provide our services to
millions of local merchants worldwide.
Our merchant services are based on of a comprehensive platform of technology
that enables us to deliver unique services such as:
. the online delivery of promotions to any device that can be used online
and offline;
. single-click buying from any Web site directly from a wireless device;
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<PAGE>
. Page Express, which enables local merchants to create a Web presence;
. StoreBuilder, which enables merchants to build on-line stores;
. ActivePromotion, which enables merchants to create targeted product
promotions and distribute them across our network;
. ActiveShopper, which provides an open marketplace where consumers can
find, research and purchase products from our merchant network.
Revenues from our merchant services are primarily generated from commerce
fees and licensing, including per store/per month or per promotion/per month
fees.
Wireless Services: Our wireless services are comprised of a comprehensive,
integrated suite of wireless portal services that provide mobile users relevant
information services such as real-time stock quotes and traffic reports, the
ability to conduct secure commerce transactions including single click buying,
communication services such as device-independent instant messaging and e-mail,
personalization capabilities and location-based services that enable the user
to search for location-based information such as the restaurant closest to the
mobile user's current location. These services are distributed through wireless
carriers, device manufacturers and software providers.
Our wireless services are private-labeled for each carrier, preserving the
brand of the carrier and their relationship with their customer and creating a
barrier to switch. Revenues are primarily generated from the carrier and
include licensing fees, per subscriber/per month fees in the U.S. and per
query/per message fees in Europe and Japan. In addition, we receive commerce
revenue for the transactions delivered on the wireless devices.
All three of our services are built on our core technology platform and use
the same operational infrastructure. We do not allocate development or
operating costs to any of these services.
In May 1997, we acquired Yellow Pages on the Internet, LLC, or YPI, a
Washington limited liability company that provided Internet yellow pages
directory information. In June 1998, we acquired Outpost, a Washington
corporation engaged primarily in electronic commerce through the sale of cards
and gifts via the Internet. In June 1999, we acquired the MyAgent technology
and related assets from Active Voice Corporation. In October 1999, we acquired
Union-Street.com, a provider of business services including private label e-
mail, address book, calendar, personal home page, chat and message boards. In
December 1999, we acquired eComLive.com, Inc., a provider of Web-based real-
time collaboration and interaction solutions specialized for consumer-to-
consumer, business-to-business and business-to-consumer vertical markets and
Zephyr Software Inc., an infrastructure services company for the Indian market.
These acquisitions were accounted for under the purchase method and,
accordingly, are included in our operating results from the date of acquisition
forward. The impact of the YPI acquisition on our consolidated statement of
operations was not substantial. The acquisitions of Outpost, MyAgent, Union-
Street and eComLive resulted in write-offs of in-process research and
development and the recording of goodwill, assembled workforce and core
technology. The acquisition of Zephyr Software resulted in the recording of
goodwill. We have integrated these businesses and the acquired technologies
with our other products and services.
In October 1999, we acquired INEX Corporation, a developer of Internet
commerce solutions designed for small and medium-sized merchants. This
transaction was accounted for as a pooling of interests. The consolidated
financial statements for the three years ended December 31, 1999 and the
accompanying notes reflect the Company's financial position and results of
operations as if INEX was a wholly-owned subsidiary since inception.
In July 1998, we entered into a joint venture agreement with Thomson to form
TDL InfoSpace to replicate our content, community and commerce services in
Europe. TDL InfoSpace has targeted the United Kingdom as its first market, and
content services were launched in the third quarter of 1998. Under
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<PAGE>
the Web site services agreement, Thomson provides its directory information to
TDL InfoSpace and sell Internet yellow pages advertising for the joint venture
through its local sales forces. We also license our technology and provide
hosting services to TDL InfoSpace. Thomson and we each purchased a 50% interest
in TDL InfoSpace and are required to provide reasonable working capital to TDL
InfoSpace. As of December 31, 1999, we had contributed $496,000 to the joint
venture. We account for our investment in the joint venture under the equity
method. For the years ended December 31, 1999 and 1998, we recorded a loss from
the joint venture of $12,000 and $125,000, respectively.
We have incurred losses since our inception and, as of December 31, 1999, we
had an accumulated deficit of approximately $35.7 million. For the year ended
December 31, 1999, our net loss totaled $21.7 million, including $13.2 million
in acquisition and related charges associated with the acquisitions of
eComLive, Union-Street, INEX and MyAgent Technology and $11.4 million in other
non-recurring charges related to two lawsuit settlements. See "--Acquisitions
and Item 3. Legal Proceedings." For the year ended December 31, 1998, our net
loss totaled $11.8 million, including a $2.8 million write-off associated with
our acquisition of Outpost and a $4.5 million cash payment to settle a lawsuit
filed by a former employee. See "--Acquisitions and Item 3. Legal Proceedings."
We believe that our future success will depend largely on our ability to
continue to offer consumer, merchant and wireless solutions that are attractive
to our existing and potential future affiliates and distribution partners.
Accordingly, we plan to significantly increase our operating expenses in order
to, among other things:
. expand our affiliate network, which may require us to pay additional
carriage fees to certain affiliates;
. expand our sales and marketing operations and hire more salespersons;
. increase our advertising and promotional activities;
. develop and upgrade our technology and purchase equipment for our
operations and network infrastructure;
. expand internationally; and
. expand our commerce, merchant and wireless services.
After giving effect to our recent acquisitions, we expect to incur
significant operating losses on a quarterly basis in the future. In light of
the rapidly evolving nature of our business and limited operating history, we
believe that period-to-period comparisons of our revenues and operating results
are not necessarily meaningful, and you should not rely upon them as
indications of future performance. Although we have experienced sequential
quarterly growth in revenues over the past ten quarters, we do not believe that
our historical growth rates are necessarily sustainable or indicative of future
growth. For information on recent and pending acquisitions see "Acquisitions--
Subsequent to Year End and Pending."
Results of Operations for the Years Ended December 31, 1999, 1998 and 1997
Revenues. Currently our revenue is derived from our consumer, merchant and
wireless services. These include advertising, licensing fees, commerce
transaction fees, and guaranteed transaction fees in lieu of revenue share. We
tailor agreements to fit the needs of our advertisers, affiliates and
distribution partners, and under any one agreement we may earn revenue from a
combination of these sources. We also have agreements that utilize services
from more than one of our areas of service. Revenues were $36.9 million the
year ended December 31, 1999, $9.6 million the year ended December 31, 1998 and
$1.7 million for the year ended December 31, 1997. The increases are primarily
due to significant growth in our consumer and merchant services as a result of
increased expansion of our affiliate network, which consists of more than 2,500
Web sites and wireless devices, increased traffic to our affiliate network that
results in increased page views, increased use of our consumer, merchant and
wireless services, as well as larger and longer term agreements with
advertisers, affiliates and distribution partners. We entered into 286 new
agreements with advertisers, affiliates and distribution partners during the
year ended December 31, 1999.
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<PAGE>
A portion of our revenues represents barter transactions resulting from our
exchange with other companies of banner advertising space for reciprocal banner
advertising space, for content licenses or for print advertising. Barter
revenues totaled $948,000, or 3% of revenues for the year ended December 31,
1999, and $852,000, or 9% of revenues for the year ended December 31, 1998.
Cost of Revenues. Cost of revenues consists of expenses associated with the
enhancement, maintenance and support of our consumer, merchant and wireless
services, including direct personnel expenses, communication costs such as
high-speed Internet access, server equipment depreciation, and content license
fees. Cost of revenues were $5.3 million, or 14% of revenues, for the year
ended December 31, 1999 compared to $1.6 million, or 17% of revenues, for the
year ended December 31, 1998 and $419,000, or 24% of revenues, for the year
ended December 31, 1997. The absolute dollar increases are primarily
attributable to personnel costs and other costs incurred in order to support
greatly increased delivery of our consumer, merchant and wireless solutions,
including communication lines, data licenses and equipment. We expect the
absolute dollars spent on personnel, enhanced content and expanded
communications will continue to increase for the foreseeable future.
Product Development Expenses. Product development expenses consist
principally of personnel costs, for research, design and development of the
proprietary technology we use to integrate and distribute our consumer,
merchant and wireless services. Product development expenses were $3.2 million
or 9% of revenues for the year ended December 31, 1999, compared to $1.2
million or 13% of revenues, for the year ended December 31, 1998 and $383,000,
or 22% of revenues, for the year ended December 31, 1997. These expenses have
declined significantly as a percentage of revenues due to our rapid revenue
growth. The increases in absolute dollars are primarily attributable to
increases in engineering personnel needed for continued development of our
products and service offerings. We believe that significant investments in
technology are necessary to remain competitive. Accordingly, we expect product
development expenses to continue to increase in absolute dollars as we hire
additional personnel who will develop and enhance our proprietary technology.
On January 1, 1999 we adopted Statement of Position 98-1 (SOP 98-1),
Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use, which requires certain product development costs to be
capitalized and amortized over future periods, which, prior to the adoption of
SOP 98-1, were expensed. For the year ended December 31, 1999, we capitalized
approximately $340,000 of product development costs.
Sales and Marketing Expenses. Sales and marketing expenses consist primarily
of salaries and related benefits for sales and marketing personnel, advertising
expenses, trademark licensing, carriage fees and distribution revenue share
paid to certain affiliates to include our content services on their Web sites,
sales office expenses and travel expenses. Sales and marketing expenses were
$23.7 million or 64% of revenues, for the year ended December 31, 1999 compared
to $6.3 million or 65% of revenues, for the year ended December 31, 1998 and
$1.5 million or 85% of revenues, for the year ended December 31, 1997. The
absolute dollar increases from the prior year were primarily due to carriage
fees paid to certain affiliates, increased advertising, expansion of our sales
and business development teams in Redmond, San Francisco and New York and
distribution revenue sharing.
General and Administrative Expenses. General and administrative expenses
consist primarily of salaries, fees for professional services, occupancy and
general office expenses, B&O tax paid to the State of Washington on gross
revenues and franchise tax paid to the State of Delaware on total assets and
authorized shares. General and administrative expenses were $9.7 million or 26%
of revenues, for the year ended December 31, 1999 compared to $4.6 million or
48% of revenues, for the year ended December 31, 1998 and $944,000 or 54% of
revenues, for the year ended December 31, 1997. The absolute dollar increases
were primarily due to increased staffing levels necessary to manage and support
our expanding operations, expansion of our facilities and professional
services. On a going forward basis, we will need to continue to strengthen our
infrastructure to support our planned growth.
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Amortization of Intangibles. Amortization of intangibles includes
amortization of goodwill, core technology, purchased domain names, trademark
and assembled workforce. Amortization of Intangibles was $3.2 million in 1999,
compared to $710,000 in 1998 and $64,000 in 1997. The increases are a result of
amortization of intangibles recorded from the acquisitions of Union-Street in
October 1999, MyAgent technology acquisition in June 1999 and Outpost Network
in July 1998. Intangibles in all three of these acquisitions include goodwill,
core technology and acquired workforce. These assets are being amortized over a
five-year period. In December 1999, we also acquired Zepher Software and
eComLive. Amortization on the goodwill, core technology and assembled workforce
for these two acquisitions will begin in January 2000. In the first quarter of
2000, we completed the acquisition of Saraide.com which will be accounted for
as a purchase and have definitive agreements to acquire Millet Software and
Orchest, Inc., both of which will be accounted for as purchases. These
acquisitions will significantly increase our amortization of intangibles in
2000 and beyond. In the event we complete additional acquisitions, expenses
relating to the amortization of intangibles could increase in the future.
Acquisition and Related Charges. Acquisition and other related charges
consist of in-process research and development and other one-time charges
related directly to acquisitions, such as legal and accounting fees. The
acquisition and related charges in 1999 were one-time in-process research and
development charges and costs incurred in the purchase acquisitions of
eComLive, Union-Street and the My Agent technology. Also included in
acquisition and other related charges in 1999 are the costs incurred in the
acquisition of INEX, which was accounted for as a pooling of interests. Total
in-process research and development charges in 1999 were $9.2 million. We
expect to continue to pursue an aggressive growth strategy to enhance and
expand our consumer, merchant and wireless services. We will incur acquisition
and related charges in the first quarter of 2000 and future quarters related to
the acquisitions we have completed and which are pending. In the event we
complete additional acquisitions, we could incur additional acquisition and
related charges in the future.
Other Non-Recurring Charges. Other non-recurring charges in 1999 and 1998
consist of costs associated with litigation settlements. In February 2000, we
reached a settlement with an alleged employee in a lawsuit for a cash payment
of $10.5 million. We accrued and expensed this liability in 1999. On July 23,
1999, we settled a patent infringement claim in exchange for a lump sum royalty
payment of $209,500. This expense was recorded in 1999. On February 22, 1999,
we reached a settlement with a former employee for a cash payment of $4.5
million. We accrued and expensed this liability in 1998.
Other Income, Net. Other income consists primarily of interest income for all
periods. Other income was $11.1 million in 1999, $434,000 in 1998 and $20,000
in 1997. The increase from the prior years is primarily due to interest earned
on higher average cash balances resulting from private financings in July and
August of 1998, the net proceeds from our initial public offering completed in
December 1998, and the net proceeds from our follow-on offering, which closed
in April 1999.
We have re-invested and will continue to re-invest part of our fixed income
securities in equity investments. We anticipate that our expansion plans may
require greater cash uses in 2000 than in prior years. With these two factors,
we anticipate that our interest income from our fixed securities will decrease
in 2000.
Equity in Loss from Joint Venture. Equity in loss from joint venture consists
of losses attributable to our 50% interest in TDL InfoSpace, our joint venture
with Thomson in the United Kingdom. Our 1999 loss was $12,000, compared to
$125,000 in 1998. The losses incurred in 1998 were primarily from start-up
operating costs associated with the venture.
Provision for Income Taxes. Net operating losses have been incurred to date
on a cumulative basis, and no tax benefit has been recorded, as sufficient
uncertainty exists regarding the realizability of the deferred tax assets.
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Liquidity and Capital Resources
From our inception in March 1996 through May 1998, we funded operations with
approximately $1.5 million in equity financing and, to a lesser extent, from
revenues generated for services performed. In May 1998, we completed a $5.1
million private placement of our common stock, and in July and August 1998, we
completed an additional private placement of our common stock for $8.2 million.
Sales of our common stock to employees pursuant to our 1998 Stock Purchase
Rights Plan also raised $1.7 million in July 1998. Our initial public offering
in December 1998 yielded net proceeds of $77.8 million and a follow-on public
offering in April 1999 yielded net proceeds of $185.0 million. As of December
31, 1999, we had cash, cash equivalents and short-term investments of $154.2
million and long-term investments of $88.2 million.
Net cash used by operating activities was $18.5 million in 1999. Cash used in
operating activities for the year ended December 31, 1999 consisted primarily
of net operating losses and increases in accounts receivable, notes receivable
and prepaid expenses. These uses of cash were partially offset by increases in
accrued expenses. Net cash used by operating activities was $2.7 million in
1998. Cash used in operating activities in 1998 consisted primarily of net
operating losses and increases in accounts receivable and prepaid expenses.
These uses of cash were partially offset by increases in accrued expenses. Net
cash used by operating activities was $1.2 million in 1997, which was primarily
comprised of the net loss.
Net cash used by investing activities was $160.1 million in the year ended
December 31, 1999. For 1999, cash used in investing activities was primarily
comprised of business acquisitions, securities investments, other investments
and purchase of fixed assets. The change in securities investments is primarily
a result of investing proceeds from our follow-on offering in short and long-
term investments. Net cash used in investing activities in 1998 was $78.7
million. This was primarily a result of investing the cash proceeds from the
initial public offering in short and long-term investments. Net cash used by
investing activities in 1997 was $225,000 and was primarily for the purchase of
fixed assets.
Cash provided by financing activities in 1999 was $193.0 million and was
primarily comprised of our net proceeds from our follow-on offering in April
1999. Cash provided by financing activities in 1998 was $96.2 million. The 1998
net proceeds were primarily from our initial public offering and, to a lesser
extent, from private placements of common stock. Cash provided by financing
activities in 1997 was primarily from private placements of our common stock.
We plan to use our cash for strategic investments and acquisitions,
investments in internally developed technology and advertising and marketing
initiatives. In addition, we are relocating our headquarter offices from
Redmond, Washington to Bellevue, Washington in the second quarter of 2000.
Included in the costs of this move is the construction of a new data center,
tenant improvements and furniture. We will also purchase capital equipment for
our headquarters and our other world-wide locations, including Mountain View,
California; Dallas, Texas; Ottawa, Canada; and Pependrecht, Netherlands. We
expect these capital expenditures to be approximately $29 million for the year
2000. These costs will be capitalized and amortized over their estimated useful
lives.
We believe that existing cash balances, cash equivalents and cash generated
from operations will be sufficient to meet our anticipated cash needs for
working capital and capital expenditures for at least the next 12 months.
However, the underlying assumed levels of revenues and expenses may not prove
to be accurate. We may seek additional funding through public or private
financings or other arrangements prior to such time. Adequate funds may not be
available when needed or may not be available on favorable terms. If we raise
additional funds by issuing equity securities, dilution to existing
stockholders will result. If funding is insufficient at any time in the future,
we may be unable to develop or enhance our products or services, take advantage
of business opportunities or respond to competitive pressures, any of which
could harm our business. See "Risk Factors Affecting Our Operating Results,
Business Prospects and Market Price of Stock--We May Require Additional
Funding."
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Factors Affecting Results of Operations
Our financial results have varied on a quarterly basis and are likely to
fluctuate substantially in the future. These fluctuations may be caused by
several factors, many of which are beyond our control. These factors include:
. the addition or loss of affiliates;
. variable demand for our consumer, merchant and wireless services by our
affiliates and distribution providers;
. the cost of acquiring and the availability of content, technology and
services;
. the overall growth level of demand for consumer, merchant and wireless
services;
. our ability to attract and retain affiliates and distribution providers;
. seasonal trends in Internet usage and advertising placements;
. the amount and timing of fees we pay to our affiliates to include our
consumer and merchant services on their Web sites;
. the productivity of our direct sales force and the sales forces of our
distribution partners;
. the amount and timing of increased expenditures for expansion of our
operations, including the hiring of new employees, capital expenditures
and related costs;
. our ability to continue to enhance, maintain and support our technology;
. the result of litigation that is currently ongoing against InfoSpace or
any litigation that is filed against us in the future;
. our ability to attract and retain personnel;
. the introduction of new or enhanced services by us or our affiliates, or
other companies that compete with us or our affiliates;
. price competition or pricing changes in Internet information
infrastructure services, such as ours;
. technical difficulties, system downtime, system failures or Internet
brown-outs;
. political or economic events and governmental actions affecting Internet
operations or content; and
. general economic conditions and economic conditions specific to the
Internet.
If one or more of these factors or other factors occur, our business could
suffer.
In addition, because we only began operations in March 1996, and because the
market for Internet information infrastructure services such as ours is new and
evolving, it is very difficult to predict future financial results. Our
expenses are partially based on our expectations regarding future revenues, and
are largely fixed in nature, particularly in the short term. As a result, if
our revenues in a period do not meet our expectations, our financial results
will likely suffer.
Acquisitions
Zephyr Software Inc.: On December 29, 1999, we acquired all of the common
stock of Zephyr Software Inc., a privately held company, and its wholly owned
subsidiary Zephyr Software (India) Private Limited ("Zephyr") for a purchase
consideration of 325,696 shares of our common stock and acquisition expenses of
$539,512. The acquisition was accounted for as a purchase in accordance with
Accounting Principles Board ("APB") No. 16. Results of operations for Zephyr
have been included with our results of operations for the period subsequent to
the date of acquisition.
In this transaction, we assumed net liabilities of $20,690, issued shares
with a fair value of $8,643,105 and incurred acquisition costs of $539,512.
This acquisition resulted in our recording $9,203,307 of goodwill.
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eComLive.com, Inc.: On December 16, 1999, we acquired all of the common stock
of eComLive.com, Inc., a privately held company, for a purchase consideration
of 686,356 shares and acquisition expenses of $582,246. The acquisition was
accounted for as a purchase in accordance with the provisions of APB No. 16.
In this transaction, we assumed net assets of $5,439,075. This includes
$5,300,000 in purchased technology which includes in-process research and
development, $140,000 of acquired workforce and $925 in net liabilities. We
issued shares with a fair value of $31,995,220 and incurred acquisition costs
of $582,246. This acquisition resulted in our recording $27,138,391 of
goodwill.
We recorded a non-recurring charge of $2.0 million for in-process research
and development that had not yet reached technological feasibility and had no
alternative future use. Among the factors we considered in determining the
amount of the allocation of the purchase price to in-process research and
development were the estimated stage of development of each module of the
technology, including the complexity and technical obstacles to overcome, the
estimated expected life of each module, the estimated cash flows resulting from
the expected revenues, margins, and operating expenses generated from each
module, and the discounted present value of the cash flows associated with the
in-process technologies. The percentage completed pre-acquisition for each
application was based primarily on the evaluation of three major factors: time-
based data, cost-based data, and complexity-based data.
The eComLive technology is built on client-server architecture. There are
three main applications, Interactive eComLive for the Consumer to Consumer
(C2C) market, Business eComLive targeted to the Business to Business (B2B)
market and Consumer eComLive for the Business to Consumer (B2C) market. We have
the ability to integrate the C2C eComLive technology into the InfoSpace Web
site and launch this technology with our consumer services. We also plan to
offer a co-branded version to our affiliates as part of our suite of co-branded
service offerings. The expected life of the modules being developed was assumed
to be five years, after which substantial modification and enhancement would be
required for the modules to remain competitive.
Our revenue assumptions for these modules were based on the number of
licenses we estimated to sell. Our expense assumptions for these modules
included cost of revenues, which we estimated to be less than 3% of revenues in
the first year and thereafter to drop to 2% as we will incur minimal costs to
deliver this technology on the platforms already developed and in use by us.
Sales and marketing expenses combined with general and administrative expenses
were estimated to be 130% in the first year, and thereafter to drop to 35% and
remain relatively constant as a percentage of revenues. However, cost of
revenues, sales and marketing expenses and general and administrative expenses
may vary, both in absolute dollars and as a percentage of revenues.
While we believe that the assumptions discussed above were made in good faith
and were reasonable when made. Accordingly, the assumptions we made may prove
to be inaccurate, and there can be no assurance that we will realize the
revenues, gross profit, growth rates, expense levels or other variables set
forth in such assumptions. Considering the inherent difficulty in developing
estimates of future performance for emerging technologies such as the eComLive
applications, we utilized a relatively high rate of return (30%) to discount to
present value the cash flows associated with the in-process technologies.
The next version of C2C Client and Server are scheduled for completion and
beta testing and release in the first half of 2000. The B2B and B2C Client and
Server are scheduled for release in the second or third quarters of 2000.
Significant technology development efforts are necessary before any one of
these modules can successfully be completed and integrated into our full suite
of service offerings of on-line services available both on the our Web site and
on those of the our many affiliates Web sites.
We expect these modules to be fully integrated into our full suite of
Internet service offerings. Further, the modules will not be distinguishable
market segments for financial reporting purposes or for management purposes.
Consequently, there will be no separate and distinguishable allocations or
utilizations of net working capital, and no specific charges for use of
contributory assets. None of our operating expenses are allocated to specific
service offerings.
41
<PAGE>
We do not expect to have the ability to calculate revenues specifically and
exclusively attributable to the integrated eComLive technology. Further, the
absence of such attribution will not be material to any module's success. The
amount that we can charge customers for access and use of these modules will be
greatly influenced by market forces and competitor's pricing of their own
packaged and integrated offerings.
Union-Street: On October 14, 1999 we acquired all of the common stock of
Union-Street, a privately held company, for a purchase consideration of 873,294
shares and acquisition expenses of $395,656. The acquisition was accounted for
as a purchase in accordance with the provisions of APB No. 16.
In this transaction, we assumed net assets of $5,352,781. This includes
$5,300,000 in purchased technology which includes in-process research and
development, $160,000 of acquired workforce and $107,219 in net liabilities. We
issued shares with a fair value of $20,487,518 and incurred acquisition costs
of $395,656. This acquisition resulted in our recording $15,530,393 of
goodwill.
We recorded a non-recurring charge of $3.3 million for in-process research
and development that had not yet reached technological feasibility and had no
alternative future use. Among the factors we considered in determining the
amount of the allocation of the purchase price to in-process research and
development were various factors such as estimating the stage of development of
each module of the technology, including the complexity and technical obstacles
to overcome, estimating the expected life of each module, estimating cash flows
resulting from the expected revenues, margins, and operating expenses generated
from each module, and discounting to present value the cash flows associated
with the in-process technologies. The percentage completed pre-acquisition for
each application was based primarily on the evaluation of three major factors:
time-based data, cost-based data, and complexity-based data.
The Union-Street technology called Traction Series 3.0 is comprised of six
modules that promote inter-activity on the customer's Web site. Businesses can
integrate individual modules onto their sites or integrate all of the modules
to form a comprehensive community solution. The modules include 1) Web Site
Creator, 2) Event Manager, 3) Relationship Manager, 4) Forums, 5) Chat and 6)
Email. We have integrated most of the Union-Street technology into the
InfoSpace Web site and have launched the technology with our consumer services.
We also plan to offer a co-branded version to our affiliates as part of our
suite of co-branded service offerings. The expected life of the modules being
developed was assumed to be five years, after which substantial modification
and enhancement would be required for the modules to remain competitive.
Our revenue assumptions for these modules were based on the number of page
views we estimated would be generated and the portion of those page views we
estimated would be attributable to the Union-Street modules. We estimated that
the Union-Street modules will generate approximately 1.6 million incremental
pages views in fiscal 2000, increasing to 3 million in 2001. Thereafter, we
expect the incremental growth attributed to this technology to be 8-12%
annually.
While we believe that the assumptions discussed above were made in good faith
and were reasonable when made, such assumptions remain largely untested, as the
modules are in the early stages of being placed in service on the InfoSpace Web
site and our affiliates' Web sites. Accordingly, the assumptions we made may
prove to be inaccurate, and there can be no assurance that we will realize the
revenues, gross profit, growth rates, expense levels or other variables set
forth in such assumptions. Considering the inherent difficulty in developing
estimates of future performance for emerging technologies such as the Union-
Street applications, we utilized a relatively high rate of return (30%) to
discount to present value the cash flows associated with the in-process
technologies.
At the time of acquisition, we expected the Union-Street Traction Series 3.0
to be released in 1999. We have now fully integrated this technology into our
consumer services. The modules are not distinguishable market segments for
financial reporting purposes or for management purposes and consequently, we
cannot segregate results from specific service offerings.
We do not expect to have the ability to calculate revenues specifically and
exclusively attributable to the integrated Union-Street technology. Further,
the absence of such attribution will not be material to any
42
<PAGE>
module's success. The amount that we can charge customers for access and use of
these modules will be greatly influenced by market forces and competitors'
pricing of their own packaged and integrated offerings.
INEX Corporation: On October 14, 1999, we consummated an Agreement and Plan
of Acquisition and Amalgamation with INEX Corporation, a privately held
company. The combination was accounted for as a pooling of interests. We issued
1,800,000 shares of our common stock (1) directly to those INEX shareholders
who elected to receive our common stock in exchange for their INEX shares at
the closing of the combination, (2) upon the exchange or redemption of the
exchangeable shares of InfoSpace.com Canada Holdings Inc., an indirect
subsidiary of ours, which exchangeable shares were issued to those INEX
shareholders who elected to receive exchangeable shares, or who did not make an
election to receive shares of our common stock at the closing, and (3) upon the
exercise of outstanding warrants and options to purchase INEX common shares,
which we assumed and which will become exercisable for shares of our common
stock.
INEX developed and marketed Internet commerce applications that deliver
solutions designed for small and medium-sized merchants to build, manage and
promote online storefronts. We have added these products to our merchant
services. The consolidated financial statements for the three years ended
December 31, 1999 and the accompanying notes reflect our financial position and
the results of operations as if INEX were our wholly-owned subsidiary since
inception.
MyAgent Technology: On June 30, 1999, we acquired the MyAgent technology and
related assets from Active Voice Corporation for a cash payment of $18 million
dollars. In addition, we hired six employees who comprised the MyAgent
development team at Active Voice. The acquisition was accounted for as a
purchase in accordance with the provisions of APB No. 16. Other than the
MyAgent technology modules, no other assets or liabilities were assumed as part
of this acquisition.
The total purchase price of the acquisition of the MyAgent technology was
$18.1 million including direct acquisition expenses of $83,054. In this
transaction, we assumed net assets of $4,380,000. This includes $4,300,000 in
purchased technology, which includes in-process research and development, and
$80,000 of acquired workforce. This acquisition resulted in our recording
$13,703,054 of goodwill.
We recorded a non-recurring charge of $3.9 million for in-process research
and development that had not yet reached technological feasibility and had no
alternative future use. Separately, we recorded a one-time charge of $1.0
million for expenses related to bonus payments made to the Active Voice MyAgent
team employees who accepted employment with us on the date of the MyAgent
technology acquisition, but who have no obligation to continue their employment
with us.
Among the factors we considered in determining the amount of the allocation
of the purchase price to in-process research and development were various
factors such as estimating the stage of development of each module of the
technology, including the complexity and technical obstacles to overcome,
estimating the amount of core technology leveraged into the in-process
projects, estimating the expected life of each module, estimating cash flows
resulting from the expected revenues, margins, and operating expenses generated
from each module, and discounting to present value the cash flows associated
with the in-process technologies. We utilized a rate of return of 30% to
discount to present value the cash flows associated with the in-process
technologies.
Within the MyAgent technology there are three main modules, the Client,
Server Intelligence, and Web Interface. We integrated the MyAgent technology
into the InfoSpace Web site and launched the technology with our desktop
portal. We also plan to offer a co-branded version to our affiliates as part of
our suite of co-branded service offerings. As of the date of acquisition, we
estimated that the Client, Server Intelligence, and Web Interface were 50%,
49%, and 29% completed, respectively. The percentage completed pre-acquisition
for each module was based primarily on the evaluation of three major factors:
time-based data, cost-based data, and complexity-based data.
The expected life of the modules being developed was assumed to be five
years, after which substantial modification and enhancement would be required
for the modules to remain competitive.
43
<PAGE>
Our revenue assumptions for these modules were based on the number of page
views we estimate the desktop portal will generate and the portion of those
page views we estimate would be attributable to the MyAgent technology modules.
We estimated that the number of page views will double as a result of the
launch of the desktop portal. We estimated that 50% of the incremental page
view growth would be attributable to the MyAgent modules. Page view revenue
generated by the desktop portal will vary from our standard page view revenue
since fewer advertisements can be placed on the desktop portal.
Our expense assumptions for these modules included cost of revenues, which we
estimated to be 17% of revenues in 2000 and thereafter to drop to 9% as we will
incur minimal costs as we leverage the technology in future periods. Sales and
marketing expenses combined with general and administrative expenses were
estimated to be 34% in 2000, and thereafter to drop to 22% of revenues.
However, cost of revenues, sales and marketing expenses and general and
administrative expenses may vary, both in absolute dollars and as a percentage
of revenues.
While we believe that the assumptions discussed above were made in good faith
and were reasonable when made, the assumptions we made may prove to be
inaccurate, and there can be no assurance that we will realize the revenues,
gross profit, growth rates, expense levels or other variables set forth in such
assumptions. Considering the inherent difficulty in developing estimates of
future performance for emerging technologies such as the MyAgent modules, we
utilized a relatively high rate of return (30%) to discount to present value
the cash flows associated with the in-process technologies. The discount rate
was selected based on evaluation of our weighted average cost of capital, the
weighted average return on assets, the internal rate of return implied from the
transaction, and management's assessment of the risk inherent in the future
performance estimates utilized in the valuation.
The Client and Server Intelligence and Web interface were released in the
fourth quarter of 1999. Significant technology development efforts were
necessary before any one of these modules could be successfully be completed
and integrated into our full suite of service offerings of on-line services
available both on the our Web site and on those of the our many affiliates Web
sites. We made the Client modular and reduced its size considerably in order
shorten the download time. The modules are not distinguishable market segments
for financial reporting purposes or for management purposes and consequently,
we cannot segregate results from specific service offerings.
We do not expect to have the ability to calculate revenues specifically and
exclusively attributable to the integrated MyAgent technology. Further, the
absence of such attribution will not be material to any module's success. The
amount that we can charge customers for access and use of these modules will be
greatly influenced by market forces and competitors' pricing of their own
packaged and integrated offerings.
The MyAgent product team was not accounted for by Active Voice as a separate
entity, a subsidiary, or a line of business, or division of the business, but
rather was rolled up as part of the research and development group.
Accordingly, historical financial information was not available and we were
unable to utilize historical results of operations in the valuation of the
MyAgent technology.
Technology from Outpost: In June 1998, we acquired Outpost, which included
the acquisition of the Outpost Technology and the hiring of approximately ten
employees. In the second quarter of 1998, we wrote off approximately $2.8
million of in-process research and development in connection with the Outpost
acquisition.
We conducted a valuation of the assets acquired from Outpost, including core
technology, assembled workforce and in-process research and development,
utilizing the following major assumptions:
. the revenue and margin contribution of each technology (in-process and
future yet-to-be defined);
. the percentage of carryover of technology from products under development
and products scheduled for development in the future;
44
<PAGE>
. the expected life of the technology;
. anticipated module development and module introduction schedules;
. revenue forecasts, including expected aggregate growth rates for the
business as a whole and expected growth rates for the Internet content
provider industry;
. forecasted operating expenses, including selling, general and
administrative expenses, as a percentage of revenues; and
. a rate of return of 30% utilized to discount to present value the cash
flows associated with the in-process technologies.
Within the acquired Outpost Technology (smart-shopping services) there are
four main modules. These modules in their developed state as of the acquisition
date of Outpost had certain technological limitations. Subsequent to the
acquisition date, we revised our strategy with respect to the transaction proxy
module, with the result being that most of the in-process technology was
discarded. Accordingly, no value was assigned to this module in connection with
our valuation of the assets acquired from Outpost. The four modules are:
. integrated content that provides users with product pricing and merchant
information;
. transaction proxy that allows us to track sales transactions from
beginning to end and to receive confirmation reports from the retailers;
. branding that allows users to travel to affiliate Web sites without
leaving the InfoSpace.com Web site; and
. universal shopping cart that allows users to make multiple purchases at
different retailers in one execution.
These modules have been integrated into our full suite of Internet service
offerings. The integrated content module was completed and integrated into our
Web site in the third quarter of 1998. Relevant portions of the transaction
proxy, branding and shopping cart modules were completed and integrated into
our ActiveShopper electronic commerce private label solution that was launched
in 1999.
The direct impact of the smart-shopping service on current and future results
of operations, liquidity and capital resources is not known, as we do not have
the ability to calculate revenues specifically and exclusively attributable to
Outpost's integrated technology. Further, the modules are not distinguishable
market segments for financial reporting purposes or for management purposes.
However, we believe that these services will allow our affiliates to broaden
and enhance their core programming at minimal cost and to generate additional
advertising and transaction revenue opportunities for both us and our
affiliates, initially through our launching, and affiliates utilizing,
ActiveShopper as a private label electronic commerce solution. Further, the
benefits to us and our affiliates can potentially extend beyond electronic
commerce transactions by:
. enabling us to apply the Outpost Technology to other functions such as
building employment classifieds and databases of local events;
. allowing end users to access consolidated bank statements or statements
of airline frequent flyer miles; and
. attracting additional Web users who are then exposed to the many other
features in our suite of content, community and commerce solutions.
45
<PAGE>
Acquisitions--Subsequent to Year-End/Pending
On March 10, 2000, we acquired San Mateo, California-based Saraide.com Inc, a
provider of wireless Internet services in Europe, Japan and Canada. Under the
terms of the acquisition, which we will account for as a purchase, we exchanged
4,795,432 shares of our common stock and contributed our wireless assets in
exchange for an 80% controlling interest in Saraide.
On March 6, 2000, we signed a definitive agreement to acquire Cupertino,
California-based Orchest, Inc. (MoneyPlant.com). Orchest has developed a Web
site to provide online account information aggregation for consumers. Under the
terms of the acquisition, which will be accounted for as a purchase, we will
exchange 123,211 shares of our common stock for all of Orchest's outstanding
shares.
On February 15, 2000, we acquired Mountain View, California-based Prio, Inc.
Prio was a privately held provider of "e-nabled" commerce solutions
specializing in the development of strategic partnerships, technologies and
programs that drive commerce in both traditional and online shopping
environments. Under the terms of the acquisition, which we will account for as
a pooling of interests, we exchanged 5,293,456 shares of our common stock for
all of Prio's outstanding shares, warrants and options.
On December 23, 1999, we entered into a definitive agreement to acquire
Berkeley, California-based Millet Software (privacybank.com). Millet develops
e-commerce solutions to make online transactions more convenient, while
enabling shoppers to check the privacy policies of online merchants at the
point of purchase. Under the terms of the acquisition, which we will account
for as a purchase, we will exchange 297,552 shares of our common stock for all
of Millet's outstanding shares, warrants and options. We expect to complete the
acquisition in the first quarter of 2000, subject to satisfaction of customary
closing conditions.
Recent Accounting Pronouncements
In December 1999, the Securities and Exchange Commission staff issued Staff
Accounting Bulletin (SAB) 101, Revenue Recognition in Financial Statements. The
SAB establishes certain criteria for net versus gross recording of sales
transactions and requires companies to comply with the SAB no later than the
first fiscal quarter of the fiscal year beginning after December 15, 1999 and
to retroactively reclassify for all periods presented. We are adopting SAB 101
on January 1, 2000. Prior to January 1, 2000 and implementation of the SAB, we
recorded gross revenues from customers for development fees, implementation
fees and/or integration fees when the service was completed. If this revenue
were recognized on a straight-line basis, in accordance with SAB 101, we
estimate that approximately $700,000 in revenue would have been deferred and
recognized in 2000 and 2001. In accordance with SAB 101, we will recognize this
revenue over the straight-lined basis and record a cumulative effect of change
in accounting principle.
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to financial market risks, including changes in interest rates
and equity price fluctuations.
Interest Rate Risk: We invest our excess cash in high-quality corporate
issuers, and in debt instruments of the U.S. Government and its agencies. By
policy, we limit our credit exposure to any one issuer. We do not have any
derivative instruments in our investment portfolio. We protect and preserve
invested funds by limiting default, market and reinvestment risk. Investments
in both fixed rate and floating rate interest earning instruments carries a
degree of interest rate risk. Fixed rate securities may have their fair market
value adversely impacted due to a rise in interest rates, while floating rate
securities may produce less income than expected if interest rates fall. Due in
part to these factors, the Company's future investment income may fall short of
expectations due to changes in interest rates or the Company may suffer losses
in principal if forced to sell securities which have declined in market value
due to changes in interest rates.
46
<PAGE>
Equity Investment Risk The Company invests in equity instruments of public
and privately-held, technology companies for business and strategic purposes.
These investments are recorded as long-term assets and are classified as
available-for-sale. For the privately-held investments, our policy is to
regularly review the assumptions underlying the operating performance and cash
flow forecasts in assessing the carrying value. For our publicly-held
investments, we are subject to significant fluctuations in fair market value
due to the volatility of the stock market. Changes in fair market value are
recorded as a component of other comprehensive income and do not effect net
income until the securities are sold and a realized gain or loss is incurred.
47
<PAGE>
Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
InfoSpace.com, Inc.:
Independent Auditors' Report............................................. 49
Consolidated Balance Sheets.............................................. 50
Consolidated Statements of Operations.................................... 51
Consolidated Statements of Changes in Stockholders; Equity and
Accumulated Other Comprehensive Income.................................. 52
Consolidated Statements of Cash Flows.................................... 53
Notes to Consolidated Financial Statements............................... 54
</TABLE>
48
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of InfoSpace.com.
Redmond, Washington
We have audited the accompanying consolidated balance sheets of
InfoSpace.com, Inc. and subsidiaries (the Company) as of December 31, 1999 and
1998, and the related consolidated statements of operations, changes in
stockholders' equity and accumulated other comprehensive income, and cash flows
for the years ended December 31, 1999, 1998 and 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of InfoSpace.com, Inc. and
subsidiaries as of December 31, 1999 and 1998, and results of their operations
and their cash flows for the years ended December 31, 1999, 1998 and 1997, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Seattle, Washington
March 10, 2000
49
<PAGE>
INFOSPACE.COM, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
ASSETS
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents ................... $ 29,456,033 $ 15,174,009
Short-term investments, held-to-maturity
(fair market value $124,656,362 and
$72,173,013) ............................... 124,720,142 72,159,522
Accounts receivable, net of allowance for
doubtful accounts of $677,960 and $603,278.. 6,539,602 3,469,976
Interest receivable.......................... 3,321,956 9,874
Notes receivable, net of allowance of $12,075
and $0 ..................................... 11,394,016 35,061
Prepaid expenses and other assets ........... 10,117,391 3,611,535
------------ ------------
Total current assets ...................... 185,549,140 94,459,977
Long-term investments, held-to-maturity (fair
market value $70,971,645 and $1,252,051) ..... 71,416,777 1,252,438
Property and equipment, net ................... 4,502,582 1,238,802
Other long-term assets ........................ 496,622 405,906
Other investments ............................. 16,779,149 370,790
Intangible assets, net......................... 73,827,125 5,276,880
------------ ------------
Total assets................................... $352,571,395 $103,004,793
============ ============
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Current liabilities:
Accounts payable............................. $ 1,865,151 $ 1,683,379
Accrued expenses............................. 16,598,382 5,032,450
Deferred revenues............................ 2,480,612 1,401,865
------------ ------------
Total current liabilities.................. 20,944,145 8,117,694
Convertible debentures payable................. -- 163,345
------------ ------------
Total liabilities.......................... 20,944,145 8,281,039
Commitments and contingencies (Note 7)
Stockholders' equity:
Preferred stock, par value $.0001--
Authorized, 15,000,000 shares; issued and
outstanding, 1 share........................ -- --
Common stock, par value $.0001--Authorized,
200,000,000 shares; issued and outstanding,
101,450,816 and 85,320,264 shares........... 10,145 8,532
Additional paid-in capital................... 368,368,889 112,309,440
Accumulated deficit.......................... (35,689,908) (13,996,133)
Deferred expense--warrants................... (2,311,159) (3,126,862)
Unearned compensation--stock options......... (68,165) (428,875)
Accumulated other comprehensive income....... 1,317,448 (42,348)
------------ ------------
Total stockholders' equity................. 331,627,250 94,723,754
------------ ------------
Total liabilities and stockholders' equity..... $352,571,395 $103,004,793
============ ============
</TABLE>
See notes to consolidated financial statements.
50
<PAGE>
INFOSPACE.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ -----------
<S> <C> <C> <C>
Revenues............................. $ 36,907,171 $ 9,623,360 $ 1,742,542
Cost of revenues .................... 5,259,043 1,634,726 418,809
------------ ------------ -----------
Gross profit..................... 31,648,128 7,988,634 1,323,733
Operating expenses:
Product development................ 3,189,279 1,244,638 383,136
Sales and marketing................ 23,694,754 6,285,897 1,476,576
General and administrative ........ 9,688,297 4,575,414 944,138
Amortization of intangibles ....... 3,223,031 709,923 64,056
Acquisition and related charges ... 13,249,533 2,800,000 --
Other--non-recurring charges ...... 11,359,500 4,500,000 137,000
------------ ------------ -----------
Total operating expense ......... 64,404,394 20,115,872 3,004,906
------------ ------------ -----------
Loss from operations ............ (32,756,266) (12,127,238) (1,681,173)
Other income, net ................... 11,074,008 433,511 20,258
Equity in loss from joint venture ... (11,517) (124,976) --
------------ ------------ -----------
Net loss............................. $(21,693,775) $(11,818,703) $(1,660,915)
============ ============ ===========
Basic and diluted net loss per share
.................................... $ (0.23) $ (0.22) $ (0.04)
============ ============ ===========
Shares used in computing basic net
loss per share ..................... 93,565,780 54,847,259 44,113,886
============ ============ ===========
Shares used in computing diluted net
loss per share ..................... 93,565,780 54,847,259 44,340,553
============ ============ ===========
</TABLE>
See notes to consolidated financial statements.
51
<PAGE>
INFOSPACE.COM, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
AND ACCUMULATED OTHER COMPREHENSIVE INCOME
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ -----------
<S> <C> <C> <C>
Common stock and additional paid in
capital:
Balance, beginning of year............ $112,317,972 $ 3,157,235 $ 1,593,597
Common stock issued................. 185,039,027 92,943,855 679,030
Common stock issued for
acquisitions....................... 61,125,843 7,902,309 292,188
Common stock issued for stock
options............................ 2,313,210 1,019,850 23
Common stock issued in exchange
transactions....................... 650,000 162,726 84,720
Common stock issued for warrants and
preferred shares................... 5,315,541 2,356,412 272,957
Common stock issued for conversion
of special shares and debentures... 170,369 -- --
Common stock issued for employee
stock purchase plan................ 286,088 -- --
Unearned compensation--stock
options............................ 1,160,984 1,512,772 234,720
Deferred expense--warrants.......... -- 3,262,813 --
------------ ------------ -----------
Balance, end of year.................. 368,379,034 112,317,972 3,157,235
------------ ------------ -----------
Balance attributed to common stock.... 10,145 8,532 4,476
Balance attributed to additional paid
in capital........................... 368,368,889 112,309,440 3,152,759
------------ ------------ -----------
Balance, common stock and additional
paid in capital...................... 368,379,034 112,317,972 3,157,235
------------ ------------ -----------
Accumulated deficit:
Balance, beginning of year............ (13,996,133) (2,177,430) (516,515)
Net loss............................ (21,693,775) (11,818,703) (1,660,915)
------------ ------------ -----------
Balance, end of year.................. (35,689,908) (13,996,133) (2,177,430)
------------ ------------ -----------
Deferred expense--warrants:
Balance, beginning of year............ (3,126,862) -- --
Deferred expense--warrants.......... -- (3,262,813) --
Warrant expense..................... 815,703 135,951 --
------------ ------------ -----------
Balance, end of year.................. (2,311,159) (3,126,862) --
------------ ------------ -----------
Unearned compensation--stock options:
Balance, beginning of year............ (428,875) (162,235) (71,437)
Unearned compensation--stock
options............................ (1,160,984) (1,512,772) (234,720)
Compensation expense--stock
options............................ 1,521,694 1,246,132 143,922
------------ ------------ -----------
Balance, end of year.................. (68,165) (428,875) (162,235)
------------ ------------ -----------
Accumulated other comprehensive
income:
Balance, beginning of year............ (42,348) (25,780) (5,181)
Unrealized gain (loss) on equity
investments........................ 1,324,301 -- --
Foreign currency translation
adjustment......................... 35,495 (16,568) (20,599)
------------ ------------ -----------
Balance, end of year.................. 1,317,448 (42,348) (25,780)
------------ ------------ -----------
$331,627,250 $ 94,723,754 $ 791,790
============ ============ ===========
</TABLE>
See notes to consolidated financial statements.
52
<PAGE>
INFOSPACE.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------ -----------
<S> <C> <C> <C>
Operating Activities:
Net loss........................... $ (21,693,775) $(11,818,703) $(1,660,915)
Adjustments to reconcile net loss
to net cash provided (used) by
operating activities:
Trademark amortization............. 1,500,000 1,500,000 --
Depreciation and other
amortization...................... 4,098,201 1,018,543 285,325
Write-off of in-process research
and development................... 9,200,000 2,800,000 --
Compensation expense--stock
options........................... 1,521,694 1,246,132 143,922
Exchange transaction............... 650,000 -- --
Currency translation............... 42,520 (28,308) (29,830)
Warrants expense................... 815,703 135,951 --
Noncash issuance of common stock... -- 70,000 --
Noncash services exchanged......... -- 155,436 24,720
Bad debt expense................... 499,464 687,602 47,000
Equity in loss in joint venture.... 11,517 124,976 --
Gain on sale of intangibles........ (7,830) -- --
Loss (gain) on disposal of fixed
assets............................ 15,019 (3,771) 3,743
Warrants--income................... (1,295,325) -- --
Cash provided (used) by changes in
operating assets and liabilities,
net of assets acquired in business
combinations:
Accounts receivable............... (3,557,965) (3,681,668) (396,990)
Notes receivable.................. (11,314,171) -- --
Interest receivable............... (3,312,082) -- --
Prepaid expenses and other
assets........................... (7,979,947) (2,086,941) (45,253)
Other long-term assets............ (90,716) (337,500) --
Other intangible assets........... -- (66,865) --
Accounts payable.................. 181,772 1,468,405 147,374
Accrued expenses.................. 11,112,077 4,805,428 199,648
Deferred revenue.................. 1,057,294 1,337,716 58,261
------------- ------------ -----------
Net cash used by operating
activities........................ (18,546,550) (2,673,567) (1,222,995)
Investing Activities:
Business acquisitions, net of cash
acquired.......................... (19,514,794) (311,951) (14,000)
Other investments.................. (13,800,250) -- --
Purchase of domain name............ (120,000) -- --
Proceeds from sale of domain name.. 10,000 -- --
Purchase of trademark.............. -- (3,290,000) --
Internally developed software...... (340,498) -- --
Purchase of property and
equipment......................... (3,634,792) (1,201,162) (181,666)
Investment in joint venture........ -- (495,767) --
Proceeds from sale of fixed
assets............................ -- 4,997 --
Purchase of short-term investments
held-to-maturity.................. (52,560,620) (72,159,522) --
Purchase of long-term investments
held-to-maturity.................. (70,164,338) (1,252,438) --
Other.............................. -- -- (29,087)
------------- ------------ -----------
Net cash used by investing
activities........................ (160,125,292) (78,705,843) (224,753)
Financing Activities:
Proceeds from issuance of common
stock............................. -- 17,332,871 952,010
Payment to shareholders for
fractional shares................. -- (28) --
Proceeds from public offerings, net
of expenses....................... 185,039,027 77,830,903 --
Proceeds from issuance of
promissory notes payable.......... -- 235,992 21,670
Repayment of promissory notes
payable........................... -- (256,220) (1,234)
Repayment of stockholder loan
payable........................... -- (5,116) (39,728)
Proceeds from issuance of
debentures payable................ -- -- 180,584
Proceeds from issuance of ESPP
shares............................ 286,088 -- --
Proceeds from exercise of
warrants.......................... 5,315,541 40,161 --
Proceeds from exercise of stock
options........................... 2,313,210 1,016,210 --
------------- ------------ -----------
Net cash provided by financing
activities........................ 192,953,866 96,194,773 1,113,302
------------- ------------ -----------
Net increase (decrease) in cash and
cash equivalents................... 14,282,024 14,815,363 (334,446)
Cash and cash equivalents, beginning
of period.......................... 15,174,009 358,646 693,092
------------- ------------ -----------
Cash and cash equivalents, end of
period............................. $ 29,456,033 $ 15,174,009 $ 358,646
------------- ------------ -----------
Supplemental Disclosure of Noncash
Financing and Investing Activities:
Acquisitions from purchase
transactions:
Stock issued....................... $ 61,125,843 $ 7,932,000 $ 382,188
Net assets assumed................. (149,723) (191,000) (90,000)
Warrants issued with abandoned
financing.......................... 650,000
Stock issued in exchange
transaction........................ -- 292,726 84,720
Stock issued for retirement of
debentures......................... 170,369 -- --
Interest paid....................... -- 14,923 --
</TABLE>
See notes to consolidated financial statements.
53
<PAGE>
INFOSPACE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999, 1998 and 1997
Note 1: Summary of Significant Accounting Policies
Description of business: InfoSpace.com, Inc., (the Company or InfoSpace),
previously known as InfoSpace, Inc., a Delaware corporation, was founded in
March 1996. The Company is a global Internet information infrastructure
services company that provides enabling technologies and Internet services to
Web sites, merchants and wireless devices.
Principles of consolidation: The consolidated financial statements include
the accounts of the Company and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
Business combinations: Business combinations accounted for under the purchase
method of accounting include the results of operations of the acquired business
from the date of acquisition. Net assets of the companies acquired are recorded
at their fair value at the date of acquisition. Amounts allocated to in-process
research and development are expensed in the period of acquisition.
Business combinations accounted for under the pooling-of-interests method of
accounting include the financial position and results of operations as if the
acquired company had been a wholly-owned subsidiary since inception. In such
cases, the assets, liabilities and stockholders' equity of the acquired
entities were combined with the Company's respective amounts at their recorded
values. The equity of the acquired entity is reflected on an as-if-converted
basis to InfoSpace.com, Inc. equity at the time of issuance. Prior period
financial statements have been recast to give effect to the merger.
Cash and cash equivalents: The Company considers all highly liquid debt
instruments with an original maturity of 90 days or less to be cash
equivalents. Cash and cash equivalents are carried at cost, which approximates
market.
Investments: The Company principally invests its available cash in high-
quality corporate issuers, and in debt instruments of the U.S. Government and
its agencies. All debt instruments with original maturities greater than three
months up to one year from the balance sheet date are considered short-term
investments. Investments maturing after twelve months from the balance sheet
date are considered long-term. The Company accounts for investments in
accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." The Company's short-term and long-term investments are
classified as held-to-maturity as of the balance sheet date as the company has
both the ability and the intent to hold the investments to maturity and are
reported at amortized cost.
Property and equipment: Property and equipment are stated at cost.
Depreciation is computed under the straight-line method over the following
estimated useful lives:
<TABLE>
<S> <C>
Computer equipment and software................................. 3 years
Office equipment................................................ 5 years
Office furniture................................................ 7 years
Leasehold improvements.......................................... lease term
</TABLE>
On January 1, 1999, the Company adopted Statement of Position 98-1,
Accounting for the Costs of Computer Software developed or Obtained for
Internal Use. This requires capitalization of certain costs
54
<PAGE>
INFOSPACE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
incurred in connection with developing or obtaining internal use software and
amortization of these costs over future periods, which prior to the adoption of
SOP 98-1, were expensed. For the year ended December 31, 1999, the Company has
capitalized $340,498 of costs associated with internally developed software.
These costs are included in property and equipment on the accompanying balance
sheet and are generally amortized over five years.
Intangible assets: Goodwill, purchased technology and other intangibles are
amortized on a straight-line basis over their estimated useful lives. Goodwill
and purchased technology are generally amortized over three to five years.
Other intangibles, primarily consisting of purchased trademarks and domain name
licenses are amortized over an estimated useful life of three years.
Other investments: The Company invests in equity investments of public and
privately-held technology companies for business and strategic purposes. These
investments are included in long-term assets and are classified as available-
for-sale. Investments in companies whose securities are not publicly traded are
recorded at cost. Investments in companies whose securities are publicly traded
are recorded at fair value. Unrealized gains or losses on these investments are
recorded as comprehensive income in the Company's stockholders' equity.
Realized gains or losses are recorded based on the identified cost of the
investment sold.
Other long-lived assets: Management periodically evaluates long-lived assets,
consisting primarily of purchased technology, goodwill, property and equipment,
to determine whether there has been any impairment of the value of these assets
and the appropriateness of their estimated remaining life. No impairment loss
has been recognized through December 31, 1999.
Revenue recognition: The Company's revenues are derived from its consumer,
merchant and wireless services. These include advertising, content carriage,
licensing fees, e-commerce fees and guaranteed transaction fees in lieu of
revenue share.
Advertising: Revenues from contracts based on the number of impressions
displayed or click throughs provided are recognized as services are
rendered.
Content carriage: Revenues from fixed fee content carriage agreements are
recognized ratably over the related contract term. For content carriage fee
contracts that are performance based with an established maximum, the
Company recognizes revenues as the services are rendered, not to exceed the
maximum amount over the fixed term.
Licensing fees: Revenue from licensed services is recognized ratably over
the term of the license agreement.
Commerce fees: Transaction fees are recognized in the period the
transaction occurred and was reported to the Company by the content
providers or online merchants.
Guaranteed transaction fees: Guaranteed minimum payments are recognized
ratably over the term of the agreements. Revenues earned above the
guaranteed minimum payments are recognized ratably over the remaining term
of the agreements.
Also included in revenues are barter revenues generated from exchanging
banners for banners, banners for content or banners for print or other
advertising. Barter revenues are recorded at the lower of the estimated fair
market value of goods and services received or impressions given, and are
recognized when the Company's advertisements are run. For barter agreements,
the Company records a receivable or liability at the end of the reporting
period for the difference in the fair value of the services provided or
received.
55
<PAGE>
INFOSPACE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Cost of revenues: Cost of revenues consists of expenses associated with the
enhancement, maintenance and support of our content services, including direct
personnel expenses, communication costs such as high-speed Internet access,
server equipment depreciation and content license fees. Fees paid for content
licenses are capitalized and amortized over the license period.
Product development: Product development expenses consist principally of
personnel costs for research, design, development, enhancement and maintenance
of the proprietary technology used to integrate and distribute the Company's
consumer, merchant and wireless services. These expenses are net of capitalized
internally developed software costs.
Advertising costs: Costs for print advertising are recorded as expense when
the advertisement appears. Advertising costs related to electronic impressions
are recorded as expense as impressions are provided. Advertising expense
totaled approximately $5,369,000, $1,265,000 and $251,000 for the years ended
December 31, 1999, 1998 and 1997, respectively.
Unearned compensation: Unearned compensation represents the unamortized
difference between the option exercise price and the fair market value of the
Company's common stock for shares subject to grant at the grant date, for
options issued under the Company's stock incentive plan (Note 5). The
amortization of unearned compensation is charged to operations and is amortized
over the vesting period of the options.
Deferred expense-warrants: Deferred expense-warrants represents the fair
value of the warrants that were issued and is expensed ratably over the four
year vesting period. The amortization of deferred warrant expense is charged to
sales and marketing expense.
Acquisition and other related charges: Acquisition and other related charges
consist of in-process research and development and other one-time charges
related directly to the acquisitions, such as legal and accounting fees.
Other non-recurring charges: Other non-recurring charges in 1999 and 1998
consist of costs associated with litigation settlements.
Foreign currencies: Assets and liabilities denominated in foreign currencies
are translated at the exchange rate on the balance sheet date. Translation
adjustments resulting from this process are charged or credited to other
comprehensive income. Revenue and expenses are translated at average rates of
exchange prevailing during the period. Gains and losses on foreign currency
transactions are included in Other income, net.
Concentration of credit risk: Financial instruments that potentially subject
the Company to concentrations of credit risk consist primarily of cash
equivalents, short-term investments, and trade receivables. These instruments
are generally unsecured and uninsured. The Company places its cash equivalents
and investments with major financial institutions. The Company operates in one
business segment and sells advertising to various companies across several
industries. Accounts receivable are typically unsecured and are derived from
revenues earned from customers primarily located in the United States operating
in a wide variety of industries and geographic areas. The Company performs
ongoing credit evaluations of its customers and maintains reserves for
potential credit losses. For the years ended December 31, 1999 and 1998, one
customer accounted for approximately 21% of revenues. For the year ended
December 31, 1997, no one customer accounted for more than 10% of revenues. At
December 31, 1999, one customer accounted for approximately 14% of accounts
receivable. At December 31, 1998, one customer accounted for approximately 27%
of accounts receivable.
56
<PAGE>
INFOSPACE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Income taxes: The Company has adopted Statement of Financial Accounting
Standards (SFAS) No. 109, Accounting for Income Taxes. Under SFAS No. 109,
deferred tax assets, including net operating loss carryforwards, and
liabilities are determined based on temporary differences between the book and
tax basis of assets and liabilities. The Company believes sufficient
uncertainty exists regarding the realizability of the deferred tax assets such
that a full valuation allowance is required.
Reclassification: Certain reclassifications have been made to the 1998 and
1997 balances to conform with the 1999 presentation.
Reverse stock split: A one-for-two reverse stock split of the Company's
common stock was effected on August 25, 1998. All references in the financial
statements to shares, share prices, per share amounts and stock plans have been
adjusted retroactively for the one-for-two reverse stock split.
Stock splits: A two-for-one stock split of the Company's common stock was
effected in May 1999. A second two-for-one stock split of the Company's common
stock was effected in January 2000. All references in the financial statements
to shares, share prices, per share amounts and stock plans have been adjusted
retroactively for these stock splits.
Use of estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual amounts may differ from estimates.
Recent accounting pronouncements: In December 1999, the Securities and
Exchange Commission staff issued Staff Accounting Bulletin (SAB) 101, Revenue
Recognition in Financial Statements. The SAB establishes certain criteria for
net versus gross recording of sales transactions and requires companies to
comply with the SAB no later than the first fiscal quarter of the fiscal year
beginning after December 15, 1999. The Company is adopting SAB 101 on January
1, 2000. Prior to January 1, 2000 and implementation of the SAB, the Company
recorded revenues from customers for development fees, implementation fees
and/or integration fees when the service was completed. If this revenue was
recognized on a straight-line basis over the term of the related service
agreements, in accordance with SAB 101, the Company estimates that
approximately $700,000 in revenue would have been deferred and recognized in
2000 and 2001. In accordance with SAB 101, the Company will record a cumulative
effect of change in accounting principle beginning in January 2000 and
recognize this revenue on a straight-lined basis.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivatives and
Hedging Activities, which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. Because the Company has never used nor currently intends to use
derivatives, management does not anticipate that the adoption of this new
standard will have a significant effect on earnings or the financial position
of the Company.
57
<PAGE>
INFOSPACE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 2: Balance Sheet Components
Investments at December 31, 1999 consist of the following:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gain Loss Value
------------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
Corporate notes and bonds
......................... $100,604,357 $ 61,109 $(530,513) $100,134,953
U.S. Government securities
......................... 52,920,693 14,198 (249,720) 52,685,171
Commercial paper ......... 27,362,325 147,997 -- 27,510,322
Certificate of deposit ... 15,249,544 79,125 (31,108) 15,297,561
------------ -------- --------- ------------
$196,136,919 $302,429 $(811,341) $195,628,007
============ ======== ========= ============
</TABLE>
Maturity information is as follows:
<TABLE>
<CAPTION>
Amortized
Cost Fair Value
------------ ------------
<S> <C> <C>
Within one year .................................. $124,720,142 $124,656,362
1 year through 5 years ........................... 71,416,777 70,971,645
------------ ------------
$196,136,919 $195,628,007
============ ============
</TABLE>
Investments at December 31, 1998 consist of the following:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gain Loss Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Commercial paper ............ $66,668,475 $13,259 $(253) $66,681,481
Municipal securities ........ 1,499,665 485 -- 1,500,150
U.S. Government securities
............................ 5,243,820 -- (387) 5,243,433
----------- ------- ----- -----------
$73,411,960 $13,744 $(640) $73,425,064
=========== ======= ===== ===========
</TABLE>
Maturity information is as follows:
<TABLE>
<CAPTION>
Amortized
Cost Fair Value
----------- -----------
<S> <C> <C>
Within one year .................................... $72,159,522 $72,173,013
1 year through 5 years ............................. 1,252,438 1,252,051
----------- -----------
$73,411,960 $73,425,064
=========== ===========
</TABLE>
58
<PAGE>
INFOSPACE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Property and equipment:
Computer equipment ............................. $ 3,852,352 $1,509,905
Purchased software ............................. 869,206 1,813
Internally developed software .................. 340,498 --
Office equipment ............................... 278,489 54,366
Office furniture ............................... 160,598 77,789
Leasehold improvements ......................... 320,498 17,632
----------- ----------
5,821,641 1,661,505
Accumulated depreciation ....................... (1,319,059) (422,703)
----------- ----------
$ 4,502,582 $1,238,802
=========== ==========
Intangible assets:
Goodwill ....................................... $70,436,117 $4,860,671
Core technology ................................ 6,500,000 800,000
Assembled workforce ............................ 420,000 40,000
Other .......................................... 552,292 435,417
----------- ----------
77,908,409 6,136,088
Accumulated amortization ....................... (4,081,284) (859,208)
----------- ----------
$73,827,125 $5,276,880
=========== ==========
Accrued expenses:
Salaries and related expenses .................. $ 2,357,981 $ 193,592
Accrued carriage fees .......................... 907,503 --
Accrued revenue share .......................... 1,064,638 93,067
Accrued settlement costs ....................... 10,500,000 4,500,000
Other .......................................... 1,768,260 245,791
----------- ----------
$16,598,382 $5,032,450
=========== ==========
</TABLE>
3. Notes Receivable
On June 30, 1999, the Company loaned an unrelated third party $6.0 million at
12% interest per annum. The short-term note and accrued interest was repaid on
February 7, 2000.
On December 1, 1999, the Company loaned an unrelated third party $2.5
million. This short-term note is due by August 1, 2000, and accrues interest at
12% per annum. The note is secured by all of the assets and properties of the
borrower and is considered fully collectible. At December 31, 1999, accrued
interest on this note is $25,000.
On December 21, 1999, the Company loaned a director of the Company $1.9
million. The promissory note is due on December 16, 2001, and accrues interest
at the prime rate. The note is secured by a pledge of the officer's shares of
the Company's common stock. The pledged shares are valued in excess of the note
balance. At December 31, 1999, accrued interest on this note is $4,405. At
December 31, 1999, the Company also had approximately $1 million in short-term
loans to employees and unrelated parties at various interest rates.
Approximately $939,000 of this balance has been repaid subsequent to year-end.
59
<PAGE>
INFOSPACE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Other Investments
The Company invests in equity instruments of public and privately-held
technology companies for business and strategic purposes. These investments are
recorded as long-term assets and are classified as available-for-sale
securities.
The Company also holds warrants in public and privately-held technology
companies for business and strategic purposes. Certain of these warrant
agreements contain provisions that require the Company to meet specific
performance criteria for the warrants to vest. When the Company meets its
performance obligations it records revenue equal to the difference in the
exercise price of the warrant and the fair market value of the underlying
security. The Company recorded revenue in the amount of $1,895,325 for vesting
in performance warrants and stock for the year ended December 31, 1999.
<TABLE>
<CAPTION>
Unrealized Carrying
Gain Value
---------- -----------
<S> <C> <C>
Investments in public companies...................... $1,324,301 $ 4,060,076
Investments in privately-held companies.............. -- 12,359,800
Investment in joint venture.......................... -- 359,273
---------- -----------
Total other investments.............................. $1,324,301 $16,779,149
========== ===========
</TABLE>
Note 5: Stockholders' Equity
Authorized shares: On May 1, 1998, the Company's Certificate of Incorporation
was amended to increase the authorized number of shares of all classes of
Company stock to 55,000,000 shares, consisting of 40,000,000 shares of common
stock with a par value of $.0001 per share and 15,000,000 shares of preferred
stock with a par value of $.0001 per share.
On August 25, 1998, the Board of Directors approved and the Company effected
a one-for-two reverse stock split of the Company's common stock.
Also, on August 25, 1998, the Company filed a Restated Certificate of
Incorporation. The effect was to change the authorized number of all classes of
Company stock to 65,000,000 shares, consisting of 50,000,000 shares of common
stock with a par value of $.0001 per share and 15,000,000 shares of preferred
stock with a par value of $.0001 per share after giving effect to the one-for-
two reverse stock split.
In April 1999, the Company closed a follow-on offering. The Company sold
8,680,000 shares and raised approximately $185 million, net of expenses.
Certain shareholders sold 6,040,000 shares.
On April 6, 1999, the Board of Directors approved a two-for-one stock split
of the Company's common stock. The stock split was effected on May 5, 1999.
On May 24, 1999, the stockholders of the Company approved an amendment to the
Company's Certificate of Incorporation to increase the authorized number of
shares of the Company's common stock to 200,000,000 shares.
On November 29, 1999, the Board of Directors approved a two-for-one stock
split of the Company's common stock. The stock split was effected on January 5,
2000.
Restated 1996 Flexible Stock Incentive Plan: On June 3, 1998, the Board of
Directors approved the Restated 1996 Flexible Stock Incentive Plan (the Plan).
The Plan provides employees (including officers and
60
<PAGE>
INFOSPACE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
directors who are employees) of the Company an opportunity to purchase shares
of stock pursuant to options which may qualify as incentive stock options under
Section 422 of the Internal Revenue Code of 1986, as amended (the Code), and
employees, officers, directors, independent contractors and consultants of the
Company an opportunity to purchase shares of stock pursuant to options which
are not described in Section 422 of the Code (nonqualified stock options). The
Plan also provides for the sale or bonus of stock to eligible individuals in
connection with the performance of service for the Company. Finally, the Plan
authorizes the grant of stock appreciation rights, either separately or in
tandem with stock options, which entitle holders to cash compensation measured
by appreciation in the value of the stock. Not more than 3,000,000 shares of
stock shall be available for the grant of options or the issuance of stock
under the Plan. If an option is surrendered or for any other reason ceases to
be exercisable in whole or in part, the shares which were subject to option but
on which the option has not been exercised shall continue to be available under
the Plan. The Plan is administered by the Board of Directors. Options granted
under the Plan typically vest over four years, 25% one year from the date of
grant and ratably thereafter on a monthly basis. Additional options have been
granted to retain certain existing employees, which options vest monthly over
four years.
On June 3, 1998, the Board of Directors approved the Option Exchange Program
and the Option Replacement Program, allowing employees of the Company to
exchange their nonqualified stock options for incentive stock options.
Nonqualified stock options to purchase a total of 1,450,212 shares were
exchanged for incentive stock options to purchase the equivalent number of
shares with an exercise price equal to the fair market value at the date of
exchange.
On May 24, 1999, the stockholders approved an amendment to the Plan to
increase the number of shares of Common Stock reserved for issuance thereunder
by 4,000,000 shares.
On May 24, 1999, the stockholders approved an amendment to the Plan to
annually increase the number of shares reserved for issuance on the first day
of the Company's fiscal year beginning January 1, 2000 by an amount equal to
the lesser of (A) 4,000,000 shares, (B) three percent of the Company's
outstanding shares at the end of the Company's preceding fiscal year, and (C) a
lesser amount determined by the Board of Directors.
On May 24, 1999, the stockholders approved an amendment to the Plan to limit
the number of shares of Common Stock that may be granted to any one individual
pursuant to stock options in any fiscal year of the Company to 4,000,000
shares, plus an additional 4,000,000 shares in connection with his or her
initial employment with the Company, which grant shall not count against the
limit.
Included in the table below as outstanding at December 31, 1999 are options
to purchase 225,192 shares that were issued outside of the Plan, of which
156,269 were exercisable as of December 31, 1999. The options issued outside
the Plan include 166,340 options that were assumed in acquisitions.
61
<PAGE>
INFOSPACE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Activity and price information regarding the options are summarized as
follows:
<TABLE>
<CAPTION>
Weighted average
Options Exercise price
---------- ----------------
<S> <C> <C>
Outstanding, December 31, 1996 ................. 4,164,424 0.06
Granted ...................................... 1,525,234 0.74
Exercised .................................... (488) 0.02
----------
Outstanding, December 31, 1997 ................. 5,689,170 0.24
Granted ...................................... 7,978,532 2.59
Cancelled .................................... (1,878,476) 0.53
Exercised .................................... (1,118,676) 0.91
----------
Outstanding, December 31, 1998 ................. 10,670,550 1.88
Granted ...................................... 4,137,212 27.93
Cancelled .................................... (380,377) 5.67
Exercised .................................... (1,990,442) 1.14
----------
Outstanding, December 31, 1999 ................. 12,436,943 10.55
==========
Options exercisable, December 31, 1999 ......... 4,185,769 2.05
==========
</TABLE>
Information regarding stock option grants during the years ended December 31,
1999, 1998 and 1997 is summarized as follows:
<TABLE>
<CAPTION>
Year ended Year ended Year ended
December 31, 1999 December 31, 1998 December 31, 1997
--------------------------- --------------------------- ---------------------------
Weighted Weighted Weighted Weighted Weighted Weighted
Average Average Average Average Average Average
exercise fair exercise fair exercise fair
Shares price value Shares price value Shares price value
--------- -------- -------- --------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Exercise price exceeds
market price........... -- $ -- $ -- -- -- $ -- 1,000,000 $1.00 $0.75
Exercise price equals
market price........... 4,137,212 27.93 28.26 6,932,532 2.93 2.91 57,738 0.70 0.22
Exercise price is less
than market price...... -- -- -- 1,066,000 0.33 0.89 467,496 0.19 0.60
</TABLE>
The Company has elected to follow the measurement provisions of Accounting
Principles Board Opinion No. 25, under which no recognition of expense is
required in accounting for stock options granted to employees for which the
exercise price equals or exceeds the fair market value of the stock at the
grant date. In those cases where options have been granted when the option
price is below fair market value, the Company recognizes compensation expense
over the vesting period using the aggregated percentage of compensation accrued
method as prescribed by Financial Standards Accounting Board Interpretation
No. 28. Compensation expense of $284,102, $1,246,132, and $143,922, was
recognized during the years ended December 31, 1999, 1998 and 1997,
respectively, for options granted with exercise prices less than grant date
fair market value.
To estimate compensation expense which would be recognized under SFAS No.
123, Accounting for Stock-based Compensation, the Company uses the modified
Black-Scholes option-pricing model with the following weighted-average
assumptions for options granted through December 31, 1999: risk-free interest
rate ranging from 4.24% to 6.56%; expected dividend yield of 0-%; 121%
volatility; and an expected life of five years for 1999 and six years for 1998
and prior.
62
<PAGE>
INFOSPACE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Had compensation expense for the Plan been determined based on fair value at
the grant dates for awards under the Plan consistent with SFAS No. 123,
Accounting for Stock-Based Compensation, the Company's net losses for the years
ended December 31, 1999, 1998 and 1997, would have been adjusted to the
following pro forma amounts:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ -----------
<S> <C> <C> <C>
Net loss as reported.................. $(21,693,775) $(11,818,703) $(1,660,915)
Net loss, pro forma................... (37,146,066) (12,234,567) (1,662,405)
Basic net loss per share, pro forma... $ (0.40) $ (0.22) $ (0.04)
</TABLE>
Additional information regarding options outstanding as of December 31, 1999,
is as follows:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
------------------------------------- -----------------------
Weighted
average Weighted Weighted
Range of remaining average average
exercise Number contractual exercise Number exercise
prices outstanding life (yrs.) price Exercisable price
-------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 0.01- 1.88 3,870,687 6.68 $ 0.94 2,820,076 $ 0.84
2.00- 9.77 4,552,296 7.91 3.66 1,193,633 3.59
10.75- 19.94 1,236,968 6.47 14.11 147,168 13.71
20.22- 28.63 2,020,900 9.75 23.48 -- --
31.19- 57.56 437,000 9.87 41.09 -- --
74.50-101.63 319,092 9.97 90.87 24,892 76.25
---------- ---- ------ --------- ------
12,436,943 8.14 10.55 4,185,769 2.05
========== ==== ====== ========= ======
</TABLE>
At December 31, 1999 6,179,815 shares were available for future grants under
the Plan.
In connection with the May and August 1998 private placement offering, the
Company issued warrants to purchase 8,255,344 shares of common stock to five
third-party participants for consulting services performed in identifying,
structuring and negotiating future financings. These warrants expire between
May 21, 2008 and August 6, 2008. The activity and additional information are as
follows:
<TABLE>
<S> <C>
Outstanding, December 31, 1998................................ 8,255,344
Exercised..................................................... (935,436)
---------
Outstanding, December 31, 1999................................ 7,319,908
=========
</TABLE>
<TABLE>
<CAPTION>
Range of
Exercise Number
prices Outstanding
-------- -----------
<S> <C>
$0.50-1.00.................................................. 3,934,984
1.25-1.50.................................................. 1,707,980
2.50....................................................... 1,676,944
</TABLE>
In July 1998, the Company issued warrants to purchase 1,911,868 shares of
common stock at an exercise price of $0.01 to a former consultant in
conjunction with the acquisition of Outpost (Note 4). All of these warrants
were exercised in 1999.
On August 24, 1998, the Company issued to AOL warrants to purchase up to
3,959,664 shares of common stock, which warrants vest in 16 equal quarterly
installments over four years, conditioned on the
63
<PAGE>
INFOSPACE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
delivery by AOL of a minimum number of searches each quarter on the Company's
white pages directory service. The warrants have an exercise price of $3.00 per
share. The warrants were valued using the fair value method, as required under
SFAS No. 123. The fair value of the warrants was approximately $3,300,000 at
the date of grant, and is being amortized ratably over the four-year vesting
period. The underlying assumptions used to determine the value of the warrants
are an expected life of six years and a 5.5% risk-free interest rate.
The Company assumed warrants to purchase 72,202 shares of the Company's
common stock as a result of the acquisition of INEX Corporation (Note 6). These
warrants were issued to seven third-party participants. Two of the third party
participants exercised 12,243 of the warrants in December 1999. The remaining
warrants expire between January 29, 2000 and July 31, 2000. The range of
exercise prices and number outstanding at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Range of Number
Exercise prices Outstanding
--------------- -----------
<S> <C>
$3.75........................................................ 17,139
8.00........................................................ 42,820
</TABLE>
Stock purchase rights plan: On June 26, 1998, the Board of Directors approved
the InfoSpace Stock Purchase Rights Plan. The plan was offered to employees of
the Company and its subsidiaries. The purpose of the plan was to provide an
opportunity for employees to invest in the Company and increase their incentive
to remain with the Company. A maximum of 2,000,000 shares of common stock were
available for issuance under the plan. During July 1998, the Company offered
shares to employees under the plan, resulting in the sale of 893,004 shares at
$1.88 per share. The plan was terminated on August 24, 1998.
1998 Employee Stock Purchase Plan: The Company adopted the 1998 Employee
Stock Purchase Plan (the ESPP) in August 1998. The ESPP was implemented upon
the effectiveness of the initial public offering. The ESPP is intended to
qualify under Section 423 of the Code, and permits eligible employees of the
Company and its subsidiaries to purchase common stock through payroll
deductions of up to 15% of their compensation. Under the ESPP, no employee may
purchase common stock worth more than $25,000 in any calendar year, valued as
of the first day of each offering period. In addition, owners of 5% or more of
the Company or subsidiary's common stock and the Company's executives may not
participate in the ESPP. An aggregate of 1,800,000 shares of common stock are
authorized for issuance under the ESPP.
The ESPP was implemented with six-month offering periods, with the first such
period commencing upon the effectiveness of the initial public offering and
ending July 31, 1999. Thereafter, offering periods will begin on each February
1 and August 1. The price of common stock purchased under the ESPP will be the
lesser of 85% of the fair market value on the first day of an offering period
and 85% of the fair market value on the last day of an offering period, except
that the purchase price for the first offering period was equal to the lesser
of 100% of the initial public offering price of the common stock offered hereby
and 85% of the fair market value on July 31, 1999. The ESPP does not have a
fixed expiration date, but may be terminated by the Company's Board of
Directors at any time. There were 76,290 shares issued for the first ESPP
offering period which ended on July 31, 1999.
Note 6: Business Combinations
Zephyr Software Inc: On December 29, 1999, the Company acquired all of the
common stock of Zephyr Software Inc., a privately held company, and its wholly
owned subsidiary Zephyr Software (India) Private Limited ("Zephyr") for a
purchase consideration of 325,696 shares of the Company's common stock and
acquisition expenses of $539,512. The acquisition was accounted for as a
purchase in accordance with
64
<PAGE>
INFOSPACE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Accounting Principles Board Opinion ("APB") No. 16. Results of operations for
Zephyr have been included with those of the Company for the period subsequent
to the date of acquisition.
The purchase price was allocated to the assets acquired and liabilities
assumed based on their estimated fair values as follows:
<TABLE>
<CAPTION>
Book and
Fair Value
----------
<S> <C>
Tangible assets acquired....................................... $ 217,932
Liabilities assumed............................................ (238,622)
----------
Book value of net liabilities acquired....................... (20,690)
Purchase price:
Fair value of shares issued.................................. 8,643,105
Acquisition costs............................................ 539,512
----------
Excess of purchase price over net assets acquired, allocated to
goodwill...................................................... $9,203,307
==========
</TABLE>
The Company is amortizing the goodwill over an estimated useful life of three
years.
eComLive.com, Inc.: On December 16, 1999, the Company acquired all of the
common stock of eComLive.com, Inc., a privately held company, for a purchase
consideration of 686,356 shares and acquisition expenses of $582,246. The
acquisition was accounted for as a purchase in accordance with the provisions
of APB No. 16.
The purchase price was allocated to the assets acquired and liabilities
assumed based on their estimated fair values as follows:
<TABLE>
<CAPTION>
Book and
Fair Value
-----------
<S> <C>
Tangible assets acquired...................................... $ 59,128
Liabilities assumed........................................... (60,053)
-----------
Book value of net liabilities acquired...................... (925)
Fair value adjustments:
Fair value of purchased technology, including in-process
research and development................................... 5,300,000
Fair value of assembled workforce........................... 140,000
-----------
Fair value of net assets acquired............................. 5,439,075
Purchase price:
Fair value of shares issued................................. 31,995,220
Acquisition costs........................................... 582,246
-----------
Excess of purchase price over net assets acquired, allocated
to goodwill.................................................. $27,138,391
===========
</TABLE>
The $5,300,000 value of purchased technology includes purchased in-process
research and development for future InfoSpace products. Generally accepted
accounting principles require purchased in-process research and development
with no alternative future use to be recorded and charged to expense in the
period acquired. Accordingly, the results of operations for the year ended
December 31, 1999, include the write-off of $2,000,000 of purchased in-process
research and development. The remaining $3,300,000 represents the purchase of
core technology and existing products which are being amortized over an
estimated useful life of five years. The Company is amortizing the goodwill
over an estimated life of five years.
65
<PAGE>
INFOSPACE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Union-Street.com: On October 14, 1999, the Company acquired all of the common
stock of Union-Street.com, a privately held company, for a purchase
consideration of 873,294 shares and acquisition expenses of $395,656. The
acquisition was accounted for as a purchase in accordance with the provisions
of APB No. 16.
The purchase price was allocated to the assets acquired and liabilities
assumed based on their estimated fair values as follows:
<TABLE>
<CAPTION>
Book and
Fair Value
-----------
<S> <C>
Tangible assets acquired...................................... $ 69,412
Liabilities assumed........................................... (176,631)
-----------
Book value of net liabilities acquired...................... (107,219)
Fair value adjustments:
Fair value of purchased technology, including in-process
research and development................................... 5,300,000
Fair value of assembled workforce........................... 160,000
-----------
Fair value of net assets acquired............................. 5,352,781
Purchase price:
Fair value of shares issued................................. 20,487,518
Acquisition costs........................................... 395,656
-----------
Excess of purchase price over net assets acquired, allocated
to goodwill.................................................. $15,530,393
===========
</TABLE>
The $5,300,000 value of purchased technology includes purchased in-process
research and development for future InfoSpace products. Generally accepted
accounting principles require purchased in-process research and development
with no alternative future use to be recorded and charged to expense in the
period acquired. Accordingly, the results of operations for the year ended
December 31, 1999, include the write-off of $3,300,000 of purchased in-process
research and development. The remaining $2,000,000 represents the purchase of
core technology and existing products which are being amortized over an
estimated useful life of five years. The Company is amortizing the goodwill
over an estimated useful life of five years.
INEX Corporation: On October 14, 1999, the Company completed the merger with
INEX Corporation, a privately held company that developed and marketed Internet
commerce applications to deliver solutions designed for small and medium-sized
merchants to build, manage and promote online storefronts. Under the terms of
the merger , which was accounted for as a pooling-of-interests, the Company
exchanged 1,800,000 shares of common stock for (1) directly to those INEX
shareholders who elected to receive our common stock in exchange for their INEX
shares at the closing of the combination, (2) upon the exchange or redemption
of the exchangeable shares of InfoSpace.com Canada Holdings Inc., an indirect
subsidiary of the Company, which exchangeable shares were issued to those INEX
shareholders who elected to receive exchangeable shares, or who did not make an
election to receive shares of our common stock at the closing, and (3) upon the
exercise of outstanding warrants and options to purchase INEX common shares,
which the Company assumed and which will become exercisable for shares of
InfoSpace common stock. The consolidated financial statements for the three
years ended December 31, 1999 and the accompanying notes reflect the Company's
financial position and the results of operations as if INEX was a wholly-owned
subsidiary since inception.
66
<PAGE>
INFOSPACE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
My Agent technology: On June 30, 1999 the Company acquired the MyAgent
technology and related assets from Active Voice Corporation for $18 million
dollars. The acquisition was accounted for as a purchase in accordance with the
provisions of APB No. 16. Under the purchase method of accounting, the purchase
price is allocated to the assets acquired and the liabilities assumed based on
their fair values at the date of the acquisition. Other than the MyAgent
technology modules, no other assets or liabilities were assumed as part of this
acquisition.
The Company recorded a non-recurring charge of $3.9 million for in-process
research and development that had not yet reached technological feasibility and
had no alternative future use. Separately, the Company also recorded a one-time
charge of approximately $1.0 million for expenses related to bonus payments
made to certain Active Voice MyAgent team employees who accepted employment
with InfoSpace but who are under no agreement to continue their employment with
InfoSpace. The Company also recorded $13.7 million of goodwill and $480,000 of
other intangible assets. These intangibles will be amortized over their useful
life, which the Company has estimated to be five years.
The allocation of the purchase price is summarized as follows:
<TABLE>
<S> <C>
Fair value of purchased technology, including in-process
research and development..................................... $ 4,300,000
Fair value of assembled workforce............................. 80,000
-----------
Fair value of net assets acquired............................. 4,380,000
Purchase price:
Cash paid................................................... 18,000,000
Acquisition costs........................................... 83,054
-----------
Excess of purchase price over net assets acquired, Allocated
to goodwill.................................................. $13,703,054
===========
</TABLE>
The $4.3 million value of purchased technology includes purchased in-process
research and development for future InfoSpace products. Generally accepted
accounting principles require purchased in-process research and development
with no alternative future use to be recorded and charged to expense in the
period acquired. Accordingly, the results of operations for the quarter ended
June 30, 1999, include the write-off of $3.9 million of purchased in-process
research and development. The remaining $400,000 represents the purchase of
core technology which is being amortized over an estimated useful life of five
years. The Company is amortizing the goodwill over an estimated life of five
years.
Prior to the acquisition, the MyAgent product team was not accounted for as a
separate entity, a subsidiary, or a line of business, or division of the
business, but rather was an integral part of the research and development
group. Accordingly, historical financial information is not available.
Outpost Network, Inc.: On June 2, 1998, the Company acquired all of the
common stock of Outpost, a privately held company, for a purchase consideration
of 5,999,952 shares of the Company's common stock, cash of $35,000, assumed
liabilities of $264,000, and acquisition expenses of $1,957,000. In conjunction
with the acquisition, the Company was required to issue warrants valued at
$1,902,000 to a former consultant, which are included in acquisition costs. The
transaction was accounted for as a purchase.
Of the purchase price of $7,992,000, $2,800,000 was allocated to in-process
research and development, $800,000 was allocated to core technology and
existing products and $4,543,000 was recorded as goodwill. Generally accepted
accounting principles require purchased in-process research and development
with no
67
<PAGE>
INFOSPACE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
alternative future use to be recorded and charged to expense in the period
acquired. Accordingly, the results of operations for the year ended December
31, 1998, include the write-off of the purchased in-process research and
development. The core technology and goodwill are being amortized over a useful
life of five years.
YPI: On May 16, 1997, the Company acquired all outstanding Membership
Interest Units of YPI, a limited liability company, in a transaction accounted
for as a purchase. YPI operations began to be included in the Company's
financial statements on the effective date of the acquisition, May 1, 1997. In
conjunction with the acquisition, the Company acquired certain advertising
agreements and assumed a note payable for $90,000. The purchase price of
$306,000 was allocated to advertising agreements of $85,417, note payable of
$90,000 and goodwill of $310,383. The aggregate number of shares of the stock
issued was derived from revenues generated by the business during the specified
measurement period. Before December 31, 1997, the number of shares to be issued
was finalized and a total of 340,000 shares were issued to the sellers on
January 2, 1998.
Pro forma information relating to acquisitions (unaudited)
The following unaudited pro forma information shows the results of the
Company for the year ended December 31, 1999 as if the acquisitions of Zephyr
Software, eComLive and Union-Street occurred on January 1, 1999 The pro forma
results of operations are unaudited, have been prepared for comparative
purposes only and do not purport to indicate the results of operations which
would actually have occurred had the combinations been in effect on the dates
indicated or which may occur in the future.
<TABLE>
<CAPTION>
(unaudited)
------------
<S> <C>
Revenue....................................................... $ 36,987,351
Net loss...................................................... (23,377,606)
Basic and diluted net loss per share.......................... $ (0.25)
</TABLE>
Note 7: Commitments and Contingencies
The Company has noncancellable operating leases for corporate facilities. The
leases expire through 2003. Rent expense under operating leases totaled
approximately $621,000, $266,000 and $134,000, for the years ended December 31,
1999, 1998 and 1997, respectively. The Company also has noncancellable carriage
fee agreements with certain affiliates.
Future minimum rental payments required under noncancellable operating leases
are as follows for the years ending December 31:
<TABLE>
<S> <C>
2000............................................................ $ 727,000
2001............................................................ 437,000
2002............................................................ 389,000
2003............................................................ 225,000
2004............................................................ 17,000
----------
$1,795,000
==========
</TABLE>
68
<PAGE>
INFOSPACE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Future payments required under noncancellable affiliate carriage fee
agreements are as follows for the years ending December 31:
<TABLE>
<S> <C>
2000........................................................... $12,083,000
2001........................................................... 11,572,000
2002........................................................... 900,000
2003........................................................... 900,000
2004........................................................... 900,000
-----------
$26,355,000
===========
</TABLE>
Litigation: On December 15, 1999, a complaint was filed against the Company
on behalf of a former employee in federal court in New Jersey alleging claims
for breach of contract, breach of the covenant of good faith and fair dealing,
fraud, negligent misrepresentation, and promissory estoppel. The former
employee contends he agreed to work for InfoSpace on the basis of certain
misrepresentations, that he entered into an agreement with the Company that
entitles him to an option to purchase 150,000 shares of the Company's common
stock, and that he was terminated without cause. The former employee seeks
(1) the right to purchase the shares of stock, (2) unspecified compensatory and
punitive damages, and (3) litigation costs and attorney's fees. On January 31,
2000, the Company answered the complaint. Discovery is ongoing, and trial is
set for September 2000. The Company is currently investigating the claims at
issue and believes the Company has meritorious defenses to such claims.
Nevertheless, litigation is uncertain and the Company may not prevail in this
suit.
One of the shareholders of INEX Corporation filed a complaint on September
22, 1999 alleging that the original shareholders of INEX and INEX itself were
bound by a shareholders agreement that entitled it to pre-emptive rights and
rights of first refusal. The complaint alleges that INEX improperly made
private placements, issued employee options and permitted share transfers after
February 1997. The complainant alleges it should have acquired rights in
approximately 88% of the INEX share capital, which would be less than one
percent of our common stock. The complaint also alleges other breaches of
contract, breach of fiduciary duty, corporate oppression, unlawful interference
with economic relations and conspiracy. The complaint was amended on December
20, 1999 to allege that the Company assumed the obligations of INEX under the
alleged shareholders agreement as a result of our acquisition of INEX on
October 14, 1999. The complaint seeks damages against the Company and named
former INEX shareholders for the difference between the issue or sale price of
INEX shares issued or transferred after February 1997 and before October 14,
1999 and the highest trading value of shares of the Company's common stock
received or receivable in exchange attained before the date of trial. In the
alternative, the complaint seeks special damages in the amount of $50,000,000
Canadian. The complaint also seeks $500,000 in punitive damages and
constructive trusts, equitable liens and tracing remedies in both INEX shares
formerly held by certain shareholders and shares of the Company's common stock
received by those shareholders in exchange for their INEX shares. 217,567
shares of the Company's common stock and shares exchangeable into the Company's
common stock that were part of the INEX purchase price which are held to
satisfy this claim. The Company is currently investigating the claims at issue
and believes the Company has meritorious defenses to such claims. Nevertheless,
litigation is uncertain and the Company may not prevail in this suit.
On December 23, 1998, the Company initiated litigation against Internet
Yellow Pages, Inc., or IYP, by filing suit in United States District Court for
the Western District of Washington. On February 3, 1999, the Company served a
first amended complaint on IYP and Greg Crane, an agent of IYP, in which the
Company asserted claims for (a) account stated, (b) breach of contract, and (c)
fraud. On March 5, 1999, IYP answered the Company's complaint in the Washington
action, and asserted claims for breach of contract, fraud,
69
<PAGE>
INFOSPACE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
extortion and Consumer Protection Act violations. IYP seeks relief consisting
of $1,500,000 and other unquantified money damages and treble damages for the
CPA and attorneys' fees. Discovery is ongoing. The Company is currently
investigating the claims at issue and believes the Company has meritorious
defenses to such claims. Nevertheless, litigation is uncertain and the Company
may not prevail in these suits. Trial is set for April 2000, but the parties
are finalizing an agreement to dispose of the case by a streamlined mini-trial
before a federal magistrate.
Settlement of litigation: On February 8, 2000, the Company reached a
settlement with an alleged former employee. Under the terms of the settlement,
the alleged former employee received a cash payment of $10.5 million. As this
subsequent event was settled prior to the issuance of the financial statements,
the expense has been recorded in the fourth quarter of 1999 in Other non-
recurring expense.
On February 22, 1999, the Company reached a settlement with a former
employee. Under the terms of the settlement the former employee received a cash
payment of $4.5 million. As this subsequent event was settled after December
31, 1998 but prior to the issuance of the financial statements, the expense was
recorded in the fourth quarter of 1998 in Other non-recurring expense.
Contingencies: In the Company's early stage of development, the Company did
not clearly document arrangements with employees and consultants, including
matters relating to the issuance of stock options. As a result of this
incomplete documentation, the Company may receive claims in the future
asserting rights to acquire common stock.
70
<PAGE>
INFOSPACE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 8: Income Taxes
No provision for federal income tax has been recorded as the Company has
incurred net operating losses through December 31, 1999. The tax effects of
temporary differences and net operating loss carryforwards that give rise to
the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward ................... $ 17,371,000 $ 36,000
Tax credits........................................ 372,000 --
Intangible amortization ........................... 428,000 60,000
Compensation expense--stock options ............... -- 59,000
Allowance for bad debt ............................ 237,000 203,000
Litigation accrual ................................ 3,675,000 1,530,000
Accrued carriage fees.............................. 318,000 --
Other, net ........................................ 225,000 34,000
Warrants .......................................... -- 46,000
Deferred revenue .................................. 199,000 473,000
------------ -----------
Gross deferred tax assets ....................... 22,825,000 2,441,000
Deferred tax liabilities:
Purchased technology .............................. 868,000 252,000
Prepaid expenses .................................. 125,000 113,000
Depreciation ...................................... 115,000 13,000
Unrealized investment gains ....................... 463,000 --
Other ............................................. 5,000 --
------------ -----------
Gross deferred tax liabilities .................. 1,576,000 378,000
------------ -----------
Net deferred tax assets ......................... 21,249,000 2,063,000
Valuation allowance ................................. (21,249,000) (2,063,000)
------------ -----------
Deferred tax balance ................................ $ -- $ --
============ ===========
</TABLE>
At December 31, 1999 and 1998, the Company provided a full valuation
allowance for its deferred tax assets. The Company believes sufficient
uncertainty exists regarding the realizability of the deferred tax assets such
that a full valuation allowance is required. The net change in the valuation
allowance during the years ended December 31, 1999 and 1998, was $19,186,000
and $1,792,000, respectively.
As of December 31, 1999, the Company's federal net operating loss
carryforward for income tax purposes was approximately $50 million. If not
utilized, the federal net operating loss carryforwards will begin to expire
between 2011 and 2019. The Company's federal research tax credit carryforwards
for income tax purposes are approximately $372,000. If not utilized, the
federal tax credit carryforwards will begin to expire between 2011 and 2019.
Deferred tax assets of approximately $17.5 million as of December 31, 1999
pertain to certain net operating loss carryforwards and credit carryforwards
resulting from the exercise of employee stock options. When recognized, the tax
benefit of these loss and credit carryforwards are accounted for as a credit to
additional paid-in capital rather than a reduction of the income tax provision.
71
<PAGE>
INFOSPACE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 9: Net Loss Per Share
The Company has adopted SFAS No. 128, Earnings per Share. Basic earnings per
share is computed using the weighted average number of common shares
outstanding during the period. Diluted earnings per share is computed using the
weighted average number of common and common equivalent shares outstanding
during the period. Common equivalent shares consist of the incremental common
shares issuable upon conversion of the exercise of stock options and warrants
(using the treasury stock method). Common equivalent shares are excluded from
the computation if their effect is antidilutive. The Company had a net loss for
all periods presented herein; therefore, none of the options and warrants
outstanding during each of the periods presented, as discussed in Note 5, were
included in the computation of diluted loss per share as they were
antidilutive. Options and warrants to purchase a total of 9,063,508, 6,016,789
and 1,574,181 shares of common stock were excluded from the calculations of
diluted loss per share for the years ended December 31, 1999, 1998 and 1997,
respectively. 340,000 contingently issuable shares of common stock have been
excluded from the calculation of basic earnings per share for the year ended
December 31, 1997 (Note 6).
Note 10: Information on Products and Services
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, SFAS No. 131 establishes standards for the
way that companies report information about operating segments in annual
financial statements. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers as well as
the reporting of selected information about operating segments in interim
financial statements for the year ended December 31, 1998. The adoption of SFAS
131 did not have a material effect on the Company's primary consolidated
financial statements but did affect the Company's disclosures.
The Company generates substantially all of its revenues through integrated
technology and services delivered through a common physical infrastructure, and
therefore the Company has only one reportable segment. Substantially all
revenues are generated from domestic sources. Substantially all of the
Company's long-lived assets are physically located within the United States.
Total operating expenses are controlled centrally based on established
budgets by operating department. Operating departments include product
development, sales and marketing, account management and customer service, and
finance and administration. Assets, technology, and personnel resources of the
Company are shared and utilized for all of the Company's service offerings.
These resources are allocated based on contractual requirements, the
identification of enhancements to the current service offerings, and other non-
financial criteria. The Company does not prepare operating statements by
revenue source. The Company does not account for, and does not report to
management, its assets or capital expenditures by revenue source.
72
<PAGE>
INFOSPACE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Revenue Information
Revenues are derived from the Company's consumer, merchant and wireless
services. These services generate revenues from advertising, content carriage,
licensing fees, commerce transaction fees and guaranteed transaction fees in
lieu of revenue share. Contracts with customers often utilize services from
more than one area of service and include revenue from more than one revenue
source.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1999 1998 1997
----------- ---------- ----------
<S> <C> <C> <C>
Consumer revenues........................ $29,371,286 $8,370,965 $1,424,748
Merchant revenues........................ 6,872,585 1,252,395 317,794
Wireless revenues........................ 663,300 -- --
----------- ---------- ----------
Total revenues........................... $36,907,171 $9,623,360 $1,742,542
=========== ========== ==========
</TABLE>
Note 11: Related-party transactions
During the years ended December 31, 1999, 1998 and 1997, the Company sold
advertising to other entities in which the Company's chief executive officer
had equity interests resulting in revenues of $580,912, $19,269 and $200,000,
respectively.
During 1999, the Company entered into a technology license and development
agreement for the development of a shopping cart technology with a software
development company whose majority owner is related to the Company's chief
executive officer. Under the terms of the agreement the Company paid a
development fee of $400,000. The Company owns all rights to the technology and
has granted a perpetual license to the software development company to use the
developed technology for certain limited uses.
Note 12: Investment in Joint Venture
In 1998, the Company entered into a joint venture with Thomson Directories
Limited to form TDL InfoSpace to replicate the Company's content, community and
commerce services in Europe. TDL InfoSpace has targeted the United Kingdom as
its first market, and content services were launched in the third quarter of
1998. Under the license agreement between Thomson and TDL InfoSpace, Thomson
licenses its U.K. directory information database to TDL InfoSpace. Under the
Web site services agreement between Thomson and TDL InfoSpace, Thomson also
sells Internet yellow pages advertising for the joint venture through its local
sales force. Under the Company's license agreement with TDL InfoSpace, the
Company licenses technology and provides hosting services to TDL InfoSpace.
Under the joint venture agreement, the Company and Thomson is obligated to
negotiate with TDL InfoSpace and the other party to jointly offer private label
solutions in other European countries prior to offering such services
independently or with other parties.
73
<PAGE>
INFOSPACE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 13: Subsequent Events
Business Combinations:
On March 10, 2000, the Company acquired San Mateo, California-based
Saraide.com, Inc., a provider of wireless Internet services in Europe, Japan
and Canada. Under the terms of the agreement, InfoSpace merged Saraide with its
own wireless services and issued 4,795,432 shares of the Company's common stock
valued at approximately $347.2 million to the existing shareholders of Saraide
in a transaction to be accounted for as a purchase. InfoSpace will control 80%
of the combined company.
On March 6, 2000, the Company signed a definitive agreement to acquire
Cupertino, California-based, Orchest, Inc. (MoneyPlant.com). Orchest has
developed a Web site to provide online account information aggregation for
consumers. Under the terms of the acquisition, which will be accounted for as a
purchase, InfoSpace will exchange 123,211 shares of the Company's common stock
valued at approximately $31.3 million for all of Orchest's outstanding shares.
On February 15, 2000, the Company closed the acquisition of Mountain View,
California-based Prio, Inc. Under the terms of the acquisition, which will be
accounted for as a pooling of interests, InfoSpace will exchange 5,293,456
shares of the Company's common stock for all of Prio's outstanding shares,
warrants and options. Prior period financial statements will be recast for this
acquisition in future filings.
On December 23, 1999, the Company signed a definitive agreement to acquire
Berkeley, California-based Millet Software (privacybank.com). Under the terms
of the acquisition, which will be accounted for as a purchase, InfoSpace will
exchange 297,552 shares of the Company's common stock valued at approximately
$29.7 million for all of Millet's outstanding shares, warrants and options. The
Company expects to close this acquisition in the first quarter of 2000.
Stockholder's Equity:
On January 21, 2000, the Board of Directors approved a two-for-one stock
split of the Company's common stock. In order to effect this split the Board of
Directors has approved, pending stockholder approval, increase the number of
authorized shares of Common Stock from 200,000,000 to 900,000,000 shares. A
special shareholder meeting of stockholders has been scheduled for April 3,
2000.
On January 21, 2000, the Board of Directors approved the deletion of the
4,000,000 limitation to the annual number of additional shares reserved for
issuance under the Restated 1996 Flexible Stock Incentive Program. The Company
intends to solicit stockholder approval for this amendment at its 2000 Annual
Meeting of Stockholders.
Commitments:
In March 2000, the Company entered into a five-year lease agreement for the
corporate headquarters in Bellevue, Washington. The Company will pay a monthly
base rent of $199,783 per month during the first two years, $208,864 per month
during the second two years and $217,864 per month during the final year.
74
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
We have omitted certain information from this Report that is required by Part
III. We intend to file a definitive proxy statement pursuant to Regulation 14A
with the Securities and Exchange Commission relating to our annual meeting of
stockholders not later than 120 days after the end of the fiscal year covered
by this Report, and such information is incorporated by reference herein.
Item 10. Executive Officers and Directors of the Registrant
The information concerning our directors required by this Item is
incorporated by reference to our proxy statement under the heading "Election of
Directors."
Information regarding our executive officers is included in Part I under the
caption "Executive Officers of the Registrant" and is incorporated by reference
into this Item.
Item 11. Executive Compensation
The information required by this Item is incorporated by reference to our
proxy statement under the heading "Additional Information Relating to Directors
and Officers of the Company."
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is incorporated by reference to our
proxy statement under the heading "Security Ownership of Certain Beneficial
Owners and Management."
Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated by reference to our
proxy statement under the heading "Additional Information Relating to Directors
and Officers of the Company--Certain Relationships and Related Transactions."
75
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Consolidated Financial Statements.
See Index to Consolidated Financial Statements at Item 8 on page 48 of this
report.
2. Financial Statement Schedules.
All financial statement schedules required by 14(a)(2) have been omitted
because they are not applicable or the required information is shown in the
Consolidated Financial Statements or Notes thereto.
3. Exhibits
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
3.1* Restated Certificate of Incorporation of the registrant.
3.2* Restated Bylaws of the registrant.
4.1* Form of Certificate of the Powers, Designations, Preferences and Rights
of Series A Preferred Stock.
10.1* Form of Indemnification Agreement between the registrant and each of
its Directors and Executive Officers.
10.2* Restated 1996 Flexible Stock Incentive Plan and Terms of Stock Option
Grant Program for Nonemployee Directors under the Restated 1996
Flexible Stock Incentive Plan.
10.3* 1998 Employee Stock Purchase Plan
10.4* Lease, dated May 14, 1998, between the registrant and TIAA Realty, Inc.
10.5* Registration Rights Agreement, dated May 1, 1997, among the registrant,
John E. Richards, Peter S. Richards, John Enger and Alexander Hutton
Capital L.L.C., as subsequently amended by Agreement dated as of
January 2, 1998, among the registrant, John E. Richards, Peter S.
Richards, John Enger and Alexander Hutton Capital L.L.C.
10.6* Agreement, dated January 2, 1998, among the registrant, John E.
Richards, Peter S. Richards, John Enger and Alexander Hutton Capital,
L.L.C.
10.7* Form of Common Stock and Common Stock Warrant Purchase Agreements,
dated May 21, 1998, between the registrant and each of Acorn Ventures-
IS, LLC, Kellett Partners, LLP and John and Carolyn Cunningham.
10.8* Form of Investor Rights Agreements, dated as of May 21, 1998, between
the registrant and each of Acorn Ventures-IS, LLC, Kellett Partners,
LLP and John and Carolyn Cunningham.
10.9* Form of Co-Sale Agreements, dated as of May 21, 1998, among the
registrant, Naveen Jain and each of Acorn Ventures-IS, LLC, Kellett
Partners, LLP and John and Carolyn Cunningham.
10.10* Form of Common Stock Warrant, dated May 21, 1998, between the
registrant and each of Acorn Ventures-IS, LLC, Kellett Partners, LLP
and John and Carolyn Cunningham.
10.11* Common Stock Purchase Agreement, dated as of August 6, 1998, by and
among the registrant and the investors named therein.
10.12* Stockholder Rights Agreement, dated as of August 6, 1998, by and among
the registrant and the investors named therein.
</TABLE>
76
<PAGE>
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
10.13* Form of Amendment to Common Stock and Common Stock Warrant Purchase
Agreements, dated August 6, 1998, between the Registrant and each of
Acorn Ventures-IS, LLC, Kellett Partners, LLP and John and Carolyn
Cunningham.
10.14* License Agreement, dated July 28, 1998, between the registrant and
American Business Information, Inc. (now known as infoUSA, Inc.).
10.15* Amended and Restated Content Provider Agreement, made as of August 24,
1998, effective as of April 25, 1998, between the registrant and 800-
U.S. Search.
10.16* Letter Agreement with Bernee D. L. Strom, dated November 22, 1998.
10.17 Lease, dated February 2000, between the registrant and Three Bellevue
Center, LLC.
10.18 Letter Agreement with Bernee D. L. Strom, dated December 15, 1999.
10.19 Letter Agreement with Naveen Jain, dated February 10, 2000.
23.1* Consent of Deloitte & Touche LLP, Independent Auditors.
24.1 Power of Attorney (contained on signature page hereto).
27.1 Financial Data Schedule
</TABLE>
- --------
* Previously filed.
Reports on Form 8-K.
The following reports on Form 8-K were filed during the quarter ended
December 31, 1999:
<TABLE>
<CAPTION>
Item # Description Filing Date
------ ----------- -----------
<C> <S> <C>
1. On October 4, 1999, we filed a Current Report on Form 8-K
(a "Form 8-K")
with the Securities and Exchange Commission (the
"Commission") to report under Item 5 that we had entered
into a definitive agreement to acquire Union-Street.com,
Inc.
2. On October 28, 1999, we filed a Form 8-K with the
Commission to report under Item 2 that we had completed
our acquisition of INEX Corporation and under Item 5
that we had completed our acquisition of Union-
Street.com, Inc. and had entered into a definitive
agreement to acquire Zephyr Software Inc. and its wholly
owned subsidiary, Zephyr Software (India) Private
Limited.
3. On December 20, 1999, we filed a Amendment to Current
Report on Form 8-K on Form 8-K/A with the Commission to
amend the Form 8-K filed on October 28, 1999 to report
under Item 7 updated financial information relating to
our acquisition of INEX Corporation.
4. On December 29, 1999, we filed a Form 8-K with the
Commission to report under Item 2 that we had completed
our acquisition of eComLive, Inc.
</TABLE>
(b) Exhibits.
See Item 14 (a) above.
(c) Financial Statements and Schedules.
See Item 14 (a) above.
77
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d), as amended, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Redmond, State of
Washington, on the 30th of March, 2000.
InfoSpace.com, Inc.
/s/ Naveen Jain
By: _________________________________
Naveen Jain, Chief Executive
Officer and Chairman of the Board
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Naveen Jain and Ellen B. Alben and each of them,
with full power of substitution and resubstitution and full power to act
without the other, as his true and lawful attorney-in-fact and agent to act in
his name, place and stead and to execute in the name and on behalf of each
person, individually and in each capacity stated below, and to file, any and
all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing,
ratifying and confirming all that said attorneys-in-fact and agents or any of
them or their and his or her substitute or substitutes, may lawfully do or
cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons in the
capacities indicated on the 30th day of March, 2000.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Naveen Jain Chief Executive Officer and
____________________________________ Chairman of the Board
Naveen Jain (Principal Executive
Officer)
/s/ Tammy D. Halstead Vice President, Acting Chief
____________________________________ Financial Officer and Chief
Tammy D. Halstead Accounting Officer
(Principal Financial and
Accounting Officer)
/s/ John E. Cunningham, IV Director
____________________________________
John E. Cunningham, IV
/s/ Peter L .S. Currie Director
____________________________________
Peter L. S. Currie
Director
____________________________________
Gary C. List
</TABLE>
78
<PAGE>
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Rufus W. Lumry III Director
____________________________________
Rufus W. Lumry III
/s/ Carl Stork Director
____________________________________
Carl Stork
/s/ Bernee D. L. Strom Director
____________________________________
Bernee D. L. Strom
/s/ David House Director
____________________________________
David House
</TABLE>
79
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
3.1* Restated Certificate of Incorporation of the registrant.
3.2* Restated Bylaws of the registrant.
4.1* Form of Certificate of the Powers, Designations, Preferences and Rights
of Series A Preferred Stock.
10.1* Form of Indemnification Agreement between the registrant and each of
its Directors and Executive Officers.
10.2* Restated 1996 Flexible Stock Incentive Plan and Terms of Stock Option
Grant Program for Nonemployee Directors under the Restated 1996
Flexible Stock Incentive Plan.
10.3* 1998 Employee Stock Purchase Plan
10.4* Lease, dated May 14, 1998, between the registrant and TIAA Realty, Inc.
10.5* Registration Rights Agreement, dated May 1, 1997, among the registrant,
John E. Richards, Peter S. Richards, John Enger and Alexander Hutton
Capital L.L.C., as subsequently amended by Agreement dated as of
January 2, 1998, among the registrant, John E. Richards, Peter S.
Richards, John Enger and Alexander Hutton Capital L.L.C.
10.6* Agreement, dated January 2, 1998, among the registrant, John E.
Richards, Peter S. Richards, John Enger and Alexander Hutton Capital,
L.L.C.
10.7* Form of Common Stock and Common Stock Warrant Purchase Agreements,
dated May 21, 1998, between the registrant and each of Acorn Ventures-
IS, LLC, Kellett Partners, LLP and John and Carolyn Cunningham.
10.8* Form of Investor Rights Agreements, dated as of May 21, 1998, between
the registrant and each of Acorn Ventures-IS, LLC, Kellett Partners,
LLP and John and Carolyn Cunningham.
10.9* Form of Co-Sale Agreements, dated as of May 21, 1998, among the
registrant, Naveen Jain and each of Acorn Ventures-IS, LLC, Kellett
Partners, LLP and John and Carolyn Cunningham.
10.10* Form of Common Stock Warrant, dated May 21, 1998, between the
registrant and each of Acorn Ventures-IS, LLC, Kellett Partners, LLP
and John and Carolyn Cunningham.
10.11* Common Stock Purchase Agreement, dated as of August 6, 1998, by and
among the registrant and the investors named therein.
10.12* Stockholder Rights Agreement, dated as of August 6, 1998, by and among
the registrant and the investors named therein.
10.13* Form of Amendment to Common Stock and Common Stock Warrant Purchase
Agreements, dated August 6, 1998, between the Registrant and each of
Acorn Ventures-IS, LLC, Kellett Partners, LLP and John and Carolyn
Cunningham.
10.14* License Agreement, dated July 28, 1998, between the registrant and
American Business Information, Inc. (now known as infoUSA, Inc.).
10.15* Amended and Restated Content Provider Agreement, made as of August 24,
1998, effective as of April 25, 1998, between the registrant and 800-
U.S. Search.
10.16* Letter Agreement with Bernee D. L. Strom, dated November 22, 1998.
10.17 Lease, dated February 2000, between the registrant and Three Bellevue
Center, LLC.
10.18 Letter Agreement with Bernee D. L. Strom, dated December 16, 1999.
10.19 Letter Agreement with Naveen Jain, dated February 10, 2000.
23.1* Consent of Deloitte & Touche LLP, Independent Auditors.
24.1 Power of Attorney (contained on signature page hereto).
27.1 Financial Data Schedule
</TABLE>
- --------
* Previously filed.
<PAGE>
EXHIBIT 10.17
THREE BELLEVUE CENTER
BELLEVUE, WASHINGTON
OFFICE LEASE AGREEMENT
BETWEEN
THREE BELLEVUE CENTER LLC, a Washington limited liability company
("LANDLORD")
AND
INFOSPACE.COM, INC., a Delaware corporation
("TENANT")
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
I. Basic Lease Information....................................... 1
II. Lease Grant................................................... 2
III. Adjustment of Commencement Date; Possession................... 3
IV. Rent.......................................................... 4
V. Compliance with Laws; Use..................................... 8
VI. Security Deposit.............................................. 8
VII. Services to be Furnished by Landlord.......................... 8
VIII. Leasehold Improvements........................................ 9
IX. Repairs and Alterations....................................... 9
X. Use of Electrical Services by Tenant..........................11
XI. Entry by Landlord.............................................11
XII. Assignment and Subletting.....................................11
XIII. Liens.........................................................13
XIV. Indemnity and Waiver of Claims................................13
XV. Insurance.....................................................13
XVI. Subrogation...................................................14
XVII. Casualty Damage...............................................14
XVIII. Condemnation..................................................15
XIX. Events of Default.............................................15
XX. Remedies......................................................15
XXI. Limitation of Liability.......................................16
XXII. No Waiver.....................................................17
XXIII. Quiet Enjoyment...............................................17
XXIV. Relocation....................................................17
XXV. Holding Over..................................................17
XXVI. Subordination to Mortgages; Estoppel Certificate..............17
XXVII. Attorneys' Fees...............................................18
XXVIII. Notice........................................................18
XXIX. Excepted Rights...............................................18
XXX. Surrender of Premises.........................................18
XXXI. Miscellaneous.................................................18
XXXII. Entire Agreement..............................................20
</TABLE>
Exhibits
- --------
Exhibit A - Outline and Location of Premises
Exhibit A-1 - Legal Description of Property
Exhibit B - Rules and Regulations
Exhibit C - Commencement Letter
Exhibit D - Work Letter Agreement
Exhibit E - Additional Provisions
Exhibit F - Subordination Agreement
Exhibit G - Rooftop Rates
Exhibit H - Form of Letter of Credit
Exhibit I - Ground Lessor Nondisturbance Agreement
Exhibit J - Facade Signage
i
<PAGE>
OFFICE LEASE AGREEMENT
This Office Lease Agreement (the "Lease") is made and entered into as of
the ____ day of February, 2000, by and between THREE BELLEVUE CENTER LLC, a
Washington limited liability company ("Landlord") and INFOSPACE.COM, INC., a
Delaware corporation ("Tenant").
I. Basic Lease Information.
A. "Building" shall mean the building located at 601 108th Avenue N.E.,
Bellevue, King County, Washington, and commonly known as Three Bellevue
Center.
B. "Rentable Square Footage of the Building" is deemed to be 472,410 square
feet.
C. "Premises" shall mean the area shown on Exhibit A to this Lease. The
Premises are located on Floors 8, 9, 10, 11 and 12 of the Building. The
"Rentable Square Footage of the Premises" is approximately 108,973 square
feet (96,951 usable square feet). The precise square footage of the
Premises shall be determined by Landlord and Tenant based upon Tenant's
Final Plans, and once so determined shall not be further adjusted except
to reflect additions to or other modifications of the Premises. Once the
area of the Premises is so determined, the area of the Premises, Base
Rent, Tenant's Pro Rata Share and the Allowance shall be appropriately
adjusted and confirmed in writing by Landlord and Tenant. "Rentable
Area," "rentable square feet" and similar terms shall mean Rentable Area
as determined in accordance with the American National Standard Method of
measuring floor space in office buildings as published by the Building
Owners and Managers Association International dated June 7, 1996
("BOMA"). "Usable Area "and "usable square feet" shall mean Usable Area
as determined in accordance with BOMA.
D. "Base Rent":
<TABLE>
<CAPTION>
Annual Monthly
Annual Rate ------ -------
Period Per Square Foot Base Rent Base Rent
------ --------------- --------- ---------
<S> <C> <C> <C>
Years 1 and 2 $22.00 $2,397,405.96 $199,783.83
Years 3 and 4 $23.00 $2,506,379.04 $208,864.92
Year 5 $24.00 $2,615,352.00 $217,946.00
</TABLE>
The above amounts are based on a rentable area of 108,973 square feet and
are subject to adjustment as provided in Section I.C above.
E. "Tenant's Pro Rata Share": 23.0675%, subject to adjustment per Section I.C
above.
F. "Term": A period of sixty (60) months, commencing on the later to occur of
(I) May 1, 2000 (the "Target Commencement Date") and, (ii) the date on
which the Landlord Work is Substantially Complete, as determined by Section
III.A. However, notwithstanding anything to the contrary contained in this
Lease, Tenant shall not be obligated to pay Base Rent on the portion of the
Premises located on the eighth (8th) floor of the Building (the "Eighth
Floor") until the earlier of (i) the date one hundred five (105) days after
the Commencement Date; or (ii) the date Tenant first occupies the Eighth
Floor for the Permitted Use. Tenant shall pay all Additional Rent and other
amounts owing under this Lease on the Eighth Floor commencing on the
Commencement Date. The Termination Date shall be the last day of the Term
based upon the actual Commencement Date, provided that if the Termination
Date, as determined herein, does not occur on the last day of a calendar
month, Landlord, at its option, may extend the Term by the number of days
necessary to cause the Termination Date to occur on the last day of the
last calendar month of the Term. Except as set forth is Section III.A
below, Landlord's failure to Substantially Complete the Landlord Work by
the Target Commencement Date shall not be a default by Landlord or
otherwise render Landlord liable for damages. Promptly after the
determination of the Commencement Date, Landlord and Tenant shall enter
into a commencement letter agreement in the form attached as Exhibit C.
G. Tenant allowance(s): $32.00 per square foot of usable area in the
Premises. See Exhibit D.
H. "Security Deposit": $800,000.00.
I. "Guarantor(s)": None.
1
<PAGE>
J. "Broker(s)": Colliers International, Inc. representing Landlord and
Leibsohn & Company representing Tenant.
K. "Permitted Use": General office purposes, including a computer/data center
room.
L. "Notice Addresses":
Tenant:
On and after the Commencement Date, notices shall be sent to Tenant at the
Premises, Attention: Chief Financial Officer, with a copy to the attention
of General Counsel. Prior to the Commencement Date, notices shall be sent
to Tenant at the following address:
InfoSpace.com, Inc.
15375 NE 90th St.
Redmond, WA 98052
Attention: Chief Financial Officer,
Phone #: (425) 882-1602
Fax #: (425) 882-0988
with a copy to Attention: General Counsel
<TABLE>
<CAPTION>
Landlord: With a copy to:
<S> <C>
Three Bellevue Center LLC Equity Office Properties
1191 Second Avenue, Suite 2000 Two North Riverside Plaza
Seattle, Washington 98101 Suite 2200
Attention: Building Manager Chicago, Illinois 60606
Attention: Regional Counsel -
West Region
</TABLE>
Payments of Rent only shall be made payable to the order of: Three
Bellevue Center LLC at the address of Landlord stated above.
M. "Business Day(s)" are Monday through Friday of each week, exclusive of New
Year's Day, President's Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day ("Holidays"). Landlord may designate
additional Holidays, provided that the additional Holidays are commonly
recognized by other office buildings in the area where the Building is
located.
N. "Landlord Work" means the work that Landlord is obligated to perform in the
Premises pursuant to this Lease and the work letter agreement (the "Work
Letter") attached as Exhibit D.
O. "Law(s)" means all applicable statutes, codes, ordinances, orders, rules
and regulations of any municipal or governmental entity.
P. "Normal Business Hours" for the Building are 6:00 A.M. to 7:00 P.M. on
Business Days and 8:00 A.M. to 1:00 P.M. on Saturdays.
Q. "Property" means the Building and the parcel(s) of land on which it is
located legally described on Exhibit A-1 attached hereto and, at Landlord's
discretion, the Building garage and other improvements serving the
Building, if any, and the parcel(s) of land on which they are located.
II. Lease Grant.
Landlord leases the Premises to Tenant and Tenant leases the Premises from
Landlord, together with the right in common with others to use any portions of
the Property that are designated by Landlord for the common use of tenants and
others, such as sidewalks, unreserved parking areas, common corridors, elevator
foyers, restrooms, vending areas and lobby areas (the "Common Areas").
2
<PAGE>
III. Adjustment of Commencement Date; Possession.
A. The Landlord Work shall be deemed to be "Substantially Complete" on the
date that all Landlord Work has been performed, other than any details of
construction, mechanical adjustment or any other similar matter, the
noncompletion of which does not materially interfere with Tenant's use of
the Premises, and as otherwise defined below. In the event the Landlord
Work has not been completed by June 15, 2000 for reasons other than Force
Majeure or Tenant Delay, then beginning on the Commencement Date Base Rent
and Additional Rent shall be abated one (1) day for each day that
substantial completion of the Landlord Work is delayed (excluding delays
caused by Force Majeure and Tenant Delay) after June 15, 2000; provided,
however, that in the event the Landlord Work has not been completed by
March 31, 2001 for any reason (including Force Majeure) other than Tenant
Delay, then Tenant shall have the right to terminate this Lease upon
written notice to Landlord within 30 days thereafter. However, if Landlord
is delayed in the performance of the Landlord Work as a result of any
Tenant Delay(s) (defined below), the Landlord Work shall be deemed to be
Substantially Complete on the date that Landlord could reasonably have been
expected to Substantially Complete the Landlord Work absent any Tenant
Delay. "Tenant Delay" means any act or omission of Tenant or its agents,
employees, vendors or contractors that actually delays the Substantial
Completion of the Landlord Work, including, without limitation: (1)
Tenant's failure to furnish information or approvals within any time period
specified in this Lease, including the failure to prepare or approve
preliminary or final plans by any applicable due date; (2) Tenant's
selection of equipment or materials that have long lead times after first
being informed by Landlord that the selection may result in a delay; (3)
changes requested or made by Tenant to previously approved plans and
specifications; (4) performance of work in the Premises by Tenant or
Tenant's contractor(s) during the performance of the Landlord Work; or (5)
if the performance of any portion of the Landlord Work depends on the prior
or simultaneous performance of work by Tenant, a delay by Tenant or
Tenant's contractor(s) in the completion of such work.
Notwithstanding anything to the contrary contained herein, the Commencement
Date shall not be deemed to occur until the following conditions shall have
been satisfied by Landlord:
(1) Landlord (A) shall have obtained a temporary Certificate of
Occupancy for the Building and the Premises, or (B) would have
been entitled to the issuance of a temporary Certificate of
Occupancy for the Building and the Premises, but for Tenant
Delay; and
(2) The following items shall have been substantially completed,
except to the extent the noncompletion of such items does not
materially interfere with Tenant's use of the Premises or was
caused by Tenant Delay:
(a) The utility and other systems servicing the Building and
necessary for the operation of the Building or Tenant's
occupancy and full enjoyment of the Premises (such as
elevators, plumbing, heating, ventilating, air conditioning,
electrical and security systems).
(b) The lobby of the Building and the entrances and public
portions (including the garage), stairways, corridors and
elevators (including freight elevators) of the Building; and
(c) The exterior of the Building (including the installation of
glass therein).
The occurrence of the Commencement Date prior to the completion in full of
all work required to be performed by Landlord as provided herein shall not
relieve Landlord of its obligation thereafter to complete the same with due
dispatch and in a workmanlike manner. Without waiving any rights of Tenant,
Landlord, Tenant, and Landlord's and Tenant's architects shall prepare
within thirty (30) days after the Commencement Date or as soon thereafter
as practicable a "punch-list" which shall consist of the items that have
not been, but should have been, finished or furnished by Landlord in the
Premises. Upon presentation of such punch-list to Landlord, Landlord shall,
with all due diligence, proceed to complete and furnish all punch-list
items. If such items relate to shell and core work, they shall be completed
at Landlord's sole cost and expense. If such items relate to Tenant
Improvements, they shall be paid in the same manner that the costs of
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Tenant Improvements are paid. Any such punch-list items which do not
materially interfere with Tenant's enjoyment of the portion of the Premises
involved shall not delay the Commencement Date with respect thereto.
B. Subject to Landlord's obligation to perform Landlord Work and Landlord's
obligations under Section IX.B., by taking possession of the Premises,
Tenant agrees that the Premises are in good order and satisfactory
condition, and that there are no representations or warranties by Landlord
regarding the condition of the Premises or the Building except as expressly
set forth in this Lease.
C. If Tenant takes possession of the Premises before the Commencement Date,
such possession shall be subject to the terms and conditions of this Lease
and Tenant shall pay Rent (defined in Section IV.A.) to Landlord for each
day of possession before the Commencement Date. Notwithstanding the
foregoing, Landlord shall give Tenant at least 30 days prior written notice
("Completion Notice") of the anticipated Commencement Date and Tenant may
occupy the Premises during the 30-day period prior to the Commencement Date
for the sole purpose of performing improvements or installing furniture,
equipment or other personal property and shall not be obligated to pay Rent
during such period. Tenant shall coordinate its occupancy during such
period with Landlord's Building contractor and the Tenant Improvement
Contractor (if different) and shall not interfere with the construction of
the Tenant Improvements.
IV. Rent.
A. Payments. As consideration for this Lease, Tenant shall pay Landlord,
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without any setoff or deduction except as expressly set forth in this
Lease, the total amount of Base Rent and Additional Rent due for the Term.
"Additional Rent" means all sums (exclusive of Base Rent) that Tenant is
required to pay Landlord. Additional Rent and Base Rent are sometimes
collectively referred to as "Rent". Tenant shall pay and be liable for all
rental, sales and use taxes (but excluding income taxes), if any, imposed
upon or measured by Rent under applicable Law. Base Rent and recurring
monthly charges of Additional Rent shall be due and payable in advance on
the first day of each calendar month without notice or demand, provided
that the installment of Base Rent for the first full calendar month of the
Term shall be payable upon Landlord's first disbursement of the Allowance
(as described in Exhibit D). All other items of Rent shall be due and
payable by Tenant on or before 30 days after billing by Landlord. All
payments of Rent shall be by good and sufficient check or by other means
(such as automatic debit or electronic transfer) acceptable to Landlord. If
Tenant fails to pay any item or installment of Rent when due, Tenant shall
pay Landlord an administration fee equal to 5% of the past due Rent,
provided that Tenant shall be entitled to a grace period of 5 days for the
first 2 late payments of Rent in a given calendar year. If the Term
commences on a day other than the first day of a calendar month or
terminates on a day other than the last day of a calendar month, the
monthly Base Rent and Tenant's Pro Rata Share of Expenses (defined in
Section IV.C.) and Taxes (defined in Section IV.D.) for the month shall be
prorated based on the number of days in such calendar month. Landlord's
acceptance of less than the correct amount of Rent shall be considered a
payment on account of the earliest Rent due. No endorsement or statement on
a check or letter accompanying a check or payment shall be considered an
accord and satisfaction, and either party may accept the check or payment
without prejudice to that party's right to recover the balance or pursue
other available remedies. Tenant's covenant to pay Rent is independent of
every other covenant in this Lease.
B. Payment of Tenant's Pro Rata Share of Expenses and Taxes. Tenant shall pay
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Tenant's Pro Rata Share of the total amount of Expenses (defined in Section
IV.C.) and Taxes (defined in Section IV.D) for each calendar year during
the Term. Landlord shall provide Tenant with a good faith estimate of the
total amount of Expenses and Taxes for each calendar year during the Term.
On or before the first day of each month, Tenant shall pay to Landlord a
monthly installment equal to one-twelfth of Tenant's Pro Rata Share of
Landlord's estimate of the total amount of Expenses and Taxes. If Landlord
determines that its good faith estimate was incorrect by a material amount,
Landlord may provide Tenant with a revised estimate. After its receipt of
the revised estimate, Tenant's monthly payments shall be based upon the
revised estimate. If Landlord does not provide Tenant with an estimate of
the total amount of Expenses and Taxes by January 1 of a calendar year,
Tenant shall continue to pay monthly installments based on the previous
year's estimate until Landlord provides Tenant with the new estimate. Upon
delivery of the new estimate, an adjustment shall be made for any month for
which Tenant paid monthly installments based on the previous year's
estimate. Tenant shall
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pay Landlord the amount of any underpayment within 30 days after receipt of
the new estimate. Any overpayment shall be refunded to Tenant within 30
days or credited against the next due future installment(s) of Additional
Rent.
Landlord currently estimates that for calendar year 2000 Expenses for the
Building will be $5.50 per rentable square foot and Taxes for the Building
will be $1.25 per rentable square foot.
As soon as is practical following the end of each calendar year, Landlord
shall furnish Tenant with a statement of the actual amount of Expenses and
Taxes for the prior calendar year and Tenant's Pro Rata Share of the actual
amount of Expenses and Taxes for the prior calendar year. If the estimated
amount of Expenses and Taxes for the prior calendar year is more than the
actual amount of Expenses and Taxes for the prior calendar year, Landlord
shall apply any overpayment by Tenant against Additional Rent due or next
becoming due, provided if the Term expires before the determination of the
overpayment, Landlord shall refund any overpayment to Tenant after first
deducting the amount of Rent due. If the estimated amount of Expenses and
Taxes for the prior calendar year is less than the actual amount of
Expenses and Taxes for such prior year, Tenant shall pay Landlord, within
30 days after its receipt of the statement of Expenses and Taxes, any
underpayment for the prior calendar year.
C. Expenses Defined. "Expenses" means all costs and expenses incurred in each
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calendar year in connection with operating, maintaining, repairing, and
managing the Building and the Property to a standard similar to other Class
A office buildings in Bellevue, Washington, including, but not limited to:
1. Labor costs, including, wages, salaries, social security and employment
taxes, medical and other types of insurance, uniforms, training, and
retirement and pension plans.
2. Management fees, the cost of equipping and maintaining a management
office not exceeding 2,000 square feet, accounting and bookkeeping
services and other customary administrative costs. Landlord, by itself
or through an affiliate, shall have the right to directly perform or
provide any services under this Lease (including management services),
provided that the cost of any such services shall not exceed the cost
that would have been incurred had Landlord entered into an arms-length
contract for such services with an unaffiliated entity of comparable
skill and experience. Landlord will engage Wright Runstad & Company to
manage the Property for at least two (2) years after the Commencement
Date.
3. The cost of services, including amounts paid to service providers and
the rental and purchase cost of parts, supplies, tools and equipment.
4. Premiums and commercially reasonable deductibles paid by Landlord for
insurance, including workers compensation, fire and extended coverage,
earthquake, general liability, rental loss, elevator, boiler and other
insurance customarily carried from time to time by owners of comparable
office buildings.
5. Electrical Costs (defined below) and charges for water, gas, steam and
sewer, but excluding those charges for which Landlord is reimbursed by
tenants. "Electrical Costs" means: (a) charges paid by Landlord for
electricity; (b) costs incurred in connection with an energy management
program for the Property. Electrical Costs shall be adjusted as
follows: (i) amounts received by Landlord as reimbursement for above
standard electrical consumption shall be deducted from Electrical Costs;
(ii) the cost of electricity incurred to provide overtime HVAC to
specific tenants (as reasonably estimated by Landlord) shall be deducted
from Electrical Costs; and (iii) if Tenant is billed directly for the
cost of building standard electricity to the Premises as a separate
charge in addition to Base Rent, the cost of electricity to individual
tenant spaces in the Building shall be deducted from Electrical Costs.
6. The amortized cost of capital improvements (as distinguished from
replacement parts or components installed in the ordinary course of
business) made to the Property after the Commencement Date which are:
(a) performed primarily to reduce operating expense costs or otherwise
improve the operating efficiency of the Property; or (b) required to
comply with any Laws that are enacted, or first interpreted to apply to
the Property, after the date of this Lease. The cost of capital
improvements shall be amortized by Landlord over the lesser of the
Payback Period
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(defined below) or 5 years. The amortized cost of capital improvements
may, at Landlord's option, include actual or imputed interest at the
rate that Landlord would reasonably be required to pay to finance the
cost of the capital improvement. "Payback Period" means the reasonably
estimated period of time that it takes for the cost savings resulting
from a capital improvement to equal the total cost of the capital
improvement.
If Landlord incurs Expenses for the Property together with one or more
other buildings or properties, whether pursuant to a reciprocal easement
agreement, common area agreement or otherwise, the shared costs and
expenses shall be equitably prorated and apportioned between the Property
and the other buildings or properties. Expenses shall not include:
(a) the cost of capital improvements (except as set forth above);
(b) depreciation; interest (except as provided above for the
amortization of capital improvements);
(c) principal payments of mortgage and other non-operating debts of
Landlord;
(d) the cost of repairs or other work to the extent Landlord is
reimbursed by insurance or condemnation proceeds;
(e) costs in connection with leasing space in the Building, including
brokerage commissions;
(f) lease concessions, including rental abatements and construction
allowances, granted to specific tenants;
(g) costs incurred in connection with the sale, financing or
refinancing of the Building;
(h) fines, interest and penalties incurred due to the late payment of
Taxes (defined in Section IV.D) or Expenses;
(i) organizational expenses associated with the creation and
operation of the entity which constitutes Landlord; or any penalties or
damages that Landlord pays to Tenant under this Lease or to other tenants
in the Building under their respective leases;
(j) costs resulting from the correction of any latent construction
defects in all or any portion of the Building, or any condition that is, as
of the Commencement Date of this Lease, not in compliance with applicable
laws, codes, rules or regulations;
(k) the costs of renovating or otherwise improving or decorating,
painting or redecorating space (exclusive of common areas) for any tenants
or other occupants of the Building or Project, including, without
limitation, Tenant;
(l) Landlord's general overhead and any other expense not directly
related to the Building or Project;
(m) all items, services and/or goods for which Tenant or any other
tenant, occupant, person or other party is obligated to reimburse, and does
reimburse, Landlord;
(n) brokerage, legal and professional fees expended by Landlord in
connection with negotiating and entering into any leases and any related
instruments with any tenant or other occupant of any portion of the
Building, and the enforcement of any such instruments; or which are
expended or incurred by Landlord in connection with the negotiation and
entering of sale, financing, partnership or similar transactions pertaining
to the Building;
(o) wages, salaries and other compensation paid to employees of the
Landlord at the Building who are above the level of general manager or
Building manager;
(p) the costs and expenses of maintenance and operation of any
parking facility in or serving the Building except to the extent that such
costs and expenses exceed any revenues for parking received from such
operation;
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(q) structural replacements;
(r) property management fees in excess of the prevailing market
management fee from time to time (determined on a percentage of gross
receipts basis) for regional or national operating/management companies
operating comparable first class office buildings in the Bellevue,
Washington area.
If the Building is not at least 95% occupied during any calendar year or if
Landlord is not supplying services to at least 95% of the total Rentable
Square Footage of the Building at any time during a calendar year, Expenses
(and, at Landlord's option, Taxes) shall, at Landlord's option, be
determined as if the Building had been 95% occupied and Landlord had been
supplying services to 95% of the Rentable Square Footage of the Building
during that calendar year. The extrapolation of Expenses under this Section
shall be performed by appropriately adjusting the cost of those components
of Expenses that are impacted by changes in the occupancy of the Building.
D. Taxes Defined. "Taxes" shall mean: (1) all real estate taxes and other
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assessments on the Building and/or Property, including, but not limited to,
assessments for special improvement districts and building improvement
districts, taxes and assessments levied in substitution or supplementation
in whole or in part of any such taxes and assessments and the Property's
share of any real estate taxes and assessments under any reciprocal
easement agreement, common area agreement or similar agreement as to the
Property; (2) all personal property taxes for property that is owned by
Landlord and used in connection with the operation, maintenance and repair
of the Property; and (3) all costs and fees incurred in connection with
seeking reductions in any tax liabilities described in (1) and (2),
including, without limitation, any costs incurred by Landlord for
compliance, review and appeal of tax liabilities. Without limitation, Taxes
shall not include any income, capital levy, franchise, capital stock, gift,
estate or inheritance tax. If an assessment is payable in installments,
Taxes for the year shall include the amount of the installment and any
interest due and payable during that year. For all other real estate taxes,
Taxes for that year shall include the amount due and payable for that year.
If a change in Taxes is obtained for any year of the Term, then Taxes for
that year will be retroactively adjusted and Landlord shall provide Tenant
with a credit, if any, based on the adjustment.
E. Audit Rights. Tenant may, within 90 days after receiving Landlord's
------------
statement of Expenses, give Landlord written notice ("Review Notice") that
Tenant intends to review Landlord's records of the Expenses for that
calendar year. Within a reasonable time after receipt of the Review Notice,
Landlord shall make all pertinent records available for inspection that are
reasonably necessary for Tenant to conduct its review. If any records are
maintained at a location other than the office of the Building, Tenant may
either inspect the records at such other location or pay for the reasonable
cost of copying and shipping the records. If Tenant retains an agent to
review Landlord's records, the agent must be with a licensed CPA firm.
Landlord agrees that Tenant may retain a third party agent to review
Landlord's books and records which third party agent is not a CPA firm, so
long as the third party agent retained by Tenant shall have expertise in
and familiarity with general industry practice with respect to the
operation of and accounting for a first class office building and whose
compensation shall in no way be contingent upon or correspond to the
financial impact on Tenant resulting from the review. Tenant shall be
solely responsible for all costs, expenses and fees incurred for the audit.
Within 60 days after the records are made available to Tenant, Tenant shall
have the right to give Landlord written notice (an "Objection Notice")
stating in reasonable detail any objection to Landlord's statement of
Expenses for that year. If Tenant fails to give Landlord an Objection
Notice within the 60 day period or fails to provide Landlord with a Review
Notice within the 90 day period described above, Tenant shall be deemed to
have approved Landlord's statement of Expenses and shall be barred from
raising any claims regarding the Expenses for that year. If Tenant provides
Landlord with a timely Objection Notice, Landlord and Tenant shall work
together in good faith to resolve any issues raised in Tenant's Objection
Notice. If Landlord and Tenant determine that Expenses for the calendar
year are less than reported, Landlord shall provide Tenant with a credit
against the next installment of Rent in the amount of the overpayment by
Tenant. Likewise, if Landlord and Tenant determine that Expenses for the
calendar year are greater than reported, Tenant shall pay Landlord the
amount of any underpayment within 30 days. In addition, if Landlord and
Tenant determine that Expenses for the Building for the year in question
were less than stated by more than five percent (5%), Landlord, within
thirty (30) days after its receipt of paid invoices
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therefor from Tenant, shall reimburse Tenant for any reasonable amounts
paid by Tenant to third parties in connection with such review by Tenant.
The records obtained by Tenant shall be treated as confidential. In no
event shall Tenant be permitted to examine Landlord's records or to dispute
any statement of Expenses unless Tenant has paid and continues to pay all
Rent when due.
V. Compliance with Laws; Use.
The Premises shall be used only for the Permitted Use and for no other use
whatsoever. Tenant shall not use or permit the use of the Premises for any
purpose which is illegal, dangerous to persons or property or which, in
Landlord's reasonable opinion, unreasonably disturbs any other tenants of the
Building or unreasonably interferes with the operation of the Building. Tenant
shall comply with all Laws, including the Americans with Disabilities Act,
regarding the operation of Tenant's business and the use, condition,
configuration and occupancy of the Premises. Tenant, within 10 days after
receipt, shall provide Landlord with copies of any notices it receives regarding
a violation or alleged violation of any Laws. Tenant shall comply with the rules
and regulations of the Building attached as Exhibit B and such other reasonable
rules and regulations adopted by Landlord from time to time. Tenant shall also
cause its agents, contractors, subcontractors, employees, customers, and
subtenants to comply with all rules and regulations. Landlord shall not
knowingly discriminate against Tenant in Landlord's enforcement of the rules and
regulations.
VI. Security Deposit.
A. The Security Deposit shall be delivered to Landlord upon the execution of
this Lease by Tenant and, if in the form of cash (or converted to cash),
shall be held by Landlord in an interest-bearing account (with interest to
be added to and held as a part of the Security Deposit hereunder) as
security for the performance of Tenant's obligations. The Security Deposit
is not an advance payment of Rent or a measure of Tenant's liability for
damages. Landlord may, from time to time, without prejudice to any other
remedy, use all or a portion of the Security Deposit to satisfy past due
Rent or to cure any uncured default by Tenant. If Landlord uses the
Security Deposit, Tenant shall on demand restore the Security Deposit to
its original amount. If Tenant is not in default at the termination of this
Lease, Landlord shall return any unapplied balance of the Security Deposit
to Tenant within thirty (30) day(s) after Tenant surrenders the Premises to
Landlord. In addition to any other deductions Landlord is entitled to make
pursuant to the terms hereof, Landlord shall have the right to make a good
faith estimate of any unreconciled Expenses and Taxes as of the Termination
Date and to deduct any anticipated shortfall from the Security Deposit. If
Landlord transfers its interest in the Premises, Landlord shall assign the
Security Deposit to the transferee and, following the assignment, Landlord
shall have no further liability for the return of the Security Deposit.
Landlord shall not be required to keep the Security Deposit separate from
its other accounts.
B. The Security Deposit may be in the form of an irrevocable letter of credit
(the "Letter of Credit"), which Letter of Credit shall: (a) be in the
amount of Eight Hundred Thousand Dollars ($800,000); (b) be in
substantially the form of Exhibit H attached hereto; (c) name Landlord as
its beneficiary; (d) be drawn on an FDIC insured financial institution
satisfactory to the Landlord; (e) expressly allow Landlord to draw upon it:
(i) in the event that the Tenant is in default under the Lease beyond
applicable notice and cure periods by delivering to the issuer of the
Letter of Credit written notice to such effect and certifying that Landlord
is entitled to draw thereunder pursuant to the terms of this Lease; or (ii)
if Tenant, within thirty (30) days prior to expiration of the Letter of
Credit then held by Landlord, fails to provide Landlord with a replacement
Letter of Credit meeting the requirements herein; (f) expressly state that
it will be honored by the issuer without inquiry into the accuracy of any
such notice or statement made by Landlord; (g) expressly permit multiple or
partial draws up to the stated amount of the Letter of Credit; (h)
expressly provide that it is transferable to any successor of Landlord; and
(i) expire no earlier than sixty (60) days after the Termination Date of
this Lease.
VII. Services to be Furnished by Landlord.
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A. Landlord agrees to furnish Tenant with the following services: (1) Water
service for use in the lavatories on each floor on which the Premises are
located; (2) Heat, ventilation and air conditioning in season during Normal
Business Hours, at such temperatures and in such amounts as are standard
for comparable Class A buildings or as required by governmental authority.
Tenant, upon such advance notice as is reasonably required by Landlord,
shall have the right to receive HVAC service during hours other than Normal
Business Hours. Tenant shall pay Landlord's actual costs of providing such
after-hours HVAC service (including a reasonable charge for additional wear
and tear on equipment); ; (3) Maintenance and repair of the Property as
described in Section IX.B.; (4) Janitor service on the evenings prior to
Business Days. If Tenant's use, floor covering or other improvements
require special services in excess of the standard services for the
Building, Tenant shall pay the additional cost attributable to the special
services; (5) Elevator service 24 hours per day, 7 days per week; (6)
Electricity to the Premises for the Permitted Use, in accordance with and
subject to the terms and conditions in Article X; and (7) such other
services as Landlord reasonably determines are necessary or appropriate for
the Property.
B. Landlord's failure to furnish, or any interruption or termination of,
services due to the application of Laws, the failure of any equipment, the
performance of repairs, improvements or alterations, or the occurrence of
any event or cause beyond the reasonable control of Landlord (a "Service
Failure") shall not render Landlord liable to Tenant, constitute a
constructive eviction of Tenant, give rise to an abatement of Rent, nor
relieve Tenant from the obligation to fulfill any covenant or agreement.
However, if the Premises, or a material portion of the Premises, is made
untenantable for a period in excess of 3 consecutive Business Days as a
result of the Service Failure, then Tenant, as its sole remedy, shall be
entitled to receive an abatement of Rent payable hereunder during the
period beginning on the 4th consecutive Business Day of the Service Failure
and ending on the day the service has been restored. If the entire Premises
has not been rendered untenantable by the Service Failure, the amount of
abatement that Tenant is entitled to receive shall be prorated based upon
the percentage of the Premises rendered untenantable and not used by
Tenant. In no event, however, shall Landlord be liable to Tenant for any
loss or damage, including the theft of Tenant's Property (defined in
Article XV), arising out of or in connection with the failure of any
security services, personnel or equipment.
VIII. Leasehold Improvements.
All improvements to the Premises (collectively, "Leasehold Improvements")
shall be owned by Landlord and shall remain upon the Premises without
compensation to Tenant. However, Landlord, by written notice to Tenant within 30
days prior to the Termination Date, may require Tenant to remove, at Tenant's
expense: (1) Cable (defined in Section IX.A) installed by or for the exclusive
benefit of Tenant and located in the Premises or other portions of the Building;
and (2) any Leasehold Improvements that are performed by or for the benefit of
Tenant and, in Landlord's reasonable judgment, are of a nature that would
require removal and repair costs that are materially in excess of the removal
and repair costs associated with standard office improvements (collectively
referred to as "Required Removables"). Without limitation, it is agreed that
Required Removables include internal stairways, raised floors, personal baths
and showers, vaults, rolling file systems and structural alterations and
modifications of any type. The Required Removables designated by Landlord shall
be removed by Tenant before the Termination Date, provided that upon prior
written notice to Landlord, Tenant may remain in the Premises for up to 5 days
after the Termination Date for the sole purpose of removing the Required
Removables. Tenant's possession of the Premises shall be subject to all of the
terms and conditions of this Lease, including the obligation to pay Rent on a
per diem basis at the rate in effect for the last month of the Term. Tenant
shall repair damage caused by the installation or removal of Required
Removables. If Tenant fails to remove any Required Removables or perform related
repairs in a timely manner, Landlord, at Tenant's expense, may remove and
dispose of the Required Removables and perform the required repairs. Tenant,
within 30 days after receipt of an invoice, shall reimburse Landlord for the
reasonable costs incurred by Landlord. Notwithstanding the foregoing, Tenant, at
the time it requests approval for a proposed Alteration (defined in Section
IX.C), may request in writing that Landlord advise Tenant whether the Alteration
or any portion of the Alteration will be designated as a Required Removable.
Within 10 days after receipt of Tenant's request, Landlord shall advise Tenant
in writing as to which portions of the Alteration, if any, will be considered to
be Required Removables. In addition, Tenant shall not be required to remove any
portion of the Tenant Improvements at the end of the Term.
IX. Repairs and Alterations.
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A. Tenant's Repair Obligations. Tenant shall, at its sole cost and expense,
---------------------------
promptly perform all maintenance and repairs to the Premises that are not
Landlord's express responsibility under this Lease, and shall keep the
Premises in good condition and repair, reasonable wear and tear excepted.
Tenant's repair obligations include, without limitation, repairs to: (1)
floor covering; (2) interior partitions; (3) doors; (4) the interior side
of demising walls; (5) electronic, phone and data cabling and related
equipment (collectively, "Cable") that is installed by or for the exclusive
benefit of Tenant and located in the Premises or other portions of the
Building; (6) supplemental air conditioning units, private showers and
kitchens, including hot water heaters, plumbing, and similar facilities
serving Tenant exclusively; and (7) Alterations performed by contractors
retained by Tenant, including related HVAC balancing required as a result
of such Alteration. All work shall be performed in accordance with the
rules and procedures described in Section IX.C. below. If Tenant fails to
make any repairs to the Premises for more than 15 days after notice from
Landlord (although notice shall not be required if there is an emergency),
Landlord may make the repairs, and Tenant shall pay the reasonable cost of
the repairs to Landlord within 30 days after receipt of an invoice,
together with an administrative charge in an amount equal to 5% of the cost
of the repairs. Notwithstanding the foregoing, if the repair to be
performed by Tenant cannot reasonably be completed within ten (10) days by
Tenant or Landlord, Landlord shall not exercise its right to make such
repair on Tenant's behalf so long as Tenant commences such repair within
five (5) days after notice from Landlord and is diligently pursuing the
same to completion.
B. Landlord's Repair Obligations. Landlord shall keep and maintain in good
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condition and repair and working order and make repairs to and perform
maintenance upon: (1) structural elements of the Building; (2) mechanical
(including HVAC), electrical, plumbing and fire/life safety systems serving
the Building in general; (3) Common Areas; (4) the roof and roof membrane
of the Building; (5) exterior windows of the Building; and (6) elevators
serving the Building. Landlord shall promptly make repairs (considering the
nature and urgency of the repair) for which Landlord is responsible.
C. Alterations. Tenant shall not make alterations, additions or improvements
------------
to the Premises or install any Cable in the Premises or other portions of
the Building (collectively referred to as "Alterations") without first
obtaining the written consent of Landlord in each instance, which consent
shall not be unreasonably withheld or delayed. However, Landlord's consent
shall not be required for any Alteration that satisfies all of the
following criteria (a "Cosmetic Alteration"): (1) is of a cosmetic nature
such as painting, wallpapering, hanging pictures and installing carpeting;
(2) is not visible from the exterior of the Premises or Building; (3) will
not affect the systems or structure of the Building; and (4) does not
require work to be performed inside the walls or above the ceiling of the
Premises. However, even though consent is not required, the performance of
Cosmetic Alterations shall be subject to all the other provisions of this
Section IX.C. Prior to starting work, Tenant shall furnish Landlord with
plans and specifications reasonably acceptable to Landlord; names of
contractors reasonably acceptable to Landlord (provided that Landlord may
designate specific contractors with respect to Building systems, and Tenant
may designate non-union contractors for Alterations to be constructed after
the Commencement Date); copies of contracts; necessary permits and
approvals; evidence of contractor's and subcontractor's insurance in
amounts reasonably required by Landlord. Changes to the plans and
specifications must also be submitted to Landlord for its approval.
Alterations shall be constructed in a good and workmanlike manner using
materials of a quality that is at least equal to the quality designated by
Landlord as the minimum standard for the Building. Landlord may designate
reasonable rules, regulations and procedures for the performance of work in
the Building and, to the extent reasonably necessary to avoid disruption to
the occupants of the Building, shall have the right to designate the time
when Alterations may be performed. Tenant shall reimburse Landlord within
30 days after receipt of an invoice for sums paid by Landlord for third
party examination of Tenant's plans for non-Cosmetic Alterations. In
addition, within 30 days after receipt of an invoice from Landlord, Tenant
shall pay Landlord a reasonable hourly fee (currently $100 per hour) for
Landlord's oversight and coordination of any non-Cosmetic Alterations. Upon
completion, Tenant shall furnish "as-built" plans (except for Cosmetic
Alterations), completion affidavits, full and final waivers of lien and
receipted bills covering all labor and materials. Tenant shall assure that
the Alterations comply with all insurance requirements and Laws. Landlord's
approval of an Alteration shall not be a representation by Landlord that
the Alteration complies with applicable Laws or will be adequate for
Tenant's use.
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X. Use of Electrical Services by Tenant.
A. Electricity used by Tenant in the Premises shall, at Landlord's option, be
paid for by Tenant either: (1) through inclusion in Expenses (except as
provided in Section X.B. for excess usage); (2) by a separate charge
payable by Tenant to Landlord within 30 days after billing by Landlord; or
(3) by separate charge billed by the applicable utility company and payable
directly by Tenant. Electrical service to the Premises may be furnished by
one or more companies providing electrical generation, transmission and
distribution services, and the cost of electricity may consist of several
different components or separate charges for such services, such as
generation, distribution and stranded cost charges. Landlord shall have
the exclusive right to select any company providing electrical service to
the Premises, to aggregate the electrical service for the Property and
Premises with other buildings, to purchase electricity through a broker
and/or buyers group and to change the providers and manner of purchasing
electricity.
B. Tenant's use of electrical service shall not exceed, either in voltage,
rated capacity, use beyond Normal Business Hours or overall load, Building
capacities. Building electrical capacities are 4.5 watts per square foot
connected load for convenience outlets, 1.2 watts per square foot connected
load for lighting (the code maximum), and an HVAC capacity for lights and
equipment of 3.5 watts per square foot (diversified load). An additional
1.5 watts per square foot connect load for convenience outlets can be made
available to Tenant and the cost of such increased capacity shall be paid
by Tenant. In the event Tenant elects to increase its connected load for
convenience outlets to 6.0 watts per square foot, Landlord reserves the
right to submeter the Premises and charge Tenant directly for such excess
usage. If Tenant requests permission to consume excess electrical service,
Landlord may refuse to consent or may condition consent upon conditions
that Landlord reasonably elects (including, without limitation, the
installation of utility service upgrades, meters, submeters, air handlers
or cooling units), and the additional usage (to the extent permitted by
Law), installation and maintenance costs shall be paid by Tenant. Landlord
shall have the right to separately meter electrical usage for the Premises
and to measure electrical usage by survey or other commonly accepted
methods.
XI. Entry by Landlord.
Landlord, its agents, contractors and representatives may enter the
Premises to inspect or show the Premises, to clean and make repairs, alterations
or additions to the Premises, and to conduct or facilitate repairs, alterations
or additions to any portion of the Building, including other tenants' premises.
Except in emergencies or to provide janitorial and other Building services after
Normal Business Hours, Landlord shall provide Tenant with reasonable prior
notice of entry into the Premises, which may be given orally. In exercising any
entry rights hereunder, Landlord shall comply with all reasonable measures
requested by Tenant in order to preserve the confidentiality and security of
Tenant's operations and business. If reasonably necessary for the protection
and safety of Tenant and its employees, Landlord shall have the right to
temporarily close all or a portion of the Premises to perform repairs,
alterations and additions. However, except in emergencies, Landlord will not
close the Premises if the work can reasonably be completed on weekends and after
Normal Business Hours. Entry by Landlord shall not constitute constructive
eviction or entitle Tenant to an abatement or reduction of Rent.
XII. Assignment and Subletting.
A. Except in connection with a Permitted Transfer (defined in Section XII.E.
below), Tenant shall not assign, sublease, transfer or encumber any
interest in this Lease or allow any third party to use any portion of the
Premises (collectively or individually, a "Transfer") without the prior
written consent of Landlord, which consent shall not be unreasonably
withheld if Landlord does not elect to exercise its termination rights
under Section XII.B below. Without limitation, it is agreed that Landlord's
consent shall not be considered unreasonably withheld if: (1) in the event
of a proposed assignment of this Lease, the proposed transferee's financial
condition does not meet the criteria Landlord uses to select Building
tenants having similar leasehold obligations; (2) the proposed transferee's
business is not suitable for the Building considering the business of the
other tenants and the Building's prestige, or would result in a violation
of an exclusive use right of another tenant; (3) the proposed transferee is
a governmental agency or occupant of the Building; (4) Tenant is in default
after the expiration of the notice and cure periods in this Lease; or (5)
any portion of the Building or Premises would likely
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become subject to additional or different Laws that would have a material,
adverse effect on the Building as a consequence of the proposed Transfer.
Tenant shall not be entitled to receive monetary damages based upon a claim
that Landlord unreasonably withheld its consent to a proposed Transfer and
Tenant's sole remedy shall be an action to enforce any such provision
through specific performance or declaratory judgment. Any attempted
Transfer in violation of this Article shall, at Landlord's option, be void.
Consent by Landlord to one or more Transfer(s) shall not operate as a
waiver of Landlord's rights to approve any subsequent Transfers. In no
event shall any Transfer or Permitted Transfer release or relieve Tenant
from any obligation under this Lease.
B. As part of its request for Landlord's consent to a Transfer, Tenant shall
provide Landlord with financial statements for the proposed transferee (in
the event of a proposed assignment), a complete copy of the proposed
assignment, sublease and other contractual documents and such other
information as Landlord may reasonably request. Landlord shall, by written
notice to Tenant within 30 days of its receipt of the required information
and documentation, either: (1) consent to the Transfer by the execution of
a consent agreement in a form reasonably designated by Landlord or
reasonably refuse to consent to the Transfer in writing; or (2) exercise
its right to terminate this Lease with respect to the portion of the
Premises that Tenant is proposing to assign or sublet; provided, however,
that Landlord shall not exercise its right to terminate this Lease in the
event Tenant is proposing to sublet, in the aggregate, no more than 25% of
the area of the Premises for less than all or substantially all of the
remainder of the Term. Any such termination shall be effective on the
proposed effective date of the Transfer for which Tenant requested consent.
Tenant shall pay Landlord a review fee of $750.00 for Landlord's review of
any Permitted Transfer or requested Transfer, provided if Landlord's actual
reasonable costs and expenses (including reasonable attorney's fees) exceed
$750.00, Tenant shall reimburse Landlord for its actual reasonable costs
and expenses in lieu of a fixed review fee.
C. Tenant shall pay Landlord 50% of all rent and other consideration which
Tenant receives as a result of a Transfer that is in excess of the Rent
payable to Landlord for the portion of the Premises and Term covered by the
Transfer. Tenant shall pay Landlord such excess within 30 days after
Tenant's receipt of such amounts. Tenant may deduct from the excess all
reasonable and customary expenses directly incurred by Tenant attributable
to the Transfer (other than Landlord's review fee), including brokerage
fees, legal fees and construction costs. If Tenant is in Monetary Default
(defined in Section XIX.A. below), Landlord may require that all sublease
payments be made directly to Landlord, in which case Tenant shall receive a
credit against Rent in the amount of any payments received (less Landlord's
share of such excess).
D. Except as provided below with respect to a Permitted Transfer, if Tenant is
a corporation, limited liability company, partnership, or similar entity,
and if the entity which owns or controls a majority of the voting
shares/rights at any time changes for any reason (including but not limited
to a merger, consolidation or reorganization), such change of ownership or
control shall constitute a Transfer. The foregoing shall not apply so long
as Tenant is an entity whose outstanding stock is listed on a recognized
security exchange, or if at least 80% of its voting stock is owned by
another entity, the voting stock of which is so listed.
E. Tenant may assign its entire interest under this Lease, or sublease all or
any portion of the Premises, to an affiliate of Tenant (meaning an entity
that controls, is controlled by, or is under common control with, Tenant)
or to a successor to Tenant by purchase, merger, consolidation or
reorganization without the consent of Landlord, provided that all of the
following conditions are satisfied (a "Permitted Transfer"): (1) Tenant
is not in default under this Lease after the expiration of any applicable
notice and cure periods in this Lease; (2) Tenant's successor shall own all
or substantially all of the assets of Tenant; (3) Tenant's successor shall
have a net worth which is at least equal to the greater of Tenant's net
worth at the date of this Lease or Tenant's net worth as of the day prior
to the proposed purchase, merger, consolidation or reorganization; (4) the
Permitted Use does not allow the Premises to be used for retail purposes;
and (5) Tenant shall give Landlord written notice at least 20 days prior to
the effective date of the proposed assignment, purchase, merger,
consolidation or reorganization. Tenant's notice to Landlord shall include
information and documentation showing that each of the above conditions has
been satisfied. If requested by Landlord in the event of an assignment,
Tenant's successor shall sign a commercially reasonable form of assumption
agreement.
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XIII. Liens.
Tenant shall not permit mechanic's or other liens to be placed upon the
Property, Premises or Tenant's leasehold interest in connection with any work or
service done or purportedly done by or for benefit of Tenant. If a lien is so
placed, Tenant shall, within 20 days of notice from Landlord of the filing of
the lien, fully discharge the lien by settling the claim which resulted in the
lien or by bonding or insuring over the lien in the manner prescribed by the
applicable lien Law. If Tenant fails to discharge the lien, then, in addition
to any other right or remedy of Landlord, Landlord may bond or insure over the
lien or otherwise discharge the lien. Tenant shall reimburse Landlord for any
amount paid by Landlord to bond or insure over the lien or discharge the lien,
including, without limitation, reasonable attorneys' fees (if and to the extent
permitted by Law) within 30 days after receipt of an invoice from Landlord.
XIV. Indemnity and Waiver of Claims.
A. Except to the extent caused by the negligence or willful misconduct of
Landlord or any Landlord Related Parties (defined below), Tenant shall
indemnify, defend and hold Landlord, its trustees, members, principals,
beneficiaries, partners, officers, directors, employees, Mortgagee(s)
(defined in Article XXVI) and agents ("Landlord Related Parties") harmless
against and from all liabilities, obligations, damages, penalties, claims,
actions, costs, charges and expenses, including, without limitation,
reasonable attorneys' fees and other professional fees (if and to the
extent permitted by Law), which may be imposed upon, incurred by or
asserted against Landlord or any of the Landlord Related Parties and
arising out of or in connection with any damage or injury occurring in the
Premises or any acts or omissions (including violations of Law) of Tenant,
the Tenant Related Parties (defined below) or any of Tenant's transferees,
contractors or licensees.
B. Except to the extent caused by the negligence or willful misconduct of
Tenant or any Tenant Related Parties (defined below), Landlord shall
indemnify, defend and hold Tenant, its trustees, members, principals,
beneficiaries, partners, officers, directors, employees and agents
("Tenant Related Parties") harmless against and from all liabilities,
obligations, damages, penalties, claims, actions, costs, charges and
expenses, including, without limitation, reasonable attorneys' fees and
other professional fees (if and to the extent permitted by Law), which may
be imposed upon, incurred by or asserted against Tenant or any of the
Tenant Related Parties and arising out of or in connection with the acts
or omissions (including violations of Law) of Landlord, the Landlord
Related Parties or any of Landlord's contractors.
C. Except for matters arising out of the negligence or willful misconduct of
Landlord or the Landlord Related Parties, Landlord and the Landlord
Related Parties shall not be liable for, and Tenant waives, all claims for
loss or damage to Tenant's business or loss, theft or damage to Tenant's
Property or the property of any person claiming by, through or under
Tenant resulting from: (1) wind or weather; (2) the failure of any
sprinkler, heating or air-conditioning equipment, any electric wiring or
any gas, water or steam pipes; (3) the backing up of any sewer pipe or
downspout; (4) the bursting, leaking or running of any tank, water closet,
drain or other pipe; (5) water, snow or ice upon or coming through the
roof, skylight, stairs, doorways, windows, walks or any other place upon
or near the Building; (6) any act or omission of any party other than
Landlord or Landlord Related Parties; and (7) any causes not reasonably
within the control of Landlord. Tenant shall insure itself against such
losses under Article XV below.
XV. Insurance.
Tenant shall carry and maintain the following insurance ("Tenant's
Insurance"), at its sole cost and expense: (1) Commercial General Liability
Insurance applicable to the Premises and its appurtenances providing, on an
occurrence basis, a minimum combined single limit of $2,000,000.00; (2) All Risk
Property/Business Interruption Insurance written at replacement cost value and
with a replacement cost endorsement covering all of Tenant's trade fixtures,
equipment, furniture and other personal property within the Premises ("Tenant's
Property"); (3) Workers' Compensation Insurance as required by the state in
which the Premises is located and in amounts as may be required by applicable
statute; and (4) Employers Liability Coverage of at least $1,000,000.00 per
occurrence. Any company writing any of Tenant's Insurance shall have an A.M.
Best rating of not less than A-VIII. All Commercial General Liability Insurance
policies shall name Tenant as a named insured and Landlord (or any successor),
Equity Office Properties Trust, a Maryland real estate investment trust, EOP
Operating Limited Partnership, a Delaware limited partnership, Wright Runstad
Associates Limited Partnership, a Washington
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limited partnership, any Mortgagee(s), and their respective members, principals,
beneficiaries, partners, officers, directors, employees, and agents, and other
designees of Landlord as the interest of such designees shall appear, as
additional insureds. All policies of Tenant's Insurance shall contain
endorsements that the insurer(s) shall give Landlord and its designees at least
30 days advance written notice of any cancellation, termination or lapse of
insurance. Tenant shall provide Landlord with a certificate of insurance
evidencing Tenant's Insurance prior to the earlier to occur of the Commencement
Date or the date Tenant is provided with possession of the Premises for any
reason, and upon renewals at least 15 days prior to the expiration of the
insurance coverage. Landlord shall maintain so called All Risk property
insurance on the Building at replacement cost value, as reasonably estimated by
Landlord and shall deliver a certificate evidencing such insurance to Tenant
upon Tenant's request. Except as specifically provided to the contrary, the
limits of either party's insurance shall not limit such party's liability under
this Lease.
XVI. Subrogation.
Notwithstanding anything in this Lease to the contrary, Landlord and Tenant
shall cause their respective insurance carriers to waive any and all rights of
recovery, claim, action or causes of action against the other and their
respective trustees, principals, beneficiaries, partners, officers, directors,
agents, and employees, for any loss or damage that may occur to Landlord or
Tenant or any party claiming by, through or under Landlord or Tenant, as the
case may be, with respect to Tenant's Property, the Building, the Premises, any
additions or improvements to the Building or Premises, or any contents thereof,
including all rights of recovery, claims, actions or causes of action arising
out of the negligence of Landlord or any Landlord Related Parties or the
negligence of Tenant or any Tenant Related Parties, which loss or damage is (or
would have been, had the insurance required by this Lease been carried) covered
by insurance.
XVII. Casualty Damage.
A. If all or any part of the Premises is damaged by fire or other casualty,
Tenant shall immediately notify Landlord in writing. During any period of
time that all or a portion of the Premises is rendered untenantable as a
result of a fire or other casualty, the Rent shall abate for the portion of
the Premises that is untenantable and not used by Tenant. Landlord shall
have the right to terminate this Lease if: (1) the Building shall be
damaged so that, in Landlord's reasonable judgment, substantial alteration
or reconstruction of the Building shall be required (whether or not the
Premises has been damaged) and Landlord is therefore terminating all
similarly situated leases in the Building ; (2) Landlord is not permitted
by Law to rebuild the Building in substantially the same form as existed
before the fire or casualty; (3) the Premises have been materially damaged
and there is less than 2 years of the Term remaining on the date of the
casualty; (4) any Mortgagee requires that the insurance proceeds over
$200,000 be applied to the payment of the mortgage debt; or (5) a material
uninsured loss to the Building occurs. Landlord may exercise its right to
terminate this Lease by notifying Tenant in writing within 90 days after
the date of the casualty. In addition to Landlord's rights to terminate as
provided herein, Tenant shall have the right to terminate this Lease if:
(1) a substantial portion of the Premises has been damaged by fire or other
casualty and such damage cannot reasonably be repaired within sixty (60)
days after the date of such fire or other casualty; (2) there is less than
one (1) year of the Lease Term remaining on the date of such casualty; (3)
the casualty was not caused by the negligence or willful misconduct of
Tenant or its agents, employees or contractors; and (4) Tenant provides
Landlord with written notice of its intent to terminate within thirty (30)
days after the date of the fire or other casualty. If neither Landlord nor
Tenant elect to terminate this Lease, Landlord shall commence and proceed
with reasonable diligence to repair and restore the Building and the
Leasehold Improvements (excluding any Alterations that were performed by
Tenant in violation of this Lease). However, in no event shall Landlord be
required to spend more than the insurance proceeds received by Landlord.
Landlord shall not be liable for any loss or damage to Tenant's Property or
to the business of Tenant resulting in any way from the fire or other
casualty or from the repair and restoration of the damage. Landlord and
Tenant hereby waive the provisions of any Law relating to the matters
addressed in this Article, and agree that their respective rights for
damage to or destruction of the Premises shall be those specifically
provided in this Lease.
B. If all or any portion of the Premises shall be made untenantable by fire or
other casualty, Landlord shall, with reasonable promptness, cause an
architect or general contractor selected by Landlord to provide Landlord
and Tenant with a written estimate of the
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amount of time required to substantially complete the repair and
restoration of the Premises and make the Premises tenantable again, using
standard working methods ("Completion Estimate"). If the Completion
Estimate indicates that the Premises cannot be made tenantable within 210
days from the date the repair and restoration is started, then regardless
of anything in Section XVII.A above to the contrary, either party shall
have the right to terminate this Lease by giving written notice to the
other of such election within 10 days after receipt of the Completion
Estimate.
XVIII. Condemnation.
Either party may terminate this Lease if the whole or any material part
of the Premises shall be taken or condemned for any public or quasi-public use
under Law, by eminent domain or private purchase in lieu thereof (a "Taking").
Landlord shall also have the right to terminate this Lease if there is a Taking
of any portion of the Building or Property which would leave the remainder of
the Building unsuitable for use as an office building in a manner comparable to
the Building's use prior to the Taking and Landlord is terminating all other
similarly situated leases in the Building. In order to exercise its right to
terminate the Lease, Landlord or Tenant, as the case may be, must provide
written notice of termination to the other within 45 days after the terminating
party first receives notice of the Taking. Any such termination shall be
effective as of the date the physical taking of the Premises or the portion of
the Building or Property occurs. If this Lease is not terminated, the Rentable
Square Footage of the Building, the Rentable Square Footage of the Premises and
Tenant's Pro Rata Share shall, if applicable, be appropriately adjusted. In
addition, Rent for any portion of the Premises taken or condemned shall be
abated during the unexpired Term of this Lease effective when the physical
taking of the portion of the Premises occurs. All compensation awarded for a
Taking, or sale proceeds, shall be the property of Landlord, any right to
receive compensation or proceeds being expressly waived by Tenant. However,
Tenant may file a separate claim at its sole cost and expense for Tenant's
Property and Tenant's reasonable relocation expenses, provided the filing of the
claim does not diminish the award which would otherwise be receivable by
Landlord .
XIX. Events of Default.
Tenant shall be considered to be in default of this Lease upon the occurrence
of any of the following events of default:
A. Tenant's failure to pay when due all or any portion of the Rent, if the
failure continues for 3 business days after written notice to Tenant
("Monetary Default").
B. Tenant's failure (other than a Monetary Default) to comply with any term,
provision or covenant of this Lease, if the failure is not cured within 20
days after written notice to Tenant. However, if Tenant's failure to comply
cannot reasonably be cured within 20 days, Tenant shall be allowed
additional time (not to exceed 90 days) as is reasonably necessary to cure
the failure so long as: (1) Tenant commences to cure the failure within 20
days, and (2) Tenant diligently pursues a course of action that will cure
the failure and bring Tenant back into compliance with the Lease. However,
if Tenant's failure to comply creates a hazardous condition, the failure
must be cured immediately upon notice to Tenant. In addition, if Landlord
provides Tenant with notice of Tenant's failure to comply with any
particular term, provision or covenant of the Lease on 3 occasions during
any 12 month period, Tenant's subsequent violation of such term, provision
or covenant shall, at Landlord's option, not require further notice (except
as required by law).
C. Tenant or any Guarantor becomes insolvent, makes a transfer in fraud of
creditors or makes an assignment for the benefit of creditors, or admits in
writing its inability to pay its debts when due.
D. The leasehold estate is taken by process or operation of Law.
XX. Remedies.
A. Upon any default, Landlord shall have the right without notice or demand
(except as provided in Article XIX) to pursue any of its rights and
remedies at Law or in equity, including any one or more of the following
remedies:
1. Terminate this Lease, in which case Tenant shall immediately surrender
the Premises to Landlord. If Tenant fails to surrender the Premises,
Landlord may, in compliance with applicable Law and without prejudice to
any other right or remedy,
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enter upon and take possession of the Premises and expel and remove
Tenant, Tenant's Property and any party occupying all or any part of the
Premises. Tenant shall pay Landlord on demand the amount of all past due
Rent and other losses and damages which Landlord may suffer as a result
of Tenant's default, whether by Landlord's inability to relet the
Premises on satisfactory terms or otherwise, including, without
limitation, all Costs of Reletting (defined below) and any deficiency
that may arise from reletting or the failure to relet the Premises.
"Costs of Reletting" shall include all costs and expenses incurred by
Landlord in reletting or attempting to relet the Premises, including,
without limitation, reasonable legal fees, brokerage commissions, the
cost of alterations and the value of other concessions or allowances
granted to a new tenant.
2. Terminate Tenant's right to possession of the Premises and, in
compliance with applicable Law, expel and remove Tenant, Tenant's
Property and any parties occupying all or any part of the Premises.
Landlord may (but shall not be obligated to) relet all or any part of
the Premises, without notice to Tenant, for a term that may be greater
or less than the balance of the Term and on such conditions (which may
include concessions, free rent and alterations of the Premises) and for
such uses as Landlord in its absolute discretion shall determine.
Landlord may collect and receive all rents and other income from the
reletting. Tenant shall pay Landlord on demand all past due Rent, all
Costs of Reletting and any deficiency arising from the reletting or
failure to relet the Premises. Landlord shall not be responsible or
liable for the failure to relet all or any part of the Premises or for
the failure to collect any Rent. The re-entry or taking of possession
of the Premises shall not be construed as an election by Landlord to
terminate this Lease unless a written notice of termination is given to
Tenant.
3. In lieu of calculating damages under Sections XX.A.1 or XX.A.2 above,
Landlord may elect to receive as damages the sum of (a) all Rent accrued
through the date of termination of this Lease or Tenant's right to
possession, and (b) an amount equal to the total Rent that Tenant would
have been required to pay for the remainder of the Term discounted to
present value at the Prime Rate (defined in Section XX.B. below) then in
effect, minus the then present fair rental value of the Premises for the
remainder of the Term, similarly discounted, after deducting all
anticipated Costs of Reletting.
B. Unless expressly provided in this Lease, the repossession or re-entering
of all or any part of the Premises shall not relieve Tenant of its
liabilities and obligations under the Lease. No right or remedy of
Landlord shall be exclusive of any other right or remedy. Each right and
remedy shall be cumulative and in addition to any other right and remedy
now or subsequently available to Landlord at Law or in equity. If Landlord
declares Tenant to be in default, Landlord shall be entitled to receive
interest on any unpaid item of Rent at a rate equal to the Prime Rate plus
4%. For purposes hereof, the "Prime Rate" shall be the per annum interest
rate publicly announced as its prime or base rate by a federally insured
bank selected by Landlord in the state in which the Building is located.
Forbearance by Landlord to enforce one or more remedies shall not
constitute a waiver of any default.
XXI. Limitation of Liability.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS LEASE, THE
LIABILITY OF LANDLORD (AND OF ANY SUCCESSOR LANDLORD) TO TENANT SHALL BE LIMITED
TO THE INTEREST OF LANDLORD IN THE PROPERTY. TENANT SHALL LOOK SOLELY TO
LANDLORD'S INTEREST IN THE PROPERTY FOR THE RECOVERY OF ANY JUDGMENT OR AWARD
AGAINST LANDLORD. NEITHER LANDLORD NOR ANY LANDLORD RELATED PARTY SHALL BE
PERSONALLY LIABLE FOR ANY JUDGMENT OR DEFICIENCY. INTEREST OF LANDLORD IN THE
BUILDING SHALL INCLUDE ANY ASSETS OF LANDLORD IN THE OPERATION OF THE BUILDING
(PRIOR TO THE DISTRIBUTION OF SAME TO ANY PARTNER OR SHAREHOLDER OF LANDLORD OR
ANY OTHER THIRD PARTY) SUCH AS ACCOUNTS RECEIVABLE, RENTS DUE FROM TENANTS,
INSURANCE PROCEEDS, FIXTURES, EQUIPMENT, SUPPLIES, CLAIMS OF ANY NATURE, SORT OR
DESCRIPTION AND ANY OTHER ITEMS DEEMED TO BE ASSETS IN CONNECTION WITH THE
OWNERSHIP, MAINTENANCE AND OPERATION OF THE BUILDING. BEFORE FILING SUIT FOR AN
ALLEGED DEFAULT BY LANDLORD, TENANT SHALL GIVE LANDLORD AND THE MORTGAGEE(S)
(DEFINED IN ARTICLE XXVI BELOW) WHOM TENANT HAS BEEN NOTIFIED HOLD MORTGAGES
(DEFINED IN ARTICLE XXVI BELOW) ON THE PROPERTY, BUILDING OR PREMISES, NOTICE
AND
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REASONABLE TIME TO CURE THE ALLEGED DEFAULT. IN ADDITION, TENANT ACKNOWLEDGES
THAT ANY ENTITY MANAGING THE BUILDING ON BEHALF OF LANDLORD, OR WHICH EXECUTES
THIS LEASE AS AGENT FOR LANDLORD, IS ACTING SOLELY IN ITS CAPACITY AS AGENT FOR
LANDLORD AND SHALL NOT BE LIABLE FOR ANY OBLIGATIONS, LIABILITIES, LOSSES OR
DAMAGES ARISING OUT OF OR IN CONNECTION WITH THIS LEASE, ALL OF WHICH ARE
EXPRESSLY WAIVED BY TENANT.
XXII. No Waiver.
Either party's failure to declare a default immediately upon its
occurrence, or delay in taking action for a default shall not constitute a
waiver of the default, nor shall it constitute an estoppel. Either party's
failure to enforce its rights for a default shall not constitute a waiver of its
rights regarding any subsequent default. Receipt by Landlord of Tenant's keys
to the Premises shall not constitute an acceptance or surrender of the Premises.
XXIII. Quiet Enjoyment.
Tenant shall, and may peacefully have, hold and enjoy the Premises,
subject to the terms of this Lease, provided Tenant pays the Rent and fully
performs all of its covenants and agreements. This covenant and all other
covenants of Landlord shall be binding upon Landlord and its successors only
during its or their respective periods of ownership of the Building, and shall
not be a personal covenant of Landlord or the Landlord Related Parties.
XXIV. Intentionally Omitted.
XXV. Holding Over.
Except for any permitted occupancy by Tenant under Article VIII, if
Tenant fails to surrender the Premises at the expiration or earlier termination
of this Lease, occupancy of the Premises after the termination or expiration
shall be that of a tenancy at sufferance. Tenant's occupancy of the Premises
during the holdover shall be subject to all the terms and provisions of this
Lease and Tenant shall pay an amount (on a per month basis without reduction for
partial months during the holdover) equal to 150% of the sum of the Base Rent
and Additional Rent due for the period immediately preceding the holdover. No
holdover by Tenant or payment by Tenant after the expiration or early
termination of this Lease shall be construed to extend the Term or prevent
Landlord from immediate recovery of possession of the Premises by summary
proceedings or otherwise. In addition to the payment of the amounts provided
above, if Landlord is unable to deliver possession of the Premises to a new
tenant, or to perform improvements for a new tenant, as a result of Tenant's
holdover and Tenant fails to vacate the Premises within 15 days after Landlord
notifies Tenant of Landlord's inability to deliver possession, or perform
improvements, Tenant shall be liable to Landlord for all damages, including,
without limitation, consequential damages, that Landlord suffers from the
holdover.
XXVI. Subordination to Mortgages; Estoppel Certificate.
Tenant accepts this Lease subject and subordinate to any mortgage(s),
deed(s) of trust, ground lease(s) or other lien(s) now or subsequently arising
upon the Premises, the Building or the Property, and to renewals, modifications,
refinancings and extensions thereof (collectively referred to as a "Mortgage").
Landlord represents that Bank of America N.A. and Union Bank of California, as
co-lenders, are the only Mortgagees (defined below) having a lien on the
Property as of the date of execution of this Lease, and Landlord shall deliver
to Tenant, in recordable form, a subordination, nondisturbance and attornment
agreement from such Mortgagees in substantially the form of Exhibit F within
thirty (30) days after execution of this Lease, and if such agreement is not so
delivered Tenant shall have the right to terminate this Lease upon written
notice given to Landlord within fifteen (15) days thereafter. The party having
the benefit of a Mortgage shall be referred to as a "Mortgagee". This clause
shall be self-operative, but upon request from a Mortgagee, Tenant shall execute
a commercially reasonable subordination agreement in favor of the Mortgagee,
including a subordination, non-disturbance and attornment agreement in the form
of Exhibit F attached hereto. In lieu of having the Mortgage be superior to this
Lease, a Mortgagee shall have the right at any time to subordinate its Mortgage
to this Lease. If requested by a successor-in-interest to all or a part of
Landlord's interest in the Lease, Tenant shall, without charge, attorn to the
successor-in-interest. Landlord and Tenant shall each, within 10 days after
receipt of a written request from the other, execute and deliver an estoppel
certificate to those parties as are reasonably requested by the other (including
a Mortgagee or prospective purchaser). The estoppel certificate shall include a
statement certifying that this Lease is unmodified (except as identified in the
estoppel certificate) and in full force and effect, describing the dates to
which Rent and other charges have been paid, representing that, to such party's
actual knowledge, there is no
17
<PAGE>
default (or stating the nature of the alleged default) and indicating other
matters with respect to the Lease that may reasonably be requested.
XXVII. Attorneys' Fees.
If either party institutes a suit against the other for violation of or
to enforce any covenant or condition of this Lease, or if either party
intervenes in any suit in which the other is a party to enforce or protect its
interest or rights, the prevailing party shall be entitled to all of its costs
and expenses, including, without limitation, reasonable attorneys' fees.
XXVIII. Notice.
If a demand, request, approval, consent or notice (collectively referred
to as a "notice") shall or may be given to either party by the other, the notice
shall be in writing and delivered by hand or sent by registered or certified
mail with return receipt requested, or sent by overnight or same day courier
service at the party's respective Notice Address(es) set forth in Article I,
except that if Tenant has vacated the Premises (or if the Notice Address for
Tenant is other than the Premises, and Tenant has vacated such address) without
providing Landlord a new Notice Address, Landlord may serve notice in any manner
described in this Article or in any other manner permitted by Law. Each notice
shall be deemed to have been received or given on the earlier to occur of actual
delivery or the date on which delivery is refused, or, if Tenant has vacated the
Premises or the other Notice Address of Tenant without providing a new Notice
Address, three (3) business days after notice is deposited in the U.S. mail or
with a courier service in the manner described above. Either party may, at any
time, change its Notice Address by giving the other party written notice of the
new address in the manner described in this Article.
XXIX. Excepted Rights.
This Lease does not grant any rights to light or air over or about the
Building. Except as otherwise expressly set forth in this Lease, Landlord
excepts and reserves exclusively to itself the use of: (1) roofs, (2) telephone,
electrical and janitorial closets, (3) equipment rooms, Building risers or
similar areas that are used by Landlord for the provision of Building services,
(4) rights to the land and improvements below the floor of the Premises, (5) the
improvements and air rights above the Premises, (6) the improvements and air
rights outside the demising walls of the Premises, and (7) the areas within the
Premises used for the installation of utility lines and other installations
serving occupants of the Building. Landlord has the right to change the
Building's name or address. Landlord also has the right to make such other
changes to the Property and Building as Landlord deems appropriate, provided the
changes do not materially affect Tenant's ability to use the Premises for the
Permitted Use or materially adversely affect Tenant's rights under this Lease.
Landlord shall also have the right (but not the obligation) to temporarily close
the Building if Landlord reasonably determines that there is an imminent danger
of significant damage to the Building or of personal injury to Landlord's
employees or the occupants of the Building. The circumstances under which
Landlord may temporarily close the Building shall include, without limitation,
electrical interruptions, hurricanes and civil disturbances. A closure of the
Building under such circumstances shall not constitute a constructive eviction
nor entitle Tenant to an abatement or reduction of Rent.
XXX. Surrender of Premises.
At the expiration or earlier termination of this Lease or Tenant's right
of possession, Tenant shall remove Tenant's Property (defined in Article XV)
from the Premises, and quit and surrender the Premises to Landlord, broom clean,
and in good order, condition and repair, ordinary wear and tear excepted. Tenant
shall also be required to remove the Required Removables in accordance with
Article VIII. If Tenant fails to remove any of Tenant's Property within 2 days
after the termination of this Lease or of Tenant's right to possession,
Landlord, at Tenant's sole cost and expense, shall be entitled (but not
obligated) to remove and store Tenant's Property. Landlord shall not be
responsible for the value, preservation or safekeeping of Tenant's Property.
Tenant shall pay Landlord, upon demand, the expenses and storage charges
incurred for Tenant's Property. In addition, if Tenant fails to remove Tenant's
Property from the Premises or storage, as the case may be, within 30 days after
written notice, Landlord may deem all or any part of Tenant's Property to be
abandoned, and title to Tenant's Property shall be deemed to be immediately
vested in Landlord.
XXXI. Miscellaneous.
A. This Lease and the rights and obligations of the parties shall be
interpreted, construed and enforced in accordance with the Laws of the
state of Washington and Landlord and Tenant hereby irrevocably consent
to the jurisdiction and proper venue of such state. If any term or
provision of this Lease shall to any extent be invalid or unenforceable,
the remainder of this Lease shall not be affected, and each provision of
this Lease shall be valid and enforced to the fullest extent permitted
by Law. The headings and titles to the
18
<PAGE>
Articles and Sections of this Lease are for convenience only and shall
have no effect on the interpretation of any part of the Lease.
B. Tenant shall not record this Lease without Landlord's prior written
consent, but the parties shall, at the request of either party, execute
and record a memorandum of this Lease in a form acceptable to both
parties.
C. Landlord and Tenant hereby waive any right to trial by jury in any
proceeding based upon a breach of this Lease.
D. Whenever a period of time is prescribed for the taking of an action by
Landlord or Tenant, the period of time for the performance of such action
shall be extended by the number of days that the performance is actually
delayed due to strikes, acts of God, shortages of labor or materials,
war, civil disturbances and other causes beyond the reasonable control of
the performing party ("Force Majeure"). However, events of Force Majeure
shall not extend any period of time for the payment of Rent or other sums
payable by either party or any period of time for the written exercise of
an option or right by either party.
E. After the Commencement Date, Landlord shall have the right to transfer
and assign, in whole or in part, all of its rights and obligations under
this Lease and in the Building and/or Property referred to herein, and
upon such transfer, and upon Landlord's delivery of the Security Deposit
to the transferee and the transferee's written assumption of all of
Landlord's obligations contained in this Lease accruing from and after
the date of such assumption, Landlord shall be released from any further
obligations hereunder, and Tenant agrees to look solely to the successor
in interest of Landlord for the performance of such obligations.
F. 1. Tenant represents that it has dealt directly with and only with
the Brokers as a broker in connection with this Lease. Tenant
shall indemnify and hold Landlord and the Landlord Related Parties
harmless from all claims of any other brokers claiming to have
represented Tenant in connection with this Lease. Landlord agrees
to indemnify and hold Tenant and the Tenant Related Parties
harmless from all claims of the Brokers and any brokers claiming
to have represented Landlord in connection with this Lease.
Landlord agrees to pay a brokerage commission to Brokers in
accordance with the terms of a written commission agreement
between Landlord and Brokers.
2. Agency Disclosure. At the signing of this Lease, Landlord's
leasing agent, Tim O'Keefe, of Colliers International, Inc.
represented Landlord. At the signing of this Lease, Tenant's
agent, Craig Levine of Leibsohn & Company represented Tenant. Each
party signing this document confirms that the prior oral and/or
written disclosure of agency was provided to such party in this
transaction, as required by RCW 18.86.030(1)(g).
3. Landlord and Tenant, by their execution of this Lease, each
acknowledge and agree that they have timely received a pamphlet on
the law of real estate agency as required under RCW
18.86.030(1)(f).
G. Tenant covenants, warrants and represents that: (1) each individual
executing, attesting and/or delivering this Lease on behalf of Tenant is
authorized to do so on behalf of Tenant; (2) this Lease is binding upon
Tenant; and (3) Tenant is duly organized and legally existing in the state
of its organization and is qualified to do business in the state in which
the Premises are located. If there is more than one Tenant, or if Tenant
is comprised of more than one party or entity, the obligations imposed upon
Tenant shall be joint and several obligations of all the parties and
entities. Notices, payments and agreements given or made by, with or to any
one person or entity constituting Tenant shall be deemed to have been given
or made by, with and to all of them.
Landlord covenants, warrants and represents that: (1) each individual
executing, attesting and/or delivering this Lease on behalf of Landlord is
authorized to do so on behalf of Landlord; (2) this Lease is binding upon
Landlord; and (3) Landlord is duly organized and legally existing in the
state of its organization and is qualified to do business in the state in
which the Premises are located.
H. Time is of the essence with respect to Tenant's exercise of any expansion,
renewal or extension rights granted to Tenant. This Lease shall create
only the relationship of landlord and tenant between the parties, and not a
partnership, joint venture or any other relationship. This Lease and the
covenants and conditions in this Lease shall
19
<PAGE>
inure only to the benefit of and be binding only upon Landlord and Tenant
and their permitted successors and assigns.
I. The expiration of the Term, whether by lapse of time or otherwise, shall
not relieve either party of any obligations which accrued prior to or which
may continue to accrue after the expiration or early termination of this
Lease. Without limiting the scope of the prior sentence, it is agreed
that Tenant's obligations under Sections IV.A, IV.B., VIII, XIV, XX, XXV
and XXX shall survive the expiration or early termination of this Lease.
J. Landlord has delivered a copy of this Lease to Tenant for Tenant's review
only, and the delivery of it does not constitute an offer to Tenant or an
option. This Lease shall not be effective against any party hereto until
an original copy of this Lease has been signed by such party.
K. All understandings and agreements previously made between the parties are
superseded by this Lease, and neither party is relying upon any warranty,
statement or representation not contained in this Lease. This Lease may be
modified only by a written agreement signed by Landlord and Tenant.
L. Tenant, within 15 days after request, shall provide Landlord with a current
financial statement and such other information as Landlord may reasonably
request in order to create a "business profile" of Tenant and determine
Tenant's ability to fulfill its obligations under this Lease. Landlord,
however, shall not require Tenant to provide such information unless
Landlord is requested to produce the information in connection with a
proposed financing or sale of the Building. Upon written request by
Tenant, Landlord shall enter into a commercially reasonable confidentiality
agreement covering any confidential information that is disclosed by
Tenant.
XXXII. Entire Agreement.
This Lease and the following exhibits and attachments constitute the
entire agreement between the parties and supersede all prior agreements and
understandings related to the Premises, including all lease proposals, letters
of intent and other documents: Exhibit A (Outline and Location of Premises),
Exhibit A-1 (Legal Description of Property), Exhibit B (Rules and Regulations),
Exhibit C (Commencement Letter), Exhibit D (Work Letter Agreement), Exhibit E
(Additional Provisions), Exhibit F (Subordination Agreement), Exhibit G (Rooftop
Rates), Exhibit H (Form of Letter of Credit), Exhibit I (Ground Lessor
Nondisturbance Agreement) and Exhibit J (Facade Signage).
20
<PAGE>
Landlord and Tenant have executed this Lease as of the day and year first
above written.
LANDLORD: THREE BELLEVUE CENTER LLC, a Washington limited
liability company
By: WRIGHT RUNSTAD ASSOCIATES LIMITED
PARTNERSHIP, a Washington limited
partnership, its manager
By: WRIGHT RUNSTAD & COMPANY, a
Washington corporation, its general
partner
By: /s/ H. J. Runstad
---------------------------
Its: Chairman and CEO
---------------------------
By: EOP-THREE BELLEVUE, L.L.C., a Delaware
limited liability company, its manager
By: EOP OPERATING LIMITED PARTNERSHIP, a
Delaware limited partnership, its sole
member
By: EQUITY OFFICE PROPERTIES TRUST, a
Maryland real estate investment
trust, its managing general partner
By: /s/ Michael Steel
--------------------------------
Its: COO, EVP Real Estate Operations
--------------------------------
TENANT: INFOSPACE.COM, INC., a Delaware corporation
By: /s/ Naveen Jain
----------------------------
Its: CEO
----------------------------
21
<PAGE>
LANDLORD ACKNOWLEDGMENTS
STATE OF )
) ss:
COUNTY OF )
On this the 3rd day of February, 2000, before me a Notary Public duly
authorized in and for the said County in the State aforesaid to take
acknowledgments personally appeared Chairman and CEO known to me to be the
H. J. Runstad of Wright Runstad & Company, the general partner of Wright Runstad
Associates Limited Partnership, a Member of THREE BELLEVUE CENTER LLC, a
Washington limited liability company, the Landlord in the foregoing instrument,
and acknowledged that as such officer, being authorized so to do, (s)he executed
the foregoing instrument on behalf of said corporation by subscribing the name
of such corporation by himself/herself as such officer and caused the corporate
seal of said corporation to be affixed thereto, as a free and voluntary act, and
as the free and voluntary act of said corporation, for the uses and purposes
therein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public: /s/ Coriss J. Perdaems
------------------------
Printed Name: Coriss J. Perdaems
-------------------------
Residing at: Seattle
--------------------------
My Commission expires: 3/29/2000
----------------
STATE OF Illinois )
) ss:
COUNTY OF Cook )
On this the 10th day of March, 2000, before me a Notary Public duly
authorized in and for the said County in the State aforesaid to take
acknowledgments personally appeared COO, EVP A.E. OPS known to me to be the
Michael Steel of Equity Office Properties Trust, the general partner of EOP
Operating Limited Partnership, the sole member of EOP-Three Bellevue, L.L.C., a
Member of THREE BELLEVUE CENTER LLC, a Washington limited liability company, the
Landlord in the foregoing instrument, and acknowledged that as such officer,
being authorized so to do, (s)he executed the foregoing instrument on behalf of
said corporation by subscribing the name of such corporation by himself/herself
as such officer and caused the corporate seal of said corporation to be affixed
thereto, as a free and voluntary act, and as the free and voluntary act of said
corporation, for the uses and purposes therein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public: /s/ Cynthia A. Nowitzki
------------------------
Printed Name: Cynthia A. Nowitzki
-------------------------
Residing at: Illinois
--------------------------
My Commission expires: 7/31/2000
----------------
22
<PAGE>
TENANT ACKNOWLEDGMENT
STATE OF WASHINGTON )
) ss:
COUNTY OF KING )
On this the 2nd day of February, 2000, before me a Notary Public duly
authorized in and for the said County in the State aforesaid to take
acknowledgments personally appeared CEO known to me to be the Naveen Jain of
INFOSPACE.COM, INC., the Tenant in the foregoing instrument, and acknowledged
that as such officer, being authorized so to do, (s)he executed the foregoing
instrument on behalf of said corporation by subscribing the name of such
corporation by himself/herself as such officer and caused the corporate seal of
said corporation to be affixed thereto, as a free and voluntary act, and as the
free and voluntary act of said corporation, for the uses and purposes therein
set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public: /s/ Kurt Langkow
-----------------------
Printed Name: Kurt Langkow
------------------------
Residing at: Bothell, WA
-------------------------
My Commission expires: 2/27/03
---------------
23
<PAGE>
EXHIBIT A
PREMISES
--------
This Exhibit is attached to and made a part of the Lease dated February ___,
2000, by and between Three Bellevue Center LLC ("Landlord") and InfoSpace.com,
Inc. ("Tenant") for space in the Building located at 601 108th Avenue NE,
Bellevue, Washington 98004.
Exhibit A
<PAGE>
EXHIBIT A-1
LEGAL DESCRIPTION OF PROPERTY
-----------------------------
This Exhibit is attached to and made a part of the Lease dated February ___,
2000, by and between Three Bellevue Center LLC, a Washington limited liability
company ("Landlord") and InfoSpace.com, Inc., a Delaware corporation ("Tenant")
for space in the Building located at 601 108th Avenue NE, Bellevue, Washington
98004.
PARCEL A:
THAT PORTION OF LOT 2 IN BLOCK 2 OF CHERITON FRUIT GARDENS PLAT NO. 1, AS PER
PLAT RECORDED IN VOLUME 7 OF PLATS, PAGE 47, RECORDS OF KING COUNTY, DESCRIBED
AS FOLLOWS:
BEGINNING AT A POINT ON THE WEST LINE OF THE EAST 230 FEET OF
SAID LOT 2 WHICH IS SOUTH 00 DEGREES 05'54f" WEST ALONG SAID WEST LINE
297 FEET FROM THE NORTH LINE OF SAID LOT 2;
THENCE SOUTH 89 DEGREES 54 minutes 06 seconds EAST 178 FEET;
THENCE SOUTH 44 DEGREES 54 minutes 06 seconds EAST 14.14 FEET;
THENCE SOUTH 89 DEGREES 54 minutes 06 seconds EAST 12 FEET TO THE WEST LINE OF
THE EAST 30 FEET OF SAID LOT 2;
THENCE SOUTH 00 DEGREES 05 minutes 54 seconds WEST ALONG SAID WEST LINE 138.02
FEET TO THE SOUTH LINE OF THE NORTH 120 FEET OF THE SOUTH 1/2 OF SAID LOT 2;
THENCE NORTH 88 DEGREES 44 minutes 41 seconds WEST ALONG SAID SOUTH LINE 200.04
FEET TO THE WEST LINE OF THE EAST 230 FEET OF SAID LOT 2;
THENCE NORTH 00 DEGREES 05 minutes 54 seconds EAST ALONG SAID WEST LINE 143.98
FEET TO THE POINT OF BEGINNING;
(ALSO KNOWN AS PARCEL B OF CITY OF BELLEVUE LOT LINE REVISION
NO. 84-43 RECORDED UNDER RECORDING NO. 8503079001)
SITUATE IN THE CITY OF BELLEVUE, COUNTY OF KING, STATE OF WASHINGTON.
PARCEL B:
THAT PORTION OF THE SOUTH 1/2 OF LOT 2 IN BLOCK 2 OF CHERITON FRUIT GARDENS PLAT
NO. 1, AS PER PLAT RECORDED IN VOLUME 7 OF PLATS, PAGE 47, RECORDS OF KING
COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE WEST LINE OF THE EAST 30
FEET OF SAID LOT 2 WITH THE SOUTH LINE THEREOF;
THENCE NORTH 88 DEGREES 46 minutes 31 seconds WEST ALONG SAID SOUTH LINE 221.81
FEET;
THENCE NORTH 00 DEGREES 05 minutes 54 seconds EAST 108.37 FEET;
THENCE SOUTH 89 DEGREES 54 minutes 06 seconds EAST 21.77 FEET TO THE WEST LINE
OF THE EAST 230 FEET OF SAID LOT 21'
THENCE NORTH 00 DEGREES 05 minutes 54N EAST ALONG SAID WEST LINE 80.31 FEET
TO THE SOUTH LINE OF PARCEL B OF CITY OF BELLEVUE BOUNDARY
LINE ADJUST NO. 84-43, RECORDED UNDER KING COUNTY RECORDING
NO. 8503019001;
THENCE SOUTH 88 DEGREES 44 minutes 41 seconds EAST ALONG SAID SOUTH LINE 200.04
FEET TO THE WEST LINE OF THE EAST 30 FEET OF SAID LOT 2;
THENCE SOUTH 00 DEGREES 05 minutes 54 seconds WEST ALONG SAID WEST LINE 189.00
FEET TO BEGINNING;
(ALSO KNOWN AS LOT 2 OF CITY OF BELLEVUE BOUNDARY LINE ADJUSTMENT NO. BLA-90-
7034 RECORDED UNDER RECORDING NO. 9201159011);
SITUATE IN THE CITY OF BELLEVUE, COUNTY OF KING, STATE OF WASHINGTON.
BOTH PARCELS ABOVE ALSO BEING DESCRIBED AS FOLLOWS:
Exhibit A-1
<PAGE>
THAT PORTION OF LOT 2 IN BLOCK 2 OF CHERITON FRUIT GARDENS PLAT NO. 1, AS PER
PLAT RECORDED IN VOLUME 7 OF PLATS, PAGE 47, RECORDS OF KING COUNTY, DESCRIBED
AS FOLLOWS:
BEGINNING AT THE SOUTHEAST CORNER OF SAID LOT 2; THENCE NORTH 88 DEGREES 46
minutes 31 seconds ST 30.00 FEET ALONG THE SOUTH LINE THEREOF TO THE WEST LINE
OF THE EAST 30.00 FEET OF SAID LOT 2, THE WEST MARGIN 108TH AVENUE N.E. (60 FEET
WIDE) AND THE TRUE POINT OF BEGINNING;
THENCE CONTINUING NORTH 88 DEGREES 4 minutes 13 seconds WEST 221.81 FEET ALONG
SAID SOUTH LINE AND THE SOUTH LINE OF LOT 2 OF CITY OF BELLEVUE
BOUNDARY LINE ADJUSTMENT NO. BLA-90-7034, RECORDED UNDER KING
COUNTY RECORDING NO. 9201159011 TO THE SOUTHWEST CORNER OF
SAID LOT 2 OF BLA-90-7034;
THENCE ALONG THE WEST LINE OF LAST SAID LOT 2 THE FOLLOWING
THREE COURSES:
THENCE NORTH 00 DEGREES 05 minutes 31 seconds EAST 108.37 FEET;
THENCE SOUTH 89 DEGREES 54 minutes 29 seconds EAST 21.77 FEET;
THENCE NORTH 00 DEGREES 05 minutes 31 seconds EAST 80.31 FEET TO THE MOST
NORTHERLY NORTHWEST CORNER OF SAID LOT 2 AND THE SOUTHWEST CORNER OF PARCEL B OF
CITY OF BELLEVUE LOT LINE REVISION NO. 84-43, RECORDED UNDER KING COUNTY
RECORDING NO. 8503079001;
THENCE CONTINUING NORTH 00 DEGREES 05 minutes 31 seconds EAST 143.98 FEET ALONG
THE WEST LINE OF SAID PARCEL B TO THE NORTHWEST CORNER THEREOF; THENCE ALONG THE
NORTH LINE OF SAID PARCEL B THE FOLLOWING THREE COURSES:
THENCE SOUTH 89 DEGREES 54 minutes 29 seconds EAST 178.00 FEET;
THENCE SOUTH 44 DEGREES 54 minutes 29 seconds EAST 14.14 FEET;
THENCE SOUTH 89 DEGREES 54 minutes 29 seconds EAST 12.00 FEET TO THE EAST LINE
OF SAID PARCEL B AND SAID WEST MARGIN OF 108TH AVENUE N.E.;
THENCE SOUTH 00 DEGREES 05 minutes 31 seconds WEST 327.02 FEET ALONG SAID WEST
MARGIN TO THE TRUE POINT OF BEGINNING;
SITUATE IN THE CITY OF BELLEVUE, COUNTY OF KING, STATE OF WASHINGTON.
Exhibit A-1
<PAGE>
EXHIBIT B
BUILDING RULES AND REGULATIONS
------------------------------
The following rules and regulations shall apply, where applicable, to the
Premises, the Building, the parking garage (if any), the Property and the
appurtenances. Capitalized terms have the same meaning as defined in the Lease.
1. Sidewalks, doorways, vestibules, halls, stairways and other similar areas
shall not be obstructed by Tenant or used by Tenant for any purpose other
than ingress and egress to and from the Premises. No rubbish, litter,
trash, or material shall be placed, emptied, or thrown in those areas. At
no time shall Tenant permit Tenant's employees to loiter in Common Areas or
elsewhere about the Building or Property.
2. Plumbing fixtures and appliances shall be used only for the purposes for
which designed, and no sweepings, rubbish, rags or other unsuitable
material shall be thrown or placed in the fixtures or appliances. Damage
resulting to fixtures or appliances by Tenant, its agents, employees or
invitees, shall be paid for by Tenant, and Landlord shall not be
responsible for the damage.
3. No signs, advertisements or notices shall be painted or affixed to windows,
doors or other parts of the Building, except those of such color, size,
style and in such places as are first approved in writing by Landlord and
except as otherwise set forth in the Lease. All tenant identification and
suite numbers at the entrance to the Premises shall be installed by
Landlord, at Tenant's cost and expense, using the standard graphics for the
Building. Except in connection with the hanging of lightweight pictures and
wall decorations, no nails, hooks or screws shall be inserted into any part
of the Premises or Building except by the Building maintenance personnel.
4. Landlord will provide and maintain in the first floor (main lobby) of the
Building an alphabetical directory board or other directory device listing
tenants, and no other directory shall be permitted unless previously
consented to by Landlord in writing.
5. Tenant shall not place any lock(s) on any door in the Premises or Building
without Landlord's prior written consent and Landlord shall have the right
to retain at all times and to use keys to all locks within and into the
Premises. A reasonable number of keys to the locks on the entry doors in
the Premises shall be furnished by Landlord to Tenant at Tenant's cost, and
Tenant shall not make any duplicate keys. All keys shall be returned to
Landlord at the expiration or early termination of this Lease.
6. All contractors, contractor's representatives and installation technicians
performing work in the Building shall be subject to Landlord's prior
approval and shall be required to comply with Landlord's standard rules,
regulations, policies and procedures, which may be revised from time to
time.
7. Movement in or out of the Building of furniture or office equipment, or
dispatch or receipt by Tenant of merchandise or materials requiring the use
of elevators, stairways, lobby areas or loading dock areas, shall be
restricted to hours designated by Landlord. Tenant shall obtain Landlord's
prior approval by providing a detailed listing of the activity. If
approved by Landlord, the activity shall be under the supervision of
Landlord and performed in the manner required by Landlord. Tenant shall
assume all risk for damage to articles moved and injury to any persons
resulting from the activity. If equipment, property, or personnel of
Landlord or of any other party is damaged or injured as a result of or in
connection with the activity, Tenant shall be solely liable for any
resulting damage or loss.
8. Landlord shall have the right to approve the weight, size, or location of
heavy equipment or articles in and about the Premises. Damage to the
Building by the installation, maintenance, operation, existence or removal
of property of Tenant shall be repaired at Tenant's sole expense.
9. Corridor doors, when not in use, shall be kept closed.
10. Tenant shall not: (1) make or permit any improper, objectionable or
unpleasant noises or odors in the Building, or otherwise interfere in any
way with other tenants or persons having business with them; (2) solicit
business or distribute, or cause to be distributed,
Exhibit B - Page 1
<PAGE>
in any portion of the Building, handbills, promotional materials or other
advertising; or (3) conduct or permit other activities in the Building that
might, in Landlord's reasonable opinion, constitute a nuisance.
11. No animals, except those assisting handicapped persons, shall be brought
into the Building or kept in or about the Premises.
12. No inflammable, explosive or dangerous fluids or substances shall be used
or kept by Tenant in the Premises, Building or about the Property. Tenant
shall not, without Landlord's prior written consent, use, store, install,
spill, remove, release or dispose of, within or about the Premises or any
other portion of the Property, any asbestos-containing materials or any
solid, liquid or gaseous material now or subsequently considered toxic or
hazardous under the provisions of 42 U.S.C. Section 9601 et seq. or any
other applicable environmental Law which may now or later be in effect.
Tenant shall comply with all Laws pertaining to and governing the use of
these materials by Tenant, and shall remain solely liable for the costs of
abatement and removal.
13. Tenant shall not use or occupy the Premises in any manner or for any
purpose which might injure the reputation or impair the present or future
value of the Premises or the Building. Tenant shall not use, or permit any
part of the Premises to be used, for lodging, sleeping or for any illegal
purpose.
14. Tenant shall not take any action which would violate Landlord's labor
contracts or which would cause a work stoppage, picketing, labor disruption
or dispute, or interfere with Landlord's or any other tenant's or
occupant's business or with the rights and privileges of any person
lawfully in the Building ("Labor Disruption"). Tenant shall take the
actions necessary to resolve the Labor Disruption, and shall have pickets
removed and, at the request of Landlord, immediately terminate any work in
the Premises that gave rise to the Labor Disruption, until Landlord gives
its written consent for the work to resume. Tenant shall have no claim for
damages against Landlord or any of the Landlord Related Parties, nor shall
the date of the commencement of the Term be extended as a result of the
above actions.
15. Tenant shall not install, operate or maintain in the Premises or in any
other area of the Building, electrical equipment that would overload the
electrical system beyond its capacity for proper, efficient and safe
operation as determined solely by Landlord. Tenant shall not furnish
cooling or heating to the Premises, including, without limitation, the use
of electronic or gas heating devices, without Landlord's prior written
consent.
16. Tenant shall not operate or permit to be operated a coin or token operated
vending machine or similar device (including, without limitation,
telephones, lockers, toilets, scales, amusement devices and machines for
sale of beverages, foods, candy, cigarettes and other goods), except for
machines for the exclusive use of Tenant's employees, and then only if the
operation does not violate the lease of any other tenant in the Building.
17. Bicycles and other vehicles are not permitted inside the Building or on the
walkways outside the Building, except in areas designated by Landlord.
18. Landlord may from time to time adopt systems and procedures for the
security and safety of the Building, its occupants, entry, use and
contents. Tenant, its agents, employees, contractors, guests and invitees
shall comply with Landlord's systems and procedures.
19. Landlord shall have the right to prohibit the use of the name of the
Building or any other publicity by Tenant that in Landlord's sole opinion
may impair the reputation of the Building or its desirability. Upon
written notice from Landlord, Tenant shall refrain from and discontinue
such publicity immediately.
20. Tenant shall not canvass, solicit or peddle in or about the Building or the
Property.
21. Neither Tenant nor its agents, employees, contractors, guests or invitees
shall smoke or permit smoking in the Common Areas, unless the Common Areas
have been declared a designated smoking area by Landlord, nor shall the
above parties allow smoke from the Premises to emanate into the Common
Areas or any other part of the Building. Landlord shall have the right to
designate the Building (including the Premises) as a non-smoking building.
Exhibit B - Page 2
<PAGE>
22. Landlord shall have the right to designate and approve standard window
coverings for the Premises and to establish rules to assure that the
Building presents a uniform exterior appearance. Tenant shall ensure, to
the extent reasonably practicable, that window coverings are closed on
windows in the Premises while they are exposed to the direct rays of the
sun.
23. Deliveries to and from the Premises shall be made only at the times, in the
areas and through the entrances and exits designated by Landlord. Tenant
shall not make deliveries to or from the Premises in a manner that might
interfere with the use by any other tenant of its premises or of the Common
Areas, any pedestrian use, or any use which is inconsistent with good
business practice.
24. The work of cleaning personnel shall not be hindered by Tenant after 5:30
P.M., and cleaning work may be done at any time when the offices are
vacant. Windows, doors and fixtures may be cleaned at any time. Tenant
shall provide adequate waste and rubbish receptacles to prevent
unreasonable hardship to the cleaning service.
Exhibit B - Page 3
<PAGE>
EXHIBIT C
---------
COMMENCEMENT LETTER
(EXAMPLE)
Date:
Tenant: InfoSpace.com, Inc.
Address:
Re: Commencement Letter with respect to that certain Lease dated as of
February ___, 2000 by and between THREE BELLEVUE CENTER LLC, as Landlord,
and INFOSPACE.COM, INC., as Tenant, for 65,331 square feet of Rentable
Area on the Floors 8, 9, 10, 11 and 12 of the Building located at 601
108th Avenue N.E., Bellevue, Washington.
Dear :
In accordance with the terms and conditions of the above referenced Lease,
Tenant accepts possession of the Premises and agrees:
1. The Commencement Date of the Lease is ;
2. The Termination Date of the Lease is .
Please acknowledge your acceptance of possession and agreement to the
terms set forth above by signing all 3 counterparts of this Commencement Letter
in the space provided and returning 2 fully executed counterparts to my
attention.
Sincerely,
Property Manager
Agreed and Accepted:
Tenant:
By:
Name:
Title:
Date:
Exhibit C
<PAGE>
EXHIBIT D
WORK LETTER
-----------
This Exhibit is attached to and made a part of the Lease dated February __,
2000, by and between WRC THREE BELLEVUE CENTER LLC, a Washington limited
liability company ("Landlord") and INFOSPACE.COM, INC., a Delaware corporation
("Tenant") for space on Floors 8, 9, 10, 11 and 12 in the Building located at
601 108th Avenue NE, Bellevue, Washington 98004.
Defined terms used in this Exhibit D shall have the same meanings given
them in the attached Lease.
I. IMPROVEMENTS PROVIDED BY LANDLORD: Landlord agrees to provide
improvements to the Building and the Premises pursuant to the attached Exhibit
D-1, Base Building Condition and the Plans and Specifications listed on Exhibit
D-2 ("Landlord Work").
II. IMPROVEMENTS BY TENANT/REIMBURSEMENT BY LANDLORD: Design and
construction of all improvements in the Premises beyond those listed on Exhibit
D-1 (the "Tenant Improvements") shall be provided at Tenant's expense. Landlord
shall pay the cost of such additional improvements up to an amount equal to
$32.00 per square foot of "Tenant's Usable Area" as outlined on the floor
plan(s) in Exhibit A, for a total payment by Landlord, based on a usable area of
96,951 square feet, of $3,102,432.00 (the "Allowance"). The Allowance shall be
applied only to the cost of design and construction of such improvements,
including but not be limited to: architectural and engineering design,
partitions (including one-half (1/2) the cost of any public corridor or demising
partitions enclosing the Tenant's Usable Area), doors, door frames, hardware,
paint, wall coverings, base, ceilings, lights, mechanical distribution,
diffusers, thermostats, sprinkler distribution, sprinkler heads, emergency
speakers, fire extinguishers and cabinets, telephone and electrical outlets,
light switches, floor coverings, and all applicable permit fees and sales tax.
Landlord shall obtain all permits and government approvals and assume
specific responsibility for delivery of the Premises as defined in the Lease and
this Exhibit D, provided Tenant shall have met the drawing delivery dates
herein. Landlord has approved Tenant's selection of Turner Construction Company
(the "Tenant Improvement Contractor") to construct the Tenant Improvements.
TENANT ACKNOWLEDGES THAT UNTIL APPROXIMATELY MAY 1, 2000, A SIGNIFICANT
AMOUNT OF CONSTRUCTION ACTIVITY RELATED TO THE CONSTRUCTION OF THE BUILDING
SHELL AND CORE AND OTHER TENANT SPACES WILL BE ONGOING IN THE BUILDING. AS A
RESULT, ACCESS TO THE BUILDING AND TO CERTAIN SERVICES, SUCH AS VERTICAL
TRANSPORTATION, WILL BE LIMITED. IT IS THEREFORE ESSENTIAL THAT TENANT AND THE
TENANT IMPROVEMENT CONTRACTOR COORDINATE ALL OF THEIR WORK IN THE PREMISES
THROUGH CINDY EDENS OR DIANE UNDI-HAGA, LANDLORD'S CONSTRUCTION COORDINATORS
("LANDLORD'S COORDINATORS"). TENANT SHALL CONSULT WITH LANDLORD'S COORDINATORS
IN ALL ASPECTS OF THE TENANT IMPROVEMENTS CONSTRUCTION AND SHALL INCLUDE
LANDLORD'S COORDINATORS IN ALL OWNER/CONTRACTOR MEETINGS. IN ORDER TO INCREASE
THE EFFICIENCY OF CONSTRUCTING THE TENANT IMPROVEMENTS, WITH RESPECT TO BOTH
COST AND TIMING, TENANT IS ENCOURAGED TO OBTAIN A BID FOR CONSTRUCTION OF THE
TENANT IMPROVEMENTS FROM SELLEN CONSTRUCTION CO., INC. ("SELLEN"), THE BUILDING
SHELL AND CORE GENERAL CONTRACTOR. SELLEN HAS EXPRESSED ITS WILLINGNESS TO
NEGOTIATE ITS CONSTRUCTION FEE AND WILL COMPETITIVELY BID ALL SUBCONTRACTS ON AN
OPEN-BOOK BASIS. IN ALL EVENTS, LANDLORD'S COORDINATORS WILL PROVIDE
COORDINATION WITH THE TENANT IMPROVEMENT CONTRACTOR FOR NO FEE.
III. BUILDING STANDARD IMPROVEMENTS: Except as Landlord and Tenant may
otherwise agree, Tenant shall use Building Standard lighting, window coverings,
doors, relites, hardware, ceiling treatment and heating, ventilating and air
conditioning distribution equipment and controls.
Exhibit D - Page 1
<PAGE>
IV. DESIGN OF TENANT IMPROVEMENTS: Tenant, at Tenant's cost (except as
provided below) and with the approval of Landlord, has retained CNA Architecture
("Tenant's Office Planner") to prepare the necessary drawings for Basic Plans
and supply the information necessary to complete the Working Drawings and
Engineering Drawings referred to in Section IV(B) of this Exhibit D for
construction of the tenant improvements in Tenant's area. Notwithstanding the
foregoing, Landlord shall provide an initial space plan of the Premises, at
Landlord's expense, not to exceed $.12 per usable square foot of area in the
Premises,. Any cost of such space plan in excess of $.12 per usable square foot
shall be paid by Tenant. All of Tenant's plans described below ("Tenant's
Plans") shall be delivered to Landlord on the dates stated (the "Plan Delivery
Dates"), and shall be subject to approval of Landlord, such approval not to be
unreasonably withheld or delayed. Landlord agrees to respond in writing with
approval or comments within five (5) business days after receipt of each
component of Tenant's Plans.
Tenant's Office Planner shall ensure that the work shown on Tenant's
Plans is compatible with the basic Building plans and that necessary basic
Building modifications are included in Tenant's Plans. Such modifications shall
be subject to Landlord approval. If such approved basic Building modifications
are made subsequent to completion of the shell and core documents or Landlord's
architect reasonably charges Landlord for such changes, then such modifications
shall be subject to Landlord's approval and the cost of the changes to the
documents as well as any increased shell and core construction costs shall be
paid by Tenant.
On or before the indicated dates, Tenant shall supply Landlord with
one (1) reproducible copy and five (5) black line prints of the following
Tenant's Plans with respect to the Tenant Improvements in the Premises:
A. Basic Plans Delivery Date: January 3, 2000
The Basic Plans due on this date shall be signed by Tenant and
include:
Architectural Floor Plans: These shall be fully dimensioned floor
plans showing partition layout and identifying each room with a number and each
door with a number. The Basic Plans must clearly identify and locate equipment
requiring plumbing or other special mechanical systems, area(s) subject to
above-normal floor loads, special openings in the floor, and other major or
special features.
B. Working Drawings Delivery Date: January 3, 2000
On this date and at Tenant's expense, Tenant's Office Planner shall
produce four (4) sets of Full Working Drawings for construction from the Basic
Plans using the Pin Bar or CADD System, which system shall be approved by
Landlord for compatibility with the other Building drawings. The four (4) sets
of Working Drawings due on this date shall be signed by the Tenant and include
all items in the Basic Plans referenced in Section IV(A) above plus the
following additional information:
(1) Electrical and Telephone Outlets: Locate all power and telephone
requirements: Dimension the position from a corner and give height above
concrete slab for all critically located outlets. Identify all dedicated
circuits and identify all power outlets greater than 120 volts. For the
equipment used in these outlets which require dedicated circuits and/or which
require greater than 120 volts, identify the type of equipment, the
manufacturer's name and the manufacturer's model number, and submit a brochure
for each piece of equipment. Also identify the manufacturer's name of the phone
system to be used and the power requirements, size, and location of its
processing equipment.
(2) Reflected Ceiling Plan: Lighting layout showing location and type
of all Building Standard and special lighting fixtures.
(3) Furniture Layout: Layout showing furniture location so that
Landlord's engineer can review the location of all light fixtures.
The Allowance shall be applied to the cost of the engineers retained
by Tenant's Office Planner. The Allowance shall also be applied to any
necessary review of the Engineering Drawings by Landlord's shell and core
engineers: electrical (Holmes Electric), mechanical (McDonald Miller) and
structural plans (KPFF) (Engineering Drawings) for Tenant's improvements based
on the signed Working Drawings.
The Working Drawings shall be delivered to the Tenant Improvement
Contractor
Exhibit D - Page 2
<PAGE>
for purposes of preparing a preliminary estimate of construction costs.
C. Permit Submittal Package: January 3, 2000
On this date, Tenant shall deliver to Landlord all materials necessary to
submit a full building permit application to the appropriate municipality.
D. Final Plans Review Date: February 7, 2000
On this date, Tenant's Office Planner shall deliver to Landlord and
Tenant for review and approval four (4) complete sets of Final Plans which will
incorporate the Working Drawings referenced in Section IV(B) above, plus the
following additional information:
(1) Millwork Details: These drawings shall be in final form with
Tenant's Office Planner's title block along the right border of the drawing, and
shall include construction details of all cabinets, paneling, trim, bookcases,
and door and jamb details for non-Building Standard doors and jambs.
(2) Keying Schedules and Hardware Information: This information
shall be in final form and include a preliminary keying schedule indicating
which doors are locked, plus an "X" on the side of the door where the key will
be inserted if a keyed door. Complete specifications for all non-Building
Standard hardware will also be provided.
(3) Room Finish and Color Schedule: This information shall be in
final form and include locations and specifications for all wall finishes, floor
covering and base for each room.
(4) Construction Notes and Specifications: Complete specifications
for every item included except those specified by the Landlord.
E. Final Plans Delivery Date: February 7, 2000
The four (4) sets of Final Plans approved by Landlord and Tenant and
due on this date shall include all the Final Plans referenced in Section IV(D)
above. Final Plans are to be signed by Tenant and delivered to Landlord by the
Final Plans Delivery Date. Landlord shall return one (1) signed set to Tenant
for Tenant's records. Landlord will incorporate or submit Engineering Drawings
with Tenant's Final Plans for transmittal to Landlord's Contractor.
F. Anticipated Construction Commencement Date: February 1, 2000
On this date Landlord anticipates that construction of the Tenant
Improvements shall commence.
Tenant shall be responsible for delays and additional costs in
completion of the Tenant Improvements incurred as a result of changes made to
any of Tenant's Plans after the specified Plan Delivery Date, delays caused by
Tenant's failure to comply with the Plan Delivery Dates, Tenant's failure to
provide adequate specifications or information for the completion of Tenant's
Plans, or by delays caused by Tenant's specification of special materials; but
only to the extent any of the foregoing delays or prevents critical path work or
adversely affects completion.
V. CONSTRUCTION OF TENANT IMPROVEMENTS
A. Authorization to Proceed. Upon completion of Tenant's Final
Plans the Final Plans will be submitted to Shell and Core Contractor for
pricing. Shell and Core Contractor shall have two (2) weeks to provide its bid
proposal with respect to completion of the Tenant Improvement Work pursuant to
the Final Plans, and if Tenant, Landlord and Shell and Core Contractor have not
agreed on hiring Shell and Core Contractor within one (1) week after receipt of
Shell and Core Contractor's bid, then the work contemplated in Tenant's Final
Plans shall go out to bid as described in Article II above. The final
construction contract to be entered into between Landlord and the Tenant
Improvement Contractor (including, but not limited to, the guaranteed maximum
price and any provisions regarding delay damages to be contained therein) shall
also be subject to Tenant's review and approval, such approval not to be
unreasonably withheld or delayed. If the Shell and Core Contractor is not
selected as the Tenant Improvement Contractor, Landlord shall entertain bids
from the three (3) firms and Landlord and Tenant shall review all pricing
documentation received from the bidding tenant
Exhibit D - Page 3
<PAGE>
improvement contractors, including sub bids, quantities, and unit prices. Within
ten (10) days of receipt of such prices and prior to execution of the Tenant
Improvements construction contract, Tenant shall give Landlord written
authorization to complete the Premises in accordance with such Final Plans and
naming the Tenant Improvement Contractor. Tenant may in such authorization
delete any or all items of extra cost; however, if the Shell and Core Contractor
is selected, then if Landlord deems these changes to be extensive, at its
option, Landlord may within three (3) business days of Tenant's written
authorization refuse to accept the authorization to proceed until all changes
have been incorporated in the Final Plans signed by Tenant and written
acceptance of the revised price has been received by Landlord from Tenant. In
the absence of such written authorization to proceed, Landlord shall not be
obligated to commence work on the Premises and Tenant shall be responsible for
any costs due to any resulting delay in completion of the Premises and as
provided in Section III.A of the Lease.
B. Payments. All costs of designing and constructing the Tenant
Improvements in excess of the Allowance shall be borne solely by Tenant. If the
budgeted cost of designing or constructing the Tenant Improvements, as
reasonably agreed by Landlord and Tenant, exceeds the Allowance, all payments
for the Tenant Improvements shall be shared by Landlord and Tenant in proportion
to their estimated sharing of the total costs of the Tenant Improvements.
Landlord may adjust that sharing ratio from time to time if the cost of
completing the Tenant Improvements has increased or decreased pursuant to change
orders approved by Landlord and Tenant. Tenant shall pay its share of such
costs directly to Landlord in immediately available funds at least one (1)
business day prior to the date such funds are required to be paid to the Tenant
Improvement Contractor or such other party due funds for work related to the
design or construction of the Tenant Improvements, provided Landlord has given
Tenant at least four (4) days prior notice of the amount to be so funded by
Tenant. The progress billings may include a retainage amount up to ten percent
(10%) of the work ("Retainage"). Final billing shall be rendered and payable
within ten (10) days after acceptance of the Premises by Tenant in accordance
with the terms of the Lease. Retainage pursuant to the terms of this paragraph
shall be payable with such final billing. In the event acceptance of the
Premises is subject to punchlist items as provided in the Lease, a portion of
the retainage equal to the cost to complete each outstanding punchlist item may
be retained until such punchlist item is complete.
C. Final Plans and Modifications. If Tenant shall request any change
after the Final Plans are submitted, Tenant shall request such change in writing
to Landlord and such request shall be accompanied by all plans and
specifications necessary to show and explain changes from the approved Final
Plans. After receiving this information, Landlord shall give Tenant within five
(5) business days a written price for the cost of engineering design services
and an estimate of construction costs to incorporate the change in Tenant's
Final Plans. If Tenant approves such price in writing within five (5) business
days, Tenant shall within five (5) business days have such Final Plans changes
made to engineering drawings and Tenant shall have changes made to other Final
Plan design documents. Within three (3) business days after completion of such
changes in the Final Plans, Landlord shall provide Tenant a written breakdown of
the final costs, if any, which shall be chargeable or credited to Tenant for
such change, addition or deletion and any impact such changes shall have on the
schedule. Landlord shall not charge for its services in relation to any such
modifications. Landlord shall not charge Tenant a construction management fee
for Landlord's work on the Tenant Improvements. If Tenant wishes to proceed with
such changes, Tenant shall within five (5) business days so notify Landlord in
writing. In the absence of such notice, Landlord shall proceed in accordance
with the previously approved Final Plans before such change, addition or
deletion was requested. In accordance with Section 3.A of the Lease, Tenant
shall be responsible for any resulting delay in completion of the Premises due
to modification of Final Plans. Tenant shall also be responsible for any
demolition work required as a result of the change.
D. Improvements Constructed by Tenant. If any work is to be
performed in connection with the Tenant Improvements on the Premises by Tenant
or Tenant's contractor:
(1) Such work shall proceed upon Landlord's written approval (not to
be unreasonably withheld) of (i) Tenant's contractor, (ii) general liability and
property damage insurance satisfactory to Landlord carried by Tenant's
contractor, which insurance shall not be required to exceed levels carried by
the contractor engaged by Landlord to complete Landlord's Work ("Landlord's
Contractor"), and (iii) detailed plans and specifications for such work.
(2) All work shall be done in conformity with a valid building
permit when required, a copy of which shall be furnished for Landlord before
such work is commenced, and in any case, all such work shall be performed in
accordance with all
Exhibit D - Page 4
<PAGE>
applicable governmental regulations. Notwithstanding any failure by Landlord to
object to any such work, Landlord shall have no responsibility for Tenant's
failure to meet all applicable regulations.
(3) All work by Tenant or Tenant's contractor shall be done with union
labor in accordance with all union labor agreements applicable to the trades
being employed, unless otherwise agreed to in writing by Landlord.
(4) All work by Tenant or Tenant's contractor shall be scheduled
through Landlord or, with Landlord's approval, directly with Landlord's
Contractor or Tenant Improvement Contractor. Landlord shall make best efforts
to accommodate work by Tenant or Tenant's contractor during times requested.
(5) Tenant or Tenant's contractor shall arrange for necessary utility,
hoisting and elevator service with the Landlord's Contractor or the Tenant
Improvement Contractor and shall pay such reasonable charges for such services
as may be charged by Landlord's Contractor or the Tenant Improvement Contractor.
(6) Tenant shall promptly reimburse Landlord for costs incurred by
Landlord due to faulty work done by Tenant or its contractors, or by reason of
any delays caused by such work, or by reason of inadequate clean-up. Tenant
shall receive notice from Landlord and a reasonable opportunity to cure damages
prior to Landlord undertaking corrective action.
(7) Prior to commencement of any work on the Premises by Tenant or
Tenant's contractor, Tenant or Tenant's contractor shall enter into an indemnity
agreement satisfactory to Landlord indemnifying and holding harmless Landlord
and Landlord's Contractor or the Tenant Improvement Contractor for any
liability, losses or damages directly or indirectly from lien claims affecting
the land, the Building or the Premises arising out of Tenant's or Tenant's
contractor's work or that of subcontractor or suppliers, and subordinating any
such liens to the liens of construction and permanent financing for the
Building.
(8) Landlord shall have the right to post a notice or notices in
conspicuous places in or about the Premises announcing its non- responsibility
for the work being performed therein.
E. Tenant's Entry to Premises. Tenant's entry to the Premises for
any purpose, including without limitation, inspection or performance of Tenant
Construction by Tenant's agents, prior to the Commencement Date as specified in
Section 3.A of the Lease shall be scheduled in advance with Landlord and shall
be subject to all the terms and conditions of the Lease, except the payment of
Rent and Additional Rent. Tenant's entry shall mean entry by Tenant, its
officers, contractors, Tenant's Office Planner, licensees, agents, servants,
employees, guests, invitees, or visitors. Landlord will make reasonable efforts
to accommodate Tenant's request for access to the Premises at all times. Tenant
will supply Landlord with a pre-approved list of individuals who will be allowed
to have access to the Premises prior to the Commencement Date.
F. Tenant's Telephone and Computer/Data Service. Tenant is
responsible for Tenant's telephone service, computer and data service, obtaining
any applicable permits related thereto, and related cabling. Tenant shall
select and coordinate installation of such communication and information systems
with the Landlord pursuant to item V(D)(4) of this Exhibit D.
G. Tenant shall be allowed to install a standby generator and
uninterrupted power supply system at Tenant's sole cost and expense in an area
of the Building that is mutually acceptable to Landlord and Tenant. Tenant
shall also be entitled to provide fencing or other appropriate security for this
area, subject to Landlord's reasonable approval.
Exhibit D - Page 5
<PAGE>
H. Landlord shall (i) promptly correct all defects in Landlord's
Work and all failures of such work to conform to the plans and specifications
for such work which have been agreed upon by Landlord and Tenant; and (ii) take
commercially reasonable measures to cause the Tenant Improvement Contractor to
correct all defects in the Tenant Improvements and all failures of the Tenant
Improvements to conform to plans and specifications for such work which have
been agreed upon by Landlord and Tenant, provided in all cases such defects or
non-conformities are disclosed in writing to Landlord within three hundred
thirty five (335) days after the Commencement Date. Landlord shall bear all
costs of correcting Landlord's Work. Costs of correcting the Tenant
Improvements shall be paid in the same manner that the costs of Tenant
Improvements are paid. Landlord and Tenant shall each give the other prompt
written notice after discovering the existence of any such defects or non-
conformities in Landlord's Work and Tenant Improvement work performed by the
Tenant Improvement Contractor.
IN WITNESS WHEREOF, Landlord and Tenant have executed this exhibit as of the day
and year first above written.
WITNESS/ATTEST: LANDLORD: THREE BELLEVUE CENTER LLC, a Washington
limited liability company
By: WRIGHT RUNSTAD ASSOCIATES LIMITED
PARTNERSHIP, a Washington limited
partnership, its manager
By: WRIGHT RUNSTAD & COMPANY, a
Washington corporation, its
general partner
By: /s/ H. J. Runstad
------------------------
Its: Chairman and CEO
------------------------
By: EOP-THREE BELLEVUE, L.L.C., a
Delaware limited liability company,
its manager
By: EOP OPERATING LIMITED
PARTNERSHIP, a Delaware
limited partnership, its sole
member
By: EQUITY OFFICE PROPERTIES
TRUST, a Maryland real
estate investment trust,
its managing general
partner
By: /s/ Michael Steel
---------------------
Its: COO, EVP Real
---------------------
Estate Operations
---------------------
WITNESS/ATTEST: TENANT: INFOSPACE.COM, INC., a Delaware corporation
By: /s/ Naveen Jain
----------------------------
Its: CEO
----------------------------
Exhibit D - Page 6
<PAGE>
EXHIBIT D-1
Bare Shell and Core
With Items Done Early
The condition of a bare shell and core floor ready for tenant improvements is as
follows:
. Building Standard restrooms completed.
. Building Standard drinking fountains installed.
. Drywall. Drywall installed around the core areas, perimeter of the floor
(around the windows and soffit) and columns; taped (one coat) and ready for
Tenant's final taping and finishes.
. Main Lobby. The main lobby serving the building is completed.
. Elevator Lobby. All Building Standard elevator lobby finishes are installed
on a multi-tenanted floor. For a single tenanted floor, Landlord will provide
only Building Standard elevator doors, frames, and buttons.
. Life Safety. Life safety includes fire sprinkler riser, code minimum tenant
distribution for open areas with drops to 8'11". Central life safety system
with conduit and wire to floor. Additional heads and sprinkler distribution
(over and above minimum code distribution) or modification of standard layout
and all detectors, strobe lights and speakers are part of Tenant Finish Work
paid for by Tenant.
. Mechanical. Mechanical includes the main system with medium pressure duct
(the main loop) serving the floor. Landlord will install seven (7) VAV boxes
per floor for freeze protection with flexible duct and thermostats hanging
from the box, including connection to main loop. Modification of the Landlord
installed boxes and distribution, including final installation of diffuser
and thermostat, and additional boxes, duct, and thermostats are part of
Tenant Finish Work paid for by Tenant. Landlord will provide plumbing stub-
outs at the core. Each floor shall be served by an auxiliary cooling loop
(five (5) tons per floor) to facilitate 24-hour cooling of computer rooms.
This cooling loop is available to Tenant at no monthly cost, provided Tenant
shall pay all costs of connecting to such cooling loop and the cost of
maintaining any special HVAC equipment installed by Tenant.
. Electrical. Electrical includes panels in the electrical closets based on a
design load of 4.5 watts per square foot. The main system includes expansion
capabilities for additional panels installed during Tenant Finish Work at
cost of Tenant.
. Perimeter Finishes. Perimeter finishes include the exterior of the building,
support structure, and insulation (as well as drywall work noted above).
. Ceiling Grid. Ceiling grid installed on a 4'x 4' pattern. Additional grid
(cross "T's" to a 2 x 2 pattern) and ceiling tiles are part of Tenant Finish
Work paid by Tenant.
. Elevators and Stairwells. Elevators and stairwells (with Building Standard
finishes) serving the floor are completed. Stairwell vestibules are
unfinished.
. Security. A multi-level cardkey system to control access to the Building and
the Building elevators. Additional card readers in the stairwells (to provide
access among the floors of the Premises) or other areas of the Premises shall
be at Tenant's costs.
. Data Access Lines. The Building shall be served with high capacity fiber
provided by at least two different companies from two access points.
Exhibit D-1
<PAGE>
EXHIBIT D-2
List of Building Plans and Specifications
Drawings
--------
<TABLE>
<CAPTION>
CIVIL
- -------------------------------------------------------------------------------------------------
<S> <C>
C1.0 Abbreviations, Vicinity Map and Legend
- -------------------------------------------------------------------------------------------------
C1.1 General Notes
- -------------------------------------------------------------------------------------------------
C2.0 Temporary Erosion and Sedimentation Control Plan
- -------------------------------------------------------------------------------------------------
C2.1 Demolition Plan
- -------------------------------------------------------------------------------------------------
C2.2 Utility Relocation Plan
- -------------------------------------------------------------------------------------------------
C2.4 Foundation Drainage Plan (sheet 1 of 2)
- -------------------------------------------------------------------------------------------------
C2.5 Foundation Drainage Plan (sheet 2 of 2)
- -------------------------------------------------------------------------------------------------
C3.0 TESC Sections and Details
- -------------------------------------------------------------------------------------------------
C3.1 Utility Sections and Details
- -------------------------------------------------------------------------------------------------
C3.2 Foundation Drainage Sections and Details
- -------------------------------------------------------------------------------------------------
C4.0 Storm Drain Profile
- -------------------------------------------------------------------------------------------------
C4.1 Water and Sewer Plan
- -------------------------------------------------------------------------------------------------
C4.2 106th Ave NE Improvements (sheet 1 of 2)
- -------------------------------------------------------------------------------------------------
C4.3 106th Ave NE Improvements (sheet 2 of 2)
- -------------------------------------------------------------------------------------------------
C4.4 Pedestrian Corridor
- -------------------------------------------------------------------------------------------------
C4.5 Sections & Details
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
ARCHITECTURAL
- -------------------------------------------------------------------------------------------------
A1.00 General Notes
- -------------------------------------------------------------------------------------------------
A1.01 Site Plan
- -------------------------------------------------------------------------------------------------
A1.02A Site Plan
- -------------------------------------------------------------------------------------------------
A1.02B Pedestrian Corridor Grading & Layout Plans
- -------------------------------------------------------------------------------------------------
A1.02C Off-site Demolition & Improvements at Rainier Plaza
- -------------------------------------------------------------------------------------------------
A1.03 Plaza Level Sections and Details
- -------------------------------------------------------------------------------------------------
A1.04 Pedestrian Corridor Sections and Elevations
- -------------------------------------------------------------------------------------------------
A1.05 Site Details
- -------------------------------------------------------------------------------------------------
A1.07 Paving Plans & Details
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
A2.0F Parking Level F Plan
- -------------------------------------------------------------------------------------------------
A2.0E Parking Level E Plan
- -------------------------------------------------------------------------------------------------
A2.0D Parking Level D Plan
- -------------------------------------------------------------------------------------------------
A2.0C Parking Level C Plan
- -------------------------------------------------------------------------------------------------
A2.0B Parking Level B Plan
- -------------------------------------------------------------------------------------------------
A2.0.A Parking Level A Plan
- -------------------------------------------------------------------------------------------------
A2.01 First Floor Plan
- -------------------------------------------------------------------------------------------------
A2.01a First Floor Perimeter Slab Edge
- -------------------------------------------------------------------------------------------------
A2.02 Second Floor Plan
- -------------------------------------------------------------------------------------------------
A2.02a Second Floor Perimeter Slab Edge Plan
- -------------------------------------------------------------------------------------------------
A2.03 Third Floor Plan
- -------------------------------------------------------------------------------------------------
A2.03a Third Floor Perimeter Slab Edge Plan
- -------------------------------------------------------------------------------------------------
A2.04 4th through 12th Floor Plans
- -------------------------------------------------------------------------------------------------
A2.14 14th Floor Plan
- -------------------------------------------------------------------------------------------------
A2.15 15th Floor Plan
- -------------------------------------------------------------------------------------------------
A2.16 16th Floor Plan
- -------------------------------------------------------------------------------------------------
A2.17 17th through 21st Floor Plans
- -------------------------------------------------------------------------------------------------
A2.22 22nd Floor Plan
- -------------------------------------------------------------------------------------------------
A2.23 23rd Floor Plan and Roof Plan
- -------------------------------------------------------------------------------------------------
A2.24 Penthouse and Upper Roof Plan
- -------------------------------------------------------------------------------------------------
A2.25 Penthouse and Upper Roof Plan
- -------------------------------------------------------------------------------------------------
A2.26 Canopy Plan
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
A3.01 Building Elevations
- -------------------------------------------------------------------------------------------------
A3.02 Building Elevations
- -------------------------------------------------------------------------------------------------
A3.05 Enlarged Podium Elevations and Plans
- -------------------------------------------------------------------------------------------------
A3.06 Enlarged Podium Elevations and Plans
- -------------------------------------------------------------------------------------------------
A3.07 Enlarged Podium Elevations and Plans
- -------------------------------------------------------------------------------------------------
A3.08 Enlarged Podium Elevations and Plans
- -------------------------------------------------------------------------------------------------
A3.09 Enlarged Partial Elevations
- -------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D-2
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------
<S> <C>
A3.10 Enlarged Tower Elevations
- -------------------------------------------------------------------------------------------------
A3.11 Enlarged Tower Elevations
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
A4.01 North South Building Section
- -------------------------------------------------------------------------------------------------
A4.02 East West Building Section
- -------------------------------------------------------------------------------------------------
A4.03 Garage Sections
- -------------------------------------------------------------------------------------------------
A4.04 Wall Sections - Podium
- -------------------------------------------------------------------------------------------------
A4.06 Wall Sections - Tower
- -------------------------------------------------------------------------------------------------
A4.07 Wall Sections - Tower
- -------------------------------------------------------------------------------------------------
A4.08 Enlarged Tower Plans
- -------------------------------------------------------------------------------------------------
A4.10 Podium Details
- -------------------------------------------------------------------------------------------------
A4.11 Podium Details
- -------------------------------------------------------------------------------------------------
A4.12 Podium Details
- -------------------------------------------------------------------------------------------------
A4.13 Podium Details
- -------------------------------------------------------------------------------------------------
A4.19 Canopy Details
- -------------------------------------------------------------------------------------------------
A4.20 Exterior Details
- -------------------------------------------------------------------------------------------------
A4.21 Exterior Details
- -------------------------------------------------------------------------------------------------
A4.22 Exterior Details
- -------------------------------------------------------------------------------------------------
A4.23 Penthouse Details
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
A5.01 Enlarged Lobby Plan, Sections & Details
- -------------------------------------------------------------------------------------------------
A5.02 Enlarged Core Plans
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
A6.01 Stair and Elevator Riser Diagrams
- -------------------------------------------------------------------------------------------------
A6.02 Stair #1 Plans and Sections
- -------------------------------------------------------------------------------------------------
A6.03 Stair #2 Plans and Sections
- -------------------------------------------------------------------------------------------------
A6.04 Stair #3 Plans and Sections/Stair Details
- -------------------------------------------------------------------------------------------------
A6.05 Elevator Plans, Sections and Details
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
A7.01 First Floor Reflected Ceiling Plan
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
A8.03 Restroom Elevations and Details
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
A9.01 Partition Types
- -------------------------------------------------------------------------------------------------
A9.02 Shaft and Opening Details
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
STRUCTURAL
- -------------------------------------------------------------------------------------------------
S0.00 Abbreviations, Drawing Symbols and Drawing List
- -------------------------------------------------------------------------------------------------
S0.01 General Notes
- -------------------------------------------------------------------------------------------------
S0.02 Load Maps
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
S1.00 Typical Concrete Details
- -------------------------------------------------------------------------------------------------
S1.01 Typical Steel Details
- -------------------------------------------------------------------------------------------------
S1.02 Typical Steel Details
- -------------------------------------------------------------------------------------------------
S1.03 Typical Steel Details
- -------------------------------------------------------------------------------------------------
S1.04 Typical Steel Details
- -------------------------------------------------------------------------------------------------
S1.05 Typical C.M.U. Details
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
S2.0F Level F Foundation Framing Plan
- -------------------------------------------------------------------------------------------------
S2.00 Level E Framing Plan
- -------------------------------------------------------------------------------------------------
S2.01 Level D Framing Plan
- -------------------------------------------------------------------------------------------------
S2.02 Level C Framing Plan
- -------------------------------------------------------------------------------------------------
S2.03 Level B Framing Plan
- -------------------------------------------------------------------------------------------------
S2.04 Level A Framing Plan
- -------------------------------------------------------------------------------------------------
S2.05 Floor 1 Framing Plan
- -------------------------------------------------------------------------------------------------
S2.06 Floor 2 Framing Plan
- -------------------------------------------------------------------------------------------------
S2.07 Floor 3 Framing Plan
- -------------------------------------------------------------------------------------------------
S2.10 Floors 4-14 Framing Plans
- -------------------------------------------------------------------------------------------------
S2.20 Floor 15 Framing Plan
- -------------------------------------------------------------------------------------------------
S2.21 Floor 16 Framing Plan
- -------------------------------------------------------------------------------------------------
S2.22 Floors 17-22 Framing Plans
- -------------------------------------------------------------------------------------------------
S2.30 Floor 23 and Roof Framing Plan
- -------------------------------------------------------------------------------------------------
S2.31 Upper Roof and Penthouse Floor Framing Plan
- -------------------------------------------------------------------------------------------------
S2.32 Penthouse Roof Framing Plan
- -------------------------------------------------------------------------------------------------
S2.40 Partial Plans
- -------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D-2
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
<S> <C>
S3.00 Core Wall Elevation - North
- -------------------------------------------------------------------------------------------------
S3.01 Core Wall Elevation - South
- -------------------------------------------------------------------------------------------------
S3.02 Core Wall Elevation - East
- -------------------------------------------------------------------------------------------------
S3.03 Core Wall Elevation - West
- -------------------------------------------------------------------------------------------------
S3.04 Core Wall Sections
- -------------------------------------------------------------------------------------------------
S3.04B Core Wall Sections
- -------------------------------------------------------------------------------------------------
S3.05 Core Wall Sections
- -------------------------------------------------------------------------------------------------
S3.06 Core Wall Sections
- -------------------------------------------------------------------------------------------------
S3.07 Core Wall Sections
- -------------------------------------------------------------------------------------------------
S3.08 Core Wall Sections
- -------------------------------------------------------------------------------------------------
S3.10 Core Wall Details
- -------------------------------------------------------------------------------------------------
S3.20 Diaphragm Reinforcement Plan
- -------------------------------------------------------------------------------------------------
S3.21 Diaphragm Reinforcement Plan
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
S4.00 Basement Wall Sections
- -------------------------------------------------------------------------------------------------
S4.10 Steel Column Schedule
- -------------------------------------------------------------------------------------------------
S4.11 Steel Column Schedule
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
S5.00 Sections and Details
- -------------------------------------------------------------------------------------------------
S5.01 Sections and Details
- -------------------------------------------------------------------------------------------------
S5.02 Sections and Details
- -------------------------------------------------------------------------------------------------
S5.03 Sections and Details
- -------------------------------------------------------------------------------------------------
S5.04 Canopy Section and Details
- -------------------------------------------------------------------------------------------------
S5.10 Stair Details
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
FIRE ALARM SYSTEM
- -------------------------------------------------------------------------------------------------
F1.01 Riser Schematic
- -------------------------------------------------------------------------------------------------
F2.0F Level F Fire Sprinkler Plan
- -------------------------------------------------------------------------------------------------
F2.0E Level E Fire Sprinkler Plan
- -------------------------------------------------------------------------------------------------
F2.0D Level D Fire Sprinkler Plan
- -------------------------------------------------------------------------------------------------
F2.0C Level C Fire Sprinkler Plan
- -------------------------------------------------------------------------------------------------
F2.0B Level B Fire Sprinkler Plan
- -------------------------------------------------------------------------------------------------
F2.0A Level A Fire Sprinkler Plan
- -------------------------------------------------------------------------------------------------
F2.01 First Floor Fire Sprinkler Plan
- -------------------------------------------------------------------------------------------------
F2.02 Second Floor Fire Sprinkler Plan
- -------------------------------------------------------------------------------------------------
F2.03 Third Floor Fire Sprinkler Plan
- -------------------------------------------------------------------------------------------------
F2.04 4th - 12th Floors Fire Sprinkler Plan
- -------------------------------------------------------------------------------------------------
F2.14 14th Floor Fire Sprinkler Plan
- -------------------------------------------------------------------------------------------------
F2.15 15th Floor Fire Sprinkler Plan
- -------------------------------------------------------------------------------------------------
F2.16 16th Floor Fire Sprinkler Plan
- -------------------------------------------------------------------------------------------------
F2.17 17th - 21st Floors Fire Sprinkler Plan
- -------------------------------------------------------------------------------------------------
F2.22 22nd Floor Fire Sprinkler Plan
- -------------------------------------------------------------------------------------------------
F2.23 23rd Floor Fire Sprinkler Plan
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
F6.01 Stair Details & Elevations
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
HVAC
- -------------------------------------------------------------------------------------------------
M-0.1 Schedules - HVAC
- -------------------------------------------------------------------------------------------------
M-2.0F Parking Level F - HVAC
- -------------------------------------------------------------------------------------------------
M-2.0E Parking Level E - HVAC
- -------------------------------------------------------------------------------------------------
M-2.0D Parking Level D - HVAC
- -------------------------------------------------------------------------------------------------
M-2.0C Parking Level C - HVAC
- -------------------------------------------------------------------------------------------------
M-2.0B Parking Level B - HVAC
- -------------------------------------------------------------------------------------------------
M-2.0A Parking Level A - HVAC
- -------------------------------------------------------------------------------------------------
M-2.01 1st Floor Plan - HVAC
- -------------------------------------------------------------------------------------------------
M-2.02 2nd Floor Plan - HVAC
- -------------------------------------------------------------------------------------------------
M-2.03 3rd Floor Plan - HVAC
- -------------------------------------------------------------------------------------------------
M-2.12 4th - 12th Floor Plan - HVAC
- -------------------------------------------------------------------------------------------------
M-2.15 14th - 15th Floor Plan - HVAC
- -------------------------------------------------------------------------------------------------
M-2.16 16th Floor Plan - HVAC
- -------------------------------------------------------------------------------------------------
M-2.17 17th - 21st Floor Plan - HVAC
- -------------------------------------------------------------------------------------------------
M-2.22 22nd Floor Plan - HVAC
- -------------------------------------------------------------------------------------------------
M-2.23 23rd Floor Plan - HVAC
- -------------------------------------------------------------------------------------------------
M-2.24 Upper Penthouse Plan - HVAC
- -------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D-2
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------
<S> <C>
M-3.01 Condenser Riser and Details - HVAC
- -------------------------------------------------------------------------------------------------
M-3.02 Risers and Details - HVAC
- -------------------------------------------------------------------------------------------------
M-3.03 Smoke Control Details - HVAC
- -------------------------------------------------------------------------------------------------
M-3.04 Details - HVAC
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
PLUMBING
- -------------------------------------------------------------------------------------------------
P-0.01 Schedules - Plumb
- -------------------------------------------------------------------------------------------------
P-2.0G Foundation Plan - Plumb
- -------------------------------------------------------------------------------------------------
P-2.0F Parking Plan Level F - Plumb
- -------------------------------------------------------------------------------------------------
P-2.0E Parking Plan Level E - Plumb
- -------------------------------------------------------------------------------------------------
P-2.0D Parking Plan Level D - Plumb
- -------------------------------------------------------------------------------------------------
P-2.0C Parking Plan Level C - Plumb
- -------------------------------------------------------------------------------------------------
P-2.0B Parking Plan Level B - Plumb
- -------------------------------------------------------------------------------------------------
P-2.0A Parking Plan Level A - Plumb
- -------------------------------------------------------------------------------------------------
P-2.01 1st Floor Plan - Plumb
- -------------------------------------------------------------------------------------------------
P-2.02 2nd Floor Plan - Plumb
- -------------------------------------------------------------------------------------------------
P-2.03 3rd Floor Plan - Plumb
- -------------------------------------------------------------------------------------------------
P-2.04 4th - 14th Floor Plan - Plumb
- -------------------------------------------------------------------------------------------------
P-2.15 15th Floor Plan - Plumb
- -------------------------------------------------------------------------------------------------
P-2.16 16th - 20th Floor Plan - Plumb
- -------------------------------------------------------------------------------------------------
P-2.21 21st Floor Plan - Plumb
- -------------------------------------------------------------------------------------------------
P-2.22 22nd Floor Plan - Plumb
- -------------------------------------------------------------------------------------------------
P-2.23 23rd Floor Plan - Plumb
- -------------------------------------------------------------------------------------------------
P-2.24 Penthouse Floor Plan - Plumb
- -------------------------------------------------------------------------------------------------
P-3.01 Toilet Room Plans - Plumb
- -------------------------------------------------------------------------------------------------
P-3.02 Riser Plans - Plumb
- -------------------------------------------------------------------------------------------------
P-4.01 Details - Plumb
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D-2
<PAGE>
<TABLE>
<CAPTION>
ELECTRICAL
- -------------------------------------------------------------------------------------------------
<S> <C>
E0.01 Symbols & Abbreviations
- -------------------------------------------------------------------------------------------------
E1.01 Site, Lighting Power Plan
- -------------------------------------------------------------------------------------------------
E2.0F Parking Level F Lighting, Power & F/A Plan
- -------------------------------------------------------------------------------------------------
E2.0E Parking Level E Lighting, Power & F/A Plan
- -------------------------------------------------------------------------------------------------
E2.0D Parking Level D Lighting, Power & F/A Plan
- -------------------------------------------------------------------------------------------------
E2.0C Parking Level C Lighting, Power & F/A Plan
- -------------------------------------------------------------------------------------------------
E2.0B Parking Level B Lighting, Power & F/A Plan
- -------------------------------------------------------------------------------------------------
E2.0A-L Parking Level A Lighting Plan
- -------------------------------------------------------------------------------------------------
E2.0A-P Parking Level A Power & F/A Plan
- -------------------------------------------------------------------------------------------------
E2.01 Lobby Level Lighting, Power & F/A Plan
- -------------------------------------------------------------------------------------------------
E2.02 Second Floor & Transfer Corridor Lighting, Power & F/A Plan
- -------------------------------------------------------------------------------------------------
E2.03 Third Floor Lighting, Power & F/A Plan
- -------------------------------------------------------------------------------------------------
E2.04 Level 4 - 12 Lighting, Power & F/A Plan
- -------------------------------------------------------------------------------------------------
E2.14 Level 14 Lighting, Power & F/A Plan
- -------------------------------------------------------------------------------------------------
E2.15 Level 15 Lighting, Power & F/A Plan
- -------------------------------------------------------------------------------------------------
E2.16 Level 16 - 22 Lighting, Power & F/A Plan
- -------------------------------------------------------------------------------------------------
E2.23 Penthouse Level Lighting, Power & F/A Plan
- -------------------------------------------------------------------------------------------------
E2.24 Upper Penthouse Level Lighting, Power & F/A Plan
- -------------------------------------------------------------------------------------------------
E2.25 Upper Penthouse Level Lighting, Power
- -------------------------------------------------------------------------------------------------
E3.01 Power Riser and 1-Line Diagrams
- -------------------------------------------------------------------------------------------------
E3.02 Stair Riser & Security Riser Diagram
- -------------------------------------------------------------------------------------------------
E3.03 Electrical Room Layouts
- -------------------------------------------------------------------------------------------------
E3.04 Fire Alarm & Communication Riser
- -------------------------------------------------------------------------------------------------
E3.05 Fire Alarm Matrix and Logic Diagram
- -------------------------------------------------------------------------------------------------
VT1 Index, Summary, Abbreviations, General Notes, Rail Forces,
Electrical/Mechanical Requirements and Work by Other Trades
- -------------------------------------------------------------------------------------------------
VT2 Hoistway, Pit, Express Zone, and Machine Room Plans Elevators 1-4 & 5-8
- -------------------------------------------------------------------------------------------------
VT3 Machine Room Plan Elevators 1-4 and Hoistway Section Elevators 1-8
- -------------------------------------------------------------------------------------------------
VT4 Hoistway, Pit, Machine Room and Overhead Plans and Section Elevators GP1 & GP2
- -------------------------------------------------------------------------------------------------
VT5 Hoistway, Pit, Machine Room and Overhead Plans and Section Elevator S1
- -------------------------------------------------------------------------------------------------
</TABLE>
Specifications
--------------
<TABLE>
- -------------------------------------------------------------------------------------------------
<S> <C>
Project Manual - Construction Set, Volume 1 of 2, Bidding and Contract 9/11/98
Requirements, Architectural
- -------------------------------------------------------------------------------------------------
Project Manual - Construction Set, Volume 2 of 2, Vertical 9/11/98
Transportation, Mechanical, Electrical
- -------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D-2
<PAGE>
EXHIBIT E
ADDITIONAL PROVISIONS
---------------------
This Exhibit is attached to and made a part of the Lease dated February ___,
2000, by and between THREE BELLEVUE CENTER LLC ("Landlord") and INFOSPACE.COM,
INC., a Delaware corporation ("Tenant") for space in the Building known as Three
Bellevue Center located at 601 - 108th Avenue NE, Bellevue, King County,
Washington.
I. Parking.
-------
A. Landlord shall lease to Tenant, or cause the operator (the
"Operator") of the garage servicing the Building (the "Garage") to lease to
Tenant, and Tenant shall lease from Landlord or such Operator, up to three
and one half (3.5) unreserved parking spaces in the Garage for each one
thousand (1,000) usable square feet of area in the Premises (the "Spaces")
for the use of Tenant and its employees. The Spaces shall be leased for the
first full year after the Commencement Date at the rate of $135.00 per
Space, per month, plus applicable tax thereon, as such rate may later be
adjusted from time-to-time to reflect the then current rate for parking in
the Garage, provided in no event shall the increases in such rate exceed at
any time a cumulative increase, measured from the Commencement Date, of six
percent (6.0%) per annum. If requested by Landlord, Tenant shall execute
and deliver to Landlord the standard parking agreement used by Landlord or
the Operator (the "Parking Agreement") in the Garage for such Spaces.
B. Tenant shall have the right, on thirty (30) days' prior written
notice to Landlord from time to time, to temporarily reduce (and thereafter
reinstate) the number of parking spaces it reserves in the Garage. No
deductions or allowances shall be made for days when Tenant or any of its
employees does not utilize the parking facilities or for Tenant utilizing
less than all of the Spaces. Tenant shall not have the right to lease or
otherwise use more than the number of reserved and unreserved Spaces set
forth above.
C. Except for particular spaces and areas designated by Landlord or the
Operator for reserved parking, all parking in the Garage shall be on an
unreserved, first-come, first-served basis. Notwithstanding anything to the
contrary contained in this Section I, Tenant acknowledges that Landlord may
implement a valet parking system in the Garage, and that up to 1.5 of the
3.5 Spaces provided per 1,000 usable square feet may be provided in covered
or surface parking lots located within the area bounded by the office
buildings commonly known as One Bellevue Center, Rainier Plaza, City Center
Bellevue, and parcels contiguous thereto, and the rate charged to Tenant
for such Spaces not located in the Garage shall be the actual cost charged
to Landlord for such Spaces.
D. Neither Landlord nor the Operator shall be responsible for money,
jewelry, automobiles or other personal property lost in or stolen from the
Garage or the surface parking areas regardless of whether such loss or
theft occurs when the Garage or other areas therein are locked or otherwise
secured. Except as caused by the negligence or willful misconduct of
Landlord and without limiting the terms of the preceding sentence, Landlord
shall not be liable for any loss, injury or damage to persons using the
Garage or the surface parking areas or automobiles or other property
therein, it being agreed that, to the fullest extent permitted by law, the
use of the Spaces shall be at the sole risk of Tenant and its employees.
E. Landlord or its Operator shall have the right from time to time to
designate the location of the Spaces and to promulgate reasonable rules and
regulations regarding the Garage, the surface parking areas, if any, the
Spaces and the use thereof, including, but not limited to, rules and
regulations controlling the flow of traffic to and from various parking
areas, the angle and direction of parking and the like. Tenant shall comply
with and cause its employees to comply with all such rules and regulations,
all reasonable additions and amendments thereto, and the terms and
provisions of the Parking Agreement.
F. Tenant shall not store or permit its employees to store any
automobiles in the Garage or on the surface parking areas without the prior
written consent of Landlord. Except for emergency repairs, Tenant and its
employees shall not perform any work on any automobiles while located in
the Garage or on the Property.
Exhibit E - Page 1
<PAGE>
G. Landlord or the Operator shall have the right to temporarily close
the Garage or certain areas therein in order to perform necessary repairs,
maintenance and improvements to the Garage or the surface parking areas, if
any.
H. Tenant shall not assign or sublease any of the Spaces without the
consent of Landlord except in connection with an assignment or sublease of
this Lease approved by Landlord in accordance with Article XII of the
Lease. Landlord shall have the right to terminate the agreement contained
in this Section I or in the Parking Agreement with respect to any Spaces
that Tenant desires to sublet or assign.
I. Landlord may elect to provide parking cards or keys to control access
to the Garage or surface parking areas, if any. In such event, Landlord
shall provide Tenant with one card or key for each Space that Tenant is
leasing hereunder, provided that Landlord shall have the right to require
Tenant or its employees to place a deposit on such access cards or keys and
to pay a fee for any lost or damaged cards or keys.
II. Renewal.
-------
A. Tenant shall have the right to extend the Lease Term (the "Renewal
Option") for two (2) additional periods of five (5) years each commencing
on the day following the Termination Date of the immediately prior Lease
Term and ending on date five (5) years thereafter (the "Renewal Term"),
if:
1. Landlord receives notice of exercise of the Renewal Option
("Initial Renewal Notice") not less than twelve (12) full calendar
months prior to the expiration of the initial Lease Term and not more
than fifteen (15) full calendar months prior to the expiration of the
initial Lease Term; and
2. Tenant is not in default under the Lease beyond any applicable
cure periods at the time that Tenant delivers its Initial Renewal
Notice or at the time Tenant delivers its Binding Notice; and
3. No more than twenty five percent (25%) of the area of the
Premises is sublet at the time that Tenant delivers its Initial
Renewal Notice or at the time Tenant delivers its Binding Notice
(except for a Permitted Transfer); and
4. The Lease has not been assigned prior to the date that Tenant
delivers its Initial Renewal Notice or prior to the date Tenant
delivers its Binding Notice (except for a transfer approved by
Landlord or a Permitted Transfer); and
5. Tenant executes and returns the Renewal Amendment (hereinafter
defined) within thirty (30) days after its submission to Tenant.
B. The initial Base Rent rate per rentable square foot for the Premises
during the Renewal Term shall equal the Prevailing Market (hereinafter
defined) rate per rentable square foot for the Premises.
C. Tenant shall pay Additional Base Rent (i.e. Expenses and Taxes) for
the Premises during the Renewal Term in accordance with Article IV of the
Lease.
D. Within sixty (60) days after receipt of Tenant's Initial Renewal
Notice, Landlord shall advise Tenant of the applicable Base Rent rate for
the Premises for the Renewal Term. Tenant, within sixty (60) days after
the date on which Landlord advises Tenant of the applicable Base Rent rate
for the Renewal Term, shall either (i) give Landlord final binding written
notice ("Binding Notice") of Tenant's exercise of its option, or (ii) if
Tenant disagrees with Landlord's determination, provide Landlord with
written notice of rejection (the "Rejection Notice"). If Tenant fails to
provide Landlord with either a Binding Notice or Rejection Notice within
such sixty (60) day period, Tenant's Renewal Option shall be null and void
and of no further force and effect. If Tenant provides Landlord with a
Binding Notice, Landlord and Tenant shall enter into the Renewal Amendment
upon the terms and conditions set forth herein. If Tenant provides
Landlord with a Rejection Notice, Landlord and Tenant shall work together
in good faith to agree upon the Prevailing Market Base Rent rate for the
Premises during the Renewal Term. Upon agreement Tenant shall provide
Landlord with Binding Notice and Landlord and Tenant shall enter into the
Renewal Amendment in accordance with the terms and conditions hereof. If
Landlord and Tenant fail to agree upon the Prevailing Market Rate within
thirty (30) days after the date of the Rejection Notice, either party, by
written notice (the "Arbitration Notice") to the other within thirty (30)
days after the expiration of such thirty (30) day period, shall have the
right to have the Prevailing Market Rate
Exhibit E - Page 2
<PAGE>
determined by binding arbitration in accordance with the procedures set
forth below. If Landlord and Tenant cannot agree upon the Prevailing Market
Rate and neither party elects to invoke its right of arbitration, Tenant's
Renewal Option shall be deemed to be null and void and of no further force
and effect. If the right of arbitration is invoked, Landlord and Tenant, at
their sole cost and expense, shall each employ an appraiser within fifteen
(15) days after the date the Arbitration Notice is given. If either party
fails to appoint an appraiser within such period then the appointed
appraiser shall be the sole appraiser and his or her determination shall be
binding. Each such appraiser shall be a member of the Master Appraisers
Institute or similar reputable organization, with ten (10) years of
experience appraising office buildings comparable to the location and type
of that of the Building. Each appraiser shall render an appraisal of the
Prevailing Market Rate for the Premises within thirty (30) calendar days.
The two appraisers, within ten (10) days after the exchange of appraisals,
shall mutually agree upon the Prevailing Market Rate and notify Landlord
and Tenant in writing of their determination. Such determination shall be
binding upon both Landlord and Tenant. If the appraisers cannot agree on a
determination of the Prevailing Market Rate within ten (10) days of the
exchange of appraisals, then Landlord and Tenant shall select an
independent third appraiser acceptable to both with ten (10) days. If
Landlord and Tenant are unable to select an independent third appraiser
acceptable to both with ten (10) days, either party may request that the
American Arbitration Association in the county in which the Building is
located appoint an independent third appraiser that meets the
qualifications described above. Within ten (10) days following appointment
(whether by mutual agreement or arbitration), the third appraiser shall
choose the appraisal of either Landlord's appraiser or Tenant's appraiser
and the chosen appraisal shall be deemed to represent the Prevailing Market
Rate for the Premises. Such determination shall be binding upon both
Landlord and Tenant. The parties shall share equally in the cost of any
such third appraiser.
E. If Tenant is entitled to and properly exercises its Renewal Option,
Landlord shall prepare an amendment (the "Renewal Amendment") to reflect
changes in the Base Rent, Lease Term, Termination Date and other
appropriate terms. The Renewal Amendment shall be:
1. sent to Tenant within a reasonable time after receipt of the
Binding Notice; and
2. executed by Tenant and returned to Landlord in accordance with
paragraph A.5. above.
An otherwise valid exercise of the Renewal Option shall, at Landlord's
option, be fully effective whether or not the Renewal Amendment is
executed.
F. For purpose hereof, "Prevailing Market" shall mean the arms length fair
market annual rental rate per rentable square foot, and refurbishment
allowance, if any, under leases entered into on or about the date on which
the Prevailing Market is being determined hereunder for space comparable to
the Premises in the Building and office buildings comparable to the
Building in Bellevue, Washington. The determination of Prevailing Market
shall take into account any material economic differences between the terms
of this Lease and any comparison lease, such as rent abatements,
construction costs and other concessions and the manner, if any, in which
the Landlord under any such lease is reimbursed for operating expenses and
taxes. The determination of Prevailing Market shall also take into
consideration any reasonably anticipated changes in the Prevailing Market
rate from the time such Prevailing Market rate is being determined and the
time such Prevailing Market rate will become effective under this Lease.
In no event shall the Prevailing Market rate be less than the rate payable
under this Lease immediately prior to the commencement of a Renewal Term.
III. Satellite Dish.
--------------
1. Tenant shall have the right to lease space on the roof of the Building
for the purpose of installing (in accordance with Section IX.C of the
Lease), operating and maintaining one or more dish, antenna or other
communication device approved by the Landlord ( collectively the
"Dish/Antenna"). Tenant shall pay, in addition to all other amounts
required to be paid under this Lease, Landlord's scheduled rates for all
roof space so leased, provided such rates shall not exceed rates then being
charged for leases of roofs of comparable buildings in the Bellevue,
Washington area. Landlord's current scheduled rates for roof space is
attached as Exhibit G. The exact location of
Exhibit E - Page 3
<PAGE>
the space on the roof to be leased by Tenant shall be designated by
Landlord (the "Roof Space"). Landlord reserves the right to relocate the
Roof Space, at Landlord's cost, as reasonably necessary during the Lease
Term. Landlord's designation shall take into account Tenant's use of the
Dish/Antenna. Notwithstanding the foregoing, Tenant's right to install the
Dish/Antenna shall be subject to the approval rights of Landlord and
Landlord's architect and/or engineer with respect to the plans and
specifications of the Dish/Antenna, the manner in which the Dish/Antenna is
attached to the roof of the Building and the manner in which any cables are
run to and from the Dish/Antenna. The precise specifications and a general
description of the Dish/Antenna along with all documents Landlord
reasonably requires to review the installation of the Dish/Antenna (the
"Plans and Specifications") shall be submitted to Landlord for Landlord's
written approval no later than twenty (20) days before Tenant commences to
install the Dish/Antenna. Tenant shall be solely responsible for obtaining
all necessary governmental and regulatory approvals and for the cost of
installing, operating, maintaining and removing the Dish/Antenna. Tenant
shall notify Landlord upon completion of the installation of the
Dish/Antenna. If Landlord determines that the Dish/Antenna equipment does
not comply with the approved Plans and Specifications, that the Building
has been damaged during installation of the Dish/Antenna or that the
installation was defective, Landlord shall notify Tenant of any
noncompliance or detected problems and Tenant immediately shall cure the
defects. If the Tenant fails to immediately cure the defects, Tenant shall
pay to Landlord upon demand the cost, as reasonably determined by Landlord,
of correcting any defects and repairing any damage to the Building caused
by such installation. If at any time Landlord, in its sole discretion,
deems it necessary, Tenant shall provide and install, at Tenant's sole cost
and expense, appropriate aesthetic screening, reasonably satisfactory to
Landlord, for the Dish/Antenna (the "Aesthetic Screening").
2. Landlord agrees that Tenant, upon reasonable prior written notice to
Landlord, shall have access to the roof of the Building and the Roof Space
for the purpose of installing, maintaining, repairing and removing the
Dish/Antenna, the appurtenances and the Aesthetic Screening, if any, all of
which shall be performed by Tenant or Tenant's authorized representative or
contractors, which shall be approved by Landlord, at Tenant's sole cost and
risk. It is agreed, however, that only authorized engineers, employees or
properly authorized contractors of Tenant, FCC inspectors, or persons under
their direct supervision will be permitted to have access to the roof of
the Building and the Roof Space. Tenant further agrees to exercise firm
control over the people requiring access to the roof of the Building and
the Roof Space in order to keep to a minimum the number of people having
access to the roof of the Building and the Roof Space and the frequency of
their visits.
3. It is further understood and agreed that the installation, maintenance,
operation and removal of the Dish/Antenna, the appurtenances and the
Aesthetic Screening, if any, will in no way damage the Building or the roof
thereof, or interfere with the use of the Building and roof by Landlord.
Tenant agrees to be responsible for any damage caused to the roof or any
other part of the Building, which may be caused by Tenant or any of its
agents or representatives.
4. Tenant agrees to install only equipment of types and frequencies which
will not cause unreasonable interference to Landlord or existing tenants of
the Building. In the event Tenant's equipment causes such interference,
Tenant will change the frequency on which it transmits and/or receives and
take any other steps necessary to eliminate the interference. If said
interference cannot be eliminated within a reasonable period of time, in
the judgment of Landlord, then Tenant agrees to remove the Dish/Antenna
from the Roof Space.
5. Tenant shall, at its sole cost and expense, and at its sole risk,
install, operate and maintain the Dish/Antenna in a good and workmanlike
manner, and in compliance with all Building, electric, communication, and
safety codes, ordinances, standards, regulations and requirements, now in
effect or hereafter promulgated, of the Federal Government, including,
without limitation, the Federal Communications Commission (the "FCC"), the
Federal Aviation Administration ("FAA") or any successor agency of either
the FCC or FAA having jurisdiction over radio or telecommunications, and of
the state, city and county in which the Building is located. Under this
Lease, the Landlord and its agents assume no responsibility for the
licensing, operation and/or maintenance of Tenant's equipment. Tenant has
the responsibility of carrying out the terms of its FCC license in all
respects. The Dish/Antenna shall be connected to Landlord's power supply
in strict compliance with all applicable Building, electrical, fire and
safety codes. Neither
Exhibit E - Page 4
<PAGE>
Landlord nor its agents shall be liable to Tenant for any stoppages or
shortages of electrical power furnished to the Dish/Antenna or the Roof
Space because of any act, omission or requirement of the public utility
serving the Building, or the act or omission of any other tenant, invitee
or licensee or their respective agents, employees or contractors, or for
any other cause beyond the reasonable control of Landlord, and Tenant shall
not be entitled to any rental abatement for any such stoppage or shortage
of electrical power. Neither Landlord nor its agents shall have any
responsibility or liability for the conduct or safety of any of Tenant's
representatives, repair, maintenance and engineering personnel while in or
on any part of the Building or the Roof Space.
6. The Dish/Antenna, the appurtenances and the Aesthetic Screening, if
any, shall remain the personal property of Tenant, and shall be removed by
Tenant at its own expense at the expiration or earlier termination of this
Lease or Tenant's right to possession hereunder. Tenant shall repair any
damage caused by such removal, including the patching of any holes to
match, as closely as possible, the color surrounding the area where the
equipment and appurtenances were attached. Tenant agrees to maintain all
of the Tenant's Dish/Antenna equipment placed on or about the roof or in
any other part of the Building in proper operating condition and maintain
same in satisfactory condition as to appearance, in Landlord's reasonable
discretion, and satisfactory condition as to safety, in Landlord's
reasonable discretion. Such maintenance and operation shall be performed
in a manner to avoid any interference with any other tenants or Landlord.
Tenant agrees that at all times during the Lease Term, it will keep the
roof of the Building and the Roof Space free of all trash or waste
materials produced by Tenant or Tenant's agents, employees or contractors.
7. In light of the specialized nature of the Dish/Antenna, Tenant shall
be permitted to utilize the services of its choice for installation,
operation, removal and repair of the Dish/Antenna, the appurtenances and
the Aesthetic Screening, if any, subject to the reasonable approval of
Landlord. Notwithstanding the foregoing, Tenant must provide Landlord with
prior written notice of any such installation, removal or repair and
coordinate such work with Landlord in order to avoid voiding or otherwise
adversely affecting any warranties granted to Landlord with respect to the
roof. If necessary, Tenant, at its sole cost and expense, shall retain any
contractor having a then existing warranty in effect on the roof to perform
such work (to the extent that it involves the roof), or, at Tenant's
option, to perform such work in conjunction with Tenant's contractor. In
the event the Landlord contemplates roof repairs that could affect Tenant's
Dish/Antenna, or which may result in an interruption of the Tenant's
telecommunication service, Landlord shall formally notify Tenant at least
thirty (30) days in advance (except in cases of an emergency) prior to the
commencement of such contemplated work in order to allow Tenant to make
other arrangements for such service.
8. Tenant shall not allow any provider of telecommunication, video, data
or related services ("Communication Services") to locate any equipment on
the roof of the Building or in the Roof Space for any purpose whatsoever,
nor may Tenant use the Roof Space and/or Dish/Antenna to provide
Communication Services to an unaffiliated tenant, occupant or licensee of
another building, or to facilitate the provision of Communication Services
on behalf of another Communication Services provider to an unaffiliated
tenant, occupant or licensee of the Building or any other building.
9. Tenant acknowledges that Landlord may at some time establish a standard
license agreement (the "License Agreement") with respect to the use of roof
space by tenants of the Building. Tenant, upon request of Landlord, shall
enter into such License Agreement with Landlord provided that such
agreement is reasonably acceptable to Tenant and does not materially alter
the rights of Tenant hereunder with respect to the Roof Space.
10. Tenant specifically acknowledges and agrees that the terms and
conditions of Article XIV of the Lease (Indemnity and Waiver of Claims)
shall apply with full force and effect to the Roof Space and any other
portions of the roof accessed or utilized by Tenant, its representatives,
agents, employees or contractors.
11. If Tenant defaults under any of the terms and conditions of this
Section or the Lease, and Tenant fails to cure said default within the
time allowed by Article XIX of the Lease, Landlord shall be permitted to
exercise all remedies provided under the terms of the Lease, including
removing the Dish/Antenna, the appurtenances and the Aesthetic Screening,
if any, and restoring the Building and the Roof Space to the condition that
Exhibit E - Page 5
<PAGE>
existed prior to the installation of the Dish/Antenna, the appurtenances
and the Aesthetic Screening, if any. If Landlord removes the Dish/Antenna,
the appurtenances and the Aesthetic Screening, if any, as a result of an
uncured default, Tenant shall be liable for all costs and expenses Landlord
incurs in removing the Dish/Antenna, the appurtenances and the Aesthetic
Screening, if any, and repairing any damage to the Building, the roof of
the Building and the Roof Space caused by the installation, operation or
maintenance of the Dish/Antenna, the appurtenances, and the Aesthetic
Screening, if any.
12. Tenant shall be allowed to install fiber optics and related equipment
in the Building for Tenant's own use, the design, location, and operating
characteristics of which shall be subject to Landlord's reasonable
approval.
IV. Signage. Landlord shall provide and install Tenant signage on the ground
-------
floor entry door side panel, the lobby directory, the floor directory on each
floor on which the Premises are located, and on the entry door to the Premises,
all using the standard graphics for the Building. Provided Tenant has not
assigned its interest under this Lease (except Permitted Transfers), continues
to lease and occupy at least two (2) full floors of the Building and is not in
default under this Lease beyond any applicable notice and cure periods, Tenant
may also install, at Tenant's expense, the Building facade signage described and
depicted on Exhibit J (the "Facade Signage"). The Facade Signage shall conform
with the specifications set forth on Exhibit J, provided that the Facade Signage
on the West side of the Building may, at Tenant's election, be either Tenant's
logo or Tenant's name, as each of those is shown elsewhere on Exhibit J, and
subject to the size and other limitations set forth on Exhibit J. Landlord
shall not allow more than two (2) other office tenants (as opposed to retail
tenants) of the Building to have prominent building facade signage facing 108th
Avenue N.E. (other than signage on the ground floor entry door side panels).
Tenant shall not be permitted to install any signs or other identification
without Landlord's prior written consent. The size, design and location of all
such signage shall comply with all applicable laws and codes and shall conform
to Landlord's specifications for the Building. Tenant agrees upon the
expiration date or sooner termination of this Lease, upon Landlord's request, to
remove the Facade Signage and to repair and restore any damage to the Building
and Property at Tenant's expense. In addition, Landlord shall have the right to
remove the Facade Signage at Tenant's sole cost and expense, if, at any time
during the Lease Term: (1) Tenant assigns this Lease (except Permitted
Transfers), (2) Tenant no longer leases and occupies at least two (2) full
floors of the Building, or (3) Tenant defaults under any term or condition of
the Lease and fails to cure such default within any applicable grace period.
V. Storage Space.
-------------
A. Landlord shall lease to Tenant up to 1,500 square feet of storage space
(the "Storage Space"). The Storage Space rental rate per square foot of the
Storage Space ("Storage Space Rental") shall be Sixteen Dollars ($16.00) per
usable square foot per month for the first year after the Commencement Date and
shall thereafter be adjusted from time to time by Landlord to reflect market
rates. Storage Space Rental shall be payable in advance on or before the first
day of each month of the Storage Term. Any initial or final month shall be
prorated. The Lease Term for the Storage Space shall be coterminous with the
Term of the Premises, provided that Tenant shall have the right to terminate the
term of the Storage Space lease upon thirty (30) days' prior written notice to
Landlord at any time during the Lease Term. The Storage Space shall be used by
Tenant for the storage of furniture, equipment, inventory or other non-
perishable items normally used in Tenant's business (exclusive of any items or
materials which may be deemed to be hazardous to the environment or hazardous to
human life or safety), and for no other purpose whatsoever. Tenant agrees to
keep the Storage Space in a neat and orderly fashion and to keep all stored
items in cartons, file cabinets or other suitable containers. Landlord shall
have the right to designate the location within the Storage Space of any items
to be placed therein. All items stored in the Storage Space shall be elevated
at least six inches above the floor on wooden pallets, and shall be at least
eighteen inches below the bottom of all sprinklers located in the ceiling of the
Storage Space, if any. Tenant shall not store anything in the Storage Space
which is unsafe or which otherwise may create a hazardous condition, or which
may increase Landlord's insurance rates, or cause a cancellation or modification
of Landlord's insurance coverage. Without limitation, Tenant shall not store
any flammable, combustible or explosive fluid, chemical or substance nor any
perishable food or beverage products, except with Landlord's prior written
approval. Landlord reserves the right to adopt and enforce reasonable rules and
regulations governing the use of the Storage Space from time to time.
B. All terms and provisions of this Lease shall be applicable to the
Storage Space,
Exhibit E - Page 6
<PAGE>
including, without limitation, Article XIV (Indemnity and Waiver of Claims) and
Article XV (Tenant's Insurance), except that Landlord need not supply air-
cooling, heat, water, janitorial service, cleaning, window washing or
electricity to the Storage Space and Tenant shall not be entitled to any work
allowances, rent credits, expansion rights or renewal rights with respect to the
Storage Space unless such concessions or rights are specifically provided for in
the Lease with respect to the Storage Space.
C. Tenant agrees to accept the Storage Space in its condition and "as-
built" configuration existing on the earlier of the date Tenant takes possession
of the Storage Space or the Commencement Date, provided that such space is then
ready for storage and provided, further, Tenant may, at its expense and with
Landlord's reasonable approval, improve such space.
D. At any time and from time to time, Landlord shall have the right to
relocate the Storage Space to a new location which shall be no smaller than the
square footage of the Storage Space. Landlord shall pay the direct, out-of-
pocket, reasonable expenses of such relocation.
E. Storage Space Rental is deemed Rent under the Lease.
F. Notwithstanding anything set forth in Article XII of the Lease, Tenant
shall not, without the prior written consent of Landlord, which consent may be
withheld in Landlord's sole discretion, assign, sublease, transfer or encumber
the Storage Space or grant any license, concession or other right of occupancy
or permit the use of the Storage Space by any party other than Tenant, except in
connection with an assignment of the Lease consented to by Landlord or pursuant
to a Permitted Assignment.
VI. Landlord's Warranties.
---------------------
Landlord hereby represents and warrants to Tenant that , to the best of
Landlord's knowledge (a) the common areas of the Building shall comply with the
requirements of the Americans With Disabilities Act in effect as of the day the
building permit for the Building was issued; and (b) the Building has been and
shall be constructed free of any hazardous materials, except in compliance with
applicable laws. The term "hazardous materials" shall mean any flammable,
contaminants, explosive or radioactive materials, asbestos, crude oil, petroleum
hydrocarbons, air pollution, soil or water pollution, hazardous materials,
hazardous wastes, dangerous, hazardous or toxic substances or similar substances
or materials including, without limitation, any substances or materials defined
as hazardous, toxic or environmentally unsafe under any federal, state or local
governmental law, rule, regulation or ordinance including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), 42 U.S.C. Sec. 9601, et seq.; the Hazardous
-- ---
Materials Transportation Act, as amended, 49 U.S.C. Section 1801, et seq.; the
-- ---
Resource Conversation and Recovery Act, as amended, 42 U.S.C. Section 6901 et
--
seq.; the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 et
- --- --
seq.; the Clean Air Act, 42 U.S.C. 7401 et seq., as amended, Federal Water
- --- -- ---
Pollution Control Act as amended by The Clean Water Act of 1977 PL 92-500, et
--
seq., as amended, and the regulations adopted and publications promulgated
- ---
pursuant to said laws or ordinances, rules or regulations.
Landlord further represents and warrants to Tenant that (a) Landlord is the sole
owner of the Building, and (b) Landlord has obtained and currently holds in full
force and effect all necessary permits and approvals for construction of the
Building in accordance with the terms of this Lease.
VII. Moving Allowance. As partial compensation of Tenant's expenses of moving
----------------
into the Premises, Landlord shall pay to Tenant, in cash, upon Tenant's
occupancy of the Premises for the Permitted Use, a moving allowance of One
Dollar ($1.00) per usable square foot of area in the Premises.
VIII. Ground Lease. Landlord represents and warrants to Tenant that Landlord
------------
is the lessee of the Property under that certain Ground Lease dated November 20,
1998 ("Ground Lease") between Sterling Realty Organization Co., a Washington
corporation ("Ground Lessor"), as landlord and Landlord as tenant. With respect
to the Ground Lease, Landlord further warrants and represents:
1. The Ground Lease has not been modified or amended and is in full force
and effect and in good standing and, to Landlord's knowledge, neither
Landlord nor
Exhibit E - Page 7
<PAGE>
Ground Lessor is in default thereunder, and Landlord is not aware of
any facts which would now or with the passage of time, or both,
constitute a default thereunder.
2. Ground Lessor has approved the plans and specifications for the Building as
required by the Ground Lease;
3. The consent of Ground Lessor is not required for the full execution,
delivery and performance of this Lease by Landlord;
4. There are no actions, suits or proceedings, governmental or otherwise,
pending or threatened against or affecting the Ground Lease;
Section 12.01 of the Ground Lease provides that Ground Lessor will deliver
nondisturbance and attornment agreements to the subtenants of Landlord. Landlord
agrees to use its commercially reasonable efforts to cause Ground Lessor to
enter into a nondisturbance and attornment agreement, in substantially the form
of Exhibit I hereto, with Tenant within thirty (30) days after the date of this
Lease, and if such agreement is not so executed and delivered, Tenant shall have
the right to terminate this Lease within ten (10) business days thereafter
unless Landlord delivers such agreement executed by Ground Lessor within fifteen
(15) days after receipt of Tenant's notice.
IX. Right of First Offer.
--------------------
A. Tenant shall have the right of first offer ("Right of First Offer")
with respect to any space that becomes Available for Lease (hereinafter
defined) within the Offering Space on the terms and conditions contained in
this Section IX. As used in this Section IX, the "Offering Space" shall
mean the portion of Floor 5 of the Building (which portion is approximately
half of Floor 5) that is not initially leased to KeyBank (as defined below)
under the lease between Landlord and KeyBank and all of Floor 6 of the
Building. Offering Space shall be deemed to be "Available for Lease" as
follows: (i) with respect to any Offering Space that is under lease from
time to time to third parties, such Offering Space shall be deemed to be
Available for Lease when Landlord has determined that such third party will
not extend or renew the term of its lease for the Offering Space, or (ii)
with respect to any Offering Space that is not under lease, such Offering
Space shall be deemed to be available when Landlord has located a
prospective tenant that may be interested in leasing such Offering Space,
provided that, notwithstanding the foregoing, the Offering Space shall not
be Available for Lease until (A) with respect to the Offering Space on
Floor 5 of the Building, Landlord has determined that KeyBank National
Association, and its successors or assigns ("KeyBank"), will not exercise
its expansion rights (including a right of first offer) with respect to
such portion of the Offering Space; and (B) with respect to the Offering
Space on Floor 6 of the Building, Landlord has determined that neither
KeyBank nor ITI Information Technology Institute (Seattle) LLC, a Delaware
limited liability company, and its successors and assigns, will exercise
their expansion rights (including a right of first offer) with respect to
such portion of the Offering Space. In addition, with respect to any
Advice delivered prior to the date the lease between Landlord and KeyBank
is fully executed, Tenant's rights under this Section IX shall be
determined as though the KeyBank Lease were then fully executed and in
effect. Landlord shall, within a reasonable time after Landlord has
determined that a particular portion of the Offering Space is Available for
Lease (but prior to leasing such portion of the Offering Space to a third
party) advise Tenant (the "Advice") of the square footage and location of
such portion of the Offering Space and the terms (i.e. Base Rent,
Additional Base Rent and improvement allowance) under which Landlord is
prepared to lease such Offering Space to Tenant for the remainder of the
Lease Term, and Landlord shall certify that in Landlord's reasonable
judgment such offered terms do not exceed then market rates being paid for
comparable space in comparable buildings in the downtown Bellevue,
Washington area. Tenant may lease such portion of the Offering Space in
its entirety only, under such terms, by delivering written notice of
exercise to Landlord ("Notice of Exercise") within five (5) business days
after the date of the Advice, except that Tenant shall have no such Right
of First Offer and Landlord need not provide Tenant with an Advice, if:
1. Tenant is in default under the Lease at the time Landlord would
otherwise deliver the Advice; or
2. The Lease has been assigned prior to the date Landlord would
otherwise
Exhibit E - Page 8
<PAGE>
deliver the Advice (unless pursuant to a Permitted Transfer); or
3. With respect to and Advice delivered after the date twelve (12)
months after the Commencement Date, Tenant is not occupying at least
75% of the Premises on the date Landlord would otherwise deliver the
Advice; or
4. The Offering Space is not ultimately intended for the exclusive
use of Tenant during the Lease Term.
B. 1. The term for the Offering Space shall commence upon the
commencement date stated in the Advice and thereupon such Offering
Space shall be considered a part of the Premises, provided that all of
the terms stated in the Advice shall govern Tenant's leasing of the
Offering Space and only to the extent that they do not conflict with
the Advice, the terms and conditions of this Lease shall apply to the
Offering Space.
2. Tenant shall pay Base Rent and Additional Base Rent for the
Offering Space in accordance with the terms and conditions of the
Advice.
3. Except to the extent otherwise provided in the Advice, the
Offering Space (including improvements and personalty, if any) shall be
accepted by Tenant in its condition and as-built configuration existing
on the earlier of the date Tenant takes possession of the Offering
Space or as of the date the term for such Offering Space commences,
provided that such Offering Space shall be delivered to Tenant vacant,
broom clean and free of claims and possession of third parties.
C. The rights of Tenant hereunder with respect to any portion of the
Offering Space for which Landlord provides Tenant with an Advice shall
terminate on the earlier to occur of: (i) Tenant's failure to exercise its
Right of First Offer within the five (5) business day period provided in
paragraph A above, and (ii) the date Landlord would have provided Tenant an
Advice if Tenant had not been in violation of one or more of the conditions
set forth in Paragraph A above. In addition, if Landlord provides Tenant
with an Advice that contains expansion rights (whether such rights are
described as an expansion option, right of first refusal, right to first
offer or otherwise) and Tenant does not exercise its Right of First Offer
to lease the Offering Space described in the Advice, Tenant's Right of
First Offer shall be subject and subordinate to all such expansion rights
contained in the Advice. Notwithstanding the foregoing, if (i) Tenant was
entitled to exercise its Right of First Offer, but failed to provide
Landlord with a Notice of Exercise within the five (5) business day period
provided in paragraph A above, and (ii) Landlord does not enter into a
lease for such portion of the Offering Space within a period of six (6)
months following the date of the Advice, Tenant shall once again have a
Right of First Offer with respect to such portion of the Offering Space. In
addition, if Landlord does enter into a lease for such portion of the
Offering Space, (i) Landlord shall lease such space for terms of either
three (3) or five (5) years, with any renewal rights being subject to
Tenant's Right of First Offer hereunder; and (ii) Tenant shall have a Right
of First Offer on such Offering Space (subject to the terms and conditions
set forth herein) upon the expiration of the lease with the prospect.
D. 1. If Tenant exercises its Right of First Offer, Landlord shall
prepare an amendment (the "Offering Amendment") adding the Offering
Space to the Premises on the terms set forth in the Advice and
reflecting the changes in the Base Rent, Rentable Area of the Premises,
Tenant's Pro Rata Share and other appropriate terms.
2. A copy of the Offering Amendment shall be (i) sent to Tenant within
a reasonable time after receipt of the Notice of Exercise executed by
Tenant, and (ii) revised by Landlord to address any requested changes
by Tenant that are necessary to accurately reflect the terms and
conditions hereof; (iii) executed by Tenant and returned to Landlord
within fifteen (15) days thereafter.
X. Rooftop Equipment.
-----------------
1. Tenant shall have the right to lease space on the roof of the Building
for the purpose of installing (in accordance with Section IX.C of the
Lease), operating and maintaining a pump room and cooling tower approved by
the Landlord ( collectively the
Exhibit E - Page 9
<PAGE>
"Rooftop Equipment"). The space on the roof to be leased by Tenant shall
include 192 square feet of usable area on the lower roof and sufficient
space on the upper roof for Tenant to place two cooling towers. The exact
location of the space on the roof to be leased by Tenant shall be
designated by Landlord (the "Roof Space"). The rental rate for the Roof
Space shall be (i) for the lower roof area, the Storage Space Rental rate,
as defined in Section V above, as it may be adjusted from time to time;
(ii) for the upper roof area, the rate chargeable for a six-foot diameter
satellite dish, as set forth in Exhibit G below and as adjusted from time
to time in accordance with Section III.1 of this Exhibit E, for each
cooling tower. That rate is initially $500 per cooling tower per month. In
addition, Landlord shall provide Tenant with a shaft running from the
Premises to the roof of the Building to connect the mechanical equipment in
the Premises to the Rooftop Equipment. The Shaft will supplant a total of
37.4 rentable square feet of area in the Building (the "Shaft Area").
Tenant shall pay a rental rate per square foot of the Shaft Area equal to
the Base Rent payable for the Premises, as adjusted from time to time in
accordance with the terms of the Lease. The rent payable for the Rooftop
Space and the Shaft Area shall hereinafter be together referred to as "Roof
Space Rental". Roof Space Rental shall be payable in advance on or before
the first day of each month of the Term. Any initial or final month shall
be prorated. The Roof Space Rental is separate and in addition to any
charges for a Dish/Antennae pursuant to Article III above. Tenant's right
to install the Rooftop Equipment shall be subject to the approval rights of
Landlord and Landlord's architect and/or engineer with respect to the plans
and specifications of the Rooftop Equipment, the manner in which the
Rooftop Equipment is attached to the roof of the Building and the manner in
which any cables or other connections are run to and from the Rooftop
Equipment. The precise specifications and a general description of the
Rooftop Equipment along with all documents Landlord reasonably requires to
review the installation of the Rooftop Equipment (the "Plans and
Specifications") shall be submitted to Landlord for Landlord's written
approval no later than twenty (20) days before Tenant commences to install
the Rooftop Equipment. Tenant shall be solely responsible for obtaining all
necessary governmental and regulatory approvals and for the cost of
installing, operating, maintaining and removing the Rooftop Equipment.
Tenant shall notify Landlord upon completion of the installation of the
Rooftop Equipment. If Landlord determines that the Rooftop Equipment does
not comply with the approved Plans and Specifications, that the Building
has been damaged during installation of the Rooftop Equipment or that the
installation was defective, Landlord shall notify Tenant of any
noncompliance or detected problems and Tenant immediately shall cure the
defects. If the Tenant fails to immediately cure the defects, Tenant shall
pay to Landlord upon demand the cost, as reasonably determined by Landlord,
of correcting any defects and repairing any damage to the Building caused
by such installation. If at any time Landlord, in its sole discretion,
deems it necessary, Tenant shall provide and install, at Tenant's sole cost
and expense, appropriate aesthetic screening, reasonably satisfactory to
Landlord, for the Rooftop Equipment (the "Aesthetic Screening").
2. Landlord agrees that Tenant, upon reasonable prior notice to Landlord,
shall have access to the roof of the Building and the Roof Space for the
purpose of installing, maintaining, repairing and removing the Rooftop
Equipment, the appurtenances and the Aesthetic Screening, if any, all of
which shall be performed by Tenant or Tenant's authorized representative or
contractors, which shall be approved by Landlord, at Tenant's sole cost and
risk. It is agreed, however, that only authorized engineers, employees or
properly authorized contractors of Tenant, or persons under their direct
supervision will be permitted to have access to the roof of the Building
and the Roof Space. Tenant further agrees to exercise firm control over
the people requiring access to the roof of the Building and the Roof Space
in order to keep to a minimum the number of people having access to the
roof of the Building and the Roof Space and the frequency of their visits.
3. It is further understood and agreed that the installation, maintenance,
operation and removal of the Rooftop Equipment, the appurtenances and the
Aesthetic Screening, if any, will in no way damage the Building or the roof
thereof, or interfere with the use of the Building and roof by Landlord.
Tenant agrees to be responsible for any damage caused to the roof or any
other part of the Building, which may be caused by Tenant or any of its
agents or representatives.
4. Tenant shall, at its sole cost and expense, and at its sole risk,
install, operate and maintain the Rooftop Equipment in a good and
workmanlike manner, and in compliance with all Building, electric,
communication, and safety codes, ordinances, standards, regulations and
requirements, now in effect or hereafter promulgated, of the
Exhibit E - Page 10
<PAGE>
Federal Government, and of the state, city and county in which the Building
is located. Under this Lease, the Landlord and its agents assume no
responsibility for the operation and/or maintenance of Tenant's equipment.
The Rooftop Equipment shall be connected to Landlord's power supply in
strict compliance with all applicable Building, electrical, fire and safety
codes. Neither Landlord nor its agents shall be liable to Tenant for any
stoppages or shortages of electrical power furnished to the Rooftop
Equipment or the Roof Space because of any act, omission or requirement of
the public utility serving the Building, or the act or omission of any
other tenant, invitee or licensee or their respective agents, employees or
contractors, or for any other cause beyond the reasonable control of
Landlord, and Tenant shall not be entitled to any rental abatement for any
such stoppage or shortage of electrical power. Neither Landlord nor its
agents shall have any responsibility or liability for the conduct or safety
of any of Tenant's representatives, repair, maintenance and engineering
personnel while in or on any part of the Building or the Roof Space.
5. The Rooftop Equipment, the appurtenances and the Aesthetic Screening,
if any, shall remain the personal property of Tenant, and shall be removed
by Tenant at its own expense at the expiration or earlier termination of
this Lease or Tenant's right to possession hereunder. Tenant shall repair
any damage caused by such removal, including the patching of any holes to
match, as closely as possible, the color surrounding the area where the
equipment and appurtenances were attached. Tenant agrees to maintain all
of the Tenant's Rooftop Equipment in proper operating condition and
maintain same in satisfactory condition as to appearance, in Landlord's
reasonable discretion, and satisfactory condition as to safety, in
Landlord's reasonable discretion. Such maintenance and operation shall be
performed in a manner to avoid any interference with any other tenants or
Landlord. Tenant agrees that at all times during the Lease Term, it will
keep the roof of the Building and the Roof Space free of all trash or waste
materials produced by Tenant or Tenant's agents, employees or contractors.
6. In light of the specialized nature of the Rooftop Equipment, Tenant
shall be permitted to utilize the services of its choice for installation,
operation, removal and repair of the Rooftop Equipment, the appurtenances
and the Aesthetic Screening, if any, subject to the reasonable approval of
Landlord. Notwithstanding the foregoing, Tenant must provide Landlord with
prior written notice of any such installation, removal or repair and
coordinate such work with Landlord in order to avoid voiding or otherwise
adversely affecting any warranties granted to Landlord with respect to the
roof. If necessary, Tenant, at its sole cost and expense, shall retain any
contractor having a then existing warranty in effect on the roof to perform
such work (to the extent that it involves the roof), or, at Tenant's
option, to perform such work in conjunction with Tenant's contractor. In
the event the Landlord contemplates roof repairs that could affect Tenant's
Rooftop Equipment, Landlord shall formally notify Tenant at least thirty
(30) days in advance (except in cases of an emergency) prior to the
commencement of such contemplated work in order to allow Tenant to make
other arrangements for such service.
7. Tenant acknowledges that Landlord may at some time establish a
standard license agreement (the "License Agreement") with respect to the
use of roof space by tenants of the Building. Tenant, upon request of
Landlord, shall enter into such License Agreement with Landlord provided
that such agreement is reasonably acceptable to Tenant and does not
materially alter the rights of Tenant hereunder with respect to the Roof
Space.
8. Tenant specifically acknowledges and agrees that the terms and
conditions of Article XIV of the Lease (Indemnity and Waiver of Claims)
shall apply with full force and effect to the Roof Space and any other
portions of the roof accessed or utilized by Tenant, its representatives,
agents, employees or contractors.
9. If Tenant defaults under any of the terms and conditions of this
Section or the Lease, and Tenant fails to cure said default within the time
allowed by Article XIX of the Lease, Landlord shall be permitted to
exercise all remedies provided under the terms of the Lease, including
removing the Rooftop Equipment, the appurtenances and the Aesthetic
Screening, if any, and restoring the Building and the Roof Space to the
condition that existed prior to the installation of the Rooftop Equipment,
the appurtenances and the Aesthetic Screening, if any. If Landlord removes
the Rooftop Equipment, the appurtenances and the Aesthetic Screening, if
any, as a result of an uncured default, Tenant shall be liable for all
costs and expenses Landlord incurs in removing the Rooftop Equipment, the
appurtenances and the Aesthetic Screening, if
Exhibit E - Page 11
<PAGE>
any, and repairing any damage to the Building, the roof of the Building and
the Roof Space caused by the installation, operation or maintenance of the
Rooftop Equipment, the appurtenances, and the Aesthetic Screening, if any.
Exhibit E - Page 12
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this exhibit as of the day
and year first above written.
LANDLORD: THREE BELLEVUE CENTER LLC, a Washington
limited liability company
By: WRIGHT RUNSTAD ASSOCIATES LIMITED
PARTNERSHIP, a Washington limited
partnership, its manager
By: WRIGHT RUNSTAD & COMPANY, a
Washington corporation, its general
partner
By: /s/ H. J. Runstad
--------------------------------
Its: Chairman and CEO
-------------------------------
By: EOP-THREE BELLEVUE, L.L.C., a Delaware
limited liability company, its manager
By: EOP OPERATING LIMITED PARTNERSHIP, a
Delaware limited partnership,
its sole member
By: EQUITY OFFICE PROPERTIES
TRUST, a Maryland real estate
investment trust, its managing
general partner
By: /s/ Michael Steel
----------------------------
Its: COO, EVP Real Estate Operations
---------------------------
TENANT: INFOSPACE.COM, INC., a Delaware corporation
By: /s/ Naveen Jain
----------------------------
Its: CEO
---------------------------
Exhibit E - Page 13
<PAGE>
EXHIBIT F
SUBORDINATION AGREEMENT
RETURN NAME AND ADDRESS:
Jackson Walker L.L.P.
901 Main Street, Suite 6000
Dallas, TX 75202
Attn: Deborah A. Lowenkron, Esq.
SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT
<TABLE>
<CAPTION>
<S> <C>
LANDLORD: Three Bellevue Center LLC, a Washington limited liability company
TENANT: InfoSpace.com, Inc., a Delaware corporation
MORTGAGEE: Bank of America, N.A., a national banking association
LEGAL
DESCRIPTION: Parcel A Portion of Lot 2, Block 2, Cheriton Fruit Gardens, Plat No. 1,
according to the plant thereof recorded in Volume 7 of Plats, page
47, in King County, Washington.
Parcel B Portion of the south half of Lot 2, Block 2, Cheriton Fruit
Gardens, Plat No. 1, according to the plat thereof recorded in
Volume 7 of Plats, page 57, in King County, Washington.
Additional legal description is on Exhibit A of document.
ASSESSOR'S
PROPERTY TAX
PARCEL ACCOUNT
NUMBER(S): 154410-0230-01 and 154410-0219-06
</TABLE>
Exhibit F - Page 1
<PAGE>
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
-------------------------------------------------------
This Subordination, Non-Disturbance and Attornment Agreement (this
"Agreement") dated ________________, 2000, is made among InfoSpace.com, Inc.
---------
("Tenant"), Three Bellevue Center, LLC ("Landlord"), and Bank of America, N.A.,
- -------- --------
a national banking association ("Mortgagee").
---------
WHEREAS, Mortgagee (as successor in interest to NationsBank, N.A.) is the
owner of a promissory note (herein, as it may have been or may be from time to
time renewed, extended, amended or supplemented, called the "Note") dated
----
November 23, 1998, executed by Landlord, payable to the order of Mortgagee, in
the principal face amount of $60,000,000, bearing interest and payable as
therein provided, secured by, among other things, a Leasehold Deed of Trust,
Security Agreement, Financing Statement and Fixture Filing (herein, as it may
have been or may be from time to time renewed, extended, amended or
supplemented, called the "Mortgage"), recorded under Auditor's No. 9811230283 in
--------
the real property records of King County, Washington, covering, among other
property, the land (the "Land") described in Exhibit "A" which is attached
----
hereto and incorporated herein by reference, and the improvements
("Improvements") thereon (such Land and Improvements being herein together
------------
called the "Property");
---------
WHEREAS, Tenant is the tenant under a lease which, including all amendments
and supplements thereto, is described as
follows:______________________________________________________________(herein,
as it may from time to time be renewed, extended, amended or supplemented,
called the "Lease"), covering a portion of the Property (said portion being
-----
herein referred to as the "Premises"); and
--------
WHEREAS, the term "Landlord" as used herein means the present landlord under
the Lease or, if the landlord's interest is transferred in any manner, the
successor(s) or assign(s) occupying the position of landlord under the Lease at
the time in question;
THEREFORE, in consideration of the mutual agreements herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Subordination. Tenant agrees and covenants that the Lease and the rights
-------------
of Tenant thereunder, all of Tenant's right, title and interest in and to the
property covered by the Lease, and any lease thereafter executed by Tenant
covering any part of the Property, are and shall be subordinate and inferior to
(a) the Mortgage and the rights of Mortgagee thereunder, and all right, title
and interest of Mortgagee in the Property, and (b) all other security documents
now or hereafter securing payment of any indebtedness of the Landlord (or any
prior landlord) to Mortgagee which cover or affect the Property (the "Security
--------
Documents"). This Agreement is not intended and shall not be construed to
- ---------
subordinate the Lease to any mortgage, deed of trust or other security document
other than those referred to in the preceding sentence, securing the
indebtedness to Mortgagee. Without limitation of any other provision hereof,
Mortgagee may, at its option and without joinder or further consent of Tenant,
Landlord, or anyone else, at any time after the date hereof subordinate the lien
of the Mortgage (or any other lien or security interest held by Mortgagee which
covers or affects the Property) to the Lease by executing an instrument which is
intended for that purpose and which specifies such subordination; and, in the
event of any such election by Mortgagee to subordinate, Tenant will execute any
documents required to evidence such subordination; provided however,
notwithstanding that the Lease may by unilateral subordination by Mortgagee
hereafter be made superior to the lien of the Mortgage, the provisions of the
Mortgage relative to the rights of Mortgagee with respect to proceeds arising
from an eminent domain taking (including a voluntary conveyance by Landlord)
and/or insurance payable by reason of damage to or destruction of the Premises
shall be prior and superior to and shall control over any contrary provisions in
the Lease.
2. Non-Disturbance. Mortgagee agrees that so long as the Lease is in full
---------------
force and effect and Tenant is not in default in the payment of rent, additional
rent or other payments or in the performance of any of the other terms,
covenants or conditions of the Lease on Tenant's part to be performed (beyond
the period, if any, specified in the Lease within which Tenant may cure such
default),
(a) Tenant's possession of the Premises under the Lease shall not be
disturbed or interfered with by Mortgagee in the exercise of any of its
rights under the
Exhibit F - Page 2
<PAGE>
Mortgage, including any foreclosure or conveyance in lieu of foreclosure, and
(b) Mortgagee will not join Tenant as a party defendant for the purpose
of terminating Tenant's interest and estate under the Lease in any proceeding
for foreclosure of the Mortgage.
3. Attornment.
----------
(a) Tenant covenants and agrees that in the event of foreclosure of the
Mortgage, whether by power of sale or by court action, or upon a transfer of
the Property by conveyance in lieu of foreclosure (the purchaser at
foreclosure or the transferee in lieu of foreclosure, including Mortgagee if
it is such purchaser or transferee, being herein called "New Owner"), Tenant
---------
shall attorn to the New Owner as Tenant's new landlord, and agrees that the
Lease shall continue in full force and effect as a direct lease between
Tenant and New Owner upon all of the terms, covenants, conditions and
agreements set forth in the Lease and this Agreement, except for provisions
which are impossible for Mortgagee to perform; provided, however, that in no
event shall the New Owner be:
(i) liable for any act, omission, default, misrepresentation, or
breach of warranty, of any previous landlord (including Landlord) or
obligations accruing prior to New Owner's actual possession of the property;
(ii) subject to any offset, defense, claim or counterclaim which
Tenant might be entitled to assert against any previous landlord (including
Landlord) (but this shall not limit New Owner's obligation to correct any
conditions that existed as of the date of attornment and violate New Owner's
obligations as landlord under the Lease);
(iii) bound by any payment of rent, additional rent or other
payments, made by Tenant to any previous landlord (including Landlord) for
more than one (1) month in advance;
(iv) bound by any material amendment, or material modification of
the Lease hereafter made, or consent by any previous landlord (including
Landlord) under the Lease to any assignment or sublease hereafter granted,
without the written consent of Mortgagee; or
(v) liable for any deposit that Tenant may have given to any
previous landlord (including Landlord) which has not, as such, been
transferred to New Owner.
(b) The provisions of this Agreement regarding attornment by Tenant
shall be self-operative and effective without the necessity of execution of
any new lease or other document on the part of any party hereto or the
respective heirs, legal representatives, successors or assigns of any such
party. Tenant agrees, however, to execute and deliver at any time and from
time to time, upon the request of Landlord or of any holder(s) of any of the
indebtedness or other obligations secured by the Mortgage, any instrument or
certificate which, in the reasonable judgement of Landlord or of such
holder(s), may be necessary or appropriate in any such foreclosure proceeding
or otherwise to evidence such attornment, including, if requested, a new
lease of the Premises on the same terms and conditions as the Lease for the
then unexpired term of the Lease.
4. Estoppel Certificate. Tenant agrees to execute and deliver from time to
--------------------
time, upon the request of Landlord or of any holder(s) of any of the
indebtedness or other obligations secured by the Mortgage, a certificate
regarding the status of the Lease, consisting of statements, if true (or if not,
specifying why not), (a) that the Lease is in full force and effect, (b) the
date through which rentals have been paid, (c) the date of the commencement of
the term of the Lease, (d) the nature of any amendments or modifications of the
Lease, (e) that no default, or state of facts which with the passage of time or
notice (or both) would constitute a default, exists under the Lease, and (f)
such other matters as may be reasonably requested.
5. Acknowledgement and Agreement by Tenant. Tenant acknowledges and agrees
---------------------------------------
as follows:
(a) Tenant acknowledges that Landlord will execute and deliver to
Mortgagee in connection with the financing of the Property an Assignment of
Leases and Rents assigning absolutely the rent and all other sums due under
the Lease. Tenant hereby expressly consents to such absolute assignment and
agrees that such assignments shall,
Exhibit F - Page 3
<PAGE>
in all respects, be superior to any interest Tenant has in the Lease of the
Property, subject to the provisions of this Agreement. Tenant will not amend,
alter, terminate, or waive any provision of, or consent to the amendment,
alteration, termination or waiver of any provision of the Lease without the
prior written consent of Mortgagee, and no termination of the Lease, whether
pursuant to the terms of the Lease or otherwise, will be effective without
the prior written consent of Mortgagee. Tenant shall not prepay any rents or
other sums due under the lease for more than one (1) month in advance of the
due date therefor. Tenant acknowledges that Mortgagee will rely upon this
instrument in connection with such financing. Notwithstanding anything to the
contrary contained herein, Tenant shall have the right to terminate the Lease
under Section III(A) thereof without notice to, or consent of, Mortgagee.
(b) Mortgagee, in making any disbursements to Landlord, is under no
obligation or duty to oversee or direct the application of the proceeds of
such disbursements, and such proceeds may be used by Landlord for purposes
other than improvement of the Property.
(c) From and after the date hereof, in the event of any act or omission
by Landlord which would give Tenant the right, either immediately or after
the lapse of time, to terminate the Lease or to claim a partial or total
eviction, Tenant will not exercise any such right (i) until it has given
written notice of such act or omission to the Mortgagee; and (ii) until the
same period of time as is given to Landlord under the Lease to cure such act
or omission shall have elapsed following such giving of notice to Mortgagee
and following the time when Mortgagee shall have become entitled under the
Mortgage to remedy the same, but in any event 30 days after receipt of such
notice or such longer period of time as may be necessary to cure or remedy
such default act, or omission including such period of time necessary to
obtain possession of the Property and thereafter cure such default, act, or
omission, during which period of time Mortgagee shall be permitted to cure or
remedy such default, act or omission; provided, however, that Mortgagee shall
have no duty or obligation to cure or remedy any breach or default. It is
specifically agreed that Tenant shall not, as to Mortgagee, require cure of
any such default which is personal to Landlord, and therefore not susceptible
to cure by Mortgagee. Notwithstanding any to the contrary contained herein,
Tenant shall have the right to terminate the Lease under Section III(A)
thereof without notice to, or consent of, Mortgagee.
(d) In the event that Mortgagee notifies Tenant of a default under the
Mortgage, Note, or Security Documents and demands that Tenant pay its rent
and all other sums due under the Lease directly to Mortgagee, Tenant shall
honor such demand and pay the full amount of its rent and all other sums due
under the Lease directly to Mortgagee or as otherwise required pursuant to
such notice beginning with the payment next due after such notice of default,
without inquiry as to whether a default actually exists under the Mortgage,
Security Documents or otherwise in connection with the Note, and
notwithstanding any contrary instructions of or demands from Landlord.
(e) Tenant shall send a copy of any notice of default or incipient
default under the Lease to Mortgagee at the same time such notice is sent to
Landlord.
(f) Tenant has no right or option of any nature whatsoever, whether
pursuant to the Lease or otherwise, to purchase the Premises or the Property,
or any portion thereof or any interest therein, and to the extent that Tenant
has had, or hereafter acquires, any such right or option, same is hereby
acknowledged to be subject and subordinate to the Mortgage and is hereby
waived and released as against Mortgagee.
(g) This Agreement satisfies any condition or requirement in the Lease
relating to the granting of a Lender's non-disturbance agreement and Tenant
waives any requirement to the contrary in the Lease.
(h) Mortgagee and any New Owner shall have no liability to Tenant or
any other party for any conflict between the provisions of the Lease and the
provisions of any other lease affecting the Property, including, but not
limited to, any provisions relating to exclusive or non-conforming uses or
rights, renewal options and options to expand, and in the event of such a
conflict, Tenant shall have no right to cancel the Lease or take any other
remedial action against Mortgagee or New Owner, or against any other party
for which Mortgagee or any New Owner would be liable.
(i) Mortgagee and any New Owner shall have no obligation nor incur any
liability with respect to the erection or completion of the improvements in
which the
Exhibit F - Page 4
<PAGE>
Premises are located or for completion of the Premises or any improvements
for Tenant's use and occupancy, either at the commencement of the term of the
Lease or upon any renewal or extension thereof or upon the addition of
additional space, pursuant to any expansion rights contained in the Lease;
provided that, notwithstanding the foregoing or any terms of the Lease to the
contrary, in the event Mortgagee or any New Owner acquires title to the
Property prior to the completion of the Tenant Improvements (as defined in
the Lease) and Mortgagee or such New Owner fails to complete construction of
the Tenant Improvements after the delivery by Tenant of any required notice
and the expiration of any applicable cure period set forth in the Lease,
Tenant may, as its sole remedy in such event, complete construction of the
Tenant Improvements itself or through a contractor engaged by Tenant, and the
cost of so completing such improvements (but not to exceed an amount equal to
the unfunded portion of the Allowance (as defined in the Lease) as of such
date), may be deducted from the next due installments of Base Rent under the
Lease.
(j) Mortgagee and any New Owner shall have no obligation nor incur any
liability with respect to any warranties of any nature whatsoever, whether
pursuant to the Lease or otherwise, including, without limitation, any
warranties respecting use, compliance with zoning, Landlord's title,
Landlord's authority, habitability or fitness for purpose.
(k) In the event that Mortgagee or any New Owner shall acquire title to
the Premises or the Property, Mortgagee or such New Owner shall have no
obligation, nor incur any liability, beyond Mortgagee's or New Owner's then
equity interest, if any, in the Property or the Premises, and Tenant shall
look exclusively to such equity interest of Mortgagee or New Owner, if any,
for the payment and discharge of any obligations imposed upon Mortgagee or
New Owner hereunder or under the Lease or for recovery of any judgement from
Mortgagee, or New Owner, and in no event shall Mortgagee, New Owner, nor any
of their respective officers, directors, shareholders, agents,
representatives, servants, employees or partners ever be personally liable
for such judgement.
(l) Nothing herein contained is intended, nor shall it be construed, to
abridge or adversely affect any right or remedy of Landlord under the Lease
in the event of any default by Tenant in the payment of rent and/or any other
sums due under the Lease or in the performance of any of the other terms,
covenants or conditions of the Lease on Tenant's part to be performed.
(m) Landlord has not agreed to any abatement of rent or other sums or
period of "free rent" for the Premises unless same is specifically provided
in the Lease, and Tenant agrees that in the event Mortgagee, or any New Owner
becomes the owner of the Property, no agreement for abatement of rent or any
other sum not specifically provided in the Lease will be binding on Mortgagee
or New Owner.
(n) Tenant has never permitted, and will not permit, the generation,
treatment, storage or disposal of any hazardous substance as defined under
federal, state, or local law, on the Premises or Property except for such
substances of a type and only in a quantity normally used in connection with
the occupancy or operation of buildings (such as non-flammable cleaning
fluids and supplies normally used in the day to day operation of first class
office establishments), which substances are being held, stored, and used in
strict compliance with federal, state, and local laws. Tenant shall be solely
responsible for and shall reimburse Landlord for any loss, liability, claim
or expense, including without limitation, cleanup and all other expenses,
that Landlord may incur by reason of Tenant's violation of the requirements
of this Section 5(n).
------------
(o) In the event that Tenant exercises any self-help right under the
Lease, Tenant shall perform all work in connection therewith in a good and
workmanlike manner and in accordance with all applicable requirements to
which Landlord would be subject under the Lease (if Landlord were performing
such work) and all applicable laws, ordinances, rules and regulations, and in
no event will such work affect or impair the building systems or any portion
of the Property other than the Premises. Tenant hereby indemnifies Landlord
for, and holds Landlord harmless from, any and all claims, liabilities,
losses, costs and expenses (including attorneys' fees) arising from or in
connection with the performance of such work by Tenant.
6. Acknowledgement and Agreement by Landlord. Landlord, as landlord under
-----------------------------------------
the Lease and grantor under the Mortgage, acknowledges and agrees for itself and
its heirs,
Exhibit F - Page 5
<PAGE>
representatives, successors and assigns, that: (a) this Agreement does not
constitute a waiver by Mortgagee of any of its rights under the Mortgage, Note,
or Security Documents, or in any way release Landlord from its obligations to
comply with the terms, provisions, conditions, covenants, agreements and clauses
of the Mortgage, Note, or Security Documents; (b) the provisions of the
Mortgage, Note, or Security Documents remain in full force and effect and must
be complied with by Landlord; and (c) Tenant is hereby authorized to pay its
rent and all other sums due under the Lease directly to Mortgagee upon receipt
of a notice as set forth in Section 5(d) above from Mortgagee and that Tenant is
------------
not obligated to inquire as to whether a default actually exists under the
Mortgage, Security Documents or otherwise in connection with the Note. Landlord
hereby releases and discharges Tenant of and from any liability to Landlord
resulting from Tenant's payment to Mortgagee in accordance with this Agreement.
Landlord represents and warrants to Mortgagee that a true and complete copy of
the Lease has been delivered by Landlord to Mortgagee.
7. Lease Status. Landlord and Tenant certify to Mortgagee that neither
------------
Landlord nor Tenant has knowledge of any default on the part of the other under
the Lease, that the Lease is bona fide and contains all of the agreements of the
parties thereto with respect to the letting of the Premises and that all of the
agreements and provisions therein contained are in full force and effect.
8. Notices. All notices, requests, consents, demands and other
-------
communications required or which any party desires to give hereunder shall be in
writing and shall be deemed sufficiently given or furnished if delivered by
personal delivery, by telegram, telex, or facsimile, by expedited delivery
service with proof of delivery, or by registered or certified United States
mail, postage prepaid, at the addresses specified at the end of this Agreement
(unless changed by similar notice in writing given by the particular party whose
address is to be changed). Any such notice or communication shall be deemed to
have been given either at the time of personal delivery or, in the case of
delivery service or mail, as of the date of first attempted delivery at the
address and in the manner provided herein, or, in the case of telegram, telex or
facsimile, upon receipt. Notwithstanding the foregoing, no notice of change of
address shall be effective except upon receipt. This Section 8 shall not be
---------
construed in any way to affect or impair any waiver of notice or demand provided
in this Agreement or in the lease or in any document evidencing, securing or
pertaining to the loan evidenced by the Note or to require giving of notice or
demand to or upon any person in any situation or for any reason.
9. Miscellaneous.
-------------
(a) This Agreement supersedes any inconsistent provision of the Lease.
(b) Nothing contained in this Agreement shall be construed to derogate
from, or in any way impair or affect the lien, security interest or
provisions of the Mortgage, Note, or Security Documents.
(c) This Agreement shall inure to the benefit of the parties hereto,
their respective successors and permitted assigns, and any New Owner, and its
heirs, personal representatives, successors and assigns; provided, however,
that in the event of the assignment or transfer of the interest of Mortgagee,
all obligations and liabilities of the assigning Mortgagee under this
Agreement shall terminate, and thereupon all such obligations and liabilities
shall be the responsibility of the party to whom Mortgagee's interest is
assigned or transferred; and provided further that the interest of Tenant
under this Agreement may not be assigned or transferred, except in connection
with an assignment permitted under the Lease or consented to by Landlord and
Mortgagee.
(d) THIS AGREEMENT AND ITS VALIDITY, ENFORCEMENT AND INTERPRETATION SHALL
BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND APPLICABLE UNITED STATES
FEDERAL LAW EXCEPT ONLY TO THE EXTENT, IF ANY, THAT THE LAWS OF THE STATE IN
WHICH THE PROPERTY IS LOCATED NECESSARILY CONTROL.
(e) The words "herein", "hereof", "hereunder" and other similar compounds
of the word "here" as used in this Agreement refer to this entire Agreement
and not to any particular section or provision.
(f) This Agreement may not be modified orally or in any manner other than
by an agreement in writing signed by the parties hereto or their respective
successors in interest.
Exhibit F - Page 6
<PAGE>
(g) If any provision of the Agreement shall be held to be invalid,
illegal, or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not apply to or affect any other provision hereof, but
this Agreement shall be construed as if such invalidity, illegibility, or
unenforceability did not exist.
(h) If any bankruptcy proceedings shall hereafter commence with respect
to Landlord, and if the Lease is rejected by the trustee pursuant to Section
365 of the United States Bankruptcy Code, Tenant agrees with Mortgagee (i)
not to treat such lease as terminated and (ii) to remain in possession of the
Premises.
Exhibit F - Page 7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
ADDRESS OF MORTGAGEE: MORTGAGEE:
- -------------------- ---------
901 Main Street BANK OF AMERICA, N.A., a national banking
51st Floor association
Dallas, Texas 75202
Attention: Real Estate
Loan Administration By:________________________________________
Name:______________________________________
Title:_____________________________________
ADDRESS OF TENANT: TENANT:
- ----------------- ------
15375 NE 90th St. INFOSPACE.COM, INC., a Delaware corporation
Redmond, Washington 98052
Attention: Chief Financial
Officer By:________________________________________
Name:______________________________________
Title:_____________________________________
ADDRESS OF LANDLORD: LANDLORD:
- ------------------- --------
1191 Second Avenue THREE BELLEVUE CENTER LLC, a
Suite 2000 Washington limited liability company
Seattle, Washington 98101
By: WRIGHT RUNSTAD ASSOCIATES LIMITED
PARTNERSHIP, a Washington limited
partnership, its manager
By: WRIGHT RUNSTAD & COMPANY,
a Washington corporation, its general
partner
By:______________________________
Its:_____________________________
By: EOP-THREE BELLEVUE, L.L.C., a Delaware
limited liability company, its manager
By: EOP OPERATING LIMITED
PARTNERSHIP, a Delaware limited
partnership, its sole member
By: EQUITY OFFICE PROPERTIES
TRUST, a Maryland real estate
investment trust, its managing general
partner
By:_____________________________
Its:_____________________________
Exhibit F - Page 8
<PAGE>
LANDLORD ACKNOWLEDGMENT
STATE OF WASHINGTON )
) ss:
COUNTY OF KING )
On this the ____ day of __________, 2000, before me a Notary Public duly
authorized in and for the said County in the State aforesaid to take
acknowledgments personally appeared ________________ known to me to be the
__________ of Wright Runstad & Company, the general partner of Wright Runstad
Associates Limited Partnership, a Member of THREE BELLEVUE CENTER LLC, a
Washington limited liability company, the Landlord in the foregoing instrument,
and acknowledged that as such officer, being authorized so to do, (s)he executed
the foregoing instrument on behalf of said corporation by subscribing the name
of such corporation by himself/herself as such officer and caused the corporate
seal of said corporation to be affixed thereto, as a free and voluntary act, and
as the free and voluntary act of said corporation, for the uses and purposes
therein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public:______________________________
Printed Name:_______________________________
Residing at:________________________________
My Commission expires:______________________
STATE OF WASHINGTON)
) ss:
COUNTY OF KING )
On this the ____ day of __________, 2000, before me a Notary Public duly
authorized in and for the said County in the State aforesaid to take
acknowledgments personally appeared ________________ known to me to be the
__________ of Equity Office Properties Trust, the general partner of EOP
Operating Limited Partnership, the sole member of EOP-Three Bellevue, L.L.C., a
Member of THREE BELLEVUE CENTER LLC, a Washington limited liability company, the
Landlord in the foregoing instrument, and acknowledged that as such officer,
being authorized so to do, (s)he executed the foregoing instrument on behalf of
said corporation by subscribing the name of such corporation by himself/herself
as such officer and caused the corporate seal of said corporation to be affixed
thereto, as a free and voluntary act, and as the free and voluntary act of said
corporation, for the uses and purposes therein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public:______________________________
Printed Name:_______________________________
Residing at:________________________________
My Commission expires:______________________
Exhibit F - Page 9
<PAGE>
TENANT ACKNOWLEDGMENT
STATE OF WASHINGTON )
) ss:
COUNTY OF KING )
On this the ____ day of __________, 2000, before me a Notary Public duly
authorized in and for the said County in the State aforesaid to take
acknowledgments personally appeared ________________ known to me to be the
__________ of INFOSPACE.COM, INC., a Delaware corporation, the Tenant in the
foregoing instrument, and acknowledged that as such officer, being authorized so
to do, (s)he executed the foregoing instrument on behalf of said corporation by
subscribing the name of such corporation by himself/herself as such officer and
caused the corporate seal of said corporation to be affixed thereto, as a free
and voluntary act, and as the free and voluntary act of said corporation, for
the uses and purposes therein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public:______________________________
Printed Name:_______________________________
Residing at:________________________________
My Commission expires:______________________
LENDER ACKNOWLEDGMENT
STATE OF )
) ss:
COUNTY OF )
On this the ____ day of __________, 2000, before me a Notary Public duly
authorized in and for the said County in the State aforesaid to take
acknowledgments personally appeared ________________ known to me to be the
__________ of BANK OF AMERICA, N.A., a national banking association, the Lender
in the foregoing instrument, and acknowledged that as such officer, being
authorized so to do, (s)he executed the foregoing instrument on behalf of said
corporation by subscribing the name of such corporation by himself/herself as
such officer and caused the corporate seal of said corporation to be affixed
thereto, as a free and voluntary act, and as the free and voluntary act of said
corporation, for the uses and purposes therein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public:______________________________
Printed Name:_______________________________
Residing at:________________________________
My Commission expires:______________________
EXHIBIT "A"
-----------
Legal Description of the Land
-----------------------------
This Exhibit is attached to and made a part of the Lease dated _____________,
2000, by and between Three Bellevue Center LLC, a Washington limited liability
company ("Landlord") and InfoSpace.com, Inc., a Delaware corporation ("Tenant")
for space in the Building located at 601 108th Avenue NE, Bellevue, Washington
98004.
PARCEL A:
THAT PORTION OF LOT 2 IN BLOCK 2 OF CHERITON FRUIT GARDENS PLAT NO. 1, AS PER
PLAT RECORDED IN VOLUME 7 OF PLATS, PAGE 47, RECORDS OF KING COUNTY, DESCRIBED
AS FOLLOWS:
Exhibit F - Page 10
<PAGE>
BEGINNING AT A POINT ON THE WEST LINE OF THE EAST 230 FEET OF SAID LOT 2 WHICH
IS SOUTH 00 degrees 05 minutes 54 seconds WEST ALONG SAID WEST LINE 297 FEET
FROM THE NORTH LINE OF SAID LOT 2; THENCE SOUTH 89 degrees 54 minutes 06 seconds
EAST 178 FEET; THENCE SOUTH 44 degrees 54 minutes 06 seconds EAST 14.14 FEET;
THENCE SOUTH 89 degrees 54 minutes 06 seconds EAST 12 FEET TO THE WEST LINE OF
THE EAST 30 FEET OF SAID LOT 2; THENCE SOUTH 00 degrees 05 minutes 54 seconds
WEST ALONG SAID WEST LINE 138.02 FEET TO THE SOUTH LINE OF THE NORTH 120 FEET OF
THE SOUTH 1/2 OF SAID LOT 2; THENCE NORTH 88 degrees 44 minutes 41 seconds WEST
ALONG SAID SOUTH LINE 200.04 FEET TO THE WEST LINE OF THE EAST 230 FEET OF SAID
LOT 2; THENCE NORTH 00 degrees 05 minutes 54 seconds EAST ALONG SAID WEST LINE
143.98 FEET TO THE POINT OF BEGINNING;
(ALSO KNOWN AS PARCEL B OF CITY OF BELLEVUE LOT LINE REVISION
NO. 84-43 RECORDED UNDER RECORDING NO. 8503079001)
SITUATE IN THE CITY OF BELLEVUE, COUNTY OF KING, STATE OF WASHINGTON.
PARCEL B:
THAT PORTION OF THE SOUTH 1/2 OF LOT 2 IN BLOCK 2 OF CHERITON FRUIT GARDENS PLAT
NO. 1, AS PER PLAT RECORDED IN VOLUME 7 OF PLATS, PAGE 47, RECORDS OF KING
COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE WEST LINE OF THE EAST 30 FEET OF SAID LOT 2
WITH THE SOUTH LINE THEREOF; THENCE NORTH 88 degrees 46 minutes 31 seconds WEST
ALONG SAID SOUTH LINE 221.81 FEET; THENCE NORTH 00 degrees 05 minutes 54 seconds
EAST 108.37 FEET; THENCE SOUTH 89 degrees 54 minutes 06 seconds EAST 21.77 FEET
TO THE WEST LINE OF THE EAST 230 FEET OF SAID LOT 21' THENCE NORTH 00 degrees 05
minutes 54 seconds EAST ALONG SAID WEST LINE 80.31 FEET TO THE SOUTH LINE OF
PARCEL B OF CITY OF BELLEVUE BOUNDARY LINE ADJUST NO. 84-43, RECORDED UNDER KING
COUNTY RECORDING NO. 8503019001; THENCE SOUTH 88 degrees 44 minutes 41 seconds
EAST ALONG SAID SOUTH LINE 200.04 FEET TO THE WEST LINE OF THE EAST 30 FEET OF
SAID LOT 2; THENCE SOUTH 00 degrees 05 minutes 54 seconds WEST ALONG SAID WEST
LINE 189.00 FEET TO BEGINNING;
(ALSO KNOWN AS LOT 2 OF CITY OF BELLEVUE BOUNDARY LINE ADJUSTMENT NO. BLA-90-
7034 RECORDED UNDER RECORDING NO. 9201159011);
SITUATE IN THE CITY OF BELLEVUE, COUNTY OF KING, STATE OF WASHINGTON.
BOTH PARCELS ABOVE ALSO BEING DESCRIBED AS FOLLOWS:
THAT PORTION OF LOT 2 IN BLOCK 2 OF CHERITON FRUIT GARDENS PLAT NO. 1, AS PER
PLAT RECORDED IN VOLUME 7 OF PLATS, PAGE 47, RECORDS OF KING COUNTY, DESCRIBED
AS FOLLOWS:
BEGINNING AT THE SOUTHEAST CORNER OF SAID LOT 2; THENCE NORTH 88 degrees 46
minutes 31 seconds WEST 30.00 FEET ALONG THE SOUTH LINE THEREOF TO THE WEST LINE
OF THE EAST 30.00 FEET OF SAID LOT 2, THE WEST MARGIN 108TH AVENUE N.E. (60 FEET
WIDE) AND THE TRUE POINT OF BEGINNING;
THENCE CONTINUING NORTH 88 degrees 46 minutes 13 seconds WEST 221.81 FEET ALONG
SAID SOUTH LINE AND THE SOUTH LINE OF LOT 2 OF CITY OF BELLEVUE BOUNDARY LINE
ADJUSTMENT NO. BLA-90-7034, RECORDED UNDER KING COUNTY RECORDING NO. 9201159011
TO THE SOUTHWEST CORNER OF SAID LOT 2 OF BLA-90-7034; THENCE ALONG THE WEST LINE
OF LAST SAID LOT 2 THE FOLLOWING THREE COURSES: THENCE NORTH 00 degrees 05
minutes 31 seconds EAST 108.37 FEET; THENCE SOUTH 89 degrees 54 minutes 29
seconds EAST 21.77 FEET; THENCE NORTH 00 degrees 05 minutes 31 seconds EAST
80.31 FEET TO THE MOST NORTHERLY
Exhibit F - Page 11
<PAGE>
NORTHWEST CORNER OF SAID LOT 2 AND THE SOUTHWEST CORNER OF PARCEL B OF CITY OF
BELLEVUE LOT LINE REVISION NO. 84-43, RECORDED UNDER KING COUNTY RECORDING NO.
8503079001; THENCE CONTINUING NORTH 00 degrees 05 minutes 31 seconds EAST 143.98
FEET ALONG THE WEST LINE OF SAID PARCEL B TO THE NORTHWEST CORNER THEREOF;
THENCE ALONG THE NORTH LINE OF SAID PARCEL B THE FOLLOWING
THREE COURSES:
THENCE SOUTH 89 degrees 54 minutes 29 seconds EAST 178.00 FEET; THENCE SOUTH 44
degrees 54 minutes 29 seconds EAST 14.14 FEET; THENCE SOUTH 89 degrees 54
minutes 29 seconds EAST 12.00 FEET TO THE EAST LINE OF SAID PARCEL B AND SAID
WEST MARGIN OF 108TH AVENUE N.E.;
THENCE SOUTH 00 degrees 05 minutes 31 seconds WEST 327.02 FEET ALONG SAID WEST
MARGIN TO THE TRUE POINT OF BEGINNING;
SITUATE IN THE CITY OF BELLEVUE, COUNTY OF KING, STATE OF WASHINGTON.
Exhibit F - Page 12
<PAGE>
EXHIBIT G
Rooftop Rates
This Exhibit is attached to and made a part of the Lease dated February ___,
2000, by and between THREE BELLEVUE CENTER LLC ("Landlord") and INFOSPACE.COM,
INC., a Delaware corporation ("Tenant") for space in the Building known as Three
Bellevue Center located at 601 - 108th Avenue NE, Bellevue, King County,
Washington.
The following are the current rates for use of the rooftop of the Building.
Such rates are subject to change by Landlord from time to time.
Average Rents by Tenant Type
- ----------------------------
Market: Northwest United States
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Monthly Annual
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Type 1 $ 6,000
- ------ $ 500
Two-Way Paging cells
Analog SMR Transmitters $ 500
.3-1 meter satellite reception dishes (VSAT)
"
Wireless data mini bases
Wireless cable antenna
Two-way communication whip antennas $ 250
Twelve foot whip antenna (450 mHz, 50 watts) $ 500
- -----
Type 2 $ 4200
- ------ $500
38 Ghz Wireless Fiber Microwave (unswitched-switched)
Community Repeaters $ 500-800
Standard paging/messaging transmitters "
Wireless data base stations "
2 foot telemetry antennas (yagi) (receive telemetering $ 200
data)
Six-foot diameter open grid dish antenna (10 watts, 950 $ 500
mHz) Studio-Transmitter Link band.
- ------------------------------------------------------------------------------------------------------------
Type 3
- ------ $ 800 $ 9600
220 MHz Repeaters
PCS mini-cells
Vehicle location services $ 800
High power messaging
- ------------------------------------------------------------------------------------------------------------
Type 4
- ------ $ 2000 $ 24000
PS Cells, Large
High power Trunking
Enhanced specialized mobile radio $ 2000
2-3 meter satellite transmission dishes $ 2,400
- ------------------------------------------------------------------------------------------------------------
Type 5
- ------- $ 3000 $ 36000
Multiple Sector Cell Sites
Traditional Microwave (6-10') $ 2,500
Major microwave backbone facilities $3,000-5,000
- ------------------------------------------------------------------------------------------------------------
Type 6
- ------ $ 7500 $90,000
38 GHz Wireless Fiber Microwave Hubs
- ------------------------------------------------------------------------------------------------------------
Type 7
- ------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit G - Page 1
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
$ 4500 $ 54000
Digital Cable Wireless Headends
$ 3000-7000
Commercial Broadcast Facilities
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit G - Page 2
<PAGE>
EXHIBIT H
Form of Letter of Credit
________________________
[Name of Financial Institution]
Irrevocable Standby
Letter of Credit
No. ______________________
Issuance Date:_____________
Expiration Date:____________
Applicant:__________________
Beneficiary
- -----------
[Insert Name of Owner]
_____________________________
_____________________________
_____________________________
Ladies/Gentlemen:
We hereby establish our Irrevocable Standby Letter of Credit in your favor for
the account of the above referenced Applicant in the amount of
____________________ U.S. Dollars ($____________________) available for payment
at sight by your draft drawn on us when accompanied by the following documents:
1. An original copy of this Irrevocable Standby Letter of Credit.
2. Beneficiary's dated statement purportedly signed by one of its officers
reading: "This draw in the amount of ______________________ U.S. Dollars
($____________) under your Irrevocable Standby Letter of Credit No.
____________________ represents funds due and owing to us as a result of
the Applicant's failure to comply after the expiration of applicable notice
and cure periods with one or more of the terms of that certain lease by and
between ______________________, as landlord, and _____________, as tenant."
It is a condition of this Irrevocable Standby Letter of Credit that it will
be considered automatically renewed for a one year period upon the expiration
date set forth above and upon each anniversary of such date, unless at least
thirty (30) days prior to such expiration date or applicable anniversary
thereof, we notify you in writing by certified mail, return receipt requested,
that we elect not to so renew this Irrevocable Standby Letter of Credit. A copy
of any such notice shall also be sent to: Three Bellevue Center LLC, 1191 Second
Avenue, Suite 2000, Seattle, Washington 98101. In addition to the foregoing, we
understand and agree that you shall be entitled to draw upon this Irrevocable
Standby Letter of Credit in accordance with 1 and 2 above in the event that we
elect not to renew this Irrevocable Standby Letter of Credit and, in addition,
you provide us with a dated statement purportedly signed by one of Beneficiary's
officers stating that the Applicant has failed to provide you with an acceptable
substitute irrevocable standby letter of credit in accordance with the terms of
the above referenced lease. We further acknowledge and agree that: (a) upon
receipt of the documentation required herein, we will honor your draws against
this Irrevocable Standby Letter of Credit without inquiry into the accuracy of
Beneficiary's signed statement and regardless of whether Applicant disputes the
content of such statement; (b) this Irrevocable Standby Letter of Credit shall
permit partial draws and, in the event you elect to draw upon less than the full
stated amount hereof, the stated amount of this Irrevocable Standby Letter of
Credit shall be automatically reduced by the amount of such partial draw; and
(c) you shall be entitled to assign your interest in this Irrevocable Standby
Letter of Credit from time to time without our approval and without charge. In
the event of an assignment, we reserve the right to require reasonable evidence
of such assignment as a condition to any draw hereunder.
This Irrevocable Standby Letter of Credit is subject to the Uniform Customs
and Practice for Documentary Credits (1993 revision) ICC Publication No. 500.
We hereby engage with you to honor drafts and documents drawn under and in
compliance with the terms of this Irrevocable Standby Letter of Credit.
Exhibit H - Page 1
<PAGE>
All communications to us with respect to this Irrevocable Standby Letter of
Credit must be addressed to our office located at
______________________________________________ to the attention of
__________________________________.
Very truly yours,
__________________
[name]
-----------------
[title]
-----------------
Exhibit H - Page 2
<PAGE>
EXHIBIT I
Ground Lessor Nondisturbance Agreement
RETURN NAME AND ADDRESS:
Perkins Coie LLP
1201 Third Avenue, 40th Floor
Seattle, WA 98101
Attn: William L. Green, Esq.
NONDISTURBANCE AND ATTORNMENT AGREEMENT
<TABLE>
<CAPTION>
<S> <C>
LANDLORD: Three Bellevue Center LLC, a Washington limited liability company
TENANT: InfoSpace.com, Inc., a Delaware corporation
GROUND LESSOR: Sterling Realty Organization, Co., a Washington company
LEGAL
DESCRIPTION: Parcel A Portion of Lot 2, Block 2, Cheriton Fruit Gardens, Plat No. 1,
according to the plant thereof recorded in Volume 7 of Plats, page
47, in King County, Washington.
Parcel B Portion of the south half of Lot 2, Block 2, Cheriton Fruit Gardens,
Plat No. 1, according to the plat thereof recorded in
Volume 7 of Plats, page 57, in King County, Washington.
Additional legal description is on Exhibit A of document.
ASSESSOR'S
PROPERTY TAX
PARCEL ACCOUNT
NUMBER(S):
154410-0230-01 and 154410-0219-06
</TABLE>
Exhibit I - Page 1
<PAGE>
NON-DISTURBANCE AND ATTORNMENT AGREEMENT
----------------------------------------
This Non-Disturbance and Attornment Agreement (this "Agreement") dated
---------
________________, 2000, is made among InfoSpace.com, Inc. ("Tenant"), Three
------
Bellevue Center, LLC ("Landlord"), and Sterling Realty Organization Co.,
--------
("Ground Lessor").
- ---------------
WHEREAS, Ground Lessor as landlord and Landlord as tenant are parties to that
certain Ground Lease dated November 20, 1998 (as amended from time to time, the
"Ground Lease") for the lease of certain real property described on Exhibit A
attached hereto (the "Land"), upon which Landlord has constructed certain
improvements (the "Improvements", and together with the Land, the "Property");
WHEREAS, Tenant is the tenant under a lease for space in the Improvements
dated February _____, 2000 (herein, as it may from time to time be renewed,
extended, amended or supplemented, called the "Lease"), covering a portion of
-----
the Property (said portion being herein referred to as the "Premises"); and
--------
WHEREAS, the term "Landlord" as used herein means the present landlord under
the Lease or, if the landlord's interest is transferred in any manner, the
successor(s) or assign(s) occupying the position of landlord under the Lease at
the time in question;
THEREFORE, in consideration of the mutual agreements herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Non-Disturbance. Ground Lessor agrees that in the event the Ground Lease
---------------
is terminated, and so long as the Lease is in full force and effect and Tenant
is not in default in the payment of rent, additional rent or other payments or
in the performance of any of the other terms, covenants or conditions of the
Lease on Tenant's part to be performed (beyond the period, if any, specified in
the Lease within which Tenant may cure such default),
(a) Tenant's possession of the Premises under the Lease shall not be
disturbed or interfered with by Ground Lessor in the exercise of any of its
rights under the Ground Lease, and
(b) Ground Lessor will, from and after the date the Ground Lease is
terminated, recognize the Lease as a direct lease between Ground Lessor as
landlord and Tenant as tenant, subject to the terms and conditions of the
Lease and this Agreement, and
(c) Ground Lessor will not join Tenant as a party defendant for the
purpose of terminating Tenant's interest and estate under the Lease in any
proceeding for termination of the Ground Lease or eviction of Landlord from
the Property.
2. Attornment.
----------
(a) Tenant covenants and agrees that in the event the Ground Lease is
terminated for any reason, Tenant shall attorn to the Ground Lessor as
Tenant's new landlord, and agrees that the Lease shall continue in full force
and effect as a direct lease between Tenant and Ground Lessor upon all of the
terms, covenants, conditions and agreements set forth in the Lease and this
Agreement, except for provisions which by their nature are not possible for
Ground Lessor to perform; provided, however, that in no event shall the
Ground Lessor be:
(i) liable for any act, omission, default, misrepresentation, or
breach of warranty, of any previous landlord (including Landlord) or
obligations accruing prior to Ground Lessor's actual possession of the
property;
(ii) subject to any offset, defense, claim or counterclaim which
Tenant might be entitled to assert against any previous landlord (including
Landlord) (but this shall not limit any right of Tenant under the Lease to
terminate the Lease if Ground Lessor fails to correct any conditions that
existed as of the date of attornment and violate Landlord's obligations under
the Lease);
Exhibit I - Page 2
<PAGE>
(iii) bound by any payment of rent, additional rent or other
payments, made by Tenant to any previous landlord (including Landlord) for
more than one (1) month in advance;
(iv) liable for any deposit that Tenant may have given to any
previous landlord (including Landlord) which has not, as such, been
transferred to Ground Lessor.
(b) The provisions of this Agreement regarding attornment by Tenant
shall be self-operative and effective without the necessity of execution of
any new lease or other document on the part of any party hereto or the
respective heirs, legal representatives, successors or assigns of any such
party. Tenant agrees, however, to execute and deliver at any time and from
time to time, upon the request of Landlord or of any holder(s) of any of the
indebtedness or other obligations secured by the Mortgage, any instrument or
certificate which, in the reasonable judgement of Landlord or of such
holder(s), may be necessary or appropriate in any such foreclosure proceeding
or otherwise to evidence such attornment, including, if requested, a new
lease of the Premises on the same terms and conditions as the Lease for the
then unexpired term of the Lease.
3. Notices. All notices, requests, consents, demands and other
-------
communications required or which any party desires to give hereunder shall be in
writing and shall be deemed sufficiently given or furnished if delivered by
personal delivery, by telegram, telex, or facsimile, by expedited delivery
service with proof of delivery, or by registered or certified United States
mail, postage prepaid, at the addresses specified at the end of this Agreement
(unless changed by similar notice in writing given by the particular party whose
address is to be changed). Any such notice or communication shall be deemed to
have been given either at the time of personal delivery or, in the case of
delivery service or mail, as of the date of first attempted delivery at the
address and in the manner provided herein, or, in the case of telegram, telex or
facsimile, upon receipt. Notwithstanding the foregoing, no notice of change of
address shall be effective except upon receipt. This Section 3 shall not be
---------
construed in any way to affect or impair any waiver of notice or demand provided
in this Agreement or in the lease or to require giving of notice or demand to or
upon any person in any situation or for any reason.
4. Miscellaneous.
-------------
(a) This Agreement supersedes any inconsistent provision of the Lease.
(b) This Agreement shall inure to the benefit of the parties hereto,
their respective successors and permitted assigns, provided, however, that in
the event of the assignment or transfer of the interest of Ground Lessor, all
obligations and liabilities of the assigning Ground Lessor under this
Agreement shall terminate, and thereupon all such obligations and liabilities
shall be the responsibility of the party to whom Ground Lessor's interest is
assigned or transferred.
(c) THIS AGREEMENT AND ITS VALIDITY, ENFORCEMENT AND INTERPRETATION
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF WASHINGTON AND APPLICABLE
UNITED STATES FEDERAL LAW.
(d) The words "herein", "hereof", "hereunder" and other similar
compounds of the word "here" as used in this Agreement refer to this entire
Agreement and not to any particular section or provision.
(e) This Agreement may not be modified orally or in any manner other
than by an agreement in writing signed by the parties hereto or their
respective successors in interest.
(f) If any provision of the Agreement shall be held to be invalid,
illegal, or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not apply to or affect any other provision hereof, but
this Agreement shall be construed as if such invalidity, illegibility, or
unenforceability did not exist.
(g) If any bankruptcy proceedings shall hereafter commence with respect
to Landlord, and if the Lease is rejected by the trustee pursuant to Section
365 of the United States Bankruptcy Code, Tenant agrees with Ground Lessor
(i) not to treat such lease as terminated and (ii) to remain in possession of
the Premises.
Exhibit I - Page 3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
ADDRESS OF GROUND LESSOR: GROUND LESSOR:
- ------------------------ -------------
________________________ STERLING REALTY ORGANIZATION, CO.
________________________ By:__________________________________
________________________ Name:________________________________
Attention: _____________ Title:_______________________________
ADDRESS OF TENANT: TENANT:
- ----------------- ------
________________________ INFOSPACE.COM, INC.
________________________ By:__________________________________
________________________ Name:________________________________
Attention:______________ Title:_______________________________
ADDRESS OF LANDLORD: LANDLORD:
- ------------------- --------
________________________ THREE BELLEVUE CENTER LLC, a
________________________ Washington limited liability company
________________________
Attention:______________ By: WRIGHT RUNSTAD ASSOCIATES LIMITED
PARTNERSHIP, a Washington limited
partnership, its manager
By: WRIGHT RUNSTAD & COMPANY,
a Washington corporation, its general
partner
By:___________________________
Its:__________________________
By: EOP-THREE BELLEVUE, L.L.C., a Delaware
limited liability company, its manager
By: EOP OPERATING LIMITED
PARTNERSHIP, a Delaware limited
partnership, its sole member
By: EQUITY OFFICE PROPERTIES TRUST, a
Maryland real estate investment trust,
its managing general partner
By:_______________________________
Its:______________________________
Exhibit I - Page 4
<PAGE>
LANDLORD ACKNOWLEDGMENT
STATE OF WASHINGTON )
) ss:
COUNTY OF KING )
On this the ____ day of February, 2000, before me a Notary Public duly
authorized in and for the said County in the State aforesaid to take
acknowledgments personally appeared ________________ known to me to be the
__________ of Wright Runstad & Company, the general partner of Wright Runstad
Associates Limited Partnership, a Member of THREE BELLEVUE CENTER LLC, a
Washington limited liability company, the Landlord in the foregoing instrument,
and acknowledged that as such officer, being authorized so to do, (s)he executed
the foregoing instrument on behalf of said corporation by subscribing the name
of such corporation by himself/herself as such officer and caused the corporate
seal of said corporation to be affixed thereto, as a free and voluntary act, and
as the free and voluntary act of said corporation, for the uses and purposes
therein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public:________________________
Printed Name:_________________________
Residing at:__________________________
My Commission expires:________________
STATE OF )
) ss:
COUNTY OF )
On this the ____ day of February, 2000, before me a Notary Public duly
authorized in and for the said County in the State aforesaid to take
acknowledgments personally appeared ________________ known to me to be the
__________ of Equity Office Properties Trust, the general partner of EOP
Operating Limited Partnership, the sole member of EOP-Three Bellevue, L.L.C., a
Member of THREE BELLEVUE CENTER LLC, a Washington limited liability company, the
Landlord in the foregoing instrument, and acknowledged that as such officer,
being authorized so to do, (s)he executed the foregoing instrument on behalf of
said corporation by subscribing the name of such corporation by himself/herself
as such officer and caused the corporate seal of said corporation to be affixed
thereto, as a free and voluntary act, and as the free and voluntary act of said
corporation, for the uses and purposes therein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public:________________________
Printed Name:_________________________
Residing at:__________________________
My Commission expires:________________
Exhibit I - Page 5
<PAGE>
TENANT ACKNOWLEDGMENT
STATE OF WASHINGTON )
) ss:
COUNTY OF KING )
On this the ____ day of February, 2000, before me a Notary Public duly
authorized in and for the said County in the State aforesaid to take
acknowledgments personally appeared ________________ known to me to be true of
INFOSPACE.COM, INC., the Tenant in the foregoing instrument, and acknowledged
that as such officer, being authorized so to do, (s)he executed the foregoing
instrument on behalf of said corporation by subscribing the name of such
corporation by himself/herself as such officer and caused the corporate seal of
said corporation to be affixed thereto, as a free and voluntary act, and as the
free and voluntary act of said corporation, for the uses and purposes therein
set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public:________________________
Printed Name:_________________________
Residing at:__________________________
My Commission expires:________________
LENDER ACKNOWLEDGMENT
STATE OF WASHINGTON )
) ss:
COUNTY OF KING )
On this the ____ day of February, 2000, before me a Notary Public duly
authorized in and for the said County in the State aforesaid to take
acknowledgments personally appeared ________________ known to me to be true of
Sterling Realty Organization, Co., the Ground Lessor in the foregoing
instrument, and acknowledged that as such officer, being authorized so to do,
(s)he executed the foregoing instrument on behalf of said corporation by
subscribing the name of such corporation by himself/herself as such officer and
caused the corporate seal of said corporation to be affixed thereto, as a free
and voluntary act, and as the free and voluntary act of said corporation, for
the uses and purposes therein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public:________________________
Printed Name:_________________________
Residing at:__________________________
My Commission expires:________________
Exhibit I - Page 6
<PAGE>
EXHIBIT "A"
-----------
Legal Description of the Land
-----------------------------
This Exhibit is attached to and made a part of the Lease dated February ___,
2000, by and between Three Bellevue Center LLC, a Washington limited liability
company ("Landlord") and Infospace.com, a Delaware company ("Tenant") for space
in the Building located at 601 108th Avenue NE, Bellevue, Washington 98004.
PARCEL A:
THAT PORTION OF LOT 2 IN BLOCK 2 OF CHERITON FRUIT GARDENS PLAT NO. 1, AS PER
PLAT RECORDED IN VOLUME 7 OF PLATS, PAGE 47, RECORDS OF KING COUNTY, DESCRIBED
AS FOLLOWS:
BEGINNING AT A POINT ON THE WEST LINE OF THE EAST 230 FEET OF SAID LOT 2 WHICH
IS SOUTH 00 degrees 05 minutes 54 seconds WEST ALONG SAID WEST LINE 297 FEET
FROM THE NORTH LINE OF SAID LOT 2; THENCE SOUTH 89 degrees 54 minutes 06 seconds
EAST 178 FEET; THENCE SOUTH 44 degrees 54 minutes 06 seconds EAST 14.14 FEET;
THENCE SOUTH 89 degrees 54 minutes 06 seconds EAST 12 FEET TO THE WEST LINE OF
THE EAST 30 FEET OF SAID LOT 2; THENCE SOUTH 00 degrees 05 minutes 54 seconds
WEST ALONG SAID WEST LINE 138.02 FEET TO THE SOUTH LINE OF THE NORTH 120 FEET OF
THE SOUTH 1/2 OF SAID LOT 2; THENCE NORTH 88 degrees 44 minutes 41 seconds WEST
ALONG SAID SOUTH LINE 200.04 FEET TO THE WEST LINE OF THE EAST 230 FEET OF SAID
LOT 2; THENCE NORTH 00 degrees 05 minutes 54 seconds EAST ALONG SAID WEST LINE
143.98 FEET TO THE POINT OF BEGINNING;
(ALSO KNOWN AS PARCEL B OF CITY OF BELLEVUE LOT LINE REVISION
NO. 84-43 RECORDED UNDER RECORDING NO. 8503079001)
SITUATE IN THE CITY OF BELLEVUE, COUNTY OF KING, STATE OF WASHINGTON.
PARCEL B:
THAT PORTION OF THE SOUTH 1/2 OF LOT 2 IN BLOCK 2 OF CHERITON FRUIT GARDENS PLAT
NO. 1, AS PER PLAT RECORDED IN VOLUME 7 OF PLATS, PAGE 47, RECORDS OF KING
COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE WEST LINE OF THE EAST 30 FEET OF SAID LOT 2
WITH THE SOUTH LINE THEREOF; THENCE NORTH 88 degrees 46 minutes 31 seconds WEST
ALONG SAID SOUTH LINE 221.81 FEET; THENCE NORTH 00 degrees 05 minutes 54 seconds
EAST 108.37 FEET; THENCE SOUTH 89 degrees 54 minutes 06 seconds EAST 21.77 FEET
TO THE WEST LINE OF THE EAST 230 FEET OF SAID LOT 21' THENCE NORTH 00 degrees 05
minutes 54 seconds EAST ALONG SAID WEST LINE 80.31 FEET TO THE SOUTH LINE OF
PARCEL B OF CITY OF BELLEVUE BOUNDARY LINE ADJUST NO. 84-43, RECORDED UNDER KING
COUNTY RECORDING NO. 8503019001; THENCE SOUTH 88 degrees 44 minutes 41 seconds
EAST ALONG SAID SOUTH LINE 200.04 FEET TO THE WEST LINE OF THE EAST 30 FEET OF
SAID LOT 2; THENCE SOUTH 00 degrees 05 minutes 54 seconds WEST ALONG SAID WEST
LINE 189.00 FEET TO BEGINNING;
(ALSO KNOWN AS LOT 2 OF CITY OF BELLEVUE BOUNDARY LINE ADJUSTMENT NO. BLA-90-
7034 RECORDED UNDER RECORDING NO. 9201159011);
SITUATE IN THE CITY OF BELLEVUE, COUNTY OF KING, STATE OF WASHINGTON.
BOTH PARCELS ABOVE ALSO BEING DESCRIBED AS FOLLOWS:
THAT PORTION OF LOT 2 IN BLOCK 2 OF CHERITON FRUIT GARDENS PLAT NO. 1, AS PER
PLAT RECORDED IN VOLUME 7 OF PLATS, PAGE 47, RECORDS OF KING COUNTY, DESCRIBED
AS FOLLOWS:
Exhibit I - Page 7
<PAGE>
BEGINNING AT THE SOUTHEAST CORNER OF SAID LOT 2; THENCE NORTH 880461310 WEST
30.00 FEET ALONG THE SOUTH LINE THEREOF TO THE WEST LINE OF THE EAST 30.00 FEET
OF SAID LOT 2, THE WEST MARGIN 108TH AVENUE N.E. (60 FEET WIDE) AND THE TRUE
POINT OF BEGINNING;
THENCE CONTINUING NORTH 8804613IN WEST 221.81 FEET ALONG SAID
SOUTH LINE AND THE SOUTH LINE OF LOT 2 OF CITY OF BELLEVUE
BOUNDARY LINE ADJUSTMENT NO. BLA-90-7034, RECORDED UNDER KING
COUNTY RECORDING NO. 9201159011 TO THE SOUTHWEST CORNER OF
SAID LOT 2 OF BLA-90-7034;
THENCE ALONG THE WEST LINE OF LAST SAID LOT 2 THE FOLLOWING
THREE COURSES:
THENCE NORTH 00'05131H EAST 108.37 FEET;
THENCE SOUTH 89 degrees 54 feet 29 inches EAST 21.77 FEET;
THENCE NORTH 00 degrees 05 feet 31 inches EAST 80.31 FEET TO THE MOST
NORTHERLY NORTHWEST CORNER OF SAID LOT 2 AND THE SOUTHWEST CORNER OF
PARCEL B OF CITY OF BELLEVUE LOT LINE REVISION NO. 84-43,
RECORDED UNDER KING COUNTY RECORDING NO. 8503079001;
THENCE CONTINUING NORTH 00 degrees 05 feet 31 inches EAST 143.98 FEET ALONG
THE WEST LINE OF SAID PARCEL B TO THE NORTHWEST CORNER THEREOF;
THENCE ALONG THE NORTH LINE OF SAID PARCEL B THE FOLLOWING
THREE COURSES:
THENCE SOUTH 89 degrees 54 feet 29 inches EAST 178.00 FEET;
THENCE SOUTH 44 degrees 54 feet 29 inches EAST 14.14 FEET;
THENCE SOUTH 89 degrees 54 feet 29 inches EAST 12.00 FEET TO THE EAST LINE
OF SAID PARCEL B AND SAID WEST MARGIN OF 108TH AVENUE N.E.;
THENCE SOUTH 00 degrees 05 feet 31 inches WEST 327.02 FEET ALONG SAID WEST
MARGIN TO THE TRUE POINT OF BEGINNING;
SITUATE IN THE CITY OF BELLEVUE, COUNTY OF KING, STATE OF WASHINGTON.
Exhibit I - Page 8
<PAGE>
EXHIBIT J
Facade Signage
[See attached]
Exhibit J
<PAGE>
Exhibit 10.18
EMPLOYMENT AGREEMENT
--------------------
This Agreement is entered into as of December 16, 1999, by and among
InfoSpace.com, Inc., a Delaware corporation ("InfoSpace"), and Bernee D. L.
Strom ("Strom").
WHEREAS, Strom is presently employed as President and Chief Operating
Officer of InfoSpace; and
WHEREAS, Strom is presently a member of the Board of Directors of
InfoSpace; and
WHEREAS, Strom and InfoSpace are parties to an employment agreement dated
as of November 22, 1998 (the "November Employment Agreement"); and
WHEREAS, Strom and InfoSpace are parties to an agreement entitled
"InfoSpace.com, Inc. Stock Option Agreement," dated November 23, 1998 (the
"Performance Option Agreement"); and
WHEREAS, Strom is a party to three other stock option agreements and/or
plans in addition to the Performance Option Agreement, namely, an agreement
entitled "InfoSpace.com, Inc. Incentive Stock Option Agreement," dated November
23, 1998, an agreement entitled "InfoSpace.com, Inc. Nonqualified Stock Option
Agreement," dated November 23, 1998, and a plan entitled "InfoSpace.com, Inc.
Restated 1996 Flexible Stock Incentive Plan" (collectively hereinafter the
option agreements and plans, not including the Performance Option Agreement,
---
will be referred to as the "Option Agreements"); and
WHEREAS, Strom purchased a residence at One Carillon Point, 5505 Lake
Washington Boulevard NE, Unit 3B, Kirkland, Washington 98033 (the "Kirkland
Residence") in connection with her relocation to the Seattle area; and
WHEREAS, the parties intend that Strom shall relinquish her position as
President and Chief Operating Officer of InfoSpace as of January 1, 2000; and
WHEREAS, InfoSpace desires to retain the services of Strom from January 1,
2000 until June 30, 2000 and Strom agrees to provide services from January 1,
2000 until June 30, 2000; and
WHEREAS the parties desire and agree to amend and supersede the November
Employment Agreement in its entirety and enter into the employment relationship
described herein by means of this Agreement;
NOW THEREFORE in consideration of the promises and mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is mutually covenanted and
agreed by and among the parties as follows:
<PAGE>
1. This Agreement Shall Supercede All Prior Employment Agreements. The
--------------------------------------------------------------
parties agree that this Agreement shall supercede the November Employment
Agreement and any other prior employment agreements between InfoSpace and Strom,
including all written and oral agreements, except for the Performance Option
Agreement, the Option Agreements and the InfoSpace Employee Non-disclosure
Agreement, the terms of which are incorporated herein subject to any revisions
or modifications made herein. This Agreement shall not affect the Performance
Option Agreement, the Option Agreements, the InfoSpace Employee Nondisclosure
Agreement and the InfoSpace Employee Handbook Acknowledgment between InfoSpace
and Strom except in the manner and to the extent set forth in this Agreement.
The parties agree that (i) the last sentence of the first paragraph of the
InfoSpace Employee Nondisclosure Agreement (the "NDA Agreement") shall be
revised to state that "business" means "the outsourcing or co-branding of fully
integrated private label solutions (as such solutions exist as of December 31,
1999) to web sites or Internet access devices (defined as "InfoSpace
Competitors") (it being agreed that any question as to whether an entity is an
InfoSpace Competitor within such definition shall be determined by the outside
directors of InfoSpace), (ii) the limitation on activities and investment in the
second sentence of the first paragraph of the NDA Agreement shall be superseded
in its entirety by Section 4 of this Agreement, (iii) the provisions of the
third and fourth paragraphs of the NDA Agreement should be revised to limit the
scope of such paragraphs to matters that relate specifically to the "business"
of InfoSpace as defined above, (iv) the provisions of the eighth, twelfth,
thirteenth and fourteenth paragraphs of the NDA Agreement shall be superseded in
its entirety by this Agreement, and (v) the provisions of the tenth paragraph of
the NDA agreement should be revised to omit the words "indirectly" and
"demonstratively anticipated" and (vi) that the InfoSpace Employee Handbook
Acknowledgment shall not be applicable to Strom after January 1, 2000.
2. Strom's Position At InfoSpace. Strom shall continue in her position as
-----------------------------
President and Chief Operating Officer of InfoSpace through December 31, 1999.
3. Strom's Position At InfoSpace's Venture Capital Division. On January 1,
--------------------------------------------------------
2000, Strom shall assume the position of President of InfoSpace's newly formed
venture capital division (the "Division"). Strom shall remain in the position of
President of the Division until June 30, 2000. Strom shall perform the duties
reasonably necessary to fulfill the responsibilities of such position. All
parties hereto acknowledge and understand that Strom may perform her duties as
President of the Division at a location of her own choice and which may only
require limited attendance at InfoSpace's corporate offices. If, for any reason,
the Division does not exist as of January 1, 2000, then Strom shall assume a
position at InfoSpace to be mutually agreed upon between the parties hereto,
under the same terms and conditions (as set forth herein) that would apply if
she assumed the position of President of the Division. Strom understands that
the Division may be formed as a separate division or a separate entity which may
be a corporation, limited liability corporation or limited partnership. The
Division will be capitalized with at least $15,000,000 and such additional
amount as may be determined by InfoSpace's Board of Directors.
4. Outside Activities. During the time in which Strom will perform the
------------------
duties of President of the Division, Strom may continue to serve as a director
of other entities and may become a director or chairman of the board of
additional entities, perform part-time consulting services for other entities,
serve as part-time employee of other entities (not to exceed 15 hours of part-
time employment per week in the aggregate) and make investments in other
entities, provided
<PAGE>
that all such activities in the aggregate do not result in Strom being unable to
fulfill her responsibilities as defined in Section 3 and are not with InfoSpace
competitors.
5. Salary And Benefits. Strom's salary and benefits will remain the same
-------------------
during the remainder of her tenure as President and Chief Operating Officer of
InfoSpace until December 31, 1999. Strom's salary and benefits as President of
the Division for January 1, 2000 to June 30, 2000 shall be the same as her
salary and benefits as President and Chief Operating Officer of InfoSpace.
6. Membership On InfoSpace's Board Of Directors. Strom will remain a
--------------------------------------------
member of InfoSpace's Board of Directors during the remainder of her tenure as
President and Chief Operating Officer of InfoSpace until December 31, 1999 and
during her employment as President of the Division from January 1, 2000 to June
30, 2000. During this time, Strom may become a member of the Board of Directors
of any other entity, except InfoSpace Competitors. Upon no less than 30 days
notice to InfoSpace, Strom may resign as a director of InfoSpace at any time and
agrees to resign when her employment at InfoSpace terminates.
7. No Termination Except For Good Cause. Strom may not be terminated from
------------------------------------
her position as President and Chief Operating Officer of InfoSpace, or from her
position as President of the Division prior to June 30, 2000, except for "Good
Cause" which is defined specifically the happening of one or more of the
following events: (a) a repeated, willful failure or a repeated refusal to
comply in any material respect with the reasonable written policies, standards
or regulations of the Company as modified to reflect the performance of services
as contemplated by this Agreement; (b) a repeated willful failure or a repeated
refusal in any material respect, faithfully or diligently, to perform her duties
as described in Section 3 (except due to ill health or disability); (c)
unethical or fraudulent conduct or conduct that materially discredits the
Company or is materially detrimental of the reputation, character or standing of
the Company; (d) dishonest conduct or a deliberate attempt to do an injury to
the Company; (e) a willful and material breach of a term (other than Section 3
which is provided for in (b) above) of this Agreement and the agreements
incorporated herein; (f) a criminal act; or (g) death. Notwithstanding the
foregoing, Strom shall not be deemed to have been terminated for "Good Cause"
without (i) at least 30 days notice to Strom setting forth the reasons and
specific facts for InfoSpace's or the Division's intention to terminate for
"Good Cause," and (ii) an opportunity during such 30 day period for Strom,
together with her counsel, if any, to be heard before the Board of Directors of
InfoSpace and/or for Strom to cure such grounds for termination. After June 30,
2000, Strom's employment shall become at will and may be terminated at any time
by Strom or InfoSpace for any reason or no reason.
8. Reimbursement Of Expenses. During the term of Strom's employment as
-------------------------
President and Chief Operating Officer of InfoSpace, and as President of the
Division, InfoSpace will continue to reimburse Strom for all expenses reasonably
incurred in the fulfillment of her duties, including, without limitation, travel
expenses, provided such expenses have been preapproved by either Tammy Halstead,
Ellen Alben or John Cunningham. Strom will submit her actual expenses, on a
monthly basis, to Tammy Halstead, who will make arrangements for reimbursement
of all expenses (within 30 days).
9. Voicemail And E-Mail Continued; Computer. During the term of Strom's
----------------------------------------
employment as President and Chief Operating Officer of InfoSpace, and as
President of the Division,
<PAGE>
InfoSpace will continue to provide Strom with all voice-mail and e-mail services
she currently has. Strom may retain her computer after termination of employment
and agrees to promptly delete all InfoSpace proprietary information therefrom.
10. Officer And Director Indemnification Continued. During the term of
----------------------------------------------
Strom's employment as President and Chief Operating Officer of InfoSpace, and as
President of the Division, InfoSpace will continue to provide Strom with
indemnification and/or insurance, such as Errors and Omissions or Directors and
Officers insurance, in the same manner and to the same extent as is currently in
effect or through purchase of a separate insurance policy.
11. Stock Option Vesting. Throughout the remainder of Strom's tenure as
--------------------
President and Chief Operating Officer of InfoSpace until December 31, 1999, and
during her employment as President of the Division, all stock options to which
Strom is entitled under the Option Agreements shall continue to vest as provided
in those agreements. During that time, all provisions of all the Option
Agreements shall continue in full force and effect including, without
limitation, all provisions relating to the parties rights in the event of a
change of control of InfoSpace.
12. Performance Option Agreement. InfoSpace confirms that Strom has been
----------------------------
vested in options to purchase 125,000 shares under the Performance Option
Agreement for 1999. Strom and InfoSpace agree that the Performance Option
Agreement shall be terminated at the effective date of this Agreement and Strom
shall not be entitled to any further awards of options under such agreement.
13. Term Loan For Stock Option Exercise And Taxes. Commencing as of the
---------------------------------------------
date of this Agreement, InfoSpace will extend a term loan in an amount not to
exceed $10,000,000 to Strom for the purpose of (i) exercising stock options to
which Strom becomes or has become entitled under the Option Agreements; and (ii)
paying the Federal taxes due upon exercise of those stock options (the "Term
Loan"). The Term Loan will be subject to a interest rate equal to the prime rate
as adjusted from time to time, compounded annually. The Term Loan and interest
accrued thereon will be secured by an escrow account, but with full recourse
against Strom. Each time Strom utilizes the Term Loan in order to exercise
options, Strom will place into escrow a sufficient number of shares of InfoSpace
stock (which, for this purpose, shall be valued at the fair market value at the
time of exercise) equal to two times the amount advanced to secure the amount
advanced for the purchase of the shares, in addition to the amount advanced for
payment of taxes incurred as a result of the exercise. For purposes of
calculations under this provisions, Strom shall be deemed to have total tax
liability in the 40% tax bracket. The Term Loan shall remain open for a period
of 2 years from the date of this Agreement, at which time the entire amount of
the Term Loan which remains unpaid, in addition to the interest accrued thereon,
shall become due and payable.
14. Relocation Expenses. From the date of this Agreement to June 30, 2001,
-------------------
Strom may, at her sole discretion, give notice to InfoSpace of her decision to
relocate and to sell the Kirkland Residence. InfoSpace agrees that if during
such period prior to June 30, 2001, Strom intends to enter into an agreement (as
evidenced by a bona fide written offer to purchase) to sell such Kirkland
Residence for a price after deduction of customary closing costs to be paid by
Strom (the "Net Purchase Price") less than $3,600,000 (the price Strom paid for
such residence, not including any improvements by Strom), then InfoSpace will
either, at its option, pay to Strom the difference
<PAGE>
between $3,600,000 and the Net Purchase Price or purchase the Kirkland Residence
from Strom at the Net Purchase Price. The provisions of Section 14 shall not be
applicable if Strom is terminated for "Good Cause."
15. Severance Package. The day following Strom's last day of employment as
-----------------
President of the Division unless such employment is earlier terminated for "Good
Cause", InfoSpace shall pay Strom a severance amount equal to $250,000 and
InfoSpace shall maintain Strom's life insurance, health insurance and dental
insurance, at the present rate until the earlier of one year from her last day
of employment, or the date Strom accepts employment with another entity
providing such benefits. The benefits in this Section 15 shall be payable to
Strom if she is terminated voluntarily or without "Good Cause." It shall be a
condition of the receipt of such amounts in this Section 15 and the amount
provided in Section 14 that Strom enter into a mutual release as of the date of
the payment of such $250,000 in the form of Section 20.
16. Public Announcement And Non-Disparagement. After execution of this
-----------------------------------------
Agreement, the parties hereto will agree on the wording of a public
announcement, an internal announcement and a response to any request for
references describing the relationship between Strom, InfoSpace and the
Division. The parties agree that neither InfoSpace, the Division nor Strom, nor
any member of the Board of Directors, officer, employee or agent of InfoSpace or
the Division, shall make any statement to the press or any individual or entity
that relates to InfoSpace's business or related activities or the relationship
between the parties that in anyway disparages the other party or InfoSpace's
officers or directors. This Agreement regarding non-disparagement shall be
personally binding upon all members of the Board of Directors of InfoSpace and
all officers of InfoSpace. Neither party will disclose the terms of this
Agreement, unless and until this Agreement is filed as required as an exhibit to
InfoSpace's Form 10-K or other SEC filing.
17. Arbitration.
-----------
(a) Agreement. In consideration of this Agreement, InfoSpace and Strom
agree that any dispute and/or claim between InfoSpace and Strom that (i)
underlies, (ii) relates to, (iii) and/or is asserted following the termination
of, her employment relationship with InfoSpace and that cannot be otherwise
resolved will be submitted to final, binding arbitration in accordance with the
National Rules for the Resolution of Employment Disputes of the American
Arbitration Association that are then in effect. (Copies of the current rules
are available from InfoSpace's human resources department.) This Agreement also
governs any claims that Strom may have against InfoSpace's officers, directors,
employees, agents and shareholders. Strom and InfoSpace understand that,
pursuant to this Agreement, each foregoes and waives the right to take any
covered dispute or claim to civil litigation in court. Strom and InfoSpace
understand that this Agreement governs any claim each may have that underlies,
relates to and/or is asserted following the termination of her employment
relationship with InfoSpace, including, but not limited to, claims of wrongful
discharge, infliction of emotional distress, breach of contract, breach of any
covenant of good faith and fair dealing, and claims of retaliation and/or
discrimination in violation of any local, state or federal law. Examples of such
laws include Title VII of the Civil Rights Act of 1964, as amended; the Age
Discrimination in Employment Act; the Americans with Disabilities Act; the
Family and Medical Leave Act, and state and local laws applicable to her
employment. This Agreement does not affect Strom's right to pursue worker's
compensation or unemployment compensation benefits for which
<PAGE>
she may be eligible in accordance with state law, nor does it affect her right
to file and/or to cooperate in the investigation of an administrative charge of
discrimination.
Strom and InfoSpace understand that each may seek in arbitration any remedy
or award that would be available to each through civil litigation and the
arbitrator has authority to grant any such remedy or award. Strom and InfoSpace
agree that such remedies include monetary damages but do not include
reinstatement unless authorized by statute.
In any matter that is presented to an arbitrator under this Agreement,
Strom and InfoSpace agree that the location of the arbitration hearing(s) will
be in Redmond, Washington, unless another location is mutually agreed upon.
Strom and InfoSpace enter into this Agreement freely and voluntarily in
consideration for her employment with InfoSpace, the compensation and benefits
she receives based on that employment and InfoSpace's mutual agreement for
arbitration.
(b) Governing Law. The arbitrator shall apply the law of the State of
-------------
Washington to the merits of any dispute or claim, without reference to rules of
conflict of law. Each party hereby expressly consents to the personal
jurisdiction of the state and federal courts located in the State of Washington
for any action or proceeding arising from or relating to this Agreement or
relating to any arbitration in which the parties are participants.
(c) Costs and Fees of Arbitration. The prevailing party in any
-----------------------------
arbitration or legal proceeding hereunder shall be entitled to recover her or
its attorneys' fees and expenses from the losing party.
(d) Equitable Relief. The parties may apply to any court of competent
----------------
jurisdiction for a temporary restraining order, preliminary injunction, or other
interim or conservatory relief, as necessary, without breach of this arbitration
agreement and without abridgment of the powers of the arbitrator.
18. Successors.
-----------
(a) InfoSpace's Successors. Any successor to InfoSpace (whether direct
----------------------
or indirect and whether by purchase, lease, merger, consolidation, or otherwise)
to all or substantially all of InfoSpace's business and/or assets shall assume
the obligations under this Agreement and agree expressly to perform the
obligations under this Agreement in the same manner and to the same extent as
InfoSpace would be required to perform such obligations in the absence of a
succession. For all purposes under this Agreement, the term "InfoSpace" shall
include any successor to InfoSpace's business and/or assets which executes and
delivers the assumption agreement described in this subsection (a) or which
becomes bound by the terms of this Agreement by operation of law.
(b) Strom's Successors. Without the written consent of InfoSpace,
------------------
Strom shall not assign or transfer this Agreement or any right or obligation
under this Agreement to any other person or entity. Notwithstanding the
foregoing, the terms of this Agreement and all rights of Strom
<PAGE>
hereunder shall inure to the benefit of, and be enforceable by, Strom's personal
or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
19. Notice Clause.
-------------
(a) Manner. Any notice hereby required or permitted to be given shall
------
be sufficiently given if in writing and upon mailing by registered or certified
mail, postage prepaid, to either party at the address of such party or such
other address as shall have been designated by written notice by such party to
the other party.
(b) Effectiveness. Any notice or other communication required or
-------------
permitted to be given under this Agreement will be deemed given on the day when
delivered in person, or the third business day after the day on which such
notice was mailed in accordance with Section 18(a).
20. Mutual Release of Claims.
------------------------
(a) General Release. Strom expressly waives any claims against
---------------
InfoSpace and releases InfoSpace (including its owners, officers, directors,
stockholders, managers, agents, employees and representatives) (collectively
"InfoSpace") from any and all actual or potential actions, claims or causes of
action and damages known or unknown from any and all actual or potential
actions, claims, causes of action, and damages, known or unknown and InfoSpace
expressly waives any claims against Strom and releases Strom from any and all
actual or potential actions, claims or causes of action and damages known or
unknown from any and all actual or potential actions, claims, causes of action,
and damages, known or unknown, in all cases on account of or arising out of
Strom's employment relationship with InfoSpace or the change in or the
termination thereof in accordance with this Agreement. It is understood that
other than as provided pursuant to this Agreement, this release includes, but is
not limited to, any claims for wages, bonuses, or other compensation, including
but not limited to stock or stock options, employment benefits, or damages of
any kind whatsoever, arising out of any common law torts, arising out of any
contracts, express or implied, any covenant of good faith and fair dealing,
express or implied, any theory of wrongful discharge, any theory of negligence,
any theory of retaliation, any theory of discrimination or harassment in any
form, any legal restriction on InfoSpace's right to terminate employees, or any
federal, state, or other governmental statute or ordinance, including, without
limitation, Title VII of the Civil Rights Act of 1964 as amended, the Americans
with Disabilities Act, the Age Discrimination in Employment Act, the Older
Workers Benefit Protection Act, the Washington Law Against Discrimination, or
any other legal limitation on or regulation of the employment relationship.
Strom agrees to indemnify and hold InfoSpace harmless from and against any and
all loss, costs, damages, or expenses, including, without limitation, reasonable
attorneys' fees incurred by InfoSpace or arising out of any breach of this
Agreement by Strom or resulting from any representation made herein by Strom
that was false when made. InfoSpace agrees to indemnify and hold Strom harmless
from and against any and all loss, costs, damages, or expenses, including,
without limitation, reasonable attorneys' fees incurred by Strom or arising out
of any breach of this Agreement by InfoSpace or resulting from any
representation made herein by InfoSpace that was false when made. This waiver
and release shall not preclude either party from proceeding with arbitration as
provided herein for the exclusive purpose of enforcing its rights under this
Agreement.
<PAGE>
(b) No Admission of Wrongdoing. This Agreement shall not be construed
--------------------------
as an admission by InfoSpace and Strom of any wrongful act, unlawful
discrimination, or breach of contract, and InfoSpace and Strom specifically
disclaim any liability to or discrimination against Strom or any other person.
(c) Other Charges or Complaints. Strom and InfoSpace represent that
---------------------------
each has not filed any complaints, charges or lawsuits against InfoSpace or
Strom with any governmental agency or any court, and agrees that each will not
initiate, assist, participate in, or encourage in any such actions, except as
required by subpoena or court order. Strom and InfoSpace agree that if any
agency or court assumes jurisdiction of any complaint or charge against
InfoSpace on behalf of Strom or against Strom on behalf of InfoSpace that the
other party will request the agency or court to withdraw from the matter and
dismiss it with prejudice.
21. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the internal substantive laws, but not the choice of law
rules, of the State of Washington.
22. Severability. The invalidity or unenforceability of any provision
------------
of this Agreement, or any terms hereof, shall not affect the validity or
enforceability of any other provision or term of this Agreement.
23. Integration. This Agreement represents the entire agreement and
-----------
understanding between the parties as to the subject matter herein and supersedes
all prior or contemporaneous agreements whether written or oral. No waiver,
alteration, or modification of any of the provisions of this Agreement shall be
binding unless in writing and signed by duly authorized representatives of the
parties hereto.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the day and year first above written.
/s/ Bernee D. L. Strom
----------------------------
BERNEE D. L. STROM
InfoSpace.com, Inc.
----------------------------
INFOSPACE.COM, INC.
By: Ellen B. Alben
-----------------------------
Its: Senior Vice President,
----------------------------
Legal and Business Affairs
----------------------------
and Secretary
----------------------------
<PAGE>
EXHIBIT 10.19
AGREEMENT
This Agreement is entered into as of February 10, 2000 by and between
InfoSpace.com, Inc., a Delaware corporation, Naveen Jain, and each of the
undersigned individuals.
WHEREAS, at the time of the Company's initial public offering in December
1998, the parties to this Agreement entered into a Indemnification Agreement
dated as of December 11, 1998, whereby Mr. Jain, as the Company's majority
stockholder, agreed to provide 1,000,000 shares (before adjustment for stock
splits after such date) of his Common Stock into an escrow fund to provide
indemnification to the Company and the Company's directors in connection with
certain potential claims against the Company arising from activities of the
Company prior to the initial public offering, and
WHEREAS, the purpose of that Agreement was to enable the Company to
complete its initial public offering and assure that, should any of such claims
related to the Company's business prior to the public offering arise, the
Company would have an escrow fund available which would provide further
assurances to the underwriters and the public investors in connection with the
Company's initial public offering, and
WHEREAS, the Company completed its initial public offering and, under the
leadership of Mr. Jain, has substantially increased its business and its market
capitalization, and
WHEREAS, the Company, Mr. Jain and the undersigned individuals wish to
enter into this Agreement terminating the Indemnification Agreement and
providing that Mr. Jain will enter into a two (2) year non-competition agreement
with the Company.
NOW THEREFORE, in consideration of the mutual agreements and covenants
herein contained, it is agreed as follows:
1. Effective as of the date of this Agreement, the Indemnification
Agreement shall be, and is, terminated and of no further force and
effect.
2. Mr. Jain, in consideration of the termination of the Indemnification
Agreement and for other good and valuable consideration, hereby
concurrently with this Agreement and as a condition thereto enters into
the attached InfoSpace.com, Inc. Employee-Non-Disclosure and Invention
Release and Non-Competition Agreement which shall provide for a non-
competition term of the duration of Mr. Jain's employment with the
Company and for a period of two (2) years thereafter.
<PAGE>
IN WITNESS WHEREOF, the undersigned have entered into this Agreement as of
the date above written.
INFOSPACE.COM, INC.
By: /s/ Ellen B. Alben
---------------------------
/s/ Naveen Jain
---------------------------
Naveen Jain
/s/ John E. Cunningham IV
---------------------------
John E. Cunningham IV
/s/ Peter L.S. Currie
---------------------------
Peter L.S. Currie
/s/ David C. House
---------------------------
David C. House
/s/ Gary List
----------------------------
Gary List
/s/ Rufus W. Lumry III
---------------------------
Rufus W. Lumry III
/s/ Carl Stork
----------------------------
Carl Stork
/s/ Bernee D. L. Strom
----------------------------
Bernee D. L. Strom
-2-
<PAGE>
InfoSpace.com Employee Non-Disclosure, Invention Release and Non-competition
Agreement
1. As an employee of InfoSpace.com, a Delaware Corporation (InfoSpace.com),
and in consideration of the compensation now and hereafter paid to me and the
-------
termination of my Indemnification with InfoSpace.com dated December 11, 1998, I
- -------------------------------------------------------------------------------
hereby agree to the provisions in this Agreement, and I will devote my best
- -----------------------------------------------------
efforts to furthering the best interest of InfoSpace.com. During my employment
by InfoSpace.com, I will not engage in any business activities or ventures
outside of the business activities of InfoSpace.com without the express prior
written consent of InfoSpace.com. Also, during my employment, I will not engage
in any activity or investment (other than an investment of less than .01% of the
shares of a company traded on registered stock exchange), that (a) conflicts
with InfoSpace.com's business interest, including without limitation, any
business activity not contemplated by this agreement, (b) occupies my attention
so as to interfere with the proper and efficient performance of my duties at
InfoSpace.com, or (c) interferes with the independent exercise of my judgment in
InfoSpace.com's best interest, except for investments that are approved by
-------------------------------------------
InfoSpace.com's Special Projects Committee. As used herein, InfoSpace.com's
- ------------------------------------------
"business" means the development, marketing and support of software for
Internet.
2. At all times during my employment and thereafter I will not disclose to
anyone outside InfoSpace.com nor use for any purpose other than my work for
InfoSpace.com (a) any confidential or proprietary technical, financial,
marketing or distribution of other technical or business information or trade
secrets of InfoSpace.com, including without limitation, concepts, techniques,
processes, methods, systems, designs, cost data, computer programs, formulas,
development or experimental work, work in progress, customer and suppliers, (b)
any information InfoSpace.com has received from others which InfoSpace.com is
obligated to treat as confidential or proprietary or (c) any confidential or
proprietary information which is circulated within InfoSpace.com via its
internal email system or otherwise. I will also not disclose any confidential
information inside InfoSpace.com except on "need to know" basis. If I have any
questions as to what comprises such confidential proprietary information or
trade secrets, or to whom, if anyone, inside InfoSpace.com, it may be disclosed,
I will consult my manager at InfoSpace.com
3. I will make prompt and full disclosure to InfoSpace.com, will hold in trust
for the sole benefit of InfoSpace.com, and will assign exclusively to
InfoSpace.com all my rights, title and interest in and to any and all
inventions, discoveries, designs, developments, improvements, copyrightable
material, and trade secrets (collectively herein "inventions") that I, solely or
jointly, may conceive, develop, or reduce to practice during the period of time
I am in the employ of InfoSpace.com. I hereby waive and quitclaim to
InfoSpace.com any and all claims of any nature whatsoever that I now or
hereafter may have for infringement of any patent resulting from any patent
applications for any inventions so assigned to InfoSpace.com.
My obligation to assign shall not apply to any Invention about which I can prove
that:
(a) It was developed entirely on my own time; and
(b) No equipment, supplies, facility, or trade secret information of
InfoSpace.com was used in it development; and
(c) It does not relate 1) directly to the business of InfoSpace.com or 2)
to the actual or demonstrably anticipated research or development of
InfoSpace.com; and
(d) It does not result from any work performed by me for InfoSpace.com
I will assign to InfoSpace.com or its designee all my rights, title and interest
in and to any and all inventions full title to which may be required to be in
the United States by any contract between InfoSpace.com and the United States or
any of its agencies.
<PAGE>
4. I have attached hereto a list describing all inventions belonging to me and
made by me prior to my employment at InfoSpace.com that I wish to have excluded
from this agreement. If no such list is attached, I represent that there are no
such inventions. If in the course of my employment at InfoSpace.com, I use in
or incorporate into an InfoSpace.com product, process, or machine, an invention
owned by me or in which I have an interest. InfoSpace.com is hereby granted and
shall have an exclusive royalty-free, irrevocable, worldwide license to make,
have made, use and sell that invention without restriction as to the extent of
my ownership or interest.
5. I will execute any proper oath or verify and proper document in connection
with carrying out the terms of this agreement. If, because of my mental or
physical incapacity or for any other reason whatsoever, InfoSpace.com is unable
to secure my signature to apply for or to pursue any application for any United
States or foreign patent or copyright covering Inventions assigned to
InfoSpace.com as stated above, I hereby irrevocably designate and appoint
InfoSpace.com and its duly authorized officers and agents as my agent and
attorney in fact, to act for me and in my behalf and stead to execute and file
any such applications and to all other lawfully permitted acts to further the
prosecution and issuance of U.S. and foreign patents and copyrights thereon with
the same legal force and effect as if executed by me. I will testify at
InfoSpace.com's request and expense in any interference, litigation, or other
legal proceeding that may arise during or after my employment.
6. I recognize that InfoSpace.com has received and will receive confidential and
proprietary information from third parties subject to a duty on InfoSpace.com's
part to maintain the confidentiality of such information and to use it only for
certain limited purposes. During the term of my employment and thereafter I owe
InfoSpace.com and such third parties a duty not to disclose such confidential or
proprietary information to anyone except as necessary in carrying out my work
for InfoSpace.com and consistent with InfoSpace.com's agreement with such third
party. I will not use such information for the benefit of anyone other than
InfoSpace.com or such third party, or in any manner inconsistent with any
agreement between InfoSpace.com and such third party of which I am made aware.
7. During my employment at InfoSpace.com I will not improperly or disclose any
confidential or proprietary information or trade secrets of my former or current
employers, principals, partners, co-ventures, clients customers or suppliers or
the vendors or customers of such persons or entities or their vendors or
customers unless such persons or entities have given verbal consent. I will not
violate any non-disclosure or proprietary rights agreement I might have signed
in connection with any such person or entity.
8. I acknowledge that my employment will be of indefinite duration and that
either InfoSpace.com or I will be free to terminate this employment relationship
at will at any time with or without cause. I also acknowledge that any
representation to the contrary are unauthorized and void, unless contained in a
formal written employment contract signed by an officer of InfoSpace.com. I
further acknowledge that the terms and conditions of this agreement shall
survive termination of my employment.
9. At the time I leave the employ of InfoSpace.com, I will return to
InfoSpace.com all papers, drawings, notes, memoranda, manuals, specifications,
designs, devices, documents, diskettes and tapes, and any other material on any
media containing or disclosing any confidential or proprietary technical or
business information. I will also return any keys, pass cards, identification
cards or any other property belonging to InfoSpace.com.
10. For a period of two years after termination of my employment for any reason,
--- --------------
I will not accept employment or engage in any activities directly or indirectly
competitive with the business (as defined in the first paragraph) or with the
actual or demonstrably anticipated research or development of InfoSpace.com as
of my termination date.
11. While employed at InfoSpace.com and for a period of two years from the
---
termination of my employment for any reason I will not induce or attempt to
--------------
influence directly or indirectly any employee of InfoSpace.com to terminate
his/her employment with InfoSpace.com or to work for me or any other person or
entity.
12. I acknowledge that any violation of this agreement by me will cause
irreparable injury to InfoSpace.com, and InfoSpace.com shall be entitled to
extraordinary relief in court, including, but not
<PAGE>
limited to, temporary restraining orders, preliminary injunctions, and permanent
injunctions, without the necessity of posting bond or security.
13. If court proceedings are required to enforce any provision or to remedy any
breach of this Agreement, the prevailing party shall be entitled to an award of
reasonable and necessary expenses of litigation, including reasonable attorney
fees.
14. I agree that this agreement shall be governed for all purposes by the laws
of the state of Washington as such laws applies to contracts to be performed
within Washington by residents of Washington and that venue for any action
arising out of this Agreement shall be property laid in King County, Washington
or in the Federal District Court of the Western District of Washington. If any
provision of this Agreement shall be declared excessively broad, it shall be
construed so as to afford InfoSpace.com the maximum protection permissible by
law. If any provision of this Agreement is void or so declared, such provision
shall be severed from this Agreement, which shall otherwise remain in full force
and effect. This Agreement sets forth the entire Agreement of the parties as to
employment at InfoSpace.com and any representations promises, or conditions in
connection therewith not in writing and signed by both parties shall not be
binding upon either party.
HAVING READ AND FULLY UNDERSTOOD THIS AGREEMENT, I have signed my name this
date.
/s/ Naveen Jain February 10, 2000
- ---------------------------- -----------------
Naveen Jain Date
Inventions listed on attached: Yes No
--- ---
Ellen B. Alben
- ----------------------------
InfoSpace.com Witness
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<PAGE>
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<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
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<SECURITIES> 124,720,142 72,159,522
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<OTHER-EXPENSES> 64,404,394 20,115,872
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<INCOME-PRETAX> (21,693,775) (11,818,703)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (21,693,775) (11,818,703)
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