U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
2THEMART.COM, INC.
(Exact Name of Registrant as Specified in Its Charter)
OKLAHOMA 33-0544320
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
18301 VON KARMAN AVENUE
7TH FLOOR
IRVINE, CALIFORNIA 92612
(Address of Principal Executive Offices) (Zip Code)
(949) 477-1200
(Registrant's Telephone Number, Including Area Code)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
(N/A) (N/A)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, par value $0.0001
(Title of Class)
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TABLE OF CONTENTS
Page
Item 1 Business . . . . . . . . . . . . . . . . . 1
Item 2 Financial Information . . . . . . . . . . . . . . . 6
Item 3 Properties . . . . . . . . . . . . . . . 8
Item 4 Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . 9
Item 5 Directors and Executive Officers . . . . . . . . . . . 10
Item 6 Executive Compensation . . . . . . . . . . . . . . . 12
Item 7 Certain Relationships and Related Transactions . . . . 15
Item 8 Legal Proceedings . . . . . . . . . . . . . . . 15
Item 9 Market Price of and Dividends on the
Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . 15
Item 10 Recent Sales of Unregistered Securities . . . . . . . 16
Item 11 Description of Registrant's
Securities to be Registered . . . . . . . . . . . . . 17
Item 12 Indemnification of Directors and Officers . . . . . . 18
Item 13 Financial Statements and Supplementary Data . . . . . 18
Item 14 Changes in and Disagreements With
Accountants on Accounting
and Financial Disclosure . . . . . . . . . . . . . . 18
Item 15 Financial Statements and Exhibits . . . . . . . . . . 19
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ITEM 1 - BUSINESS
This Registration Statement on Form 10 includes forward-looking statements
within the meaning of the Securities Exchange Act of 1934 (the "Exchange
Act"). These statements are based on management's current beliefs and
assumptions about the Registrant and the industry in which the Registrant
competes in, and on information currently available to management.
Forward-looking statements include, but are not limited to, the information
concerning possible or assumed future results of operations of the
Registrant set forth under the headings "Financial Information-Management's
Discussion,""Plan of Operations," and "Business." Forward-looking
statements also include statements in which words such as "expect,"
"anticipate," "intend," "plan," "believe," "estimate," "consider" or similar
expressions are used.
Forward-looking statements are not guarantees of future performance. They
involve risks, uncertainties and assumptions. The Registrant's future
results and shareholder values may differ materially from those expressed or
implied in these forward-looking statements. Readers are cautioned not to
put undue reliance on any forward-looking statements. In addition, the
Registrant does not undertake to update forward-looking statements after the
effectiveness of this Registration Statement, even if new information,
future events or other circumstances have made them incorrect or misleading.
GENERAL DEVELOPMENT OF BUSINESS
History of the Company
2TheMart.com, Inc. ("2TheMart" or the "Company") is a development stage
Internet based electronic commerce ("e-commerce") company. The Company has
contracted with International Business Machines, Inc. ("IBM") to develop and
launch a business-to-consumer and person-to-person trading community on the
Internet. The Company has completed the design phase of its Web site, and
in conjunction with IBM, is currently coding and developing the site. The
Company hopes to develop an e-commerce site in which buyers and sellers will
be brought together to buy and sell a variety of goods such as antiques,
coins, collectibles, computers, memorabilia, stamps, toys and more in an
auction format. Once fully functional, the 2TheMart service will enable
sellers to list items for sale, buyers to bid on those items and allow
2TheMart users to browse through all items in a fully automated, topically
arranged online service that is expected to be available 24 hours a day,
seven days a week. This site is currently scheduled to be available for use
on the Internet during the fourth quarter of 1999.
There can be no assurances that the Company's intended Web site will
operate on a continual 24 hour/7 day basis. The Company's computer
systems and operations are vulnerable to, among other things, damage or
interruption from earthquakes, floods, fires, power loss, telecommunication
failures and similar events. These systems are also potentially subject to
break-ins, sabotage, intentional acts of vandalism and similar misconduct.
Any damage to, or failure of the Company's systems could result in
interruptions in the Company's service. In addition, if the Company
experiences demand for its services beyond the capacity of its systems, the
Company's Web site may become unstable and may cease to operate for periods
of time. Many of the Company's competitors have experienced periodic
unscheduled downtime. Continued unscheduled downtime could harm the
Company's business and also could discourage users of the Company's Web site
and reduce future revenues, if any.
The Company was originally incorporated under the laws of the State of
Oklahoma on December 2, 1992 as S.K.B. Design, Inc. Between 1992 to 1996,
the Company was inactive. On October 1, 1996, the Company acquired certain
technology and assets with the intention of developing a cd-rom based
multimedia yearbook product. On December 22, 1997, the Company changed its
name from S.K.B Design, Inc. to CD-Rom Yearbook Company, Inc. ("CD-Rom") to
reflect its new business plan. Due to certain technical and market
difficulties, the business of CD-Rom did not develop as expected. As a
result, CD-Rom ceased its operations in the fall of 1998 and began a search
for new business opportunities. Effective January 8, 1999, CD-Rom acquired
all of the outstanding common stock of 2TheMart.com, Inc., a Nevada
corporation ("2TheMart-Nevada"), in a business transaction described as a
"reverse merger." For accounting purposes, the acquisition has been
treated as the acquisition of CD-Rom by 2TheMart-Nevada. Immediately prior
to the acquisition, CD-Rom had 2,291,850 shares of common stock
outstanding. As part of the reorganization and stock purchase agreement,
CD-Rom issued an additional 17,800,000 shares of the Common Stock of CD-Rom
to the shareholders of 2TheMart-Nevada in exchange for 17,800,000 shares of
the Common Stock of 2TheMart-Nevada. In addition, options to purchase 2.5
million shares of the Company's Common Stock at an exercise price of $3.00
were issued to the previously controlling shareholder of CD-Rom and 1.2 million
of the previously issued CD-Rom shares were placed in escrow to be distributed
to the 2TheMart-Nevada shareholders upon the occurrence of certain events.
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Simultaneously with the merger, CD-Rom changed its name to "2TheMart.com,
Inc.," an Oklahoma corporation, and adopted the business plan of
2TheMart-Nevada. All officers and directors of CD-Rom resigned their
positions, and the management of 2TheMart-Nevada was appointed as new
management to the Company. The Company's common stock currently trades on
the NASD OTC Bulletin Board under the symbol "TMRT."
Plan of Operations for the Twelve Months Ending June 30, 2000.
The Company's business plan for the period January 8, 1999 (inception) to
December 31, 1999 and the six months ended June 30, 2000, is to
complete the development and launch of its e-commerce auction Web
site. The Company has completed the design phase of its Web site,
and in conjunction with IBM, is currently coding and implementing
the site. This site is currently scheduled to be
available for use on the Internet during the fourth quarter of 1999 and is
designed to facilitate transactions between businesses and consumers and
between consumers and consumers. The Company will charge a fee to its users
for posting items on the site and a commission-based fee upon the sale of
items on the site.
In building the Company's Web site, the Company has contracted with several
third-parties to furnish supporting equipment and services. The Company has
contracted with IBM for the building of its Web application in an amount of
approximately $2.4 million, of which approximately $464,000 has been paid as
of June 30, 1999. The Company has also contracted with IBM for the
acquisition of its Web site related and corporate related computer equipment
and software in an amount of approximately $7.9 million, $2.0 million of
which has been paid as of June 30, 1999. On April 29, 1999 the Company entered
into an agreement with Exodus Communications, Inc. ("Exodus") to secure space
for the housing of its main Web site server operations. Pursuant to its
agreement with Exodus, the Company will be required to pay Exodus a minimum
monthly fee of approximately $78,000, increasing depending on Internet
bandwidth usage, once the Company has installed its computer hardware at
Exodus's Sterling, Virginia data center. The Exodus agreement is
cancellable during the first 30 days after the installation or upon 90 days
notice thereafter. The Company also anticipates that
it will incur additional expenses of approximately $250,000 in improving its
Irvine, California headquarters and the completion of its back-up data
center to be located at its Irvine headquarters.
On June 16, 1999, the Company entered into an agreement with USWeb/CKS to
develop and implement the marketing programs and strategies of the Company's
Web site. Pursuant to this agreement, the Company is obligated to pay
$86,000 per month to USWeb/CKS.
On June 24, 1999, the Company entered into an agreement with The Summit
Group to integrate the Company's accounting and billing software
with the Company's Web site. The implementation is expected to cost the
Company approximately $400,000.
On July 16, 1999, the Company entered into an agreement with Lawson
Associates, Inc., dba Lawson Software for the use of its
accounting and billing software. Under the agreement with Lawson,
the Company has made a payment to Lawson in the amount of approximately
$127,000 and has the option of either paying a one time flat fee to Lawson
on March 10, 2000 in the amount of $573,070 or a fee based on a percentage of
the Company 's revenue. The Lawson agreement is cancellable upon 90 days
written notice.
The Company does not currently generate any revenue from its operations and
does not expect to report any revenue from operations at least until the
launch of its web site. Additionally, after the launch of the Company's Web
site, there can be no assurance that the Company will generate positive cash
flow and there can be no assurances as to the level of revenues, if any, the
Company may actually achieve from its Web operations.
As the Company approaches the commencement of its Web operations, the
Company anticipates that its personnel requirements (which is currently
heavily supplemented with outside consultants) will increase substantially
from its current level of 24 people. The Company expects to increase its
full-time staffing to approximately 75 to 100 people by December 31, 1999.
The Company anticipates that this increased staffing will be used for
customer support, administration, accounting, marketing, and technology. It
is also anticipated that this increased staffing will substantially increase
corporate expenditures from their current levels.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company only operates in one industry segment and has received no
operating revenues to date.
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NARRATIVE DESCRIPTION OF BUSINESS
Business Summary
2TheMart is a development stage enterprise currently in the process of
developing an e-commerce Internet Web site to facilitate person-to-person
and business-to-person trading via an auction format. The Company has
completed the design phase of its Web Site, and in conjunction with IBM, is
currently coding and implementing the site. As of June 30, 1999, the
Company has expended approximately $464,000 and expects to expend
approximately an additional $1.9 million to complete its Web site
application. The Company also anticipates spending approximately $7.9
million, of which $2.0 million has been paid, for related hardware and
associated software, a portion of which is expected to be financed with
equipment financing. Once operational, the 2TheMart service will enable
sellers to list items for sale, buyers to bid on those items of interest and
allow 2TheMart users to browse through all available products and utilize
the site as an online service that is expected to be available 24 hours a
day, seven days a week.
E-Commerce
The Internet provides the opportunity for merchants to expand their current
market place to a global market place without the capital requirements
typically required in expanding a "brick and mortar" business. The Internet
also offers the opportunity for even the smallest vendor (i.e., an
individual with a single product) to create a market for the sale of his or
her product well beyond the traditional geographical limits of a traditional
storefront. An Internet-based auction style e-commerce site can facilitate
buyers and sellers in completing a commerce transaction. Through such a
site, buyers can access a significantly broader selection of goods to
purchase and sellers have the opportunity to sell their goods efficiently to
a broader base of buyers. As a result, a significant market opportunity
exists for an Internet-based e-commerce auction type site.
Once the Company's site is fully functional, any visitor to the 2TheMart
site will be able to browse among its items for sale, many of which are
unique or otherwise hard to find, organized across numerous product
categories, facilitating easy navigation and searching. Browsers and buyers
can also search auction listings on a variety of means such as by category,
keyword, seller name, recently-commenced auctions or auctions about to end.
Upon registering as a 2TheMart user, a seller will be able to immediately
list an item for sale, identify a minimum price for opening bids and specify
how long the auction will last. Sellers will pay a nominal placement fee for
an item based on the seller's minimum price for the item (preliminary
estimates of the minimum price for the placement fee is expected to
range from $0.25 to $2.00 per item). Sellers will be able to highlight
their auctions through a variety of premium services to be made
available to them. At the end of the auction period, if a bid
exceeds the seller's minimum price, 2TheMart will
automatically notify the buyer and seller via email and then the buyer and
seller consummate the transaction independently of 2TheMart. At the time of
notification of a successful auction, 2TheMart will charge the seller a
success fee that is expected to range from 1.25% to 5%, based on the closing
price of the item. Buyers are not charged for making bids or purchases
through 2TheMart. At no point during the process does 2TheMart take
possession of either the item being sold or the buyer's payment for the
item; instead, 2TheMart will only act as the facilitator of the transaction.
Following completion of a transaction, each user will be able to rate his
or her experience with the seller through the use of "User Ratings."
2TheMart's objective is to be an online facilitator of transactions in the
business-to-consumer and person-to-person marketplace. Key elements of the
Company's strategy after the launch of its site include: (i) developing the
2TheMart community and the 2TheMart brand to attract members to the 2TheMart
community; (ii) developing 2TheMart's site by expanding product categories,
promoting new product categories and expanding internationally; (iii)
enhancing 2TheMart's site features and functionality through the
introduction of new features for both sellers and buyers, new auction
formats and category-specific content; and (iv) introducing pre- and
post-transaction services, such as shipping and third-party escrow services.
Systems
2TheMart will utilize internally developed systems for its service and
transaction processing, including billing and collections processing.
2TheMart must continually enhance and improve these systems in order to
accommodate the anticipated level of use of 2TheMart's proposed Web site.
Furthermore, in the future, 2TheMart may add additional features and
functionality to its services that could result in the need to develop or
license additional technologies. However, there can be no assurances that
the Company will be able to develop or license such additional technologies.
Governmental Regulation
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2TheMart is not currently subject to direct federal, state or local
regulation, and laws or regulations applicable to access to or commerce on
the Internet, other than regulations applicable to businesses generally.
International Operations
A component of 2TheMart's strategy is to expand internationally. In
preparation for future expansion into the international market, 2TheMart has
reserved 1,000 square feet of space at Exodus' London facility. This space
has been reserved at no cost and the Company is only obligated to pay Exodus
a fee once the Company has installed its computer servers to the Internet.
In the future, should the Company expand internationally, such expansion
will require management attention and resources. In addition, if the
Company does expand internationally the Company will not have had any
experience in localizing its service to conform to local cultures, standards
and policies. The Company may also have to compete with local companies who
understand the local market better than it does. The Company may not be
successful in expanding into international markets or in generating revenues
from foreign operations. The Company may also be subject to risks of doing
business internationally, including the following:
- regulatory requirements that may limit or prevent the offering of the
Company's services in local jurisdictions;
- legal uncertainty regarding liability for the listings of the
Company's users, including less Internet friendly basic law and
unique local laws;
- government-imposed limitations on the public's access to the
Internet;
- difficulties in staffing and managing foreign operations;
- cultural nonacceptance of online auctions;
- political instability;
- potentially adverse tax consequences; and
- administrative burdens in collecting local taxes, including value-added
taxes.
Transaction Services
In order to offer a complete experience to buyers and sellers, 2TheMart
intends to offer a variety of pre- and post-transaction services to enhance
the user experience. 2TheMart intends to introduce pre-transaction services,
such as services to facilitate scanning and uploading of photographs of
listed items, and post-transaction services, such as third-party escrow
services and arrangements with shippers to help sellers ship their products
more easily. 2TheMart may pursue strategic relationships with third parties
to provide many of these transaction related services. 2TheMart will also
provide tools to enable buyers and sellers to monitor their auctions; for a
buyer to be notified if they are outbid; and for future buyers to be
notified when a product they were searching for becomes available at
2TheMart.
User Rating
Every registered 2TheMart user will be issued a User Rating based upon that
user's prior transactions completed on the site. This information will be
recorded in a ratings profile that is expected to include a rating for the
person and comments from other 2TheMart users who have interacted with that
person over the past seven days, the past month, the past six months and
beyond. The Company is designing its Web site so that 2TheMart users will
be able to review a person's ratings profile to check on the person's
reputation within the 2TheMart community before deciding to bid on an item
listed by that person or determining how to complete the payment for and
delivery of the item. 2TheMart believes its User Ratings will be extremely
useful in overcoming initial user hesitancy when trading over the Web as it
is expected to reduce the anonymity and uncertainty of dealing with an
unknown trading partner. In addition, by focusing on the business to
consumer market space, 2TheMart believes that it will minimize the
possibility of a fraudulent transaction occurring between a buyer and seller
as many sellers on 2TheMart are expected to be established companies.
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What Can Be Purchased or Sold on 2TheMart
2TheMart will organize the products on its site under category headings to
reflect the major types of items to be listed. The major product categories
are expected to be organized under the following headings:
Antiques Electronics & Cameras
Apparel & Sportsware Furniture
Automotive Health & Fitness
Movies & Music Jewelry
Music Food & Beverages
Coins and Stamps Sporting Goods
Collectibles Sports Memorabilia
Computers Toys & Games
Cosmetics/Perfumes
Each category is expected to have numerous subcategories. As the 2TheMart
site expands and additional items are listed, 2TheMart plans to organize
products under additional categories to respond to the needs of the 2TheMart
community.
Customer Support
2TheMart plans on devoting significant resources to provide timely customer
service and support to all users of its site. 2TheMart plans to offer
customer support through its Customer Care Center on a 24 hour a day, seven
day a week basis. Most customer support inquiries will be handled via email,
with customer email inquiries expected to be answered within 24 hours after
submission. 2TheMart plans to offer an online tutorial for new 2TheMart
users and maintain live customer support bulletin boards, where users can
post questions that will be answered by 2TheMart customer support personnel
or other 2TheMart users. 2TheMart may also enter into a strategic
relationship with a third party customer support organization to enable
2TheMart to scale its customer support capabilities without diminishing the
effectiveness of its customer service.
Competition
The market for conducting e-commerce through an auction type format over
the Internet is new, rapidly evolving and intensely competitive, and
2TheMart expects competition to intensify further in the future. Barriers to
entry are relatively low, and current and new competitors can launch new
sites at a relatively low cost using commercially available software.
2TheMart will compete with a number of other companies. The Company's direct
competitors expect to include various online auction services, such as eBay,
Inc., Amazon.com, Auction Universe, Yahoo Auctions, and Excite (a
wholly-owned subsidiary of At Home Corporation; and a number of other small
services, including those that serve specialty markets. 2TheMart will also
compete with business-to-consumer online auction services such as Onsale,
uBid, First Auction, and Surplus Auction (a wholly-owned subsidiary of
Egghead, Inc.). 2TheMart potentially faces competition from a number of
large online communities and services that have expertise in developing
online commerce and in facilitating online person-to-person and
business-to-consumer interaction. Certain of these potential competitors,
including America Online, Inc. and Microsoft Corporation, which currently
offer a variety of business-to-consumer services. Other large companies
with strong brand recognition and experience in online commerce, such as
Cendant Corporation, QVC and traditional auction companies may also seek to
compete in the online auction market. Many of the Company's current and
potential competitors have longer operating histories, larger customer
bases, greater brand recognition and significantly greater financial,
marketing and other resources. Competitive pressures created by any one of
these companies, or by the Company's competitors collectively, could have a
material adverse effect on the Company's business, results of operations and
financial condition.
2TheMart believes that the principal competitive factors in its targeted
marketplace will be brand recognition, reliability of the Company's Web
site, the site's ease of use, and the number of visitors to the site.
Current Number of Employees
At August 23, 1999, the Company had 24 full time employees.
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Status of Development of the Company's Web Site
Shortly following the completion of the Company's merger as previously
described, the Company began work on its planned Internet auction Web site.
In furtherance of this, the Company entered into a contract with IBM for the
architecture, development and construction of the Web site. The Company's
Web site developers have completed the Web site's design and are currently
completing the programming and coding of the site. The site is expected to
become operational during the fourth quarter of 1999. Although the
Company is reasonably confident that it will be operational by the end of
the fourth quarter, neither the Company nor its Web designers can give any
assurances as to the specific launch date of its Web site.
By December 31, 1999, the Company expects to employ approximately 75 to 100
people in customer support, administration, accounting, marketing and
technology positions in support of Web site operations.
ITEM 2 - FINANCIAL INFORMATION
SELECTED FINANCIAL DATA
As previously discussed, the Company was originally incorporated under the
laws of the State of Oklahoma on December 2, 1992 as S.K.B. Design, Inc.
Between 1992 to 1996, the Company was inactive. On October 1, 1996, the
Company acquired certain technology and assets with the intention of
developing a cd-rom based multimedia yearbook product. On December 22,
1997, the Company changed its name to CD-Rom Yearbook Company, Inc.
("CD-Rom") to reflect its new business plan. Due to certain technical and
market difficulties, the business of CD-Rom did not develop as expected. As
a result, the Company ceased its operations in the fall of 1998 and began a
search for new business opportunities. Effective January 8, 1999, CD-Rom
acquired all of the outstanding common stock of 2TheMart.com, Inc., a Nevada
corporation ("2TheMart-Nevada"), in a business transaction described as a
"reverse merger." Selected financial data has been included for the
period January 8, 1999 (inception) to June 30, 1999 covering the Company's
operations since its merger with 2TheMart-Nevada.
The following table contains selected financial data of the Company and is
qualified by the more detailed financial statements and the notes thereto
provided in this Registration Statement. The financial data as of and for
the period January 8, 1999 (inception) to June 30, 1999, have been derived
from the Company's financial statements, which statements were audited by
Grant Thornton LLP.
<TABLE>
Period from
January 8, 1999
(Inception)
Selected To
Financial Data June 30, 1999
<S> <C>
Operating Revenue $0
Net Loss $(1,913,303)
Net loss per basic $(0.08)
and diluted share
Total assets $5,287,435
Long-Term $0
Obligations
Stockholders' $4,692,132
equity
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
After CD-Rom's merger with 2TheMart-Nevada, as previously discussed, the
Company discontinued its prior business plan and implemented in its place,
the Company's current business plan to develop and launch an e-commerce
auction type Web site to facilitate transactions between businesses and
consumers and between consumers and consumers. Therefore, this discussion
and analysis will focus on the Company's current business plan and
operations.
During the period from January 8, 1999 (inception) through June 30, 1999,
the Company had no revenues and was in the development stages of its
e-commerce Internet auction Web site and incurred general and administrative
expenses of approximately $2.0 million consisting primarily of compensation,
rent, and professional fees.
Liquidity
In the first two quarters of 1999, the Company raised approximately $5.8
million through the sale of a portion of its Common Stock to accredited
investors. In addition, on July 12, 1999, the Company initiated a private
placement of 1,000,000 shares of its Common Stock at a price of $10.00 per
share. As of the date of this registration statement, the Company has sold
53,000 shares of its Common Stock pursuant to the Private Offering,
resulting in net proceeds of $530,000 to the Company.
On August 18, 1999, the Company entered into a short term note with a
shareholder in the amount of $500,000. Under the terms of the note,
the Company is obligated to pay interest in the amount of 12% per annum.
Interest and principal is due on or before October 18, 1999. The loan
is secured by 100,000 shares of the Common Stock of the Company.
The Company believes that its existing capital resources together with
ongoing fund raising efforts will be sufficient to meet its operating
expenses and capital requirements until December 31, 1999. However, the
Company's long-term capital requirements will depend upon many factors,
including, but not limited to, the rate of market acceptance of the
Company's Web site, the Company's ability to develop, maintain and expand
its Web user base, the level of resources required to expand the Company's
marketing and sales organization, information systems and development
activities and other factors, some of which are beyond the control of the
Company.
In particular, a slower than expected rate of acceptance of the Company's
Web site, when available to the public, or lower than expected revenues
generated from the Company's Web site, would materially adversely affect the
Company's liquidity. The Company may need additional capital sooner than
anticipated. The Company has no commitments for additional financing, and
there can be no assurances that any such additional financing would be
available on a timely manner or, if available, would be on terms acceptable
to the Company. Furthermore, any additional equity financing could be
dilutive to our then-existing shareholders and any debt financing could
involve restrictive covenants with respect to future capital raising
activities and other financial and operational matters.
Capital Expenditures
Capital Expenditures for the remainder the fiscal year ended December 31,
1999 consist primarily of software and hardware associated with the
development of the Company's Web site. The Company has contracted with IBM
to acquire hardware for its Web site operations and corporate infrastructure
in the amount of approximately $10.3 million, of which the Company has paid
$2.5 million. The Company also is negotiating to secure equipment financing
for a substantial portion of these hardware requirements. The Company also
will be required to begin paying for the space that it has secured with
Exodus at its Sterling, Virginia Data Center at the time the hardware placed
at that facility is connected to the Internet. The Company's minimum
expected monthly obligation to Exodus pursuant to its contract at the time
the Company' hardware is connected to the Internet is approximately $100,000
which may increase depending on the Company's bandwidth usage.
Additionally, on June 16, 1999, the Company contracted with USWeb/CKS for
the development and implementation of its marketing programs and strategies.
Under the terms of its agreement with USWeb/CKS, the Company is obligated to pay
$86,000 per month. The Company has also contracted with The Summit Group
for the integration of the Company's back-end and office
accounting software which is expected to cost the Company approximately
$400,000. Additionally, the Company has contracted with Lawson Associates
to license the use of Lawson's accounting software system. Under the terms
of the agreement with Lawson, the Company has made a payment to Lawson
in the amount of approximately $127,000 and has the option of either paying a
one time flat fee to Lawson on March 10, 2000 in the amount of $573,070 or a
fee based on a percentage of the Company's revenue. The Company will also
incur approximately $250,000 in improving its leased corporate headquarter
space and Irvine data center located at that space.
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Results of Operations
The Company has not realized any operating revenue to date. Additionally,
the Company does not expect to report any operating revenues until at least
the launch of its Web site. Since the Company has no historical operating
revenues to gauge future operating revenues upon, it is uncertain as to what
level of revenues, if any, the Company may achieve from its Web operations.
As the Company approaches the commencement of its Web operations, its
personnel requirements will increase substantially from its current levels.
The Company expects to increase its staffing to approximately 75 people by
December 31, 1999. This increased staffing will substantially increase
corporate expenditures from their current levels.
As a result of the development stage nature of the Company's prior
operations, the Company is not reporting any impact on its operations from
inflation or changing prices.
YEAR 2000 DISCLOSURE
The Company has completed a review of its computer systems to identify all
software applications and hardware that could be affected by the inability
of many existing computer systems to process time-sensitive data accurately
beyond the year 1999, referred to as the Year 2000 or Y2K issue. The
Company is dependent on third-party computer systems and applications,
particularly with respect to such critical tasks as the operation of its
planned Web site. The Company also relies on its own computer systems. As
a result of its review, the Company has discovered no problems with its
computer systems relating to the Y2K issue. Although the Company believes
that its computer systems are Y2K compliant, the Company is continuing to
monitor its computer systems in a continual effort to insure that its
systems are Y2K compliant. Additionally, the Company has obtained written
assurances from its major suppliers and the developers of its web site
indicating that they have completed a review of their respective computer
systems and that such systems are Y2K compliant. Costs associated with the
Company's review were not material to its results of operations.
While the Company believes that its procedures have been designed to be
successful, because of the complexity of the Y2K issue and the
interdependence of organizations using computer systems, there can be no
assurances that the Company's efforts, or those of third parties with whom
the Company interacts, have fully resolved all possible Y2K issues. Failure
to satisfactorily address the Y2K issue could have a material adverse effect
on the Company. The most likely worst case Y2K scenario which management
has identified to date is that, due to unanticipated Y2K compliance
problems, the Company's planned Web site may not function at all or not
function as expected, and that the Company may be unable to bill its
customers, in full or in part, for services used. Should this occur, it
would result in a material loss of some or all gross revenue to the Company
for an indeterminable amount of time, which could cause the Company to cease
operations. The Company has not yet developed a contingency plan to address
this worse case Y2K scenario, and does not intend to develop such a plan in
the future.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is not exposed to material risk based on interest rate
fluctuation, exchange rate fluctuation, or commodity price fluctuation.
ITEM 3 - PROPERTIES
Effective February 3, 1999, the Company began leasing 20,341 square feet of
administrative office space in Irvine, California. This facility serves as
the Company's headquarters, primary place of business, and will house its
Irvine back-up data center. The current monthly rental rate is $35,597.
The lease expires in June 2001.
On April 29, 1999 the Company entered into an agreement with Exodus to
secure space for the housing of its main Web site server operations in
Sterling, Virginia. Pursuant to its agreement with Exodus, the Company will
be required to pay Exodus a minimum monthly fee of approximately $100,000
which may increase depending on the Company's Internet bandwidth usage, once
the Company has installed its computer hardware at Exodus's Sterling,
Virginia data center.
8
<PAGE>
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 30, 1999, certain information
with respect to the number of shares of Common Stock of the Company
beneficially owned by (i) each officer and director of the Company; (ii)
each person known to beneficially own more than 5% of the Company' s Common
Stock; and (iii) all directors and executive officers as a group. The
Company has no other class of stock outstanding.
<TABLE>
<S> <C> <C>
Percent of
Name and Address of Number of all shares of
Beneficial Owners and Management Shares Common Stock
- ---------------------------------- ---------- -------------
Steven W. Rebeil(1) 8,500,000 34.79%
18301 Von Karman Avenue, 7th Floor
Irvine, California 92612
Dominic J. Magliarditi(2) 8,500,000 34.79%
18301 Von Karman Avenue, 7th Floor
Irvine, California 92612
Thomas N. Benjamin 100,000 0.4%
18301 Von Karman Avenue, 7th Floor
Irvine, California 92612
Robert Allende(3) 16,667 < 1%
18301 Von Karman Avenue, 7th Floor
Irvine, California 92612
Mark Rosenberg(4) 12,500 < 1%
18301 Von Karman Avenue, 7th Floor
Irvine, California 92612
Raymond Park Family(5) 2,372,500 9.83%
6200 Cleveland Drive
Cleveland Ohio, 44135
All directors and officers as a group (5 total) 17,112,050 70.87%
</TABLE>
_______________________
(1) Denotes shares beneficially owned by Mr. Rebeil but
held of record by PZ Holdings, Limited. Mr. Rebeil is
the general partner of PZ Holdings, Limited.
(2) Denotes shares beneficially owned by Mr. Magliarditi
but held of record by DFM Holdings, Ltd. Mr.
Magliarditi is the general partner of DFM Holdings, Ltd.
(3) Represents options to acquire 16,667 shares of the Company's
Common Stock at an exercise price of $5.00 per share which
vest within 60 days of the date of this registration
statement. Does not include an aggregate of 58,333 options
to acquire shares of the Company's Common Stock at an
exercise price of $5.00 per share vesting over a period of
three and 1/2 years beginning on March 1, 2000 in accordance
with Mr. Allende's employment agreement.
(4) Represents vested options to acquire 12,500 shares of
the Company's Common Stock at an exercise price of
$5.00 per share. Does not include an aggregate of
112,500 options to acquire shares of the Company's
Common Stock at an exercise price of $5.00 per share
vesting over a period of four years beginning on
November 7, 1999 in accordance with Mr. Rosenberg's
employment agreement.
(5) Denotes shares beneficially owned by the Raymond Park
family but held of record by Net Investments, Inc., an
Ohio corporation.
The Company believes that the beneficial owners of securities listed above,
based on information furnished by such owners, have sole investment and
voting power with respect to such shares, subject to community property laws
where applicable. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission and generally includes
voting or investment power with respect to securities. Shares of stock
subject to options or warrants currently exercisable, or exercisable within
60 days, are deemed outstanding for purposes of computing the percentage of
the person holding such options or warrants, but are not deemed outstanding
for purposes of computing the percentage of any other person.
9
<PAGE>
ITEM 5 - DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and ages of the current directors
and executive officers of the Company, the principal offices and positions
with the Company held by each person and the date such person became a
director or executive officer of the Company. The executive officers of the
Company are elected annually by the Board of Directors. The directors serve
one-year terms and until their successors are elected. The executive
officers serve terms of one year or until their death, resignation or
removal by the Board of Directors. There are no family relationships
between any of the directors and executive officers. In addition, there was
no arrangement or understanding between any executive officer and any other
person pursuant to which any person was selected as an executive officer.
The directors and executive officers of the Company as of June 30, 1999 are
as follows:
<TABLE>
<S> <C> <C>
Name Age Position(s)
- ---- --- -----------
Steven W. Rebeil 37 Chairman of the Board and
Chief Executive Officer
Dominic J. Magliarditi 35 President, Chief Operating
Officer, Secretary, Chief
Financial Officer, and Director
Thomas N. Benjamin 35 Vice President of Strategic
Planning & Analysis
Robert Allende 32 Chief Technology Officer
Mark Rosenberg 36 Vice President of Marketing
and Sales
William M. Wagner 33 Vice President of Finance and
Corporate Controller
</TABLE>
STEVEN W. REBEIL has served as the Chief Executive Officer, Chairman of the
Board and a Director of the Company since January 1999. Since 1992, Mr.
Rebeil has been the principal shareholder and Chairman of the Board of
Directors of Gem Development Company, a real estate development company.
From 1994-1997, Mr. Rebeil, was a principal and officer of Gem Gaming, Inc.,
which designed and developed hotel projects. From 1989 to 1996, Mr. Rebeil
was a principal and officer of Gem Homes, Inc., a Las Vegas, Nevada
developer of residential real estate properties. Between 1982 to 1989, Mr.
Rebeil founded and managed R&R Landscaping, Inc., a Las Vegas area landscape
maintenance and construction company.
DOMINIC J. MAGLIARDITI has served as the President, Chief Operating
Officer, Secretary, Chief Financial Officer, and a Director of the Company
since January 1999. From February 1994 to December 1998, Mr. Magliarditi
has been the Vice President, Secretary, General Counsel, and director of Gem
Development Company, a real estate development company. Mr. Rebeil was a
principal shareholder and director of Gem Development Company. Between
March 1994 and October 1996, Mr. Magliarditi, was a principal shareholder
and officer of Gem Gaming, Inc., which designed and developed hotel
projects. During the same time period, Mr. Magliarditi was the General
Counsel and director of Gem Homes, Inc., a Las Vegas, Nevada developer of
residential properties. From 1988 to1994, Mr. Magliarditi practiced law in
New York, New York and Las Vegas, Nevada, where he practiced primarily in
the corporate and real estate areas.
THOMAS N. BENJAMIN has served as the Company's Vice President of Strategic
Planning and Analysis since August 1999 and prior to that, the Company's
Vice President of Business Development from January 1999 to July 1999.
From July 1995 to December 1998 Mr. Benjamin worked as a consultant for a
variety of companies advising clients on issues ranging from technological
intellectual property to real estate development. Between January 1994 and
April 1995, Mr. Benjamin worked for SpecTron Communications Corporation as
its Vice President of Operations which developed credit card activated
wireless phones. From February 1990 to December 1993 Mr. Benjamin worked
for The Clifford Companies, a real estate management and restructuring
company, where he last held the position of Vice President and Regional
Manager.
ROBERT ALLENDE has served as the Company's Chief Technology Officer of the
Company since March 1999. Prior to joining the Company, Mr. Allende was
with Cabletron Systems, Inc., for the years 1992 to 1998. At Cabletron, Mr.
Allende held the position of Regional Systems Engineering Manager.
10
<PAGE>
MARK ROSENBERG has served as the Company's Vice-President of Marketing and
Sales since May 1999. Prior to joining the Company, Mr. Rosenberg served as
an e-Business Marketing executive for the Global Services Division of
International Business Machines, Inc. ("IBM") from October 1998 to May 1999.
Between July 1997 and October 1998, Mr. Rosenberg served as program
director of e-business for IBM's PC division. Prior to joining IBM, between
May 1996 and June 1997, Mr. Rosenberg provided consulting services to third
parties. Between March 1995 and 1996, Mr. Rosenberg was director of
Marketing and Product Development for BTI, a southeast regional
telecommunications company based in Raleigh, N.C. Between 1984 and 1995,
Mr. Rosenberg served as president and creative director at Rosenberg &
Associates Advertising, a regional boutique advertising agency in North
Carolina
WILLIAM M. WAGNER has served as the Company's Vice President of Finance and
Corporate Controller since June 1999. From 1997 until June 1999, Mr. Wagner
was Director, Financial Reporting for Irvine Apartment Communities (NYSE:
IAC) where he was responsible for all aspects of accounting and Securities
and Exchange Commission reporting as well as being involved in numerous
financing transactions. From 1990 to 1997, Mr. Wagner was an audit manager
with Ernst & Young LLP where he was involved in many initial public
offerings and public financings.
2TheMart is presently seeking additional management and directors.
ITEM 6 - EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table shows certain compensation information for
services rendered in all capacities for the period January 8, 1999
(inception) to June 30, 1999. Other than as set forth herein, no executive
officer's salary and bonus exceeded $100,000 in any of the applicable years.
The following information includes the dollar value of base salaries, bonus
awards, the number of stock options granted and certain other compensation,
if any, whether paid or deferred.
SUMMARY COMPENSATION TABLE
<TABLE>
Annual Compensation Long Term Compensation
------------------- -----------------------
Awards Payouts
------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Salary Bonus Compensation Awards Options Payouts Compensation
Principal Position Year ($) ($) ($) ($) SARs (#) ($) ($)
Dominic J. 1999 69,231 -0- -0- -0- -0- -0- -0-
Magliarditi (6/30)
(President)
Steven W. Rebeil 1999 63,462 -0- -0- -0- -0- -0- -0-
(Chairman and CEO) (6/30)
Thomas N. Benjamin 1999 36,923 -0- -0- 100,000 -0- -0- -0-
(V.P. of Business (6/30)
Development)
Robert Allende 1999 40,865 -0- -0- -0- 75,000 -0- -0-
(Chief Technology (6/30)
Officer)
Mark Rosenberg 1999 23,077 20,000 -0- -0- 125,000 -0- -0-
(V.P. of Marketing (6/30)
and Sales)
</TABLE>
12
<PAGE>
<TABLE>
OPTION/SAR GRANTS IN PERIOD
JANUARY 8, 1999 (INCEPTION) TO JUNE 30, 1999
(INDIVIDUAL GRANTS)
<S> <C> <C> <C> <C> <C>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SAR'S GRANTED TO
UNDERLYING EMPLOYEES IN PERIOD JANUARY
OPTIONS/SARS 8, 1999 (INCEPTION) TO EXERCISE OF BASE GRANT DATE
GRANTED (#) JUNE 30, 1999 PRICE ($/SH) EXPIRATION DATE PRESENT VALUE
NAME ($)
Dominic J. Magliarditi -0- n/a n/a n/a n/a
Steven W. Rebeil -0- n/a n/a n/a n/a
Thomas N. Benjamin -0- n/a n/a n/a n/a
Robert Allende(1) 75,000 27% 5.00 September 1, 2002 642,000
Mark Rosenberg(2) 125,000 46% 5.00 September 1, 2003 2,625,000
</TABLE>
(1) Represents options to acquire 16,667 shares of the Company's Common
Stock at an exercise price of $5.00 per share which vest on September 1,
1999 and an aggregate of 58,333 options to acquire shares of the Company's
Common Stock at an exercise price of $5.00 per share vesting over a period
of three and 1/2 years beginning on March 1, 2000 in accordance with Mr.
Allende's employment agreement.
(2) Represents vested options to acquire 12,500 shares of the
Company's Common Stock at an exercise price of $5.00 per share and 112,500
options to acquire shares of the Company's Common Stock at an exercise price
of $5.00 per share vesting over a period of four years beginning on November
7, 1999 in accordance with Mr. Rosenberg's employment agreement.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN PERIOD
JANUARY 8, 1999 (INCEPTION) TO JUNE 30, 1999
AND OPTION/SAR VALUES AS OF JUNE 30, 1999
<S> <C> <C> <C> <C>
Number of Unexercised Value of Unexercised In-
Securities Underlying The-Money Options/SARs
Shares Acquired On Value Options/SARs At June 30, 1999 At June 30, 1999 ($)
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- --------------------------------------------------------------------------------------------------------------------------
Dominic J. Magliarditi n/a n/a n/a n/a
Steven W. Rebeil n/a n/a n/a n/a
Thomas N. Benjamin -0- -0- n/a n/a
Robert Allende -0- -0- 0/75,000 0/647,250
Mark Rosenberg -0- -0- 12,500/112,500 107,875/970,875
</TABLE>
EMPLOYMENT AGREEMENTS
On February 1, 1999, the Company entered into a five-year Employment
Agreement with Steven W. Rebeil, the Company's Chief Executive Officer and
Chairman of the Board, whereby the Company will pay Mr. Rebeil an annual
salary of $150,000. Pursuant to the Agreement, Mr. Rebeil's salary shall
increase to $200,000 on July 1, 1999. The Agreement also provides that when
the Company's Web site is available for use to the public, the Company shall
pay a bonus to Mr. Rebeil in an amount to be determined by the Company's
Board of Directors. The Company has also agreed to fund a life insurance
policy insuring Mr. Rebeil's life in the principal amount of $1,000,000, and
Mr. Rebeil or his designee will be the owner and beneficiary of such policy.
The Agreement also requires the Company to provide, at its expense,
complete health insurance coverage for Mr. Rebeil and his family and an
automobile for business use, reimbursements for auto-related expenses and
other equipment, facilities and ancillary services for the performance of
Mr. Rebeil's duties. In the event of Mr. Rebeil's death or disability
during the term of this Agreement, the Company is obligated to pay to Mr.
Rebeil or his successors and heirs a payment equal to one year of his then
base salary if the remaining term of this Agreement is less than one year,
or if more than one year remains under this Agreement, Mr. Rebeil's
successors and heirs may elect to continue to receive Mr. Rebeil's base
salary for the remaining term of this Agreement. Mr. Rebeil will also be
entitled to receive a severance payment equal to the greater of (i) the sum
equivalent to the balance of salary due to be paid under this Agreement or
(ii) 300% of his base salary. If Mr. Rebeil's employment with the Company
is terminated within 24 months following a change of control of the Company,
in addition to any other compensation or benefits payable pursuant to this
Agreement, Mr. Rebeil will be entitled to a payment in cash equal to four
times his base salary and immediate vesting of all stock, options and other
awards.
13
<PAGE>
On February 1, 1999, the Company entered into a five-year Employment
Agreement with Dominic J. Magliarditi, the Company's President, Secretary,
Chief Financial Officer, and Treasurer, whereby the Company will pay Mr.
Magliarditi an annual salary of $150,000. Pursuant to the Agreement, Mr.
Magliarditi's salary shall increase to $200,000 on July 1, 1999. The
Agreement also provides that when the Company's Web site is available for
use to the public, the Company shall pay a bonus to Mr. Magliarditi in an
amount to be determined by the Company's Board of Directors. The Company
has also agreed to fund a life insurance policy insuring Mr. Magliarditi's
life in the principal amount of $1,000,000, and Mr. Magliarditi or his
designee will be the owner and beneficiary of such policy. The Agreement
also requires the Company to provide, at its expense, complete health
insurance coverage for Mr. Magliarditi and his family and an automobile for
business use, reimbursements for auto-related expenses and other equipment,
facilities and ancillary services for the performance of Mr. Magliarditi's
duties. In the event of Mr. Magliarditi's death or disability during the
term of this Agreement, the Company is obligated to pay to Mr. Magliarditi
or his successors and heirs a payment equal to one year of his then base
salary if the remaining term of this Agreement is less than one year, or if
more than one year remains under this Agreement, Mr. Magliarditi's
successors and heirs may elect to continue to receive Mr. Magliarditi's base
salary for the remaining term of this Agreement. Mr. Magliarditi will also
be entitled to receive a severance payment equal to the greater of (i) the
sum equivalent to the balance of salary due to be paid under this Agreement
or (ii) 300% of his base salary. If Mr. Magliarditi's employment with the
Company is terminated within 24 months following a change of control of the
Company, in addition to any other compensation or benefits payable pursuant
to this Agreement, Mr. Magliarditi will be entitled to a payment in cash
equal to four times his base salary and immediate vesting of all stock,
options and other awards.
On March 6, 1999, the Company entered into an Employment Offer Letter with
Robert Allende, the Company's Chief Technology Officer, whereby the Company
will pay Mr. Allende an annual salary of $125,000. Pursuant to the
Agreement, Mr. Allende's salary shall increase to $150,000 on September 1,
1999. On January 1, 2000, the Company is obligated, under the Agreement, to
pay Mr. Allende an amount equal to the difference of Mr. Allende's salary
(at an annualized rate of $125,000) and what Mr. Allende's salary would have
been if his salary was set at an annualized rate of $150,000, for the period
between the commencement of Mr. Allende's employment with the Company and
September 1, 1999. Pursuant to the Agreement, the Company has also agreed
to grant options for up to 50,000 shares of Common Stock of the Company to
be granted at the discretion of the Board of Directors of the Company on the
first anniversary of Mr. Allende's employment with the Company.
Additionally, the Agreement granted Mr. Allende options to purchase up to
75,000 shares of the Company's Common Stock at an exercise price of $5.00
per share, vesting over a period of three years. The Agreement also
requires the Company to provide health benefits to Mr. Allende and his
family and to allow Mr. Allende the opportunity to participate in the
company's retirement, stock option and bonus plans as they may be established.
On May 7, 1999, the Company entered into an Employment Offer Letter with
Mark Rosenberg, the Company's Vice-President of Marketing and Sales, whereby
the Company will pay Mr. Rosenberg an annual salary of $200,000. The
Agreement also requires the Company to provide health benefits to Mr.
Rosenberg and his family and to allow Mr. Rosenberg the opportunity to
participate in the Company's retirement, stock option and bonus plans as
they may be established. Under the Agreement, in the event of a termination
of Mr. Rosenberg's employment with the Company for reasons other than cause,
Mr. Rosenberg will also be entitled to receive his base salary for a period
of six months after the termination. The Agreement also provides for a
bonus of $20,000 to Mr. Rosenberg payable upon the commencement of his
employment, and reimbursements for certain relocation expenses.
Additionally, the Agreement granted Mr. Rosenberg options to purchase up to
125,000 shares of the Company's Common Stock at an exercise price of $5.00
per share, vesting over a period of four years.
COMPENSATION OF DIRECTORS
Directors currently receive no cash compensation for their services in that
capacity. Reasonable out-of-pocket expenses may be reimbursed to directors
in connection with attendance at meetings.
14
<PAGE>
BOARD INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Steven W. Rebeil and Dominic J. Magliarditi are each an officer and
a director of the Company and each participates in the deliberations of the
Company's Board of Directors concerning executive officer compensation
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No relationships or related transactions exist of the type required to be
reported under this Item 7.
ITEM 8 - LEGAL PROCEEDINGS
The Company may from time to time be involved in various claims, lawsuits,
disputes with third parties, actions involving allegations of
discrimination, or breach of contract actions incidental to the operation of
its business. The Company is not currently involved in any such litigation
which it believes could have a materially adverse effect on its financial
condition or results of operations.
ITEM 9 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
The following table sets forth the high and low bid prices for shares of
the Company Common Stock for the periods noted, as reported by the National
Daily Quotation Service and the NASD Non-NASDAQ Bulletin Board. Quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission
and may not represent actual transactions. The Company's Common Stock was
not listed on the NASDAQ Bulletin Board until December 11, 1997, and did not
begin trading until March 1998.
BID PRICES
YEAR PERIOD HIGH LOW
---- ------ ---- ----
1999 First Quarter . . . . . . . . . . . . . . . 50 1.75
Second Quarter . . . . . . . . . . . . . . 29.0 11.75
Pursuant to NASD Eligibility Rule 6530 (the "Rule") issued on January 4,
1999, issuers who do not make current filings pursuant to Sections 13 and
15(d) of the Securities Act of 1934 are ineligible for listing on the NASDAQ
Over- the-Counter Bulletin Board ("OTCBB"). Pursuant to the Rule, issuers
who are not current with such filings are subject to having the quotation of
their securities removed from the OTCBB pursuant to a phase-in schedule
depending on each issuer's trading symbol as reported on January 4, 1999 and
thereafter may quote its Common Stock on the National Quotation Bureaus
"Pink Sheets" (the "Pink Sheets"). As previously discussed, the Company's
trading symbol on January 4, 1999 was CDRH. Therefore, pursuant to the
phase-in schedule, the Company is subject to having the quotation of its
securities removed from the OTCBB on October 7, 1999, until the Company
becomes compliant with the Rule. One month prior to having the quotation of
their securities removed from the OTCBB, non complying issuers will have
their trading symbol appended with an "E".
The Company is not currently in compliance with the Rule, and in the
past, has not made filings pursuant to Sections 13 and 15(d) of the
Securities Act of 1934. The Company has filed this Registration Statement
on Form 10 in order to become a "reporting" company and therefore comply
with the Rule. However, the Company will remain subject to having
quotation of its securities removed from the OTCBB on October 1, 1999, and
trading of its securities thereafter on the Pink Sheets, until such time as
the Securities and Exchange Commission ("SEC") has reviewed the Company's
Form 10 and has stated that it has no further comments. Should the SEC fail
to clear all comments prior to October 1, 1999, quotation of the Company's
securities will be removed from the OTCBB and thereafter traded on the Pink
Sheets until such time as this Registration Statement is cleared by the SEC.
Once the Company has complied with the Rule, it will once again become
eligible for listing on the OTCBB and will seek to be reinstated on the
OTCBB or other appropriate exchange.
NUMBER OF SHAREHOLDERS
The number of holders of record of the Common Stock of the Company as of
the close of business on June 30, 1999 was 174.
15
<PAGE>
DIVIDEND POLICY
To date, the Company has declared no cash dividends on its Common Stock,
and does not expect to pay cash dividends in the foreseeable future. The
Company intends to retain future earnings, if any, to provide funds for
operation of its business.
ITEM 10 - RECENT SALES OF UNREGISTERED SECURITIES
On December 22, 1998, CD-Rom entered into a merger agreement to acquire
all of the outstanding common stock of 2TheMart-Nevada in a business
combination described as a "reverse acquisition." The merger closed on
January 8, 1999. For accounting purposes, the acquisition has been treated
as the acquisition of CD-Rom by 2TheMart-Nevada. Immediately prior to the
acquisition, CD-Rom had 2,291,850 shares of common stock outstanding. As
part of the reorganization and stock purchase agreement, CD-Rom issued an
additional 17,800,000 shares of the Common Stock of CD-Rom to the
shareholders of 2TheMart-Nevada (all of which were "accredited" investors)
in exchange for all of the shares of 2TheMart-Nevada. In addition,
1.2 million o fthe previously issued CD-Rom shares were placed in
escrow to be distributed to the 2TheMart-Nevada shareholders upon the
occurrence of certain events. This issuance was conducted under an
exemption under Section 4(2) of the Securities Act of 1933.
On January 8, 1999, the Company issued an aggregate of 917,500 shares of
its Common Stock to six "accredited" investors under Rule 504 of Regulation
D promulgated under the Securities Act of 1933 resulting in net proceeds to
the Company in the amount of approximately $980,000.
On January 8, 1999, the Company issued an aggregate of 80,000 shares of
its Common Stock to the Company's securities counsel, under Rule 504 of
Regulation D promulgated under the Securities Act of 1933, in exchange for
legal services rendered.
On January 25, 1999, the Company issued 15,000 shares of "restricted" (as
that term is defined under Rule 144 of the Securities Act of 1933) Common
Stock to the Company's securities counsel, in consideration for legal
services rendered. The issuance was exempt under Section 4(2) of the
Securities Act of 1933.
On January 25, 1999, the Company issued 40,000 shares of "restricted" (as
that term is defined under Rule 144 of the Securities Act of 1933) Common
Stock to an individual, in consideration for certain consultation and
software services rendered valued at $40,000. The issuance was exempt under
Section 4(2) of the Securities Act of 1933.
On January 29, 1999, the Company issued 1,000,000 shares of "restricted"
(as that term is defined under Rule 144 of the Securities Act of 1933)
Common Stock to an "accredited" investor, resulting in net proceeds of
approximately $1,000,000 to the Company. The issuance was exempt under
Section 4(2) of the Securities Act of 1933.
On January 30, 1999, the Company issued 50,000 shares of "restricted" (as
that term is defined under Rule 144 of the Securities Act of 1933) Common
Stock to an "accredited" investor in exchange for $25,000 and consultation
services valued at $25,000. The issuance was exempt under Section 4(2) of
the Securities Act of 1933.
On February 2, 1999, the Company issued 100,000 shares of "restricted"
(as that term is defined under Rule 144 of the Securities Act of 1933)
Common Stock to Thomas Benjamin, the Company's Vice-President of Business
Development as employee compensation valued at $100,000. The issuance was
exempt under Section 4(2) of the Securities Act of 1933.
On February 2, 1999, the Company issued 7,500 shares of "restricted" (as
that term is defined under Rule 144 of the Securities Act of 1933) to an
individual in consideration for certain consultation services rendered
valued at $7,500. The issuance was exempt under Section 4(2) of the
Securities Act of 1933.
On February 2, 1999, the Company issued 5,000 shares of "restricted" (as
that term is defined under Rule 144 of the Securities Act of 1933) to an
employee of the Company as employee compensation valued at $5,000. The
issuance was exempt under Section 4(2) of the Securities Act of 1933.
On February 4, 1999, the Company issued 1,555,000 shares of "restricted"
(as that term is defined under Rule 144 of the Securities Act of 1933)
Common Stock to an accredited investor, resulting in net proceeds of
approximately $1,555,000 to the Company. The issuance was conducted under
an exemption provided by Rule 506 of Regulation D promulgated under the
Securities Act of 1933 and Section 4(2) of the Securities Act of 1933.
16
<PAGE>
On March 1, 1999, the Company issued 15,000 shares of "restricted" (as
that term is defined under Rule 144 of the Securities Act of 1933) Common
Stock to the Company's securities counsel, in consideration for legal
services rendered. The issuance was exempt under Section 4(2) of the
Securities Act of 1933.
On April 7, 1999, the Company issued an aggregate of 75,000 "restricted"
(as that term is defined under Rule 144 of the Securities Act of 1933)
shares of the Company's Common Stock in addition to warrants to purchase
125,000 "restricted" (as that term is defined under Rule 144 of the
Securities Act of 1933) shares of the Company's Common Stock at an exercise
price of $5.00 to an "accredited" individual, in exchange for certain
consultation services rendered valued at $75,000. These issuances were
conducted under an exemption provided by Section 4(2) of the Securities Act
of 1993 as well as Rule 506 and 701 of Regulation D promulgated under the
Securities Act of 1933.
In April, 1999, the Company completed a private placement offering of
1,140,000 "restricted" (as that term is defined under Rule 144 of the
Securities Act of 1933) shares of the Company's Common Stock under Rule 506
of Regulation D and Section 4(2) of the Securities Act of 1933 to
"accredited" investors. An aggregate of 840,000 shares were sold at a price
of $1.00. After such shares were sold, the Company amended its PPM,
increasing the price of the offered shares to $5.00. A total of 300,080
shares were sold at a price of $5.00. The offering resulted in aggregate
net proceeds to the Company of approximately $2,340,400.
In August, 1999, the Company issued an aggregate of 53,000 "restricted"
(as that term is defined under Rule 144 of the Securities Act of 1933)
shares of the Company's Common Stock at a price of $10.00 per share pursuant
to an ongoing private offering of the Company's Common Stock to four
"accredited" investors. The sales resulted in aggregate net proceeds to the
Company of approximately $530,000. The sale was conducted under Rule 506 of
Regulation D and Section 4(2) of the Securities Act of 1933.
ITEM 11 - DESCRIPTION OF SECURITIES
COMMON STOCK
The Company's Articles of Incorporation authorizes the issuance of
50,000,000 shares of Common Stock, $0.0001 par value per share, of which
25,091,930 shares were outstanding as of July 31, 1999. Holders of shares
of Common Stock are entitled to one vote for each share on all matters to be
voted on by the stockholders. Holders of Common Stock have no cumulative
voting rights. Holders of shares of Common Stock are entitled to share
ratably in dividends, if any, as may be declared, from time to time by the
Board of Directors in its discretion, from funds legally available therefor.
In the event of a liquidation, dissolution or winding up of the Company,
the holders of shares of Common Stock are entitled to share pro rata all
assets remaining after payment in full of all liabilities. Holders of
Common Stock have no preemptive rights to purchase the Company's common
stock. There are no conversion rights or redemption or sinking fund
provisions with respect to the common stock. All of the outstanding shares
of Common Stock are fully paid and non-assessable.
PREFERRED STOCK
The Company's Articles of Incorporation authorize the issuance of
25,000,000 shares of preferred stock, $0.0001 par value. As of June 30,
1999, there were no issued and outstanding shares of Preferred Stock. The
Company's Board of Directors has authority, without action by the
shareholders, to issue all or any portion of the authorized but unissued
preferred stock in one or more series and to determine the voting rights,
preferences as to dividends and liquidation, conversion rights, and other
rights of such series.
The Company intends to furnish holders of its common and preferred stock
annual reports containing audited financial statements and to make public
quarterly reports containing unaudited financial information.
TRANSFER AGENT
The transfer agent for the Common Stock is Pacific Stock Transfer
Company, 5844 S. Pecos Road, Suite D, Las Vegas, NV 89120.
17
<PAGE>
ITEM 12 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Corporation Laws of the State of Oklahoma and the Company's Bylaws
provide for indemnification of the Company's Officers and Directors for
liabilities and expenses that they may incur in such capacities. In
general, Directors and Officers are indemnified with respect to actions
taken in good faith in a manner reasonably believed to be in, or not opposed
to, the best interests of the Company, and with respect to any criminal
action or proceeding, actions that the indemnitee had no reasonable cause to
believe were unlawful.
Beginning in March 1999, the Company maintains a policy of Directors and
Officers Liability Insurance with an aggregate coverage limit of $8,000,000.
ITEM 13 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the Consolidated Financial Statements, together with
the notes thereto and the reports thereon of Grant Thornton LLP appearing
on pages F-1 through F-12 of this Form 10.
ITEM 14 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Subsequent to the acquisition of 2TheMart-Nevada by the CD-Rom, Grant
Thornton LLP, Certified Public Accountants were retained by the Company on
August 10, 1999 as their principal accountants to audit the Company's
financial statements. There have been no disagreements between Grant
Thornton and Management of the type required to be reported under this Item
14 since their date of engagement.
18
<PAGE>
ITEM 15 - FINANCIAL STATEMENTS AND EXHIBITS
(A) INDEX TO FINANCIAL STATEMENTS
Audited financial statements for
2TheMart.com, Inc. for the period
January 8, 1999 (inception) to June 30, 1999 . . . . F-1
The Company has not included financial statements for CD-Rom within this
Form 10 as it does not consider the acquisition of the CD Rom stock to be the
acquisition of a business as defined by Reg S-X 210 11-01(d). CD Rom had
not conducted any significant operations for over one year, and had no
employees, sales force, market distribution system, or active customer base.
Additionally, the Company has discontinued all aspects of CD Rom's prior
business and the nature of the revenue producing activity of the Company
will not be the same as before this transaction. Therefore, the financial
statements of CD Rom are not applicable as the described transaction did not
constitute the purchase of a business as defined in Reg S-X 210 11-01(d) as
there is not sufficient continuity of the acquired entity's operations.
Moreover, pro forma financial information is not required as the transaction
was not a purchase of a business as defined by Reg S-X 210 11-01(d).
(B) INDEX TO EXHIBITS
EXHIBIT NUMBER
2.1 Reorganization and Stock Purchase Agreement dated
December 22, 1998
3.1 Articles of Incorporation
3.2 Amended Articles of Incorporation, filed with the
Oklahoma Secretary of State on December 22, 1997
3.3 Certificate of Merger, filed with the Oklahoma
Secretary of State on January 8, 1999.
3.4 Amended Articles of Incorporation, filed with the
Oklahoma Secretary of State on February 16, 1999
3.5 Bylaws of the Company
10.1 Lease by and between Cruttenden Roth Incorporated and K23 LP,
assigned to 2TheMart.com, Inc. relating to property located at
18500 Von Karman Avenue, Suite 120, Irvine, CA 92715.
10.2 Contract dated February 3, 1999 and May 28, 1999 by and between
2TheMart.com, Inc., and International Business Machines, Inc.
10.3 Contract dated April 29, 1999 by and between 2TheMart.com, Inc.,
and Exodus Communications, Inc.
10.4 Employment agreement by and between 2TheMart.com,
Inc. and Steven W. Rebeil dated February 1, 1999
10.5 Employment agreement by and between 2TheMart.com,
Inc., and Dominic J. Magliarditi dated February 1, 1999
10.6 Employment agreement by and between 2TheMart.com,
Inc., and Robert Allende dated March 6, 1999
10.7 Employment agreement by and between 2TheMart.com,
Inc., and Mark Rosenberg dated May 7, 1999
19
<PAGE>
10.8 Agreement between mPRm, Inc. and 2TheMart.com, Inc., dated June
11, 1999
10.9 Agreement between USWeb/CKS and 2TheMart.com, Inc. dated June
18, 1999
10.10 Co-Branding and Advertising Agreement between I-Escrow, Inc. and
2TheMart.com, Inc., dated June 21, 1999.
10.11 Agreement between Summit Group and 2TheMart.com, Inc., dated
June 24, 1999.
10.12 Agreement between Lawson Association, Inc. and 2TheMart.com,
Inc., dated July 16, 1999.
10.13 International Business Machines, Inc. Computer Hardware Agreement
by and between International Business Machines, Inc., and
2TheMart.com, Inc., dated August 5, 1999.
27.1 Financial Data Schedule
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
2THEMART.COM, INC.
Date: August 26, 1999 By: /s/ Dominic J. Magliariditi
-------------------------------
Dominic J. Magliarditi
President
20
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
2TheMart.com, Inc.
We have audited the accompanying balance sheet of 2TheMart.com, Inc.
(a development stage enterprise) as of June 30, 1999, and the
related statement of operations, stockholders' equity and cash flows
for the period from January 8, 1999 (inception) through June 30,
1999. 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 audit.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
2TheMart.com, Inc. as of June 30, 1999, and the results of its
operations and its cash flows for the period from January 8, 1999
(inception) through June 30, 1999, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. The Company is
not yet generating revenues and, as shown in the financial
statements, has incurred losses in its development stage. Also, as
discussed in Note 4, the Company has incurred substantial
obligations and will need to raise additional capital to complete
its development activities. These factors, among others as
discussed in Note 3, raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans are also
discussed in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
GRANT THORNTON LLP
August 24, 1999
Irvine, California
F-1
<PAGE>
2TheMart.com, Inc.
(a Development Stage Enterprise)
Balance Sheet
June 30, 1999
- ----------------------------------------------------------------
<TABLE>
<S> <C>
Assets
Cash and cash equivalents $ 2,110,252
---------
Total current assets 2,110,252
Property and equipment
Computer hardware and software 846,138
Furniture, fixtures and other office equipme 210,320
Tenant improvements 59,637
Less: accumulated depreciation (10,938)
-----------
1,105,157
Deposits 2,072,026
-----------
Total Assets $ 5,287,435
===========
Liabilities and Stockholders' Equity
Accounts payable $ 510,759
Other accrued liabilities 84,544
Total current liabilities 595,303
Stockholders' Equity
Preferred stock, par value $0.0001; 25,000,000
shares authorized; none issued and outstanding -
Common stock, par value $0.0001; 50,000,000
shares authorized; 25,041,930 issued
and outstanding 2,504
Additional paid-in capital 9,798,787
Deferred compensation expense (3,195,856)
Deficit accumulated during the development stage (1,913,303)
---------
4,692,132
---------
Total Liabilities and Stockholders' Equity $ 5,287,435
=========
</TABLE>
F-2
<PAGE>
2TheMart.com, Inc.
(a Development Stage Enterprise)
Statement of Operations
For the Period January 8, 1999 (inception) to June 30, 1999
<TABLE>
<S> <C>
Interest income $ 86,726
General and administrative
Employee compensation 448,768
Compensatory stock and option issuances 809,928
Professional fees 232,375
Rent 87,052
Other 421,906
-------------
2,000,029
-------------
Net loss $ (1,913,303)
=============
Basic and diluted loss per common share $ (0.08)
=============
Basic and diluted weighted average shares
outstanding 23,665,432
=============
</TABLE>
F-3
<PAGE>
<TABLE>
2TheMart.com, Inc.
(a Development Stage Enterprise)
Statement of Stockholders' Equity
For the Period January 8, 1999 (inception) to June 30, 1999
<S> <C> <C> <C> <C> <C>
Deferred Deficit
Compensation Accumulated
Additional Related to During the
Common stock paid-in Option Development
Shares Amount capital Issuances Stage Total
---------------------- --------- ---------- ----------- ---------
Shares issued in conjunction
with merger 17,800,000 $ 1,780 $ - $ 1,780
Common stock before merger 2,291,850 229 (229) -
Private placement offerings of
common stock:
Private placement issuance
under Ruling 504 1,004,167 100 979,902 980,002
Private placement issuance
under Ruling 506:
Shares issued at $1 per 3,420,000 342 3,312,983 3,313,325
Shares issued at $5 per 300,080 30 1,500,370 1,500,400
Issuances of common stock
for consulting services 225,833 23 264,155 264,178
Issuances of stock options
for employee compensation 3,741,606 (3,195,856) 545,750
Net loss (1,913,303) (1,913,303)
---------- ---------- ---------- ------------ ----------- -----------
Balance, June 30, 1999 25,041,930 $ 2,504 $ 9,798,787 $(3,195,856 $(1,913,303) $ 4,692,132
========== ========== ========== ============ =========== ===========
</TABLE>
F-4
<PAGE>
2TheMart.com, Inc.
(a Development Stage Enterprise)
Statement of Cash Flows
For the Period January 8, 1999 (inception) to June 30, 1999
<TABLE>
<S> <C>
Cash Flows From Operating Activities:
Net loss $ (1,913,303)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 10,938
Compensation expense - stock options 595,303
Issuances of common stock
for services 264,178
(Decrease) increase in cash attributable to changes
in assets and liabilities:
Deposits 72,026
Accounts payable 595,303
--------------
Net cash used in operating activities ( 569,160)
Cash Flows From Investing Activities:
Purchases of property and equipment (1,116,095)
--------------
Deposit on equipment purchases (2,000,000)
--------------
Net cash used in investing activities (3,116,095)
Cash Flows From Financing Activities:
Proceeds from issuance of common stock 5,795,507
--------------
Net Increase in Cash and Cash Equivalents 2,110,252
Cash and Cash Equivalents, beginning of year --------------
Cash and Cash Equivalents, end of period $ 2,110,252
==============
</TABLE>
F-5
<PAGE>
2TheMart.com, Inc.
(a Development Stage Enterprise)
Notes to Financial Statements
Note 1 - Organization and Basis of Presentation
The Company
2TheMart.com, Inc., an Oklahoma corporation, ("2TheMart" or the
"Company") is a development stage, internet-based electronic
commerce company. The Company's year end is December 31, 1999.
The Company has contracted with an unrelated party to develop and
launch a business-to-consumer and person-to-person trading
community on the internet. The Company plans on developing an
electronic commerce site in which buyers and sellers will be
brought together to buy and sell a variety of goods such as
antiques, coins, collectibles, computers, memorabilia, stamps,
toys and more in an auction format. Once fully functional, the
2TheMart service will enable sellers to list items for sale,
buyers to bid on those items and allow 2TheMart users to browse
through all items in a fully automated, topically arranged online
service.
Reorganization
In December 1998, CD-Rom Yearbook Company, Inc. an Oklahoma
corporation, ("CD-Rom") entered into a merger agreement to
acquire all of the outstanding common stock of 2TheMart-Nevada, a
Nevada corporation, in a transaction described as a reverse
merger. The merger became effective on January 8, 1999. The
surviving entity, CD-Rom, changed its name to 2TheMart.com, Inc.
The transaction has been treated as a recapitalization of
2TheMart-Nevada.
Immediately prior to the merger, CD-Rom had 2,291,850 shares of
common stock outstanding. As part of the reorganization and
stock purchase agreement, CD-Rom issued an additional 17,800,000
shares to the shareholders of 2TheMart-Nevada in exchange for all
of the shares of 2TheMart-Nevada. In addition, options to purchase
2.5 million shares of the Company's Common Stock at an exercise
price of $3.00 were issued to the previously controlling shareholder
of CD-Rom and 1.2 million of the previously issued CD-Rom shares
were placed in escrow, to be distributed to the 2TheMart-Nevada
shareholders upon the occurrence of certain events.
Note 2 - Summary of Significant Accounting Policies
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 as of the date of the
financial statements and the reported amounts of revenue and
expenses during the reporting periods. Actual results could
differ from these estimates.
Cash and Cash Equivalents - Cash equivalents consist of money
market funds whose fair value approximates cost and are readily
redeemable.
F-6
<PAGE>
Concentration of Credit Risk - Financial instruments that
potentially subject the Company to a concentration of credit risk
consist of cash and cash equivalents. Cash and cash equivalents
are deposited with high credit, quality financial institutions.
Property and Equipment - Depreciation and amortization are
provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service
lives. Leasehold improvements are amortized over the lives of
the respective leases or the service lives of the improvements,
whichever is shorter. The straight-line method of depreciation
is followed for substantially all assets for financial reporting
purposes, but accelerated methods are used for tax purposes.
Income Taxes - Deferred tax assets and liabilities are recognized
for the future consequences of events that have been recognized
in the Company's financial statements or tax returns. The
measurement of the deferred items is based on enacted tax laws.
A valuation allowance related to a deferred tax asset is recorded
when it is more likely than not that some portion or all of the
deferred tax asset will not be realized.
Deferred Compensation Related to Stock Option Issuances - The
Company granted certain options to officers and employees at
exercise prices which were less than the fair value of such
shares. Amounts recorded as deferred compensation are amortized
over the appropriate service period based upon the vesting
schedule for such grants (generally four years).
Fair Value of Financial Instruments - The Company is required to
estimate the fair value of all financial instruments included on
its balance sheet at June 30, 1999. The Company considers the
carrying value of such amounts in the financial statements (cash
and cash equivalents) to approximate their fair value due to the
relatively short period of time between origination of the
instruments and their expected realization and interest rates,
which approximate current market rates.
Earnings per Share - Basic net income per share is computed by
dividing the net income available to common stockholders for the
period by the weighted average number of common shares
outstanding during the period. Incremental common shares
issuable upon the exercise of stock options and warrants, are
included in the computation of diluted net income (loss) per
share to the extent such shares are dilutive.
Note 3 - Development Stage Enterprise and Going Concern
Since January 8, 1999 (inception), the Company has been in the
development stage and its principal activities have consisted of
raising capital and developing its internet-based electronic
commerce website.
F-7
<PAGE>
The accompanying financial statements have been prepared on the
basis of a going concern, which contemplates the realization of
assets and liquidation of liabilities in the normal course of
business. The Company is not yet generating revenues from
website operations and, at June 30, 1999, had accumulated a
deficit from its operating activities. Continuation of the
Company as a going concern is dependent upon, among other things,
obtaining additional capital, meeting other obligations under
various agreements and achieving satisfactory levels of
profitable operations. The financial statements do not include
any adjustments relating to the realization of assets and
liquidation of liabilities that might be necessary should the
Company be unable to continue as a going concern.
The Company is currently raising additional funds through an
ongoing private offering (see Note 9). Management intends to
seek additional financing through future private placement
offerings. Management is also seeking equipment financing or a
leasing transaction to complete the acquisition of its computer
hardware.
Note 4 - Commitments
The Company has entered into contracts with an unrelated
party for the acquisition of computer hardware and its electronic
commerce site. The total amount of these contracts is
approximately $10.3 million, of which $2.5 million (including a
deposit of $2.0 million) had been paid as of June 30, 1999.
In February 1999, the Company entered into five-year guaranteed
employment agreements with its president and its chief executive
officer. Under the agreements, each individual is entitled to a
severance payment equal to the greater of (i) the sum equivalent
of the balance of salary due to be paid under the agreement or
(ii) 300% of the individual's base salary. In addition, certain
employees have been granted employment agreements which provide
for up to six months severance pay in the event of termination
without cause.
In June 1999, the Company entered into a one year agreement with
USWeb/CKS to develop and implement the marketing programs and
strategies of the Company's website. The Company is obligated to
pay $86,000 per month.
The Company conducts a substantial portion of its operations
utilizing leased office space, office equipment and
communications equipment. Some of the operating leases provide
that the Company pay taxes, maintenance, insurance and other
occupancy expense applicable to leased premises. Generally, the
leases provide for renewal for various periods at stipulated
rates. Future minimum payments due under operating leases are as
follows:
F-8
<PAGE>
Six Months
Ended
December 31,
------------
1999 $ 241,874
Year Ended
December 31,
------------
2000 483,748
2001 252,369
2002 30,609
2003 4,632
2004 1,544
----------
$1,014,776
==========
Note 5 - Shareholders' Equity
Preferred Stock
The Company's Articles of Incorporation authorize the issuance of
25,000,000 shares of preferred stock, $0.0001 par value. As of
June 30, 1999, there were no issued and outstanding shares of
Preferred Stock. The Company's Board of Directors has authority,
without action by the shareholders, to issue all or any portion
of the authorized but unissued preferred stock in one or more
series and to be determine the voting rights, preferences as to
dividends and liquidation, conversation, conversion rights, and
other rights of such series.
Common Stock
The Company's Articles of Incorporation authorizes the issuance
of 50,000,000 shares of Common Stock, $0.0001 par value per
share, of which 25,041,930 shares were outstanding as of June 30,
1999. Holders of shares of Common Stock are entitled to one vote
for each share on all matters to be voted on by the stockholders.
Holders of Common Stock have no cumulative voting rights.
Holders of shares of Common Stock are entitled to share ratably
in dividends, if any, as may be declared, from time to time by
the Board of Directors in its discretion, from funds legally
available therefore. In the event of a liquidation, dissolution
or winding up of the company, the holders of shares of Common
Stock are entitled to share pro rata all assets remaining after
payment in full of all liabilities. Holders of Common Stock have
no preemptive rights to purchase the Company's common stock.
There are no conversion rights or redemption or sinking fund
provisions with respect to the common stock. All of the
outstanding shares of Common Stock are fully paid and non-
assessable.
Note 6 - Earnings Per Share
The following table sets forth the computation of basic and
diluted earnings per share for the period January 8, 1999
(inception) to June 30, 1999:
Numerator:
Numerator for basic and diluted earnings $
per share - net loss (1,913,303)
Denominator:
Denominator for basic and diluted earnings per share
- weighted average shares outstanding
23,665,432
Options to purchase 2,773,200 shares of common stock ranging from
$3.00 - $12.25 a share were outstanding at June 30, 1999. Such
options were not included in the computation of diluted earnings
per share because they were antidilutive.
F-9
<PAGE>
Note 7 - Stock Options and Warrants
The Company accounts for its stock option plan in accordance with
the provisions of APB Opinion No. 25, Accounting for Stock Issued
to Employees. Had compensation cost for the stock option plan
been determined based on the fair value at the grant date
consistent with the method of SFAS No. 123, Accounting for Stock-
Based Compensation, the Company's net loss and net loss per share
would have been the pro forma amounts indicated below:
For the Period
January 8, 1999
(inception) to
June 30, 1999
---------------
Actual net loss $1,913,303
Pro forma net loss $1,791,628
Actual net loss per share $(.08)
Pro forma net loss per share $(.08)
The fair value of each option grant was estimated at the grant
date using the Black-Scholes option-pricing model for the period
January 8, 1999 (inception) to June 30, 1999, assuming a risk-free
interest rate of 6%, volatility of 61%, zero dividend yield, and
an expected life of 6 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options and warrants which
have no vesting restrictions and are fully transferable. In
addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price
volatility. Because the Company's employee stock options and
warrants have characteristics significantly different from those
of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its
employee stock options.
F-10
<PAGE>
A summary of the status of the company's options as of June 30,
1999 and changes during the period January 8, 1999 (inception) to
June 30, 1999 is presented below.
<TABLE>
<S> <C> <C> <C>
Exercise Price Weighted Average
per Share Exercise Price Shares
-------------- ---------------- ------------
Granted
Above FMV $3.00 $3.00 2,500,000
Below FMV $5.00 - 10.00 $5.87 273,500
At FMV $12.25 $12.25 200
------------
Options outstanding at
June 30, 1999 $3.28 2,773,700
============
Options exercisable at
June 30, 1999 $5.00 $5.00 12,500
Weighted-average fair
value of options granted
during the year 1.87
</TABLE>
The following table summarizes information concerning options
outstanding at June 30, 1999:
<TABLE>
Total Outstanding Exercisable
--------------------------------------------------------- ---------------
<C> <C> <C> <C> <C> <C>
Weighted
Range of Weighted Weighted Average
Exercise Number Average Average Number Exercise
Prices of Shares Remaining Life Exercise of Shares Price
$3.00 - 8.00 2,765,000 6.00 $3.26 12,500 $5.00
$10.00 - 12.25 8,700 6.00 $10.05 - -
----------- ----------
2,773,700 12,500
=========== ==========
</TABLE>
The Company has committed to issue a warrant for 125,000 common
shares at $5 per share for services received in connection with a
private placement offering.
F-11
<PAGE>
Note 8 - Income Taxes
As of June 30, 1999, the Company had net deferred tax assets of
approximately $765,321, which has been offset in full by a
valuation allowance as the Company is still in the development
stage and has not generated any revenue or income. This deferred
tax asset is comprised of unused federal and state net operating
losses and credits that can be used to reduce taxes through 2019
for federal and 2004 for state purposes.
Note 9 - Subsequent Events
In August 1999, the Company issued 53,000 shares of "restricted"
common stock to four accredited investors at a price of $10.00
per share pursuant to an ongoing private offering of the
Company's Common Stock, resulting in net proceeds of
approximately $530,000 to the Company.
In August 1999, the Company received a short-term loan from a
shareholder in the amount of $500,000. The loan bears interest
at 12% per annum and is due and payable on or before October 18,
1999. The loan is collateralized by an agreement to issue
100,000 shares of restricted common stock of the Company.
<PAGE>
REORGANIZATION AGREEMENT
AGREEMENT AND
PLAN OF REORGANIZATION
DATED DECEMBER 22, 1998
BETWEEN
CD-ROM YEARBOOK COMPANY, INC.
AND
2THEMART.COM, INC.
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement")
is entered into this 22th day of December, 1998 by and between
CD-Rom Yearbook Company, Inc., an Oklahoma corporation ("CD-Rom" and
"Surviving Corporation") and 2themart.com, a Nevada corporation,
("2themart.com").
RECITALS
A. Subject to and in accordance with the terms and
conditions of this Agreement and pursuant to the Certificate of
Merger attached hereto as Exhibit A ("Certificate of Merger"), the
parties intend that 2themart.com will merge with and into Cd-Rom
(the "Merger"), whereby at the Effective Time, all of the
2themart.com Common Stock will be converted into seventeen million
eight hundred thousand (17,800,000) shares of common stock of Cd-Rom
(the "Cd-Rom Common Stock").
B. For federal income tax purposes, it is intended that the
Merger shall qualify as a tax free reorganization within the meaning
of Section368(a)(1)(A) of the Code.
C. The parties hereto desire to set forth certain
representations, warranties and covenants made by each to the other
as an inducement to the consummation of the Merger.
AGREEMENT
NOW, THEREFORE, in reliance on the foregoing recitals and in
and for the consideration and mutual covenants set forth herein, the
parties agree as follows:
1. CERTAIN DEFINITIONS.
1.1 "AFFILIATE" shall have the meaning set forth in the
rules and regulations promulgated by the Commission pursuant to the
Securities Act.
1.2 "CLOSING" shall mean the closing of the transactions
contemplated by this Agreement.
1.3 "CLOSING DATE" shall mean the date of the Closing.
1.4 "CODE" shall mean the United States Internal Revenue
Code of 1986, as amended.
1.5 "COMMISSION" shall mean the United States Securities and
Exchange Commission.
<PAGE>
1.6 "DISSENTING SHARES" shall mean those shares held by
holders who perfect their appraisal rights under the applicable
state laws.
1.7 "EFFECTIVE TIME" shall mean the date and time of the
effectiveness of the Merger under Oklahoma and Nevada law.
1.8 "GAAP" shall mean generally accepted accounting principles.
1.9 "2THEMART.COM COMMON STOCK" shall mean all of the
outstanding shares of Common Stock of 2themart.com.
1.10 "MATERIAL ADVERSE EFFECT" shall mean a material adverse
effect on the operations, assets or financial condition (financial
or otherwise) of an entity considered as a whole.
1.11 "SECURITIES ACT" shall mean the Securities Act of 1933,
as amended, or any similar federal statute and the rules and
regulations thereunder, all as the same shall be in effect at the time.
1.12 "TRANSACTION DOCUMENTS" shall mean all documents or
agreements attached as an exhibit or schedule hereto, and set forth
on the Table of Contents.
2. PLAN OF REORGANIZATION.
2.1 THE MERGER. Subject to the terms and conditions of this
Agreement and the Certificate of Merger, 2themart.com shall be
merged with and into Cd-Rom in accordance with the applicable
provisions of the laws of the States of Oklahoma and Nevada, and
with the terms and conditions of this Agreement and the Certificate
of Merger, so that:
(A) At the Effective Time (as defined in Section 2.5
(below)), 2themart.com shall be merged with and into Cd-Rom. As a
result of the Merger, the separate corporate existence of
2themart.com shall cease, and Cd-Rom shall continue as the surviving
corporation, and shall succeed to and assume all of the rights and
obligations of 2themart.com in accordance with the laws of Delaware.
(B) The Certificate of Incorporation and Bylaws of
Cd-Rom in effect immediately prior to the Effective Time shall be
the Certificate of Incorporation and Bylaws, respectively, of the
Surviving Corporation after the Effective Time unless and until
further amended as provided by law.
(C) Subject to the terms of this Agreement, the
directors and officers of 2themart.com immediately prior to the
Effective Time shall be the directors and officers of the Surviving
Corporation after the Effective Time. Such directors and officers
shall hold their
<PAGE>
position until the election and qualification of
their respective successors or until their tenure is otherwise
terminated in accordance with the Bylaws of the Surviving Corporation.
2.2 CONVERSION OF SHARES. Each share of 2themart.com Common
Stock, issued and outstanding immediately prior to the Effective
Time, will, by virtue of the Merger, and at the Effective Time, and
without further action on the part of any holder thereof, be
converted into one share of fully paid and nonassessable share of
Cd-Rom Common Stock.
2.3 FRACTIONAL SHARES. No fractional shares of Cd-Rom
Common Stock will be issued in connection with the Merger.
2.4 THE CLOSING. Subject to termination of this Agreement
as provided in Section 5 (below), the Closing shall take place at
the offices of M. Richard Cutler, 610 Newport Center Drive, Suite
800, Newport Beach, CA 92660, as soon as possible upon the
satisfaction or waiver of all conditions set forth in Section 3
hereof, or such other time and place as is mutually agreeable to the
parties.
2.5 EFFECTIVE TIME. Simultaneously with the Closing, the
Certificate of Merger shall be filed in the office of the Secretary
of State of the State of Oklahoma. The Merger shall become
effective immediately upon the filing of the Certificate of Merger
with such office.
2.6 TAX FREE REORGANIZATION. The parties intend to adopt
this Agreement as a tax-free plan of reorganization and to
consummate the Merger in accordance with the provisions of
Section368(a)(1)(A) of the Code. Each party agrees that it will not
take or assert any position on any tax return, report or otherwise
which is inconsistent with the qualification of the Merger as a
reorganization within the meaning of Section368(a) of the Code.
Cd-Rom represents now, and as of the Closing Date, that it presently
intends to continue 2themart.com's historic business or use a
significant portion of 2themart.com's business assets in a business.
3. MUTUAL COVENANTS.
3.1 REGULATORY FILINGS; CONSENTS; REASONABLE EFFORTS.
Subject to the terms and conditions of this Agreement, 2themart.com
and Cd-Rom shall use Cd-Rom respective best efforts to (i) make all
necessary filings with respect to the Merger and this Agreement
under the Securities Act, and applicable blue sky or similar
securities laws and shall use all reasonable efforts to obtain
required approvals and clearances with respect thereto and shall
supply all additional internally prepared information requested in
connection therewith; (ii) make merger notification or other
appropriate filings with federal, state or local governmental bodies
or applicable foreign governmental agencies and shall use all
reasonable efforts to obtain required approvals and clearances with
respect thereto and shall supply all additional internally prepared
information requested in connection therewith; (iii) obtain all
consents, waivers, approvals, authorizations and orders required in
connection with the authorization, execution and delivery of this
Agreement and the consummation of the Merger; and (iv) take, or
cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary, proper or advisable to
<PAGE>
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement.
3.2 FURTHER ASSURANCES. Prior to and following the Closing,
each party agrees to cooperate fully with the other parties and to
execute such further instruments, documents and agreements and to
give such further written assurances, as may be reasonably requested
by any other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect
the intents and purposes of this Agreement.
4. CLOSING MATTERS.
4.1 FILING OF CERTIFICATE OF MERGER. On the date of the
Closing, but not prior to the Closing, the Certificate of Merger
shall be filed with the offices of the Secretary of State of the
State of Oklahoma and the merger of 2themart.com with and into
Cd-Rom shall be consummated.
4.2 EXCHANGE OF CERTIFICATES. At or within 30 days of the
Closing, Cd-Rom shall deliver and issue to each shareholder of
2themart.com a certificate or certificates representing the Cd-Rom
Common Stock issuable to such shareholder as consideration in this
Merger.
4.3 DELIVERY OF DOCUMENTS. On or before the Closing, the
parties shall deliver the documents, and shall perform the acts
specified herein, including delivery of the counterpart signature
pages of the Transaction Documents executed by 2themart.com and/or
Cd-Rom, as the case may be. All documents which 2themart.com shall
deliver or cause to be delivered shall be in form and substance
reasonably satisfactory to Cd-Rom. All documents which Cd-Rom shall
deliver or cause to be delivered shall be in form and substance
reasonably satisfactory to 2themart.com.
5. TERMINATION OF AGREEMENT.
5.1 TERMINATION. This Agreement may be terminated at any
time prior to the Closing by the mutual written consent of each of
the parties hereto. This Agreement may also be terminated and
abandoned by either 2themart.com or Cd-Rom, if the Merger is not
effected by January 31, 1999. Any termination of this Agreement
under this Section 5.1 shall be effected by the delivery of written
notice of the terminating party to the other parties hereto.
5.2 LIABILITY FOR TERMINATION. Any termination of this
Agreement pursuant to this Section 5 shall be without further
obligation or liability upon any party in favor of any other party
hereto; provided, that if such termination shall result from the
willful failure of a party to carry out its obligations under this
Agreement, then such party shall be liable for losses incurred by
the other parties as set forth in Section 5.5. The provisions of
this Section 5.2 shall survive termination.
<PAGE>
5.3 CERTAIN EFFECTS OF TERMINATION. In the event of the
termination of this Agreement as provided in Section 5.1 herein,
each party, if so requested by the other party, will (i) return
promptly every document (other than documents publicly available)
furnished to it by the other party (or any subsidiary, division,
associate or affiliate of such other party) in connection with the
transactions contemplated hereby, whether so obtained before or
after the execution of this Agreement, and any copies thereof which
may have been made, and will cause its representatives and any
representatives of financial institutions and investors and others
to whom such documents were furnished promptly to return such
documents and any copies thereof any of them may have made; or (ii)
destroy such documents and cause its representatives and such other
representatives to destroy such documents, and such party shall
deliver a certificate executed by its president or vice president
stating to such effect; and
5.4 REMEDIES. No party shall be limited to the termination
right granted in Section 5.1 hereto by reason of the nonfulfillment
of any condition to such party's closing obligations but may, in the
alternative, elect to do one of the following:
(A) proceed to close despite the nonfulfillment of any
closing condition, it being understood that consummation of the
transactions contemplated hereby shall be deemed a waiver of any
misrepresentation or breach of warranty or covenant and of any
party's rights and remedies with respect thereto to the extent that
the other party shall have actual knowledge of such
misrepresentation or breach and the Closing shall nonetheless take
place; or
(B) decline to close, terminate this Agreement as
provided in Section 5.1 hereof, and thereafter seek damages to the
extent permitted in Section 5.5 hereof.
5.5 ARBITRATION. Any dispute arising out of this Agreement,
or its performance or breach, shall be resolved by binding
arbitration conducted by JAMS/Endispute under the JAMS/Endispute
Rules for Complex Arbitration (the "JAMS Rules"). This arbitration
provision is expressly made pursuant to and shall be governed by the
Federal Arbitration Act, 9 U.S.C. Sections 1-14. The parties hereto
agree that pursuant to Section 9 of the Federal Arbitration Act, a
judgment of the United States District Courts for the Southern
District of California shall be entered upon the award made pursuant
to the arbitration. A single arbitrator, who shall have the
authority to allocate the costs of any arbitration initiated under
this paragraph, shall be selected according to the JAMS Rules within
ten (10) days of the submission to JAMS/Endispute of the response to
the statement of claim or the date on which any such response is
due, whichever is earlier. The arbitrator shall conduct the
arbitration in accordance with the Federal Rules of Evidence. The
arbitrator shall decide the amount and extent of pre-hearing
discovery which is appropriate. The arbitrator shall have the power
to enter any award of monetary and/or injunctive relief (including
the power issue permanent injunctive relief and also the power to
reconsider any prior request for immediate injunctive relief by
either of the parties and any order as to immediate injunctive
relief previously granted or denied by a court in response to a
request therefor by either of the parties), including the power to
render an award as provided in Rule 43 of the JAMS Rules; provided,
however, that the arbitrator shall not have the power to award
punitive damages under any circumstances (whether styled as
punitive, exemplary, or treble
<PAGE>
damages, or any penalty or punitive type of damages) regardless of whether
such damages may be available under applicable law, the parties hereby
waiving Cd-Rom rights to
recover any such damages. The arbitrator shall award the prevailing
party its costs and reasonable attorneys' fees, and the losing party
shall bear the entire cost of the arbitration, including the
arbitrator's fees. All arbitration shall be held in Orange County,
California. In addition to the above court, the arbitration award
may be enforced in any court having jurisdiction over the parties
and the subject matter of the arbitration. Notwithstanding the
foregoing, the parties irrevocably submit to the nonexclusive
jurisdiction of the state and federal courts situated where the
respondent is domiciled or resides as of the Effective Date in any
action to enforce an arbitration award. With respect to any request
for immediate injunctive relief, that state and federal courts in
Orange County, California shall have exclusive jurisdiction and
venue over any such disputes.
6. MISCELLANEOUS.
6.1 GOVERNING LAWS. It is the intention of the parties
hereto that the internal laws of the State of California
(irrespective of its choice of law principles) shall govern the
validity of this Agreement, the construction of its terms, and the
interpretation and enforcement of the rights and duties of the
parties hereto.
6.2 BINDING UPON SUCCESSORS AND ASSIGNS. Subject to, and
unless otherwise provided in, this Agreement, each and all of the
covenants, terms, provisions, and agreements contained herein shall
be binding upon, and inure to the benefit of, the permitted
successors, executors, heirs, representatives, administrators and
assigns of the parties hereto.
6.3 SEVERABILITY. If any provision of this Agreement, or
the application thereof, shall for any reason and to any extent be
invalid or unenforceable, the remainder of this Agreement and
application of such provision to other persons or circumstances
shall be interpreted so as best to reasonably effect the intent of
the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and
enforceable provision which will achieve, to the extent possible,
the economic, business and other purposes of the void or
unenforceable provision.
6.4 ENTIRE AGREEMENT. This Agreement, the exhibits hereto,
the documents referenced herein, and the exhibits thereto,
constitute the entire understanding and agreement of the parties
hereto with respect to the subject matter hereof and thereof and
supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect hereto and
thereto. The express terms hereof control and supersede any course
of performance or usage of the trade inconsistent with any of the
terms hereof.
6.5 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original as
against any party whose signature appears thereon and all of which
together shall constitute one and the same instrument. This
Agreement
<PAGE>
shall become binding when one or more counterparts hereof,
individually or taken together, shall bear the signatures of all of
the parties reflected hereon as signatories.
6.6 EXPENSES. Except as provided to the contrary herein,
each party shall pay all of its own costs and expenses incurred with
respect to the negotiation, execution and delivery of this
Agreement, the exhibits hereto, and the other Transaction Documents.
6.7 AMENDMENT AND WAIVERS. Any term or provision of this
Agreement may be amended, and the observance of any term of this
Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only by a
writing signed by the party to be bound thereby. The waiver by a
party of any breach hereof for default in payment of any amount due
hereunder or default in the performance hereof shall not be deemed
to constitute a waiver of any other default or any succeeding breach
or default.
6.8 SURVIVAL OF AGREEMENTS. All covenants, agreements,
representations and warranties made herein shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby notwithstanding any investigation
of the parties hereto and shall terminate on the date one year after
the Closing Date.
6.9 NO WAIVER. The failure of any party to enforce any of
the provisions hereof shall not be construed to be a waiver of the
right of such party thereafter to enforce such provisions.
6.10 ATTORNEYS' FEES. Should suit be brought to enforce or
interpret any part of this Agreement, the prevailing party shall be
entitled to recover, as an element of the costs of suit and not as
damages, reasonable attorneys' fees to be fixed by the court
(including without limitation, costs, expenses and fees on any
appeal). The prevailing party shall be the party entitled to
recover its costs of suit, regardless of whether such suit proceeds
to final judgment. A party not entitled to recover its costs shall
not be entitled to recover attorneys' fees. No sum for attorneys'
fees shall be counted in calculating the amount of a judgment for
purposes of determining if a party is entitled to recover costs or
attorneys' fees.
6.11 NOTICES. Any notice provided for or permitted under
this Agreement will be treated as having been given when (a)
delivered personally, (b) sent by confirmed telex or telecopy, (c)
sent by commercial overnight courier with written verification of
receipt, or (d) mailed postage prepaid by certified or registered
mail, return receipt requested, to the party to be notified, at the
address set forth below, or at such other place of which the other
party has been notified in accordance with the provisions of this
Section 6.11.
2themart.com:
2themart.com, Inc.
135 E. Reno Avenue, Suite F-7
Las Vegas, NV 89119
Facsimile No: 702-795-8691
<PAGE>
Cd-Rom:
CD-Rom Yearbook Company, Inc.
c/o Ricky Chow
320 S. Garfield Avenue, Suite 106
Alhambra, CA 91801
Facsimile No.: 626-282-1398
Such notice will be treated as having been received upon actual
receipt.
6.12 TIME. Time is of the essence of this Agreement.
6.13 CONSTRUCTION OF AGREEMENT. This Agreement has been
negotiated by the respective parties hereto and Cd-Rom attorneys and
the language hereof shall not be construed for or against any party.
The titles and headings herein are for reference purposes only and
shall not in any manner limit the construction of this Agreement
which shall be considered as a whole.
6.14 NO JOINT VENTURE. Nothing contained in this Agreement
shall be deemed or construed as creating a joint venture or
partnership between any of the parties hereto. No party is by
virtue of this Agreement authorized as an agent, employee or legal
representative of any other party. No party shall have the power to
control the activities and operations of any other and Cd-Rom status
is, and at all times, will continue to be, that of independent
contractors with respect to each other. No party shall have any
power or authority to bind or commit any other. No party shall hold
itself out as having any authority or relationship in contravention
of this Section 6.14.
6.15 PRONOUNS. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine or neuter, singular or
plural, as the identity of the person, persons, entity or entities
may require.
6.16 FURTHER ASSURANCES. Each party agrees to cooperate
fully with the other parties and to execute such further
instruments, documents and agreements and to give such further
written assurances, as may be reasonably requested by any other
party to better evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement.
6.17 ABSENCE OF THIRD-PARTY BENEFICIARY RIGHTS. No
provisions of this Agreement are intended, nor shall be interpreted,
to provide or create any third-party beneficiary rights or any other
rights of any kind in any client, customer, affiliate, stockholder,
partner of any party hereto or any other person or entity except
employees and stockholders of 2themart.com specifically referred to
herein, and, except as so provided, all provisions hereof shall be
personal solely between the parties to this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
CD-ROM YEARBOOK COMPANY, INC. 2THEMART.COM, INC.
an Oklahoma corporation a Nevada corporation
By:/s/Ricky Chow By:/s/Dominic J. Magliarditi
Ricky Chow, President Dominic J. Magliarditi, President
ATTEST: ATTEST:
/s/Ricky Chow /s/Dominic J. Magliarditi
Ricky Chow, Secretary Dominic J. Magliarditi, Secretary
<PAGE>
2themart.com, Inc.
Secretary's Certificate
The undersigned, Dominic J. Magliarditi, Secretary of
2themart.com, Inc., a Nevada corporation and one of the merging
corporations mentioned in the foregoing Agreement and Plan of
Reorganization (the "Agreement"), certifies that the Agreement has
been adopted by the written consent of the shareholders of all of
the outstanding stock of 2themart.com, Inc. entitled to vote thereon
in accordance with the provisions of the General Corporation Law of
the State of Nevada.
Dated: December 22, 1998
/s/Dominic J. Magliarditi
Dominic J. Magliarditi
Secretary of 2themart.com, Inc.
<PAGE>
CD-Rom Yearbook Company, Inc.
Secretary's Certificate
The undersigned, Ricky Chow, Secretary of CD-Rom Yearbook
Company, Inc., an Oklahoma corporation and one of the merging
corporations mentioned in the foregoing Agreement and Plan of
Reorganization (the "Agreement"), certifies that the Agreement has
been adopted by the affirmative vote of the holders of a majority of
the outstanding Common Stock of CD-Rom Yearbook Company, Inc.
entitled to vote thereon at a meeting held pursuant to notice in
accordance with the provisions of the Oklahoma General Corporation Law.
Dated: December 22, 1998
/s/Ricky Chow
Ricky Chow
Secretary of CD-Rom Yearbook, Inc.
FEE: $1.00 per $1,000.00 [FILED
On Authorized Capital DEC 2, 1992
MINIMUM FEE: $50.00 OKLAHOMA SECRETARY
OF STATE
FOR OFFICE USE ONLY]
CERTIFICATE OF INCORPORATION
(PROFIT)
FILE IN DUPLICATE
PRINT CLEARLY
TO THE SECRETARY OF STATE OF THE STATE OF OKLAHOMA:
1. The name of this corporation is: S.K.B. DESIGN INC.
2. The address of the registered office in the State of Oklahoma and the
name of the registered agent at such address are: HARVEY BRYANT, 2108
RAINTREE, EDMOND, OK 73013
3. The duration of the corporation is: PERPETUAL
4. The purpose or purposes for which the corporation is formed are: TO DO
DESIGN WORK AND TO ENGAGE IN ANY LAWFUL ACT OF ACTIVITY FOR WHICH
CORPORATIONS MAY BE ORGANIZED UNDER THE GENERAL CORPORATION LAW OF OKLAHOMA
5. The aggregate number of shares which the corporation shall have authority
to issue,
the designation of each class, the number of shares of each class, and the
par value of
the shares of each class are as follows:
NUMBER OF SHARES SERIES PAR VALUE PER SHARE
(Or, if without par value, so state)
Common 25,000,000 .001
Preferred 25,000,000 .001
TOTAL NO. SHARES: 50,000,000 TOTAL AUTHORIZED CAPITAL: $50,000
FEE: $50.00
[FILED
(Minimum)
DEC 22 1997
OKLAHOMA SECRETARY
FILE IN DUPLICATE
OF STATE]
PRINT CLEARLY
SOS CORP. KEY:
AMENDED
CERTIFICATE OF INCORPORATION
(After Receipt of Payment of Stock)
PLEASE NOTE: This form MUST be filed with a letter from the Oklahoma Tax
Commission stating the franchise tax has been paid for the current
fiscal year. If the authorized capital is increased in excess of fifty
thousand dollars ($50,000.00), the filing fee shall be an amount equal to
one-tenth of one percent (1/10 of 1%) of such increase.
TO THE SECRETARY OF STATE OF THE STATE OF OKLAHOMA, 101 State
Capitol Bldg., Oklahoma City, OK 73105:
The undersigned Oklahoma corporation, for the purpose of amending its
certificate of incorporation as provided by Section 1077 of the
Oklahoma General Corporation Act, hereby certifies:
1. A. The name of the corporation is: S. K. B. Design, Inc.
B. As amended: The name of the corporation has been changed to:
CD-ROM Yearbook Company, Inc.
2. A. No change, as filed {X}.
B. As amended: The address of the registered office in the
State of Oklahoma and the name of the registered agent at
such address is:
3. A. No Change, as filed {X}.
B. As amended: The duration of the corporation is:
4. A. No change, as filed {X}.
B. As amended: The purpose or purposes for which the
corporation is formed are:
5. A. No change, as filed {X}.
B. As amended: The aggregate number of the authorized shares,
itemized by class, par value of shares, shares without par
value, and series, if any, within a class is:
<PAGE>
That at a meeting of the Board Of Directors,, a resolution was duly
adopted setting forth the foregoing proposed amendment(s) to the Certificate
of Incorporation of said corporation, declaring said amendment(s) to be
advisable and calling a meeting of the shareholders of said
corporation for consideration thereof.
That thereafter, pursuant to said resolution of its Board of
Directors, a meeting of the shareholders of said corporation was duly called and
held, at which meeting the necessary number of shares as required by statute
were voted in favor of the amendment(s).
SUCH AMENDMENT(S) WAS DULY ADOPTED IN ACCORDANCE WITH 18 O.S., 11077.
IN WITNESS WHEREOF, said corporation has caused this certificate to be
signed by its {X} President and attested by its {X} Secretary, this
30th day Of November, 1997.
/s/Daniel J. McClory
By {X} President
Daniel J. McClory
(PLEASE PRINT NAME)
ATTEST:
/s/Keith C. Moore
By {X} Secretary
Keith C. Moore
(PLEASE PRINT NAME)
CERTIFICATE OF MERGER
MERGING 2THEMART.COM, INC., A NEVADA CORPORATION
INTO
CD-ROM YEARBOOK COMPANY, INC., AN OKLAHOMA CORPORATION
CD-ROM Yearbook Company, Inc., an Oklahoma corporation,
pursuant to Section 1082 of the Oklahoma General Corporation Act,
DOES HEREBY CERTIFY:
FIRST. That the name and state of incorporation of CD-ROM
YEARBOOK COMPANY, INC. is Oklahoma and that the name and state of
incorporation of 2THEMART.COM, INC. is Nevada;
SECOND. That an Agreement And Plan of Reorganization merging
2THEMART.COM, INC., a Nevada corporation into CD-ROM YEARBOOK
COMPANY, INC., an Oklahoma corporation, has been approved, adopted,
certified, executed and acknowledged by each of the constituent
corporations in accordance with the provisions of Sections 1082(c)
and 1073 of the Oklahoma General Corporation Act;
THIRD. That the name of the surviving corporation is
2THEMART.COM, INC., formerly CD-ROM YEARBOOK COMPANY, INC.;
FOURTH. That the certificate of incorporation of CD-ROM
YEARBOOK COMPANY, INC. shall be the certificate of incorporation of
the surviving corporation, except that the name of the surviving
corporation shall be 2THEMART.COM, INC.;
FIFTH. That the executed Agreement and Plan of Reorganization
is on file at the principal place of business of the surviving
corporation, which is located at 135 E. Reno Ave., Suite F-7, Las
Vegas, Nevada 89119;
SIXTH. That a copy of the Agreement and Plan of Reorganization
will be furnished by the surviving corporation, on request and
without cost, to any shareholder of any constituent corporation;
SEVENTH. That the authorized common stock of 2THEMART.COM,
INC., a Nevada corporation, is 25,000,000 shares, par value $0.001;
and
EIGHTH. This merger shall be effective at 5:00 p.m. Central
Daylight Savings Time on the date this certificate is filed with the
Oklahoma Secretary of State.
<PAGE>
IN WITNESS WHEREOF, CD-ROM YEARBOOK COMPANY, INC. has caused
this certificate to be signed by its President, and attested by its
Secretary this 6th day of January, 1999.
ATTEST: CD-ROM YEARBOOK COMPANY, INC.
/s/Ricky Chow /s/Ricky Chow
Ricky Chow, Secretary Ricky Chow, President
MINIMUM FEE $50.00
If the authorized capital is [FILED
increased in excess of fifty
thousand dollars
($50,000.00), the filing fee FEB 16 1999
shall be an amount equal to
one-tenth of one percent OKLAHOMA SECRETARY
(1/10th of 1%) of such OF STATE
increase.
FILE IN DUPLICATE
PRINT CLEARLY
AMENDED
CERTIFICATE OF INCORPORATION
(AFTER RECEIPT OF PAYMENT OF STOCK)
TO: OKLAHOMA SECRETARY OF STATE
2300 N. Lincoln Blvd., Room 101, State Capitol Building
Oklahoma City, Oklahoma 73105-4897
(405)-522-4560
PLEASE NOTE: This form MUST be filed with a letter from the Oklahoma
Tax Commission, Franchise Tax Department, stating that the franchise
tax, due yearly, has been paid for the current fiscal year.
The undersigned Oklahoma corporation, for the purpose of amending its
certificate of incorporation as provided by Section 1077 of the
Oklahoma General Corporation Act, hereby certifies:
1. A. The name of the corporation is:
2TheMart. com, Inc.
B. As amended: The name of the corporation has been changed to:
N/A
(Please Note: The new name of the corporation MUST contain one of the
following words: association, company, corporation, club,
foundation, fund,
incorporated, institute, society, union, syndicate or limited or one
of the abbreviations co., corp., inc. or ltd.)
2. The name of the registered agent and the street address of the
registered office in the State of Oklahoma is:
Paracorp Incorporated 217 N. Harvey, #213 Oklahoma City, Oklahoma
73102
3. The duration of the corporation is: Perpetual
[RECEIVED
FEB 16 1999
OKLAHOMA SECRETARY
OF STATE]
<PAGE>
4. The aggregate number of the authorized shares, itemized by
class, par value of shares, shares without par value, and series, if any,
within a class is:
NUMBER OF SHARES SERIES PAR VALUE PER SHARE
(If any) (Or, if without par value, so state)
COMMON 50,000,000 $0.0001
PREFERRED 25,000,000 $0.0001
5. Set forth clearly any and all amendments to the certificate of
incorporation which are desired to be made:
That the shares of Common stock of tile Corporation be
increased from 25,000,000 shares, par value, $0.0001, to 50,000,000 shares, par
value $0.0001
That the registered agent for service of process be changed to
Paracorp Incorporated, 217 N. Harvey, #213, Oklahoma City, Oklahoma 73102
That at a meeting of the Board of Directors, a resolution was duly
adopted setting forth the foregoing proposed amendment(s) to the Certificate of
Incorporation of said corporation, declaring said amendment(s) to be.
advisable and calling a meeting of the shareholders of said
corporation for consideration thereof.
That thereafter, pursuant to said resolution of its Board of
Directors, a meeting of the shareholders of said corporation was duly called and
held, at which meeting the necessary number of shares as required by statute
were voted in favor of the amendment(s).
IN WITNESS WHEREOF, said corporation has caused this
certificate to be signed by its President or Vice President and attested by its
Secretary or Assistant Secretary, this ___________ day of 19__.
/s/Dominic Magliarditi
By President
Dominic Magliarditi
ATTEST:
/s/Dominic Magliarditi
By Secretary
Dominic Magliarditi
BYLAWS
OF
SKB DESIGN, INC.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation shall
be established and maintained at 2108 RAINTREE, EDMUND, OKLAHOMA 73013.
SECTION 2. OTHER OFFICES. The corporation may have other offices, either
within or without the State of Oklahoma, at such place or places as the
Board of Directors may from time to time appoint or the business of the
corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. Annual meetings of stockholders for the election
of directors and for such other business as may be stated in the notice of
the meeting, shall be held at such place, either within or without the State
of Oklahoma, and at such time and date as the Board of Directors, by
resolution, shall determine and as set forth in the notice of the meeting.
In the event the Board of Directors fails to so determine the time, date and
place of meeting, the annual meeting of stockholders shall be held at the
registered office of the corporation in Oklahoma on the second Tuesday of
May of each year at 11 a.m., local time.
<PAGE>
If the date of the annual meeting shall fall upon a legal holiday, the
meeting shall be held on the next succeeding business day. At each annual
meeting, the stockholders entitled to vote shall elect a Board of Directors
and they may transact such other corporate business as shall be stated in
the notice of the meeting.
SECTION 2. OTHER MEETINGS. Meetings of stockholders for any purpose other
than the election of directors may be held at Such time and place as shall
be stated in the notice of the meeting.
SECTION 3. VOTING. Each stockholder entitled to vote in accordance with the
terms of the Certificate of Incorporation and in accordance with the
provisions of these Bylaws shall be entitled to one vote, in person or by
proxy, for each share of stock entitled to vote held by such stockholder,
but no proxy shall be voted after three years from its date unless such
proxy provides for a longer period. Upon the demand of any stockholder, the
vote fox, directors and the vote upon any question before the meeting, shall
be by ballot. All elections for directors shall be decided by plurality vote
of the shares present in person or represented by proxy at the meeting and
entitled to vote on the election of directors; and all other questions shall
be decided by the affirmative vote of the majority of shares present in
person or represented by proxy at the meeting and entitled to vote on the
subject matter, except as otherwise provided by the Certificate of
Incorporation or the laws of the State of Oklahoma.
<PAGE>
A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary
business hours for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present.
SECTION 4. QUORUM. Except as otherwise required by law,
by the Certificate of Incorporation or by these Bylaws, the
presence, in person or by proxy, of stockholders holding a majority
of the stock of the corporation entitled to vote shall constitute
a quorum at all meetings of the stockholders. In case a quorum
shall not be present at any meeting, a majority in interest of the
stockholders entitled to vote thereat, present in person or by
proxy, shall have power to adjourn the meeting from time to time,
wit without hour notice other than announcement at the meeting until
the requisite amount of stock entitled to vote shall be present. At any such
adjourned meeting at which the requisite amount of stock entitled to vote
shall be represented, any business may be transacted which might have been
transacted at the meeting as originally noticed; but only those stockholders
entitled to vote at
<PAGE>
the meeting as originally noticed shall be entitled to vote at any
adjournment or adjournments thereof.
SECTION 5. SPECIAL MEETINGS. Special meetings of the stockholders for any
purpose or purposes may be called by the President or Secretary, or by
resolution of the directors.
SECTION 6. NOTICE OF MEETINGS. Written notice, stating the place, date and
time of the meeting, and the general nature of the business to be
considered, shall be given to each stockholder entitled to vote thereat at
his address as it appears on the r ecords of the corporation, not less than
ten (10) nor more than sixty (60) days before the date of the meeting. No
business other than that stated in the notice shall be transacted at any
meeting without the unanimous consent of all the stockholders entitled to
vote thereat.
SECTION 7. ACTION WITHOUT MEETING. Unless otherwise provided by the
Certificate of Incorporation, any action required to be taken at any annual
or special meeting of stockholders, or any action which may be taken at any
annual or special meeting, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action
so taken, shall be signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote
thereon were present and voted. Prompt notice of the taking of the corporate
action without a meeting by less than
<PAGE>
unanimous written consent shall be given to those stockholders who have not
consented in writing.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM. The number of directors shall be one or more.
The directors shall be elected at the annual meeting of the stockholders and
each director shall be elected to serve until his or her successor shall be
elected and shall qualify. Directors need not be stockholders.
SECTION 2. RESIGNATIONS. Any director, member of a committee or other office
may resign at any time. Such resignation shall be made in writing, and shall
take effect at the time Specified therein, and if no time be specified, at
the time of its receipt by the President or Secretary. The acceptance of a
resignation shall not be necessary to make it effective.
SECTION 3. VACANCIES. If the office of any director, member of a committee
or other officer becomes vacant, the remaining directors in office, though
less than a quorum by a majority vote, may appoint any qualified person to
fill such vacancy, who shall hold office for the unexpired term and until
his successor shall be duly chosen.
SECTION 4. REMOVAL. Any director or directors may be removed either for or
without cause at any time by the affirmative vote of the holders of a
majority of all the shares of stock outstanding and entitled to vote, at a
special meeting of the stockholders called for the purpose and the vacancies
thus created
<PAGE>
may be filled, at the meeting held for the purpose of removal, by the
affirmative vote of a majority in interest of the stockholders entitled to
vote.
SECTION 5. INCREASE OF NUMBER. The number of directors
may be increased by amendment of these Bylaws by the affirmative
vote of a majority vote of a majority in interest of the
stockholders, at the annual meeting or at a special meeting called
for that purpose, and by like vote the additional directors may be
Cho sen at such meeting to hold office until the next annual
election and until their successors are elected and qualify.
SECTION 6. POWERS. The Board of Directors shall exercise all of the powers
of the corporation except such as are by law, or by the Certificate of
Incorporation of the corporation or by these Bylaws conferred upon or
reserved to the stockholders.
SECTION 7. COMMITTEES. The Board of Directors may, by resolution or
resolutions passed by a majority of the whole board, designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. Any such committee, to the extent provided in the resolution of
the Board of Directors, or in these Bylaws, shall have and may exercise all
the powers and authority of the Board of Directors in the management of the
business and affairs of the corporation, and may authorize the seal of the
corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the
<PAGE>
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending
the Bylaws of the corporation; and, unless the resolution, these Bylaws or
the Certificate of Incorporation expressly so provide, no such committee
shall have the power or authority to declare a dividend or to authorize the
issuance of stock.
SECTION 8. ANNUAL MEETINGS. The annual meeting of the Board may be held at
such time and place as shall be f ixed by a vote of the shareholders at the
annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order to legally constitute such meeting.
SECTION 9. REGULAR MEETINGS. Regular meetings of the directors may be held
without notice at such places and times as shall be determined from time to
time by resolution of the directors.
SECTION 10. SPECIAL MEETINGS. Special meetings of the board may be called by
the President or by the Secretary on the written request of any two (2)
directors on at least two (2) days' notice to each director and shall be
held at such place or places as may be determined by the directors, or as
shall be stated in the call of the meeting.
SECTION 11. QUORUM. A majority of the directors shall constitute a quorum
for the transaction of business. If at any meeting of the board there shall
be less than a quorum present, a
<PAGE>
majority of those present may adjourn the meeting from time to time until a
quorum is obtained, and no further notice thereof need be given other than
by announcement at the meeting which shall be so adjourned.
SECTION 12. COMPENSATION. Directors shall not receive any stated salary for
their services as directors or as members of committees, but by resolution
of the board a fixed fee and expenses of attendance may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity as
an -officer, agent or otherwise, and receiving compensation therefor.
SECTION 13. ACTION WITHOUT MEETING. Any action required or Permitted to be
taken at any meeting of the Board of Directors, or of any committee thereof,
may be taken without a meeting, if prior to such action a written consent
thereto is signed by all members of the board, or of such committee as the
case may be, and such written consent is filed with the minutes of
proceedings of the board or committee.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the corporation shall be a President, a
Treasurer, and a Secretary, all of whom shall be elected by the Board of
Directors and who shall hold office until their successors are elected and
qualified. In addition, the Board of Directors may elect a Chairman, one (1)
or more Vice Presidents and such Assistant Secretaries and Assistant
<PAGE>
Treasurers as they may deem proper. None of the officers of the corporation
need be directors. The officers shall be elected at the, first meeting of
the Board of Directors after each annual meeting. More than two (2) offices
may be held by the same person.
SECTION 2. OTHER OFFICERS AND AGENTS. The Board of Directors may appoint
such other officers and agents as it may deem advisable, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board of Directors.
SECTION 3. CHAIRMAN. The Chairman of the Board of Directors, if one be
elected, shall preside at all meetings of the Board of Directors and he
shall have and perform such other duties as from time to time may be
assigned to him by the Board of Directors.
SECTION 4. PRESIDENT. The President shall be the chief executive officer of
the corporation and shall have the general powers and duties of supervision
and management usually vested in the office of President of a corporation.
He shall preside at all meetings of the stockholders if present thereat, and
in the absence or non-election of the Chairman of the Board of Directors, at
all meetings of the Board of Directors, and shall have general supervision,
direction and control of the business of the corporation. Except as the
Board of Directors shall authorize the execution thereof in some other
manner, he shall execute bonds, mortgages and other contracts in behalf of
the corporation, and shall cause the seal to be affixed to any instrument
requiring it
<PAGE>
and when so affixed the seal shall be attested by the signature of the
Secretary or an Assistant Secretary.
SECTION 5. VICE PRESIDENT. Each Vice President shall have such powers and
shall perform such duties as shall be assigned to him by the directors.
SECTION 6. TREASURER. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts
and disbursements in books belonging to the corporation. He shall deposit
all monies and other valuables in the name and to the credit of the
corporation in such depositories as may be designated by the Board of
Directors.
SECTION 7. SECRETARY. The Secretary shall give, or cause to be given, notice
of all meetings of stockholders and directors, and all other notices
required by law or by these Bylaws, and in case of his absence or refusal or
neglect so to do, any such notice may be given by any person thereunto
directed by the President, or by the directors, or stockholders, upon whose
requisition the meeting is called as provided in these Bylaws. He shall
record all the proceedings of the meetings of the corporation and. of the
directors in a book to be kept for that purpose, and shall perform such
other duties as may be assigned to him by the directors or the President. He
shall have custody of the seal of the corporation and shall affix the same
to all instruments requiring it, when authorized by the directors or the
President, and attest the same.
<PAGE>
SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. Assistant
Treasurers and Assistant Secretaries, if any, shall be elected and shall
have such powers and shall perform such duties as shall be assigned to them,
respectively, by the directors.
SECTION 9. SALARIES. The salaries of all officers of the corporation shall
be fixed by the Board of Directors.
SECTION 10. REMOVAL. Any officer elected o r appointed by the Board of
Directors may be removed from office, with or without cause, at any time by
the affirmative vote of a majority of the directors present at any meeting
of the Board at which a quorum is present.
ARTICLE V
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK. Certificates of stock, signed by the
President or Vice President, and the Treasurer or an Assistant Treasurer, or
Secretary or an Assistant Secretary, shall be issued to each stockholder
certifying the number of shares owned by him in the corporation. Any of or
all the signatures may be facsimiles.
SECTION 2. LOST CERTIFICATES. A new certificate of stock may be issued in
the place of any certificate theretofore issued by the corporation, alleged
to have been lost or destroyed, and the directors may, in their discretion,
require the owner of the lost or destroyed certificate, or his legal
representatives, to give the corporation a bond, in such sum as they may
direct, not
<PAGE>
exceeding double the value of the stock, to indemnify the corporation
against any claim that may be made against it on account of the alleged loss
of any such certificate, or the issuance of any such new certificate.
SECTION 3. TRANSFER OF SHARES. The shares of stock of the corporation shall
be transferable only upon its books by the holders thereof in person or by
their duly authorized attorneys or legal representatives, and upon such
transfer the old certificates shall be surrendered to the corporation by the
delivery thereof to the person in charge of the stock and transfer books and
ledgers, or to such other person as the directors may designate, by whom
they shall be cancelled, and new certificates shall thereupon be issued. A
record shall be made of each transfer and whenever a transfer shall be made
for collateral security, and not absolutely, it shall be so expressed in the
entry of the transfer.
SECTION 4. STOCKHOLDERS RECORD DATE. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or to express consent to
corporation action in writing without a meeting, or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or
exchange of stock or for the purpose of any other lawful action, the Board
of Directors may fix, in advance, a record date, which shall not be more
than sixty (60) nor less than ten (10) days before the date of such meeting,
nor more than sixty (60) days prior to any other
<PAGE>
action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 5. REGISTERED STOCKHOLDERS. The corporation shall be entitled to
treat the holder of record of any share or shares as the holder in fact
thereof, and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share on the part of any other person,
whether or not it shall have express or other notice thereof, except as may
be otherwise expressly provided by the laws of Oklahoma.
SECTION 6. DIVIDENDS. Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the
capital stock of the corporation as and when they deem expedient. Before
declaring any dividend there may be set apart out of any funds of the
corporation available for dividends, such sum or sums as the directors from
or as a reserve fund to meet contingencies or for equalizing dividends or
for such other purposes as the directors shall deem conducive to the
interests of the corporation.
SECTION 7. SEAL. The corporate seal shall be circular in form and shall
contain the name of the corporation and the words "CORPORATE SEAL." Said
seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
<PAGE>
SECTION 8. FISCAL YEAR. The fiscal year of the corporation shall be
determined by resolution of the Board of Directors.
SECTION 9. CHECKS. All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
corporation shall be signed by such officer or officers, agent or agents of
the corporation, and in such manner as shall be determined from time to time
by resolution of the Board of Directors.
SECTION 10. NOTICE. Whenever any notice is required by these Bylaws to be
given, personal notice is not meant unless expressly so stated, and any
notice so required shall be deemed to be sufficient if given by depositing
the same in the United States mail, postage prepaid, addressed to the person
entitled thereto at his address as it appears on the records of the
corporation, and such notice shall be deemed to have been given on the day
of such mailing. Stockholders not entitled to vote shall not be entitled to
receive notice of any meetings except as otherwise provided by Statute.
SECTION 11. WAIVER OF NOTICE. Whenever any notice whatever is required to be
given under the provisions of any law, or under the provisions of the
Certificate of Incorporation of the corporation or these Bylaws, a waiver
thereof in writing, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent
thereto.
<PAGE>
ARTICLE VI
INDEMNIFICATION OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS
To the extent and in the manner permitted by the laws of the State of
Oklahoma, and specifically as is permitted under Section 1031 of the
Oklahoma General Corporation Act, the corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, other than an action by or in the .right of
the corporation, by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement.
ARTICLE VII
AMENDMENTS
These Bylaws may be altered or repealed and Bylaws may be made at any annual
meeting of the stockholders or at any special meeting thereof if notice of
the proposed alteration or repeal or Bylaw or Bylaws to be made be contained
in the notice of such
special meeting, by the affirmative vote of a majority of the stock issued
and outstanding and entitled to vote thereat, or by the affirmative vote of
a majority of the Board of Directors, at any regular meeting of the Board of
Directors, or at any special
<PAGE>
meeting of the Board of Directors, if notice of the proposed alteration or
repeal, or Bylaw or Bylaws to be made, be contained
in the notice of such special meeting.
DATED: December 2, 1992
CONSENT TO SUBLEASE
THIS AGREEMENT ("Agreement") is made as of February 3, 1999, by and
among 18301 Associates L.P. ("Landlord"), Cruttenden Roth Inc., a California
Corp.("Sublessor"), and 2TheMart.com, Inc., an Oklahoma Corp. ("Subtenant").
Recitals
1. Landlord is the landlord and Sublessor is the tenant under a lease
dated March 8, 1991 as amended (the "Prime Lease"), for approximately 20,341
square feet of space (the "Premises"), located on the seventh floor of the
office building, known as Suite 700 located at 18301 Von Karman, Irvine, CA
(the "Building"). Capitalized terms not otherwise defined herein shall have
the meanings given them in the Prime Lease.
2. Sublessor has requested that Landlord consent to the subletting by
Sublessor to Subtenant of a portion of the Premises ("Sublet Premises"),
pursuant to the Sublease dated February 3, 1999 (the "Sublease"), to which
this Agreement is attached.
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants contained herein, Landlord hereby consents to the Sublease subject
to and upon the following terms and conditions, as to each of which
Sublessor and Subtenant expressly agree:
1. Nothing contained in this Agreement shall:
(a) operate as a consent to or approval or ratification by Landlord of
any specific provisions of the Sublease or as a representation or warranty
by Landlord, or cause Landlord to be estopped or bound in any way by any of
the provisions of the Sublease, or
(b) be construed to modify, waive or affect (I) any of the provisions,
covenants or conditions in the Prime Lease, or (ii) any of Sublessor's
obligations under the Prime Lease, or (iii) any rights or remedies of
Landlord under the Prime Lease or otherwise or to enlarge or increase
Landlord's obligations or Sublessor's rights under the Prime Lease or
otherwise, or
(C)be deemed to make Subtenant a third party beneficiary of the
provisions of the Prime Lease, or create or permit any direct right of
action by Subtenant against Landlord for breach of the covenant of quiet
enjoyment or any other covenant of Landlord under the Prime Lease, or
(d) be construed to waive any past, present or future breach or default
on the part of Sublessor under the Prime Lease.
2. The Sublease shall be subject and subordinate at all times to the
Prime Lease and to all of its provisions, covenants and conditions. Except
for rent payable under Prime Lease, Subtenant shall perform faithfully and
be bound by all of the terms, covenants, conditions, provisions and
agreements of the Prime Lease (including, without limitation, insurance
requirements, as though Subtenant were the "Tenant" under the Prime Lease),
for the
<PAGE>
period covered by the Sublease, but only to the extent applicable to the
Sublet Premises. In case of any conflict between the provisions of the Prime
Lease and the provisions of the Sublease, the provisions of the Prime Lease
shall prevail unaffected by the Sublease.
3. Neither the Sublease nor this consent thereto shall release or
discharge Sublessor from any liability under the Prime Lease. Sublessor
shall remain liable and responsible for the full performance and observance
of all the provisions, covenants and conditions set forth in the Prime Lease
on the part of Sublessor to be performed and observed. Any breach or
violation of any provision of the Prime Lease by Subtenant shall be deemed
to be, and shall constitute, a default by Sublessor in fulfilling such
provision.
4. This consent by Landlord shall not be assignable or transferable and
shall not be construed as a consent by Landlord to any further subletting by
Sublessor or Subtenant or to any assignment by Sublessor of the Prime Lease
or assignment by Subtenant of the Sublease, whether or not the Sublease
purports to permit the same, and, without limiting the generality of the
foregoing, both Sublessor and Subtenant agree that Subtenant has no right
whatsoever to assign, mortgage or encumber the Sublease nor to sublet any
portion of the Sublet Premises or permit any portion of the Sublet Premises
to be used or occupied by any other party or in any other manner to transfer
all or any part of Subtenant's rights with respect to the Sublease or the
Sublet Premises. All provisions in the Prime Lease restricting or
prohibiting transfer of Tenant's interests shall also apply to restrict or
prohibit transfer by Subtenant (but, except only as otherwise expressly
provided to the contrary in this Agreement, no provisions in the Prime Lease
permitting any transfer by Sublessor shall apply to permit any transfer by
Subtenant). This consent may not be construed as a consent by Landlord to
any modification, amendment, extension or renewal of the Sublease, without
Landlord's prior written consent.
5. Sublessor hereby absolutely and irrevocably assigns to Landlord any
and all rights to receive rent and other consideration from any sublease,
including the Sublease, and agrees that Landlord, as assignee or as
attorney-in-fact for Sublessor for purposes hereof, or a receiver for
Sublessor appointed on landlord's application may (but shall not be
obligated to) collect such rents and other consideration and apply the same
toward Sublessor's obligations to Landlord under the Prime Lease; provided,
however, that Landlord grants to Sublessor at all times prior to occurrence
of any breach or default by Sublessor under the Prime Lease a revocable
license to collect such rents (which license shall automatically and without
notice be and be deemed to have been revoked and terminated immediately upon
any Event of Default under the Prime Lease). Sublessor and Subtenant agree
that upon receipt of notice from Landlord directing Subtenant to pay the
sublease rent directly to Landlord, Subtenant shall pay rent due under the
Sublease to Landlord. Landlord shall credit Sublessor with any rent received
by Landlord under such assignment, but the acceptance of any payment on
account of rent from Subtenant as the result of any such default shall in no
manner whatsoever serve to release Sublessor from any liability under the
Prime Lease, except to the extent of%- rent so credited.
6. Upon the expiration or any earlier termination of the term of the
Prime Lease, the voluntary or involuntary surrender of the Prime Lease by
Sublessor to Landlord, or a mutual cancellation of the Prime Lease by
Landlord and Sublessor, the Sublease and its term shall terminate and
Subtenant shall vacate the Premises on or before the effective date of such,
<PAGE>
termination. In the event of the failure of Subtenant to so vacate the
Premises, Landlord shall be entitled to enforce against Subtenant all of the
rights and remedies available to a landlord against a tenant holding over
after the expiration of a term.
7. Both Sublessor and Subtenant shall be and continue to be liable for
the payment of (a) all bills rendered by Landlord for charges incurred by
Subtenant for services and materials supplied to the Sublet Premises beyond
that which is required by the terms of the Prime Lease, and (b) any
additional costs incurred by Landlord for maintenance and repair of the
Sublet Premises as the result of Subtenant occupying the Sublet Premises
(including, but not limited to, any excess cost to Landlord of services
furnished to or for the Sublet Premises).
8. Notwithstanding anything to the contrary contained in the Sublease,
Landlord may require that requests for any service to be supplied by
Landlord to the Sublet Premises, requests to alter the Sublet Premises,
requests to further sublet the Sublet Premises or assign the Sublease, and
other requests for Landlord's consent or approval be made by Sublessor on
behalf of Subtenant.
9. Sublessor and Subtenant each covenants and agrees that under no
circumstances shall Landlord be liable for any brokerage commission or other
charge or expense in connection with the Sublease.
10. Sublessor and Subtenant understand and acknowledge that Landlord's
consent to the Sublease expressed herein is not a consent to any improvement
or alteration work to be performed in the Sublet Premises (including without
limitation any improvement work contemplated in the Sublease), that
Landlord's consent for such work must be separately sought and that any such
work shall be subject to all the provisions of the Prime Lease with respect
thereto.
11. In the event of any conflict between the provisions of this
Agreement and the provisions of the Sublease, the provisions of this
Agreement shall prevail.
12. In addition to complying with all provisions of the Prime Lease
concerning estoppel certificates, Sublessor and Subtenant each also agree to
execute and deliver from time to time upon request such other estoppel
certificates as Landlord may require with respect to the Sublease.
13. In the event of any arbitration or action or proceeding at law or
in equity between or among the parties to this Agreement as a consequence of
any controversy, claim or dispute relating to this agreement or the breach
thereof or to enforce any of the provisions and/or rights hereunder, the
unsuccessful party or parties to such arbitration, action or proceeding
shall pay to the successful party or parties costs and expenses, including
attorneys' fees incurred therein by such successful party or parties.
14. Each of Subtenant and Sublessor, jointly and severally, shall
indemnify, defend and hold Landlord harmless from and against any and all
claims arising out of (i) Subtenant's use of the Premises or any part
thereof, or (ii) any activity, work or other thing done,
<PAGE>
permitted or suffered by Subtenant in or about the Building or the Premises,
or any part thereof, or (iii) any breach or default in the performance of
any obligation on Subtenant's part to be performed under the terms of the
Sublease or this Agreement, (iv) any act or negligence of Subtenant or any
officer, agent, employee, contractor, servant, invitee or guest of
Subtenant, or (v) any claim for brokerage commissions or other charges or
expenses in connection with the Sublease; and in each case from and against
any and all damages, losses, liabilities, lawsuits, j udgments, and costs
and expenses (including without limitation reasonable attorneys' fees)
arising in connection with any such claim or claims as described in clauses
(i) through (v) above, or any action or proceeding brought thereon. If any
such action or proceeding be brought against Landlord, the indemnifying
party, upon notice from Landlord, shall defend the same at the indemnifying
party's sole expense by counsel reasonably satisfactory to Landlord.
Subtenant, as all material part of the consideration to Landlord, hereby
assumes all risk of damage or loss to property or injury or death to
persons, in, upon or about the Premises, from any cause, and Subtenant
hereby waives all claims in respect thereof against Landlord.
15. This Agreement shall be construed in accordance with the laws of
the State of California and, together with the Sublease and the Prime Lease,
contains the entire agreement of the parties hereto with respect to the
subject matter hereof and may not be changed or terminated orally or by
course of conduct.
16. This Agreement is hereby incorporated into the Sublease and shall
be attached to the Sublease.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
LANDLORD:
18301 ASSOCIATES L.P.
a California limited partnership
By: CORNERSTONE HOLDINGS, LLC
a Delaware limited liability company
Its General Partner
By:/s/Robert Paratte
Name:Robert Paratte
Title: Authorized Signatory
SUBLESSOR: CRUTTENDEN ROTH INCORPORATED,
a California corporation
By:/s/Arnold Krause
<PAGE>
Name:
Title:
SUBTENANT: 2TheMart.com, Inc.
an Oklahoma Corporation
By:/s/Dominic J. Magliarditi
Name: Dominic J. Magliarditi
Title: President
<PAGE>
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD SUBLEASE
(Long-form to be used with pre-1996 AIR leases)
1. Parties. This Sublease, dated, for reference purposes only February 3,
1999, is made by and between Cruttenden Roth Incorporated, a California
Corporation, formerly Cruttenden & Co., Inc., a California Corporation
("Sublessor") and 2TheMart.com. , an Oklahoma Corp. ("Sublessee").
2. Premises. Sublessor hereby subleases to Sublessee and Sublessee hereby
subleases from Sublessor for the term, at the rental. and upon all of the
conditions set forth herein, that certain real property, including all
improvements therein, and commonly known by the street address of 18201 Von
Karman, Suite 790, Irvine located in the County of Orange, State of
California and generally described as (describe briefly the nature of the
property) the sublease space located on the seventh (7th) floor only
consisting of approximately 20,341 rentable square feet. The office building
is a class "A" eleven story building.
("Premises").
3. Term.
3.1 Term. The term of this Sublease shall be for approx 28.5 months
commencing on February 12, 1999 or upon final approval by the landlord and
ending on June 27, 2001 unless sooner terminated pursuant to any provision
hereof.
3.2 Delay In Commencement. Sublessor agrees to use its best commercially
reasonable efforts to deliver possession of the Promises by the commencement
date. If, despite said efforts, Sublessor is unable to deliver possession as
agreed, Sublessor shall not be subject to any liability therefor, nor shall
such failure affect the validity of this Sublease. Sublessee shall not,
however, be obligated to pay Rent or perform its other obligations until it
receives possession of the Promises. If possession is not delivered within
sixty days after the commencement date, Sublessee may, at its option, by
notice in writing within ten days after the end of such sixty day period,
cancel this Sublease, in which event the Parties shall be discharged from
all obligations hereunder. If such written notice is not received by
Sublessor within said ten day period, Sublessee's right to cancel shall
terminate, Except as otherwise provided, if possession is not tendered to
Sublessee when required and Sublessee does not terminate this Sublease, as
aforesaid, any period of rent abatement that Sublessee would otherwise have
enjoyed shall run from the date of delivery of possession and continue for a
period equal to what Sublessee would otherwise have enjoyed under the terms
hereof, but minus any days of delay caused by the acts or omissions of
Sublessee, if possession is not delivered within 120 days after the
commencement date, this Sublease shall automatically terminate unless the
Parties agree, in writing, to the contrary.
4. Rent.
4.1Base Rent. Sublessee shall pay to Sublessor as Base Rent for the Premises
equal monthly payments of $*see below in advance, on the First day of each
month of the term hereof. Sublessee shall pay Sublessor upon the execution
hereof $32,070.50 as Base Rent for the 3 at two (2) months of occupancy Base
Rent for any period during the term hereof which is for less than one month
shall be a pro rata portion of the monthly installment.
*MONTHS 00-01 $6,604.50
02-3.5 $25,466.00
4.5-28.5 $35,596.75
4.2 Rent Defined. All monetary obligations of Sublessee, to Sublessor under
the terms of this Sublease (except for the Security Deposit) are deemed to
be rent ("Rent'). Rent shall be payable in lawful money of the United States
to Sublessor at the address stated herein or to such other persons or at
such other places as Sublessor may designate in writing.
5. Security Deposit. Sublessee shall deposit with Sublessor upon execution
hereof $71,193.50** ** PROVIDED SUBLESSEE 1S NOT IN DEFAULT UNDER TH1S
SUBLEASE, SUBLESSEE SHALL BE ABLE TO APPLY ONE-HALF (1/2) OF THE SECURITY
DEPOSIT IN THE AMOUNT OF $35,596.75 TOWARDS THE RENT FOR, THE FOURTEENTH
(14TH) MONTH OF THE SUBLEASE TERM.
as security for Sublessee's faithful performance of Sublessee's obligations
hereunder. If Sublessee fails to pay Rent or other charges due hereunder, or
otherwise defaults with respect to any provision of (his Sublease, Sublessor
may use, apply or retain all or any portion of said deposit for the payment
of any Rent or other charge in default or for the payment of any other sum
to which Sublessor may become obligated by reason of Sublessee's default, or
to compensate Sublessor for any loss or damage which Sublessor may suffer
thereby. If Sublessor so uses or applies all of any portion of said deposit,
Sublessee shall within ten days after written demand therefore forward to
Sublessor an amount sufficient to restore said Deposit to the full amount
provided for herein and Sublessee's failure to do so shall he a material
breach of this Sublease. Sublessor shall not be required to keep said
Deposit separate from its general accounts. If Sublessee performs all of
Sublessee's obligations hereunder, said Deposit, or so much thereof as has
not therefore been applied by Sublessor, shall be returned , without payment
of interest to Sublessee (or at Sublessor's option, to the last assignee, if
any, of Sublessee's interest hereunder) at the expiration of the term
hereof, and after Sublessee has vacated the Premises. No trust relationship
is created herein between Sublessor and Sublessee with respect to said
Security Deposit.
6. Use
6.1 Agreed Use. The Premises shall be used and occupied only for an
Internet firm and related office uses and for no other purpose.
6.2 Compliance. Sublessor warrants that the improvements on the Premises
comply with all applicable covenants or restrictions of record and
applicable building codes, regulations and ordinances ('Applicable
Requirements') in effect on the commencement date. Said warranty does not
apply to the use to which Sublessee will put the Premises or to any
alterations or utility installations made or to be made by Sublessee. NOTE:
Sublessee is responsible for determining whether or not the zoning is
appropriate for its intended use, and acknowledges that past uses of the
Premises may no longer be allowed. If the premises do not comply with said
<PAGE>
warranty, Sublessor shall, except as otherwise provided, promptly after
receipt of written notice from Sublessee setting forth with specificity the
nature and extent of such non-compliance, rectify the same at Sublessor's
expense. If Sublessee does not give Sublessor written notice of a
non-compliance with this warranty within six months following the
commencement date, correction of that non-compliance shall be the obligation
of Sublessee at its sole cost and expense. If the Applicable Requirements
are hereafter changed so as to require during the term of this Sublease the
construction of an addition to or an alteration of the Building, the
remediation of any Hazardous Substance, or the reinforcement or other
physical modification of the Building ("Capital Expenditure''), Sublessor
and Sublessee shall allocate the cost of such work as follows:
(a) If such Capital Expenditures are required as a result of the specific
and unique use of the Premises by Sublessee as compared with uses by tenants
in general, Sublessee shall be fully responsible for the cost thereof
provided, however, that if such Capital Expenditure is required during the
last two years of this Sublease and the cost thereof exceeds six months'
Base Rent, Sublessee may instead terminate this Sublease unless Sublessor
notifies Sublessee in writing, within ton days after receipt of Sublessees'
termination notice that Sublessor has elected to pay the difference between
(he actual cast thereof and the amount equal to six months' Base Rent. If
the Parties elect termination, Subleases shall immediately cease the use of
the Promises which requires such Capital Expenditure and deliver to
Sublessor written notice specifying a termination date at least ninety days
thereafter. Such termination date shall, however, in no event be earlier
then the last day that Sublessee could legally utilize the Promises without
commencing such Capital Expenditure,
(b) If such Capital Expenditure is not the result of the specific and unique
use of the Premises by Sublessee (such as governmentally mandated seismic
modifications, then Sublessor shall pay for said Capital Expenditure and the
cost thereof shall be prorated between the Sublessor and Subleases and
Subleases shall only be obligated to pay, each month during the remainder of
the term of this Sublease, on the date on which Rent is due, an amount equal
to the product of multiplying the cost of such Capital Expenditure by a
traction, the numerator of which is one, and the denominator of which is the
number of months of the useful life of such Capital Expenditure as such
useful life is specified pursuant to Federal income tax regulations or
guidelines for depreciation thereof (including interest on the unamortized
balance as is then commercially reasonable in the judgment of Sublessor's
accountant), with Subleases reserving the right to prepay its obligation at
any time. Provided, however, that if such Capital Expenditure is required
during the last two years of this Sublease or in Sublessor reasonably
determines that it is not economically feasible to pay its share thereof,
Sublessor shall have the option to terminate this Sublease upon ninety days
prior written notice to Sublessee unless Sublessee notifies Sublessor, in
writing, within ten days after receipt of Sublessor's termination notice
that Sublessee will pay for such Capital Expenditure, if Sublessor does not
elect to terminate, and falls to tender its share of any such Capital
Expenditure. Sublessee may advance such funds and deduct same, with
interest, from Rent until Sublessor's share of such costs have been fully
paid. It Sublessee is unable to finance Sublessor's share, or if the balance
of the Rent due and payable for the remainder of this Sublease is not
sufficient to fully reimburse Sublessee on an offset basis, Subleases shall
have the right to terminate this Sublease upon ten days written notice to
Sublessor,
(C) Notwithstanding the above, the provisions concerning Capital
Expenditures are intended to apply only to non-voluntary, unexpected, and
new Applicable Requirements. If the Capital Expenditures are instead
triggered by Sublessee as a result of an actual or proposed change in use,
change in intensity of use. or modification to the Premises then, and in
that event, Sublessee shall be fully responsible for the cost thereof, and
Sublessee shall not have any right to terminate this Sublease.
6.3 Acceptance of Premises and Lessee. Sublessee acknowledges that:
(a) it has been advised by Brokers to satisfy itself with respect to the
condition of the Premises (including but not limited to the electrical, HVAC
and fire sprinkler systems, security, environmental aspects, and compliance
with Applicable Requirements), and their suitability for Subleases's
intended use,
(b) Subleases has made such investigation as it deems necessary with
reference to such matters and assumes all responsibility therefor as the
same relate to its occupancy of the Promises, and
(C) neither Sublessor, Sublessor's agents, nor any Broker has made any
oral or written representations or warranties with respect to said matters
other than as set forth in this Sublease.
In addition, Sublessor acknowledges that:
(a) Broker has made no representations, promises or warranties concerning
Sublessee's ability to honor the Sublease or suitability to occupy the
Promises, and
(b) it is Sublessor's sole responsibility to investigate the financial
capability and/or suitability of all proposed tenants.
7. Master Lease
7.1 Sublessor is the lessee of the Premises by virtue of a lease,
hereinafter the "Master Lease a copy of which is attached hereto marked
Exhibit 1 wherein 18301 Associate, LP, formerly KZ3, a California limited
partnership is the lessor, hereinafter the "Master Lessee'
7.2 This Sublease is and shall be at all times subject and subordinate to
the Master Lease.
7.3 The terms, conditions and respective obligations of Sublessor and
Subleases to each other under this Sublease shall be the terms and
conditions of the Master Lease except for those provisions of the Master
Lease which are directly contradicted by this Sublease
in which event the terms of this Sublease document shall control over the
Master Lease. Therefore, for the purposes of this Sublease, wherever in the
Master Lease the word "Lessor" is used it shall be deemed to mean the
Sublessor herein and wherever in the Master Lease the word "Lessee" is used
it shall be deemed to mean the Sublessee herein.
7.4 During the term of this Sublease and for all periods subsequent for
obligations which have arisen prior to the termination of this Sublease.
Sublessee does hereby expressly assume and agree to perform and comply with,
for the benefit of Sublessor and Master Lessor, each and every obligation of
Sublessor under the Master Lease except for the following paragraphs which
are excluded therefrom:
Paragraphs 1(1) (m) (o) (p) (q) (r) (s) and exhibit 'B' work letter.
7.5 The obligations that Subleases has assumed under paragraph 7.4 hereof
are hereinafter referred to as the "Sublessee's
Assumed Obligations". The obligations that Sublessee has not assumed under
paragraph 7.4 hereof are hereinafter referred to as the
"Sublessor's Remaining Obligations"
7.6 Sublessee shall hold Sublessor free and harmless from all liability,
judgments, costs. damages, claims or demands, including reasonable attorneys
fees, arising out of Sublessee's failure to comply with or perform
Sublessee's Assumed Obligations.
7.7 Sublessor agrees to maintain the Master Lease during the entire term of
this Sublease, subject, however, to any earlier termination of the Master
Lease without the fault of the Sublessor. and to comply with or perform
Sublessor's Remaining Obligations and to hold Sublessee free and harmless
from all liability, judgments, costs, damages, claims or demands arising out
of Sublessor's failure to comply with or perform Sublessor's Remaining
Obligations.
7.8 Sublessor represents to Sublessee that the Master Lease is in full force
and effect and that no default exists on the part of any Party to the Master
Lease.
8.Assignment of Sublease and Default.
8.1 Sublessor hereby assigns and transfers to Master Lessor the Sublessor's
interest in this sublease, subject however to the provisions of Paragraph
8.2 hereof.
8.2 Master Lessor, by executing this document, agrees that until a Default
shall occur in the performance of Sublessor's Obligations under the Master
Lease, that Sublessor may receive, collect and enjoy the Rent accruing under
this Sublease. However, if Sublessor shall Default in the performance of
its obligations to Master Lessor then Master Lessor may, at its option,
receive and collect, directly from Sublessee, all Rent owing and to be owed
under this Sublease. Master Lessor shall not, by reason of this assignment
of the Sublease nor by reason of the collection of the Rent from the
Sublessee, be deemed liable to Sublessee for any failure of the Sublessor to
perform and comply with Sublessor's Remaining Obligations.
8.3 Sublessor hereby irrevocably authorizes and directs Sublessee upon
receipt of any written notice from the Master Lessor stating that a Default
exists in the performance of Sublessor's obligations under the Master Lease,
to pay to Master Lessor the Rent due and to become due under the Sublease.
Sublessor agrees that Sublessee shall have the right to rely upon any such
statement and request
<PAGE>
from Master Lessor, and that Sublessee shall pay such Rent to Master Lessor
without any obligation or right to inquire as to whether such Default exists
and notwithstanding any notice from or claim from Sublessor to the contrary
and Sublessor shall have no right or claim against Sublessee for any such
Rent so paid by Subleases.
8.4 No changes or modifications shall be made to this Sublease without the
consent of Master Lessor.
9. Consent of Master Lessor.
9.1 In the event that the Master Lease requires that Sublessor obtain the
consent of Master Lessor to any subletting by Sublessor then, this Sublease
shall not be effective unless, within ton days or the date hereof, Master
Lessor signs this Sublease thereby giving its consent to this Subletting.
9.2 In the event that the obligations of the Sublessor under the Master
Lease have been guaranteed by third parties then neither this Sublease, nor
the Master Lessor's consent, shall be effective unless, within 10 days of
the date hereof, said guarantors sign this Sublease thereby giving their
consent to this Sublease.
9.3 In the event that Master Lessor does give such consent then:
(a) Such consent shall not release Sublessor of its obligations or alter the
primary liability of Sublessor to pay the Rent and perform and comply with
all of the obligations of Sublessor to be performed under the Master Lease.
(b) The acceptance of Rent by Master Lessor from Sublessee or anyone else
liable under the Master Lease shall not be deemed a waiver by Master Lessor
of any provisions of the Master Lease.
(C) The consent to this Sublease shall not constitute a consent to any
subsequent subletting or assignment.
(d) In the event of any Default of Sublessor under the Master Lease, Master
Lessor may proceed directly against Sublessor. any guarantors or anyone else
liable under the Master Lease or this Sublease without first exhausting
Master Lessor's remedies against any other person or entity liable thereon
to Master Lessor.
(e) Master Lessor may consent to subsequent sublettings and assignments of
the Master Lease or this Sublease or any amendments or modifications thereto
without notifying Sublessor or anyone else liable under the Master Lease and
without obtaining their consent and such action shall not relieve such
persons from liability.
(f) In the event that Sublessor shall Default in its obligations under the
Master Lease, then Master Lessor, at its option and without being obligated
to do so, may require Sublessee to attorn to Master Lessor in which event
Master Lessor shall undertake the obligations of Sublessor under this
Sublease from the time of the exercise of said option to termination of this
Sublease but Master Lessor shall not be liable for any prepaid Rent nor any
Security Deposit paid by Sublessee, nor shall Master Lessor be liable for
any other Defaults of the Sublessor under the Sublease.
9.4 The signatures of the Master Lessor and any Guarantors of Sublessor at
the end of this document shall constitute their consent to the terms of this
Sublease.
9.5 Master Lessor acknowledges that, to the best of Master Lessor's
knowledge, no Default presently exists under the Master Lease of obligations
to be performed by Sublessor and that the Master Lease is in full force and
effect.
9.6 In the event that Sublessor Defaults under its obligations to be
performed under the Master Lease by Sublessor, Master Lessor agrees to
deliver to Sublessee a copy of any such notice of default. Sublessee shall
have the right to cure any Default of Sublessor described in any notice of
default within ten days after service of such notice of default on
Sublessee, If such Default is cured by Sublessee then Sublessee shall have
the right of reimbursement and offset from and against Sublessor.
10. Brokers Fee.
10.1 Upon execution hereof by all parties, Sublessor shall pay to Charles
Dunn Company. a licensed real estate broker, ("Broker"), a fee as set forth
in a separate agreement between Sublessor and Broker, or in the event there
is no such separate agreement, the sum of $ pursuant to agreement for
brokerage services rendered by Broker
to Sublessor in this transaction.
10.2 Sublessor agrees that if Sublessee exercises any option or right of
first refusal as granted by Sublessor herein, or any option or right
Substantially similar thereto, either to extend the term of this Sublease,
to renew this Sublease, to purchase the Promises, or to lease or purchase
adjacent property which Sublessor may own or in which Sublessor has an
interest, then Sublessor shall pay to Broker a fee in accordance with the
schedule of Broker in effect at the time of the execution of this Sublease.
Notwithstanding the foregoing, Sublessor's obligation under this Paragraph
10.2 is limited to a transaction in which Sublessor is acting as a
Sublessor, lessor or seller.
10.3 Master Lessor agrees that if Sublessee shall exercise any option or
right of first refusal granted to Sublessee by Master Lessor in connection
with this Sublease, or any option or right substantially similar thereto,
either to extend or renew the Master Lease, to purchase the Premises or any
part thereof, or to lease or purchase adjacent property which Master Lessor
may own or in which Master Lessor has an interest. or if Broker is the
procuring cause of any other lease or sale entered into between Sublessee
and Master Lessor pertaining to the Premises, any part thereof, or any
adjacent property which Master Lessor owns or In which it has an interest,
then as to any of said transactions, Master Lessor shall pay to Broker a
fee, in cash, in accordance with the schedule of Broker in effect at the
time of the execution of this Sublease.
10.4 Any fee due from Sublessor or Master Lessor hereunder shall be due and
payable upon the exercise of any option to extend or renew, upon the
execution of any new lease, or, in the event of a purchase, at the close of
escrow.
10.5 Any transferee of Sublessor's interest in this Sublease, or of Master
Lessor's interest in the Master Lease, by accepting an assignment thereof,
shall be deemed to have assumed the respective obligations of Sublessor or
Master Lessor under this Paragraph 10, Broker shall be deemed to be a
third-party beneficiary of this paragraph 10.
11. Attorney's Fees. If any party or the Broker named herein brings an
action to enforce the terms hereof or to declare rights hereunder, the
prevailing party In any such action, on trial and appeal, shall be entitled
to his reasonable attorney's fees to be paid by the losing party as fixed by
the Court.
12. Additional Provisions. If there are no additional provisions, draw a
line from this point to the next printed word after the space left here. If
there are additional provisions place the same here.
13. Operating Expense Allowance: Sublessee shall receive a 1999 calendar
base year allowance per rentable square foot. Sublessee percentage shall be
9.264% as reflected in the amendment No. 4 to office building lease.
14. Tenant Improvements: Sublessee shall accept the premises in 'as-is'
condition and shall be solely responsible for any and all modifications to
the premises. Sublessee shall receive five (5) days of early occupancy in
the executive area in order to replace the carpet, install phone lines,
furniture, etc.
<PAGE>
ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY REAL ESTATE BROKER AS TO THE
LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS SUBLEASE OR THE
TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO:
1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
SUBLEASE.
2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF
THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE
POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PROPERTY, THE
STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND
THE SUITABILITY OF THE PREMISES FOR SUBLESSEE'S INTENDED USE.
WARNING: IF THE SUBJECT PROPERTY IS LOCATED IN A STATE OTHER THAN
CALIFORNIA, CERTAIN PROVISIONS OF THE SUBLEASE MAY NEED TO BE REVISED TO
COMPLY WITH THE LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED.
Executed at: CRUTTENDEN ROTH
INCORPORATED
on: By:/s/Arnold Krause
Address: 24 Corporate Plaza Newport Beach, CA By
"Sublessor" (Corporate
Seal)
Executed at: 2THEMART.COM, INC.
on: By:/s/Dominic J.
Magliarditi
Address: 5405 Alton Parkway Irvine, CA Its: President
"Sublessee" (Corporate
Seal)
Executed at: See page 4a
on: By
Address: 18301 Von Karman Ave . Irvine, CA By
"Master Lessor'
(Corporate Seal)
<PAGE>
18301 ASSOCIATES, L.P.
a California limited partnership
By: CORNERSTONE HOLDINGS, LLC
A Delaware limited liability company
Its General Partner
By:
Name:
Title: Authorized Signatory
Date:
<PAGE>
OFFICE BUILDING LEASE
BETWEEN
KZ3
LANDLORD
AND
CRUTTENDEN & CO., INC.
TENANT
March 8, 1991
<PAGE>
OFFICE BUILDING LEASE
TABLE OF CONTENTS
Paragraph Page
3. Terms and Definitions 1
4. Premises and Common Areas Leased 2
5. Term 3
6. Possession 3
7. Annual Basic Rent 3
8. Rental Adjustment 4
9. Security Deposit 5
10. Use 5
11. Notices 6
12. Brokers 6
13. Holding Over 6
14. Taxes on Tenant's Property 6
15. Condition of Premises 6
16. Alterations 7
17. Repairs 7
18. Liens 7
19. Entry By Landlord 8
20. Utilities and Services 8
21. Bankruptcy 8
22. Idenification and Exculpation of Landlord 8
23. Damage to Tenant's Property 9
24. Tenant's Insurance 9
25. Damage or Destruction 10
26. Eminent Domain 11
27. Defaults and Remedies 11
28. Assignment and Subletting 12
<PAGE>
29. Subordination 13
30. Estoppel Certificate 14
31. Building Planning 14
32. Rules and Regulations 14
33. Conflict of Laws 14
34. Successors and Assigns 14
35. Surrender of Premises 14
36. Professional Fees 14
37. Performance by Tenant 15
38. Mortgage Protection 15
39. Definition of Landlord 15
40. Waiver 15
41. Identification of Tenant 15
42. Parking 16
43. Force Majeure 16
44. Terms and Headings 16
45. Examination of Lease 16
46. Time 16
47. Prior Agreement or Amendments 16
48. Separability 17
49. Recording 17
50. Limitation on Liability 17
51. Traffic Impact 17
52. Air Traffic 17
53. Modification For Lender 17
54. Financial Statements 17
53. Quiet Enjoyment 17
54. Tenant as Corporation 18
<PAGE>
EXHIBITS
Exhibit Item
A. 1. Outline of Premises
2. Site Plan
B. Work Letter Agreement
C. Notice of Lease Term Dates and Tenant's Percentage
D. Standards for Utilities and Services
E. Tenant Estoppel Certificate
F. Rules and Regulations
G. Parking Rules and Regulations
H. Signage
KZ3
OFFICE BUILDING LEASE
THIS OFFICE BUILDING LEASE ("Lease") is made as of the 8th day of March,
1991 by and between KZ3, a California limited partnership ("Landlord') and
Cruttenden & Co., Inc., A California Corporation ("Tenant").
1. TERMS AND DEFINITIONS.
For the purposes of this Lease, the following terms shall have the following
definitions and meanings:
(a) Landlord: KZ3
(b) Landlord's address:
18500 Von Karman Avenue, Suite 120
Irvine, California 92715
With a copy to:
N/A
(c) Tenant: Cruttenden & Co., Inc.
(d) Building address:
18301 Von Karman Avenue
Irvine, California 92715
(e) Suite number: 100
(f) Floor(s) upon which the Premises are located: Ground
(g) Premises: Those certain premises defined in Subparagraph 2(a) below.
(h) Site: The parcel or parcels of real property defined in Subparagraph
2(a) below.
(i) Approximate rentable square feet within Premises:11,732 square feet.
provided that such amount shall be adjusted by Landlord's architect upon
completion of the working plans and specifications for the build out of the
Premises pursuant to the Work Letter Agreement, and the exact amount of
rentable square feet within the Premises shall
be determined by Landlord's architect upon completion of the improvements
pursuant to the Work Letter Agreement. Said calculations shall be made in
accordance with the method of measuring rentable office space specified in
the American National Standard institute Publication ANSI 265.1-1980 (the
"BOMA Standard").
(j) Term: ten (10) Lease Years and 0 Months.
SEE RIDER, ITEM #57
(l) Tenant Improvement Allowance: $37.00per square foot of Usable Area (as
such term is defined in the Work Letter Agreement).
(m) Tenant Improvements: All work performed by Landlord to prepare the
Premises for occupancy pursuant to the Work Letter Agreement described in
Subparagraph 2(a) below.
(n) Commencement Date: The date on which the term of this Lease shall
commence as determined in accordance with Paragraph 8 of the Work Letter
Agreement.
<PAGE>
(o) Annual Basic Rent: $211,176.00. Monthly Basic Rent: $17,598.00.
Year SEE RIDER, ITEMS #55 & #56
(p) Operating Expense Allowance: $1992 Calendar Base per rentable square
foot. The aggregate amount of rentable square feet of the Premises shall be
determined in accordance with Subparagraph 1(i).
(q) Tenant's Percentage: 5.3440, which shall be adjusted upon the
determination of the exact number of rentable square feet within the
Premises to equal a fraction whose numerator is the number of rentable
square feet within the Premises determined in accordance with Subparagraph
1(i) above and whose denominator is the approximate number
of rentable square feet within the Building as determined by Landlord's
architect in accordance with the BOMA Standard.
(r) Security Deposit: $19,357.80.
(s) Brokers: Meridian Pacific Commercial Real Estate Services.
(t) Landlord's Construction Representative: Koll Construction Company.
(u) Tenant's Construction Representative: N/A.
(v) Use: General office use for a financial services corporation.
(w) Riders:55 through 68, inclusive.
which Riders are attached to this Lease and are incorporated herein by this
reference.
2. PREMISES AND COMMON AREAS LEASED.
(a) Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
the Premises contained within the suite designated in Paragraph 1, outlined
on the Floor Plan attached hereto and marked Exhibit "A-I" and incorporated
herein by this reference, in that certain building which, together with its
related parking facilities, is located at the address designated in
Subparagraph 1(d) above (said building and said parking facilities are
herein together referred to as the "Building"), located on the parcel or
parcels of real property (the "Development") outlined on the Site Plan
attached hereto as Exhibit "A-II" and incorporated herein by this reference,
and improved or to be improved by Landlord with the Tenant Improvements
described in the Work Letter Agreement, a copy of which is attached hereto
and marked Exhibit "B" and which is incorporated herein by this reference,
said Premises being agreed, for the purposes of this Lease, to have an area
approximately the number of rentable Square feet designated in Subparagraph
1(i)(the exact number of which shall be determined in accordance with such
Subparagraph) and being situated on the floor(s) designated in Subparagraph
1(f) above. By taking possession of the Premises, Tenant accepts the Tenant
Improvements as completed or as substantially completed, and in the latter
case, Landlord and Tenant shall create a list of incomplete and/or
corrective items, which list shall be approved and acknowledged by Tenant
and which items landlord shall complete and/or correct promptly thereafter.
The parties hereto agree that said letting and hiring is upon and subject to
the terms, covenants and conditions herein set forth and Tenant covenants as
a material part of the consideration for this Lease to keep and perform each
and all of said terms, covenants and conditions by it to be kept and
performed and that this Lease is made upon the condition of such performance.
(b) Tenant shall have the nonexclusive right to use in common with other
tenants in the Building and the Development and subject to the Rules and
Regulations referred to in Paragraph 30 below the following areas ("Common
Areas") appurtenant to the Premises:
(i) The Building's common entrances, lobbies, restrooms, elevators,
stairways and accessways, loading docks, ramps, drives and platforms and any
passageways and serviceways thereto, and the common pipes, conduits, wires
and appurtenant equipment serving the Premises;
(ii) Loading and unloading areas, trash areas, parking areas, roadways,
sidewalks, walkways, parkways, driveways and landscaped areas and similar
areas and facilities appurtenant to the Building.
(c) Landlord reserves the right from time to time without unreasonable
interference with Tenant's use:
(i) To install, use, maintain, repair and replace pipes, ducts, conduits,
wires and appurtenant meters and equipment for service to other parts of the
Building above the ceiling surfaces, below the floor surfaces, within the
walls and in the central core areas, and to relocate any pipes, ducts,
conduits, wires and appurtenant meters and equipment included in the
Premises which are located in the Premises or located elsewhere outside the
Premises, and to expand the Building;
(ii) To make changes to the Common Areas, including, without limitation,
changes in the location, size, shape and number of driveways, entrances,
parking spaces, parking areas, loading and unloading areas, ingress, egress,
direction of traffic, landscaped areas and walkways;
(iii) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;
<PAGE>
(iv) To designate other adjacent land outside the boundaries of the
Building to be a part of the Common Areas;
(v) To add additional buildings and improvements to the Common Areas;
(vi) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Building or the Development, or
any portion thereof;
(vii) To do and perform such other acts and make such other changes in, to
or with respect to the Common Areas, the Building or the Development as
Landlord may, in the exercise of sound business judgment deem to be
appropriate.
3. TERM
The term of this Lease shall be for the period designated in Paragraph 1,
commencing on the Commencement Date, and ending on the expiration of such
period, unless the term hereby demised shall be sooner terminated as
hereinafter provided. The Commencement Date, the date upon which the term of
this Lease shall end, the rentable square feet within the Premises and
Tenant's Percentage shall be determined in accordance with the provisions of
Paragraph 1 and will be specified in Landlord's Notice of Lease Term Dates
and Tenant's Percentage ("Notice"), in the form of Exhibit "C" which is
attached hereto and is incorporated herein by this reference, and shall be
served upon Tenant as provided in Paragraph 9, after Landlord delivers or
tenders possession of the Premises to Tenant. The Notice shall be binding
upon Tenant unless Tenant objects to the Notice in writing served upon
Landlord as provided for in Paragraph 9 hereof, within five (5) days of
Tenant's receipt of the Notice.
4. POSSESSION.
Tenant agrees that, if Landord is unable to deliver possession of the
Premises to Tenant on the scheduled commencement of the term of this Lease
as set forth in the Work Schedule (as such term is defined in the Work
Letter Agreement), this Lease shall not be void or voidable, nor shall
Landlord be liable to Tenant for any loss or damage resulting therefrom, nor
shall the expiration date of the above term be in any way extended, but in
such event Tenant shall not be liable for any rent until Landlord tenders
possession of the Premises to Tenant with the Tenant Improvements
substantially completed. If Landord completes construction of the Tenant
Improvements prior to the date scheduled in the Work Schedule, Landlord
shall deliver possession of the Premises to Tenant upon such completion and
the term of this Lease shall thereupon commence. Notwithstanding the
foregoing, Tenant shall have a right to terminate this Lease and all
obligations thereunder in the event the premises are not substantially
completed and possession delivered to Tenant no later than September 15,
1991. Tenant's ability to cancel this lease shall be applicable only if the
delays are not the result of Tenant delays or changes in the Space Plan or
as a result of force majeure.
5. ANNUAL BASIC RENT
(a) Tenant agrees to pay landlord as Annual Basic Rent for the Premises the
Annual Basic Rent designated in Subparagraph 1(o)(subject to adjustment as
hereinafter provided) in twelve (12) equal monthly installments, each in
advance on the first day of each calendar month during the term. If the
term of this Lease commences or ends on a day other than the first day of a
calendar month, then the rental for such period shall be prorated in the
proportion that the number of days this Lease is in effect during such
period bears to thirty (30). In addition to the Annual Basic Rent, Tenant
agrees to pay as additional rental the amount of rental adjustments and
other charges required by this Lease. All rental shall be paid to Landlord,
without prior demand and without any deduction or offset, in lawful money of
the United States of America, at the address of Landlord designated in
Subparagraph 1(b) hereof or to such other person or at such other place as
Landlord may from time to time designate in writing.
<PAGE>
(c) LATE CHARGES. In the event Tenant fails to pay any installment of rent
within seven (7) days of when due or in the event Tenant fails to make any
other payment for which Tenant is obligated under this Lease within seven
(7) days of when due, then Tenant shall pay to Landlord as additional rent a
late charge equal to ten percent (10%) of the amount due to compensate
Landlord for the extra costs incurred as a result of such late payment. The
parties agree that such late charge represents a fair and reasonable
estimate of the cost that Landlord will incur by reason of late payment by
Tenant. Acceptance of any late charge shall not constitute a waiver of the
Tenant's default with respect to the overdue amount, or prevent Landlord
from exercising any of the other rights and remedies available to Landlord.
(d) If the term of this lease contains any rental abatement period, Tenant
hereby agrees that if Tenant materially breaches the Lease and/or abandons
thePremises before the end of the Lease term, or if Tenant's right to
possession is terminated by Landlord because of Tenant's breach of the
lease. Landlord shall, at its option, void the rental abatement period; and
(2) recover from Tenant, in addition to any damages due Landlord under the
terms and conditions of the Lease, rent prorated for the duration of the
rental abatement period.
6. RENTAL ADJUSTMENT.
(a) For the purposes of this Subparagraph 6(a) the following terms are
defined as follows:
TENANT'S PERCENTAGE: Tenant's Percentage shall mean that portion of the
total rentable area of the Building occupied by Tenant as set forth as a
percentage in Subparagraph l(q) above.
OPERATING EXPENSE ALLOWANCE: Operating Expense Allowance shall mean that
portion of Tenant's Percentage of the Operating Expenses which Landlord has
included in the Annual Basic Rent and which amount is set forth in
Subparagraph 1(p) above.
OPERATING EXPENSES: Operating Expenses shall consist of alldirect costs of
operation and maintenance of the Buildingand the Common Areas, including any
expansions to the Common Areas by Landlord ("Operating Expenses"), as
determined by standard accounting practices, calculated assumingthe Building
is 100% fully occupied, calculated for a full year of operation, including
the following costs by way of illustration, but not limitation: any and all
assessments Landlord must pay for the Building pursuant to any covenants,
conditions or restrictions. reciprocal easement agreements,
tenancy-in-common agreements or similar restrictions and agreements
affecting the Building or the Development; real property taxes and
assessments and any taxes or assessments hereafter imposed in lieu thereof:
rent taxes, gross receipt taxes(whether assessed against Landlord or
assessed against Tenant and paid by Landlord or both): water and sewer
charges; accounting; legal and other necessary consulting fees; the net cost
and expense of insurance for which Landlord is responsible hereunder or
which Landlord or any first mortgagee with a lien affecting the Premises
reasonably deems necessary in connection with the operation of the Building:
utilities; janitorial services; security; labor; parking charges; utilities
surcharges; or any other costs levied assessed or imposed by, or at the
direction of, or resulting from statutes or regulations or interpretations
thereof promulgated by any federal, state, regional, municipal or local
government authority in connection with the use or occupancy of the Building
or the Premises or the parking facilities serving the Building or the
Premises; the cost (amortized over such reasonable period as Landlord shall
determine together with interest at the maximum rate allowed by law on the
unamortized balance) of any capital improvements made to the Building or the
Common Areas by the Landlord or replacement of any building equipment needed
to operate the Building or the Common Areas at the same quality levels as
prior to the replacement costs incurred in the management of the Building,
if any (including supplies, wages and salaries of employees used in the
management, operation and maintenance of the Building, and payroll taxes and
similar governmental charges with respect thereto. Building management
office rental, a management fee and, in the event Landlord is directly
participating in the administration of the Building, an administrative fee
in the amount of Landlord's actual adjusted expenses, such administrative
fee not to exceed ten (10%) percent of the annual adjusted Operating
Expenses excluding therefrom such fee); air conditioning; waste disposal;
heating; ventilating; elevator maintenance; supplies; materials; equipment;
tools; repair and maintenance of the structural portions of the Building,
including the plumbing, heating, ventilating, air conditioning andelectrical
systems installed or furnished by Landlord; maintenance costs, including
utilities and payroll expenses, rental of personal property used in
maintenance, and all other upkeep of all parking and Common Areas; costs and
expenses of gardening and landscaping; maintenance of signs (other than
Tenant's signs): personal property taxes levied on or attributable to
personal property used in connection with the entire building, including the
Common Areas; reasonable audit or verification fees; and costs and expenses
ofrepairs, resurfacing, repairing, maintenance, painting, lighting,
cleaning, refuse removal, security and similar items, including appropriate
reserves. Operating Expenses shall not include depreciation on the Building
or equipment therein. Landlord's executive salaries or real estate brokers'
commissions.
As used herein, the term "real property taxes"* shall include any form of
assessment, license fee, license tax, business license fee, commercial
rental tax, levy, charge, tax or similar imposition, imposed by any
authority having the direct power to tax, including any city, county, state
or federal government, or any school, agricultural, lighting, drainage or
other improvement or special assessment district thereof, as against any
legal or equitable interest of Landlord in the Premises, including, but not
limited to, the following:
(i) any tax on Landlord's "right" to other income from the Premises or as
against Landlord's business of leasing the Premises;
*Tenant shall not be liable for any increase in real property taxes from any
assessment or reassessment of the Building ,or project to the extent that
any such increases arises out of or results from any initial sale or
transfer of all or any part of or interest in the Building by KZ3 during the
initial Lease term. Tenant shall be obligated for any such increase
resulting from any subsequent sale or transfer or resulting from any sale or
transfer that occurs after the KC1 8/85 expiration of the initial Lease term
(i.e. 4 during any option period).
(ii) any assessment, tax, fee, levy or charge in substitution,
partially or totally, of any assessment, tax, fee. levy or charge previously
included within the definition of real estate tax, including but not limited
to, any assessments, taxes, fees, levies and charges that may be imposed by
governmental agencies for such services as fire protection, street. sidewalk
and road maintenance, refuse removal and for other governmental services
formerly provided without charge to property owners or occupants. It is the
intention of Tenant and Landlord that all such new and increased
assessments, taxes, fees, levies and charges be included within the
definition of "real property taxes" for the purposes of this Lease;
(iv) any assessment, tax, fee, levy or charge upon this transaction or
any document to which Tenant is a party creating or transferring an interest
or an estate in the Promises.
Notwithstanding any provision of this Subparagraph 6(a) expressed or
implied to the contrary. "real property taxes" all not include Landlord's
federal or state income, franchise, inheritance or estate taxes.
(b) if Tenant's Percentage of the Operating Expenses paid or incurred
by Landlord for any calendar year exceeds the Operating Expense Allowance
included in Tenant's rent, then Tenant shall pay such excess as additional
rent. For each calendar year during the term of the Lease, or portion
thereof, Tenant shall pay its percentage of Landlord's estimate of the
amount by which Operating Expenses for that year shall exceed the Operating
Expense Allowance, which estimate may be changed not more than three (3)
times annually by Landlord. This estimated amount shall be divided into
twelve (12) equal monthly installments. Tenant shall pay to Landlord,
concurrently with the regular monthly rent payment next due following the
receipt of the estimate for the first calendar year of the Lease term
following 1992 an amount equal to one monthly installment multiplied by the
number of months from January 1, 1993 to the month of such payment, both
months inclusive. Subsequent installments shall be payable concurrently with
the regular monthly rent payments for the balance of that calendar year and
shall continue until the next calendar year's estimate is rendered. If, in
any calendar year, Tenant's Percentage of actual Operating Expenses is less
than the estimate for that year, then upon receipt of Landlord's statement,
any overpayment made by Tenant on the monthly installment basis shall be
credited towards the next monthly rent falling due and the estimated monthly
installments of Tenant's Percentage of Operating Expenses shall be adjusted
to reflect such lower Operating Expenses for the most recent calendar year.
Similarly, if Tenant's percentage of the actual Operating Expenses for any
calendar year is greater than the estimated payment made by Tenant for
such year, Tenant shall pay the amount of Such
difference to Landlord on the regular monthly rent payment date next
following Tenant's receipt of Landlord's statement of actual Operating
Expenses. However, if Landlord's estimate exceeds annual operating expenses
by more than 20%, Tenant shall, be credited the difference plus interest of
the then prevailing prime rate.
(C) Even though the term has expired and Tenant has vacated the
Premises, when final determination is made of Tenant's Percentage of
Operating Expenses for the year in which this Lease terminates. Tenant shall
immediately pay any increase due over the estimated expenses paid and,
conversely, any overpayment made in the event said expenses decrease shall
be rebated by Landlord to Tenant. SEE RIDER, ITEM #66
7. SECURITY DEPOSIT.
Tenant has deposited with Landlord the Security Deposit designated in
Subparagraph 1(r). Said sum shall be held by Landlord as security for the
faithful performance by Tenant of all of Tenant's obligations hereunder. If
Tenant defaults with respect to an provision of this Lease, including, but
not limited to, the provisions relating to the payment of rent. Landlord may
(but shall not be required to) use, apply or retain all or any part of this
Security Deposit for the payment of any rent or any other sum in default, or
for the payment of any other amount which Landlord may spend or become
obligated to spend by reason of Tenant's default or to compensate Landlord
for any other loss or damage which Landlord may suffer by reason of Tenant's
default. If any portion of the Security Deposit is so used or applied,
Tenant shall, upon demand, deposit cash with Landlord in an amount
sufficient to restore the Security Deposit to its original amount. Tenant's
failure to do so shall be a material breach of this Lease. Landlord shall
not be required to keep this Security Deposit separate from its general
funds, and Tenant shall not be entitled to interest on such Security
Deposit. If Tenant shall fully and faithfully perform all of its obligations
under this Lease. the Security Deposit or any balance therefore shall be
returned to Tenant (or, at Landlord's option, to the last assignee to
Tenant's interests hereunder) at the expiration of the Lease term provided
that Landlord may retain the Security Deposit until such time as any amount
due from Tenant in accordance with Paragraph 6 hereof has been determined
and paid in full. Should Landlord sell its interest in the Premises during
the term hereof and if Landlord deposits with the purchaser thereof the then
unappropriated funds deposited by Tenant as aforesaid, thereupon Landlord
shall be discharged from any further liability with respect to the Security
Deposit.
8. USE.
Tenant shall use the Premises for the uses set forth in Subparagraph
1(v) above. and shall not use or permit the Premises to be used for any
other purpose without the prior written consent of Landlord. Nothing
contained herein shall be deemed to give Tenant any exclusive right to such
use in the Building. Tenant shall not use or occupy the Premises in
violation of law or of the Certificate of Occupancy issued for the Building,
and shall, upon written notice from Landlord, discontinue any use of the
Premises which is declared by any governmental authority having jurisdiction
to be a violation of law or of said Certificate of Occupancy. Tenant shall
comply With any director of any governmental authority having jurisdiction
which shall. by reason of the nature of Tenant's use or occupancy of the
Premises, impose any duty upon Tenant or Landlord with respect to the
Premises or with respect
Landlord has supplied Tenant with and
<PAGE>
to the use or occupation thereof. Tenant shall comply with all rules,
orders, regulations and requirements of the Pacific Fire Rating Bureau or
any other organization performing a similar function. Tenant shall promptly,
upon demand, reimburse Landlord any additional premium charged for such
policy by reason of Tenant's failure to comply with the provisions of this
Paragraph. Tenant shall do or permit anything to be done in or about the
Premises which will in any way obstruct or interfere with the rights of
other tenants or occupants of the Building, or injure or annoy them, or use
or allow the Premises to be used for any improper, immoral, unlawful or
objectionable purpose, nor shall Tenant cause, maintain or permit any
nuisance in, on or about the Premises. Landlord has supplied Tenant with,
and Tenant shall comply with all restrictive covenants and obligations
created by private contracts which affect the use and operation of the
Premises, the Building, the Common Area or the Development. Tenant shall not
commit or suffer to be committed any waste in or upon the Premises and shall
keep the Premises in first class repair and appearance. Further, Tenant's
business machines and mechanical equipment which cause vibration or noise
that may be transmitted to the Building structure or to any other space in
the Building shall be so installed, maintained and used by Tenant as to
eliminate such vibration or noise.
9. NOTICES.
Any notice required or permitted to be given hereunder must be in
writing and may be given by personal delivery or by mail. and if given by
mail shall be deemed sufficiently given if sent by registered or certified
mail addressed to Tenant at the Building. or to Landlord at both of the
addresses designated in Subparagraph 1(b). Either party may specify a
different address for notice purposes by written notice to the other. except
that the Landlord may in any event use the Premises as Tenant's address for
notice purposes.
10. BROKERS.
Tenant warrants that it has had no dealings with any real estate
broker or agent in connection with the negotiation of this Lease, except for
those certain brokers whose names are set forth in Subparagraph 1(s) whose
commission shall be payable by Landlord, and that it knows of no other real
estate broker or agent who is or might be entitled to a commission in
connection with this Lease. it Tenant has dealt with any other person or
real estate broker with respect to leasing or renting space in the Building,
Tenant shall be solely responsible for the payment of any fee due said
person or firm and Tenant shall hold Landlord free and harmless against any
liability in respect thereto, including attorneys' fees and costs.
11. HOLDING OVER.
If Tenant hold over after the expiration or earlier termination of the
term hereof without the express written consent of Landlord Tenant shall
become a Tenant sufferance only, at a rental rate of one hundred twenty five
percent (125%) of the rent in effect upon the date of such expiration
(subject to adjustment as provided in Paragraph 6 hereof and prorated on a
daily basis), and otherwise subject to the terms, covenants and conditions
herein specified so far as applicable Acceptance by Landlord of rent after
such expiration or earlier termination shall not result in a renewal of this
Lease. The foregoing provisions of this Paragraph 11 are in addition to and
do not affect Landlord's right of re-entry or any rights of Landlord
hereunder or as otherwise provided by law. If Tenant fails to surrender the
Premises upon the expiration of this Lease despite demand to do so by
Landlord, Tenant shall indemnity and hold Landlord harmless from all loss or
liability, including without limitation, any claim made by any succeeding
tenant founded on or resulting from such failure to surrender and any
attorneys fees and costs. Subject to Landlord's sole discretion, if
Landlord and Tenant are negotiating in good faith towards the extension of
this Lease not provided for in Rider, Item #59, Landlord may waive this
holding over rental rate for a maximum of sixty (60) days or until Landlord
determined Tenant to be no longer negotiating in reasonably good faith
towards the extension of this Lease.
12. TAXES ON TENANT'S PROPERTY.
(a) Tenant shall be liable for and shall pay, at least ten (10) days
before delinquency, all taxes Wed against any personal property or trade
fixtures placed by Tenant in or about the Premises. If any such taxes on
Tenant's personal property or trade fixtures are levied against Landlord or
Landlord's property or if the assessed value of the Premises is increased by
the inclusion therein of a value placed upon such personal property or trade
fixtures of Tenant and if Landlord, after written notice to Tenant. pays the
taxes based upon- such increased assessment. which Landlord shall have the
right to do regardless of the validity thereof. but only under proper
protest if requested by Tenant, Tenant shall, upon demand, repay to Landlord
the taxes so levied against Landlord. or the portion of such taxes resulting
from such increase in the assessment.
(b) If the Tenant Improvements in the Premises, whether installed.
and/or paid for by Landlord or Tenant and whether or not affixed to the real
property so as to become a part thereof. are assessed for real property tax
purposes at a valuation higher than the valuation at which tenant
improvements conforming to Landlord's "Building Standard" for other space in
the Building are assessed, then the real property taxes and assessments
levied against the Building by reason of such excess assessed valuation
shall be deemed to be taxes levied against personal property of Tenant and
shall be governed by the provisions of Paragraph 12(a) above. If the records
of the County Assessor are not available or sufficiently detailed to serve
as a basis for making said determination, the actual cost of construction
shall be used.
13. CONDITION OF PREMISES.
Tenant acknowledges that neither Landlord nor any agent of Landlord
has made any representation or warranty with respect to the Premises or the
Building with the exception that the Building mechanicals shall function in
accordance with their designed use or with respect to the suitability of
either for the conduct of Tenant's business except punch list items.
<PAGE>
The taking of possession of the Premises by Tenant shall conclusively
establish that the Premises and the Building were in satisfactory condition
at such time. Without limiting the foregoing, Tenant's execution of the
Notice attached hereto as EXHIBIT "C" shall constitute a specific
acknowledgment and acceptance of the various startup inconveniences that may
be associated with the use of the Building's Common Areas such as certain
construction obstacles including scaffolding, delays in use of freight
elevator service, certain elevators not being available to Tenant, the
passage of work crews using elevators, uneven air conditioning services and
other typical conditions incident to recently constructed office buildings.
14. ALTERATIONS.
(a) Tenant shall make no alterations, additions or improvements in or
to the Premises without Landlord's prior written consent, and then only by
contractors or mechanics approved by Landlord. Tenant shall submit to
Landlord plans and specifications
for any proposed alterations, additions or improvements to the Premises, and
may, not make such alterations, additions or improvements until Landlord has
approved of such plans and specifications. Tenant shall construct such
alterations, additions or improvements in accordance with the plans and
specifications approved by Landlord, and shall not amend or modify such
plans and specifications without Landlord's prior written consent. If the,
proposed change requires the consent or approval of any lessor of a superior
lease, or the holder of a mortgage encumbering the Premises, such consent or
approval must be secured prior to the construction of such alteration,
addition or improvement that shall not be unreasonably withheld. Tenant
agrees that there shall be no construction of partitions or other
obstructions which might interfere with Landlord's free access to mechanical
installations or service facilities of the Building or interfere with the
moving of Landlord's equipment to or from the enclosures containing said
installations or facilities. All such work shall be done at such times and
in such manner as Landlord may from time to time designate. Tenant covenants
and agrees that all work done by Tenant shall be performed in full
compliance with all laws, rules. orders, ordinances, regulations and
requirements of all governmental agencies, offices and boards having
jurisdiction, and in full compliance with the rules. regulations and
requirements of the Pacific Fire Rating Bureau, and of any similar body.
Before commencing any work, Tenant shall give Landlord at least ten (10)
days written notice of the proposed commencement of such work and shall, it
required by Landlord, secure at Tenant's own cost and expense, a completion
and lien indemnity bond satisfactory to Landlord for said work. Tenant
further covenants and agrees that any mechanic's lien filed against the
Premises or against the Building for work claimed to have been done for, or
materials claimed to have been furnished to Tenant, will be discharged by
Tenant, by bond or otherwise. within (10) ten days after the filing thereof,
at the cost and expense of Tenant. All alterations, additions or
improvements upon the Premises made by either party, including (without
limiting the generality of the foregoing) all wall covering, built-in
cabinet work. paneling and the like, shall, unless Landlord elects
otherwise, become the property of Landlord, and shall remain upon, and be
surrendered with the Premises, as a part thereof, at the end of the term
hereof, except that Landlord may, by written notice to Tenant, require
Tenant to remove all partitions, counters, railings and the like installed
by Tenant, and Tenant shall repair all damage resulting from such removal
or, at Landlord's option, shall pay to Landlord all costs arising from such
removal.
(b) All articles of personal property and all business and trade
fixtures. machinery and equipment, furniture and movable partitions owned by
Tenant or installed by Tenant at its expense in the Premises shall be and
remain the property of Tenant and. may be removed by Tenant at any time
during the lease term when Tenant is not in default hereunder. If Tenant
shall fail to remove all of its effects from the Premises upon termination
of this Lease for any cause whatsoever. Landlord may, at its option, remove
the same in any manner that Landlord shall choose, and store said effects
without liability to Tenant for loss thereof. In such event Tenant agrees to
pay Landlord upon demand any and all expenses incurred in such removal,
including court costs and attorneys' fees and storage charges on such
effects, for any length of time that the same shall be in Landlord's
possession. Landlord may, at its option, without notice, sell said effects,
or any of the same, at private sale and without legal process, for such
price as Landlord may obtain and apply the proceeds of such sale upon any
amounts due under this Lease from Tenant to Landlord and upon the expense
incident to the removal and sale of said effects.
15. REPAIRS.
(a) By entry hereunder with the exception of punch list items, Tenant
accepts the Premises as being in good and sanitary order, condition and
repair, reasonable wear and tear excepted. Tenant shall keep, maintain and
preserve the Premises in first class condition and repair, and shall, when
and if needed, at Tenant's sole cost and expense, make all repairs to the
Premises and every part thereof. Tenant shall, upon the expiration or sooner
termination of the term hereof, surrender the Premises to Landlord in the
same condition as when received, usual and ordinary wear and tear excepted.
Landlord Shall have no obligation to alter, remodel, improve, repair,
decorate or paint the Premises or any part thereof. The parties hereto
affirm that Landlord has made no representations to Tenant respecting the
condition of the Premises or the Building or the Common Area except as
specifically herein set forth.
(b) Anything contained in Paragraph 15(a) above to the contrary
notwithstanding, Landlord shall repair and maintain the structural portions
of the Building and the plumbing, heating, ventilating, air conditioning,
elevator and electrical systems installed or furnished by Landlord, unless
such maintenance and repairs are caused in part or in whole by the act,
neglect or omission of any duty by Tenant, its agents, servants, employees,
or invitees, in which case Tenant shall pay to Landlord, as additional rent,
the reasonable cost of such maintenance and repair Landlord shall not be
liable for any failure to make any such repairs or to perform any
maintenance unless such failure shall result in an unreasonable interference
with Tenant's business or shall persist for an unreasonable time after
written notice of the need of such repairs or maintenance is given to
Landlord by Tenant. Except as provided in Paragraph 23 hereof, there shall
be no abatement of rent and no liability of Landlord by reason of any injury
to or interference with Tenant's business arising from the making of any
repairs, alterations or improvements in or to any portion of the Building or
the Premises or in or to fixtures, appurtenances
and equipment therein. Tenant waives the right to make repairs at
Landlord's expense under any law, statute or ordinance now or hereafter in
effect.
(c) Tenant's Self-Help Rights. Tenant waives the right to make
repairs at Landlord's expense under any law, statute or ordinance now or
hereafter in effect (including the provisions of California Civil Code
Section 1942 and any successive sections or statutes of a similar nature);
provided, however, subject to the termination rights set forth in Paragraph
23 and 24, if Landlord fails to perform any maintenance or repair work
required pursuant to Subparagraph 15(b) above within thirty (30) days after
Landlord receives Tenant's written ,notice of the need for such repairs (or
such period of time in excess of thirty (30) days as is reasonably necessary
based upon the nature of such work), then Tenant shall be permitted to make
such repairs, using contractors reasonably approved by Landlord, following
delivery of an additional two (2) days' prior written notice to Landlord
indicating that Tenant will be undertaking such repairs, and Tenant shall be
entitled to recover from Landlord the reasonable and documented costs of
such repairs made by Tenant, but without any off-set rights against rent or
any other amounts payable by Tenant under this Lease. If Tenant makes any
such repairs pursuant to this Subparagraph 15(b), the performance of such
repairs shall be done in accordance with the provisions of this Lease
including, without limitation, Paragraphs 14 and 16 hereof.
<PAGE>
16. LIENS.
Tenant shall not permit any mechanic's materialmen's or other liens to be
filed against all or any part of the Development, the Building or the
Premises, nor against Tenant's leasehold interest in the Premises, by reason
of or in connection with any repairs, alterations, improvements or other
work contracted for or undertaken by Tenant or any other act or omission of
Tenant or Tenant's agents, employees, contractors, licensees or invitees.
Tenant shall, at Landlord's request, provide Landlord with enforceable,
conditional and final lien releases (and other evidence reasonably requested
by Landlord to demonstrate protection from liens) from all persons
furnishing labor and/or materials with respect to the Premises. Landlord
shall have the right at all reasonable times to post on the Premises and
record any notices of non-responsibility which it deems necessary for
protection from such liens. If any such liens are filed, Tenant shall, at
its sole cost, immediately cause such liens to be released of record or
bonded so that it no longer affects title to the Development, the Building
or the Premises. If Tenant fails to cause any such liens to be so released
or bonded within ten (10) days after filing thereof, such failure shall be
deemed a material breach by Tenant under this Lease without the benefit of
any additional notice or cure period described in Paragraph 25
below, and Landlord may, without waiving its right and remedies based on,
such breach, and
without releasing Tenant from any of its obligations, cause such lien to be
released by any means it shall deem proper, including payment in
satisfaction of the claim giving rise to such lien. Tenant shall pay to
Landlord within five (5) days after receipt of invoice from Landlord, any
sum paid by Landlord to remove such liens, together with interest at the
Interest Rate from the date of such payment by Landlord.
17. ENTRY BY LANDLORD.
Landlord reserves and shall at any and times have the right to enter
the Premises to inspect the same, to supply janitor service and any other
service to be provided by Landlord to Tenant hereunder, to show the Premise
to prospective purchases or tenants, to post notices of non-responsibility,
to reasonably alter, improve or repair the Premises or any of the portion of
the Building all without being deemed guilty of any eviction of Tenant and
without abatement of rent. Landlord may in order to carry out such
purposes, erect scaffolding and other necessary structures where reasonably
required by the character of the work to be performed, provided that the
business of Tenant shall be interfered with as little as reasonably
practicable. If Landlord is diligent in completing such alterations,
improvements or repairs, then Tenant hereby waives any claim for damages for
any injury or inconvenience to or interference with Tenant's business, any
loss of occupancy or quiet enjoyment of the Premises, and any other loss in,
upon and about the Premises. Landlord shall at all times have and retain a
key with which to unlock all doors in the Premises, excluding Tenant's
vaults and safes. Landlord shall have the right to use any and all means
which Landlord may deem proper to open said doors in an emergency in order
to obtain entry to the Premises. Any entry to the Premises obtained by
Landlord by any of said means, or otherwise, shall not be construed or
deemed to be a forcible or
unlawful entry into the Premises, or an eviction of Tenant from the Premises
or any portion thereof, and any damages caused on account thereof shall be
paid by Tenant. It is understood and agreed that no provision of this Lease
shall be construed as obligating Landlord to perform any repairs,
alterations or decorations other than those consistent for maintaining a
class "A" Building, except as otherwise expressly agreed herein by Landlord.
18. UTILITIES AND SERVICES.
Provided that Tenant is not in material default under this Lease,
Landlord agrees to furnish or cause to be furnished to the Premises the
utilities and services described in the Standards for Utilities and
Services, attached hereto as EXHIBIT I'D' subject to the conditions and in
accordance with the standards set forth therein. Landlord's failure to
furnish any of the foregoing items where such failure is caused by (I)
accident, breakage or repairs; (ii) strikes. lockouts or other labor
disturbance or labor dispute of any character; (iii) governmental
regulation, moratorium or other governmental action: (iv) inability despite
the exercise of reasonable diligence to obtain electricity, water or fuel;
or by (v) any other cause beyond Landlord's reasonable control, shall not
result in any liability to Landlord. In addition. Tenant shall not be
entitled to any abatement or reduction of rent by reason of such failure. no
eviction of Tenant shall result from such failure and Tenant shall not be
relieved from the performance of any covenant or agreement in this Lease
because of such failure. In the event of any failure, stoppage or
interruption thereof, Landlord shall diligently attempt to resume service
promptly. If Tenant requires or utilizes more water or electrical power than
is projected at the date of this Lease, Landlord may at its option require
Tenant to pay, as additional rent, the cost, as fairly determined by
Landlord, incurred by such extraordinary usage. In this case, Landlord may
install separate meter(s) for the Premises, at Tenant's sole expense,
and Tenant thereafter shall pay all charges of e utility providing service
and Landlord shall make appropriate adjustment to account for the fact
Tenant is directly paying such metered charges.
19. BANKRUPTCY.
If Tenant shall file a petition in bankruptcy under any provision of
the Bankruptcy Code as then in effect, or if Tenant shall be adjudicated a
bankrupt in involuntary bankruptcy proceedings and such adjudication shall
not have been vacated within sixty (60) days from the date thereof, or if a
receiver or trustee shall be pointed of Tenant's property and the order
appointing such receiver of trustee shall not be set aside or vacated within
sixty (60) days after the entry thereof, or if Tenant shall assign Tenant's
estate or effects for the benefit of creditors, or if this Lease shall, by
operation of law or otherwise, pass to any person or persons other than,
Tenant, then in any such event Landlord may terminate this Lease, it
Landlord so elects, with or without notice of such election and with or
without entry or action by Landlord. In such case, notwithstanding any other
provisions of this Lease, Landlord in addition to any and all rights and
remedies allowed by law or equity, shall, upon such termination, be entitled
to recover damages in the amount provided in Paragraph 25(b) hereof. Neither
Tenant nor any person claiming through or under Tenant or by virtue of any
statute or order of any court shall be entitled to possession of the
Premises but shall surrender the Premises to Landlord.
Nothing contained herein shall limit or prejudice the right of Landlord to
recover damages by reason of any such termination equal to the maximum
allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, such damages are to be proved; whether
or not such amount is greater, equal to or less than the amount of damages
recoverable under the provisions of this Paragraph 19.
20. INDEMNIFICATION AND EXCULPATION OF LANDLORD.
(a) Tenant shall indemnity, defend and hold Landlord harmless from all
claims arising from Tenant's use of the Premises the conduct of its business
or from any activity, work or thing done, permitted or suffered by Tenant in
or about the Premises,
the Building or the Common Area, except to the extent caused by the
negligence by Landlord. Tenant shall further indemnity, defend and hold
Landlord harmless from all claims arising from any breach or default in the
pert rmance of any obligation to be performed by Tenant under the terms of
this Lease, or arising
<PAGE>
from any act, neglect, fault or omission of Tenant or of its agents or
employees, and from and against all costs, attorneys expenses and
liabilities incurred in or about such claim or any action or proceeding
brought thereon. In case any action or proceeding shall be brought against
Landlord by reason of any such claim, Tenant, upon notice from Landlord,
shall defend the same at Tenant's expense by counsel approved in writing by
Landlord. Tenant, as a material part of the consideration to Landlord,
hereby assumes all risk of damage to property or injury to person in, upon
or about the Premises from any cause whatsoever except the failure that
which is caused by the gross negligence or willful misconduct of Landlord or
the failure of Landlord to observe any of the terms and conditions of this
Lease where such failure has persisted for an unreasonable period of time
after written notice of such failures. Tenant hereby waives all its claims
in respect thereof against Landlord.
(b) Neither Landlord nor any partner, director, officer, agent or
employee of Landlord shall be liable to Tenant or its partners directors,
officers, contractors, agents, employees, invitees, sublessees or licensees,
for any loss, injury or damage to Tenant or to any other person, or to its
or their property, irrespective of the cause of such injury, damage or loss,
unless caused the negligence or willful misconduct of Landlord or its
employees. Further, neither Landlord nor any partner, director, officer,
agent or employee of Landlord shall be liable (I) for any such damage caused
by other lessees or persons in or about the Building, or caused by
quasi-public work unless permitted or authorized by Landlord; or (ii) for
consequential damages arising out of any loss of the use of the Premises of
any equipment or facilities therein by Tenant or any person claiming through
or under Tenant.
21. DAMAGE TO TENANT'S PROPERTY.
Notwithstanding provisions of Paragraph 20 to the contrary, Landlord
or its agents shall not be liable for (i) any damage to any property
entrusted to employees of the Building, (ii) loss or damage to any property
by theft or otherwise, (iii) any injury or damage to persons or property
resulting from fire, explosion, falling plaster, steam. gas, electricity,
water or rain which leak from any part of the Building or from the pipes,
appliances or plumbing work therein or from the roof, street or sub-surface
or from any other place or resulting from dampness or any other cause
whatsoever. Landlord or its agents shall not be liable for interference with
light or other incorporeal hereditaments. Tenant shall give prompt notice
to Landlord in case of fire or accidents in the Premises or in the Building
or of defects therein or in the fixtures or equipment.
22. TENANT'S INSURANCE.
(a) Tenant shall. during the term hereof and any other period of
occupancy, at its sole cost and expense, keep in full force and effect the
following insurance:
(i) Standard form property insurance insuring against the perils
of fire, extended coverage, vandalism, malicious mischief, special extended
coverage ("All-Risk") and sprinkler leakage. This insurance policy shall be
upon all property owned by Tenant,
for which Tenant is legally liable or that was installed at Tenant's
expense, and which is located in the Building including, without limitation,
furniture, fittings. installations, fixtures (other than Tenant improvements
installed by Landlord), and any other personal property, in an amount not
less than ninety percent (90%) of the full replacement cost thereof. In the
event that there shall a dispute as to the amount which comprises full
replacement cost, the decision of Landlord or any mortgagees of Landlord
shall be reasonable and conclusive. This insurance policy shall also be upon
direct or indirect loss of Tenant's earnings attributable to Tenant's
inability to use fully or obtain access to the Premises or Building in an
amount as will properly reimburse Tenant. Such policy shall name Landlord
and any mortgagees of Landlord as insured parties, as their respective
interests may appear.
(ii) Comprehensive General Liability Insurance insuring Tenant
against any liability arising out of the lease, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto. Such
insurance shall be in the amount of $1,000,000 with a 3,000,000 aggregate
limit Combined Single Limit for injury to, or death of one or more persons
in an occurrence. and for damage to tangible property (including loss of
use) in an occurrence, with such liability amount to be adjusted from year
to year to reflect increases in the Consumer Price Index. The policy shall
insure the hazards of the Premises and Tenant's Operations thereon,
independent contractors, contractual liability (covering the indemnity
contained in Paragraph 20 hereof) and shall (1) name Landlord as an
additional insured, (2) contain a cross liability provision and (3) contain
a provision that the insurance provided the Landlord hereunder shall be
primary and non-contributing with any other insurance available to the
Landlord.
(iii) Workmen's Compensation and Employer's Liability insurance
(as required by state law).
(iv) Any other form or forms of insurance as Tenant or Landlord
or any mortgagees of Landlord may reasonably require tram time to time in
form, in amounts and for insurance risks against which a prudent tenant
would protect itself.
(b) All policies shall be written in a form satisfactory to Landlord
and shall be taken out with insurance companies holding a General
Policyholders Rating of "A" and a Financial Rating of "X" or better, as set
forth in the most current issue of Bests Insurance Guide. Within ten (10)
days after the execution of this Lease, Tenant shall deliver to Landlord
copies of policies or certificates evidencing the existence of the amounts
and forms of coverage satisfactory to Landlord. No such policy shall be
cancellable or reducible in coverage except after thirty (30) days prior
written notice to Landlord. Tenant shall, within ten (10) days prior to the
expiration of such policies, furnish Landlord with renewals or "binders"
thereof, or Landlord may order such insurance and charge the cost thereof to
Tenant as additional rent, it Landlord obtains any insurance that is the
responsibility of Tenant under this Paragraph, Landlord shall deliver to
Tenant a written statement setting forth the cost of any such insurance and
showing in reasonable detail the manner in which it has been computed.
<PAGE>
(c) During the term of this Lease, Landlord shall insure the Building
(excluding any property which Tenant is obligated to insure under
Subparagraphs 22(a) and (b) hereof) against damage with All -Risk insurance
and public liability insurance, all in such amounts and with such deductions
as Landlord considers appropriate and is reasonable and consistent with a
class "A" Building. Landlord may, but shall not be obligated to, obtain
and carry any other form or forms of insurance as it or Landlord's
mortgagees may determine advisable. Notwithstanding any contribution by
Tenant to the cost of insurance premiums, as provided herein, Tenant
acknowledges that it has no right to receive any proceeds from any insurance
policies carried by Landlord.
(d) Tenant will not keep, use, sell or offer for sale in or upon the
Premises any article which may be prohibited by any Insurance policy
periodically in force covering the Building. If Tenant's occupancy or
business in, or on, the Premises. whether or not Landlord has consented to
the same, results in any increase in premiums for the insurance periodically
carried by Landlord with respect to the Building, Tenant shall pay any such
increase in premiums as additional rent within ten (10) days after being
billed therefore by Landlord. In determining whether increased premiums are
a result of Tenant's use of the Premises, a schedule issued by the
organization computing the insurance rate on the Building or the Tenant
Improvements showing the various components of such rate, shall be
conclusive evidence of the several items and charges which make up such
rate. Tenant shall promptly comply with all reasonable requirements of the
insurance authority or any present or future insurer relating to the Premises.
(e) If any of Landlord's insurance policies shall be canceled or
cancellation shall be threatened or the coverage thereunder reduced or
threatened to be reduced in any way because of the use of the Premises or
any part thereof by Tenant or any assignee or subtenant of Tenant or by
anyone Tenant permits on the Premises and, if Tenant fails to remedy the
condition giving rise such cancellation, threatened cancellation, threatened
reduction of coverage, increase in premiums, threatened increase in
premiums, within forty-eight (48) hours or a longer period if reasonably
necessary, after notice thereof, Landlord may, at its option, either
terminate this Lease or enter upon the Premises and attempt to remedy such
condition, and Tenant shall promptly pay the cost thereof to Landlord as
additional rent. Landlord shall not be liable for any damage or injury
caused to any property of Tenant or of others located on the Premises
resulting from such entry. If Landlord is unable, or elects not to remedy
such condition, then Landlord shall have all of the remedies provided for in
this Lease in the event of a default by Tenant. Notwithstanding the
foregoing provisions of this Subparagraph 22(e), if Tenant fails to remedy
as aforesaid, Tenant shall be in default of its obligation hereunder and
Landlord shall have no obligation to remedy such default.
(f) All policies of insurance required hereunder shall include a
clause or endorsement denying the insurer any rights of subrogation against
the other party to the extent rights have been waived by the insured before
the occurrence of injury of loss. Landlord and Tenant waive any rights of
recovery against the other for injury or loss due to hazards covered by
policies of insurance containing such a waiver of subrogation clause or
endorsement to the extent of the injury or loss covered thereby.
23. DAMAGE OR DESTRUCTION.
(a) In the event the Building and/or the Premises is damaged by fire
or other perils covered by Landlord's insurance, Landlord shall:
(I) In the event of total destruction if in Landlord's
reasonable estimation the Building and the Premises can be restored within
180 days, then at Landlord's option, as soon as reasonably possible
thereafter, commence repair reconstruction and restoration of the Building
and/or the Premises and prosecute the same diligently to completion, in
which event this Lease shall remain in full force and effect; or within
sixty (60) days after such damage, elect not to so repair, reconstruct or
restore the Building and/or the Premises, in which event this Lease shall
terminate. In either event, Landlord shall give Tenant written notice of its
intention within said sixty (60) day period. In the event Landlord elects
not to restore the Building and/or the Premises, this Lease shall be deemed
to have terminated as of the date of such total destruction.
(ii) In the event of a partial destruction of the Building
and/or the Premises, to an extent not exceeding twenty-five percent (25%) of
the full insurable value thereof, and if the damage thereto is such that the
Building and/or the Premises may be repaired, reconstructed or restored
within a period of ninety (90) days from the date of the happening of such
casualty, and if Landlord will receive insurance proceeds sufficient to
cover the cost of such repairs. then Landlord shall commence and proceed
diligently with the work of repair, reconstruction and restoration and this
Lease shall continue in full force and effect. If such work of repair,
reconstruction and restoration shall require a period longer than ninety
(90) days or exceeds twenty-rive percent (25%) of the full insurable value
thereof, or if said insurance proceeds will not be sufficient to cover the
cost of such repairs, then Landlord either may elect to so repair,
reconstruct or restore and the Lease shall continue in full force and effect
or Landlord may elect not to so repair, reconstruct or restore and the Lease
shall then terminate. Under any of the conditions of this Subparagraph
23(a)(ii), Landlord shall give written notice to Tenant of its intention
within said sixty (60) day period. In the event Landlord elects not to
restore the Building and/or the Premises, this Lease shall be deemed to have
terminated as of the date of such partial destruction.
(b) Upon any termination of this Lease under any of the provisions of
this Paragraph 23, the parties shall be released without further obligation
to the other from the date possession of the Premises is surrendered to
Landlord except for items which have therefore accrued and are then unpaid.
(c) In the event of repair, reconstruction and restoration by Landlord
as herein provided, the rental payable under this lease shall be abated
proportionately with the degree to which Tenant's use of the Premises is
impaired during the period of such repair,
reconstruction or restoration; provided that there shall be no abatement of
rent if such damage is the result of Tenant's negligence or intentional
wrongdoing. Tenant shall not be entitled to any compensation or damages for
loss in the use of the whole or any part of the Premises and/or any
inconvenience or annoyance occasioned by such damage, repair, reconstruction
or restoration.
<PAGE>
(d) Tenant shall not be released from any of its obligations under this
Lease except to the extent and upon the conditions expressly stated in this
Paragraph 23. Notwithstanding anything to the contrary contained in this
Paragraph 23, if Landlord is delayed or prevented from repairing or
restoring the damaged Premises within one (1) year after the occurrence of
such damage or destruction by reason of acts of God, war, governmental
restrictions, inability to procure the necessary labor or materials. or
other cause beyond the control of Landlord, Landlord, at its option, may
terminate this Lease, whereupon Landlord shall be relieved of its obligation
to make such repairs or restoration and Tenant shall be released from its
obligations under this Lease as of the end of said one year period.
(e) It damage is due to any cause other than fire or other peril covered by
extended coverage insurance. Landlord may elect to terminate this Lease.
(f) If Landlord is obligated to or elects to repair or restore as herein
provided, Landlord shall be obligated to make repair or restoration only of
those portions of the Building and the Premises which were originally
provided at Landlord's expense, the repair and the repair and restoration of
items not provided at Landlord's expense shall be the obligation of Tenant.
(g) Notwithstanding anything to the contrary contained in this Paragraph
23, Landlord shall not have any obligation whatsoever to repair, reconstruct
or restore the Premises when the damage resulting from any casualty covered
under this Paragraph 23 occurs during the last twelve (12) months of the
term of this Lease or any extension hereof., and in such event Lease shall
be terminated.
(h) The provisions of California Civil Code Section 1932, Subsection 2,
and Section 1933, Subsection 4, which permit termination of a lease upon
destruction of the leased premises, are hereby waived by Tenant; and the
provisions of this Paragraph shall govern in case of such destruction.
24. EMINENT DOMAIN.
(a) In case all of the Premises and/or parking area or such part thereof as
shall . substantially interfere with Tenant's use and occupancy there shall
be taken for any public or quasi-public purpose by any lawful power or
authority by exercise of the right of appropriation. condemnation or eminent
domain, or sold to prevent such taking, either party shall have the right to
terminate this Lease effective as of the date possession is required to be
surrendered to said authority. Tenant shall not assert any claim against
Landlord or the taking authority for any compensation because of such
taking, and Landlord shall be entitled to receive the entire amount of any
award without deduction for any estate or interest of Tenant. In the event
the amount of property or the type of estate taken shall not substantially
interfere with the conduct of Tenant's business, Landlord shall be entitled
to the entire amount of the award without deduction for any estate or
interest of Tenant, Landlord shall restore the Premises to substantially
their same condition prior to such partial taking, and a proportionate
allowance shall be made to Tenant for the rent corresponding to the time
during which. and to the part of the Premises of which, Tenant shall be so
deprived on account of such taking and restoration. Nothing contained in
this Subparagraph shall be deemed to give Landlord any interest in any award
made to Tenant for the taking of personal property and fixtures belonging to
Tenant.
(b) In the event of taking of the Premises or any part thereof for temporary
use. (I) this Lease shall be and remain unaffected thereby and rent shall
not abate, and (ii) Tenant shall be entitled to receive for itself such
portion or portions of any award made for such use with respect to the
period of the taking which is within the term, provided that if such taking
shall remain in force at the expiration or earlier termination of this
Lease, Tenant shall then pay to Landlord a sum equal to the reasonable cost
of performing Tenant's obligations under Paragraph 15 with respect to
surrender of the Premises and upon such payment shall be excused from such
obligations. For purpose of this Subparagraph 24(b), a temporary taking
shall be defined as a taking for a period of 180 days or less.
25. DEFAULTS AND REMEDIES.
(a) The occurrence of any one or more of the following events shall
constitute a default hereunder by Tenant:
(I) The vacation or abandonment of the Premises by Tenant. Abandonment is
herein defined to include, but is not limited to. any, absence by Tenant
from the Premises for five (5) business days or longer while in default of
any provision of this Lease.
(ii) The failure by Tenant to make any payment of rent or additional rent or
any other payment required to be made by Tenant hereunder, as and when due,
where such failure shall continue for a period of three (3) days after
written notice thereof from Landlord to Tenant: provided, however, that any
such notice shall be in lieu of. and not in addition to, any notice under
California Code of Civil Procedure Section 1161 regarding unlawful detainer
actions.
(iii) The failure by Tenant to observe or perform any of the express or
implied covenants or provisions of the is Lease observed or performed by
Tenant, other than as specified in Subparagraph 25(a)(I) or (ii) above,
where such failure shall continue for a period of thirty (30) days after
written notice thereof from Landlord to Tenant. Any such notice shall be in
lieu of and not in addition to any notice required under California Code of
Civil Procedure Section 1161 regarding unlawful detainer actions. If the
nature of Tenant's default is such that more than thirty (30) days are
reasonably required for its cure, then Tenant shall not be deemed to be in
default if Tenant shall commence such cure within said = day period and
thereafter diligently prosecute such cure to completion.
<PAGE>
(iv) (1) The making by Tenant of any general assignment the benefi of
creditors; (2) the filing by or against Tenant of a petition to have Tenant
adjudged a bankrupt or a petition for reorganization or a arrangement under
any law relating to bankruptcy (unless, in the case of a petition filed
against Tenant, the same is dismissed within sixty (60) days); (3) the
appointment of a trustee or receiver to take possession of substantially all
of Tenant's assets located at the Premises or of Tenant's interest in this
Lease where possession is not restored to Tenant within sixty (60);days: or
(4) the attachment, execution or other judicial seizure of substantially all
of Tenant's assets located at the Premises or of Tenant's interest in this
Lease where such seizure is not discharged within thirty (30) days.
(b) In the event of any such default by Tenant which is not cured within the
applicable cure period, in addition to any other remedies available to
Landlord at law or in equity Landlord shall have the immediate option to
terminate this Lease and all rights of Te nant hereunder. In the event that
Landlord shall elect to so terminate this Lease then Landlord may recover
from Tenant:
(i) The worth at the time of award of any unpaid rent which had been
earned at the time of such termination; plus
(ii) the worth at the time of award of the amount by which the unpaid rent
which would have been earned after termina. tion until the time of award
exceeds the amount of such rental loss that Tenant proves could have been
reasonable avoided; plus
(iii) the wonh,at the time of award of the amount by which the unpaid rent
for the balance of the term after the time of aw,*d exceeds the amount of
such rental loss that Tenant proves could be reasonably avoided, plus
(iv) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom.
As used in Subparagraphs 25(b) (i) and (li) above, the "Worth at the time
of award" is computed by allowing interest at the maximum rate permitted
by law. As used in Subparagraph 25(b) (iii) above, the "worth at the time
of award" is computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco at the time of award plus one
percent (1%).
(c) In the event of any such default by Tenant, Landlord shall also have
the right, with or without terminating this Lease. to re-enter the
Premises and remove all persons and property from the Premises; such
properly may be removed and stored in a public warehouse or elsewhere at
the cost of and for the account of Tenant. No re-entry or taking
possession of the Premises by Landlord pursuant to this paragraph 25(c)
shall be construed as an election to terminate this Lease unless a written
notice of such intention is given to Tenant or unless the termination
thereof is decreed by a court of competent jurisdiction.
(d) In the event of the vacation or abandonment of the Premises by Tenant
or in the event that Landlord shall elect to re-enter as provided above or
shall take possession of the Premises pursuant to legal proceeding or
pursuant to any notice provided by law. then if Landlord does not elect to
terminate this Lease as provided above, Landlord may from time to time.
without terminating this Lease, either recover all rent as it becomes due
or relet the Premises or any part thereof for the term for this Lease on
terms and conditions as Landlord in its sole discretion may deem advisable
with the right to make alterations and repairs to the Premises.
In the event that Landlord shall elect to so relet, then rentals received
by Landlord from such reletting shall be applied: first. to the payment of
any indebtedness other than rent due hereunder from Tenant to Landlord;
second, to the payment of any cost of such reletting; third, to the
payment of the cost of any alterations and repairs to the Premises,
fourth, to the payment of rent due and unpaid hereunder and the residue,
if any, shall be held by Landlord and applied to payment of future rent as
the same may become due and payable hereunder. Should that portion of such
rentals received from such reletting during any month, which is applied to
the payment of rent hereunder, be less than the rent payable during that
month by Tenant hereunder, then Tenant shall pay such deficiency to
Landlord immediately upon demand therefore by Landlord. Such deficiency
shall be calculated and paid monthly. Tenant shall also pay to Landlord,
as soon as ascertained, any costs and expenses incurred by Landlord in
such reletting or in making such alterations and repairs not covered by
the rentals received from such reletting.
(e) All rights, options and remedies of Landlord contained in this Lease
shall be construed and held to be cumulative, and no one of them shall be
exclusive of the other, and Landlord shall have the right to pursue any
one or all of such remedies or any other remedy or relief which may be
provided by law, whether or not stated in this Lease. No waiver of any
default of Tenant hereunder shall be implied from any acceptance by
Landlord of any rent or other payments due hereunder or any omission by
Landlord to take any action on account of such default if such default
persists or is repeated, and no express waiver shall affect defaults other
than as specified in said waiver. The consent or approval of Landlord to
or of any act by Tenant requiring Landlord's consent or approval shall not
be deemed to waive' or render unnecessary Landlord's consent approval to
or of any subsequent similar acts by Tenant.
26. ASSIGNMENT AND SUBLETTING.
Tenant shall not voluntarily assign or encumber its interest in this
Lease or in the Premises or sublease all or any part of the Premises, or
allow any other person or entity to occupy or use all or any part of the
Premises, without first obtaining Landlord's prior written consent. Any
assignment, encumbrance or sublease without Landlord's prior written consent
shall be voidable at Landlord's election and shall constitute a default. For
purposes hereof, in the event Tenant is a partnership, a withdrawal or change
<PAGE>
in one or more transfers of partners owning more than a fifty percent (50%)
interest in the partnership, or if Tenant is a corporation any transfer of
fifty percent (50%) of its stock in one or more transfers, shall constitute
a voluntary assignment and shall be subject to these provisions. No consent
to an assignment, encumbrance or sublease shall constitute further waiver of
the provisions of this Paragraph. Tenant shall notify Landlord in writing of
Tenant's intent to assign, encumber or sublease this Lease, the name of the
proposed assignee or subleasee, information concerning the financial
responsibility of the proposed assignee or subleasee and the terms of the
proposed assignment or subletting, and Landlord shall, within fifteen (15)
days of receipt of such written notice, and additional information requested
by Landlord concerning the proposed assignee's or subleasee's financial
responsibility, elect one of the following: (a) consent to such proposed
assignment, encumbrance or sublease; (b) refuse such consent, which refusal
shall be on reasonable grounds; or (C) elect to terminate this Lease, or in
the case of a partial sublease, terminate this Lease as to the portion of
the Premises proposed to be sublet. Lease shall be the deliver to Landlord
of a true copy of the fully executed instrument of assignment, transfer or
hypothecation, and the delivery to Landlord of an agreement executed by the
assignee in form and substance satisfactory to Landlord and expressly
enforceable by Landlord, whereby the assignee assumes and agrees to be bound
by all of the terms and provisions of this Lease and to perform all of the
obligations of Tenant hereunder.
As a condition to Landlord;'s consent to any sublease, such sublease shall
provide that it is subject and subordinate to this Lease and to all
mortgages; that Landlord may enforce the provisions of the sublease,
including collection of rent; that in the event of termination of this Lease
for any reason, including without limitation a voluntary surrender by
Tenant, of in the event of any reentry or repossession of the Premises by
Landlord, Landlord may, at its option, either (i) terminate the sublease or
(ii) take over all of the right, title and interest of Tenant, as sublessor,
under such sublease, in which case such sublessee shall attorn to Landlord.
but that nevertheless Landlord shall not (1) be liable for any previous act
or omission of Tenant under such sublease, (2) be subject to any defense or
offset previously accrued in favor of the sublessee against Tenant, or (3)
be bound by any previous modification of any sublease made without
Landlord's written consent, or by any previous prepayment by sublessee of
more one month's rent.
In the eve that Landlord shall consent to an assignment or sublease under
the provisions this Paragraph 26, Tenant shall pay Landlord's reasonable
processing costs and attorneys' fees not to exceed $250.00 incurred in
giving such consent. If Landlord shall consent to any assignment of this
lease, Tenant shall pay to Landlord, as additional rent, fifty percent (50%)
all sums and other considerations payable to and for the benefit of Tenant
by the assignee on account of the assignment, as and when such sums and
other consideration are due and payable by the assignee to or for the
benefit of Tenant (or, if Landlord so requires. and without any release of
Tenant's liability for the same, Tenant shall instruct the assignee to pay
such sums and other consideration directly to Landlord). If for any proposed
sublease Tenant receives rent or other consideration, either initially or
over the term of the sublease, in excess of the rent called for hereunder
or, in case of the sublease of a portion of the Premises, in excess of such
rent fairly allocable to such portion, after appropriate adjustments to
assure that all other payments called for hereunder are taken into account.
Tenant shall pay to Landlord as additional rent hereunder fifty percent
(50%) of the excess of each such payment of rent or other consideration
received by Tenant promptly after its receipt. Landlord's waiver consent to
any assignment or subletting shall not relieve Tenant or any assignee or
sublessee from any obligation under this Leas whether or not accrued.
Occupancy of all or part of the Premises by parent or subsidiary companies
of Tenant shall not be deeme an assignment or subletting. If Tenant requests
Landlord's consent to any assignment of this Lease or any subletting of all
or a portion of the Premises, Landlord shall have the right, to be exercised
by giving written notice to Tenant within thirty (30) days of receipt by
Landlord of the financial responsibility information of required by this
Paragraph 26, to terminate this Lease effective as of the date Tenant
proposes to assign this Lease or sublet all or a portion of the Premises.
Landlord's right to terminate the Lease as to all or a portion of the
Premises on assignment or subletting shall not terminate as a result of
Landlord's consent to he assignment of this Lease or a subletting of all or
a portion of the Premises or Landlord's failure to exercise this right with
respect to any assignment or subletting. Tenant understands and acknowledges
that the option, as provided in this Paragraph 26, to terminate this Lease
rather than approve the assignment thereof or the subletting of all or any
portion of the Premises. is a material for Landlord's agreeing to lease the
Premise to Tenant upon the terms and conditions herein set forth.
27. SUBORDINATION.
Without the necessity of any additional document being executed by Tenant
for the purpose of effecting a subordination. and at the election of
Landlord or any mortgagee with a lien on the Building or any ground lessor
with respect to the Building, this Lease shall be subject and subordinate at
all times to:
(a) all ground leases or underlying leases which may now exist or hereafter
be executed affecting the Building or the land upon which the Building is
situated or both; and
(b) the lien of any mortgage or deed of trust which may now exist or
hereafter be executed in any amount for which the Building, land, ground
leases or underlying leases, or Landlord's interest or estate in any of said
items is specified as security.
Notwithstanding the foregoing, Landlord shall have the right to subordinate
or cause to be subordinated any such ground leases or underlying leases or
any such liens to this Lease. In the event that any ground lease or
underlying lease terminates
<PAGE>
for any reason or any mortgage or deed of trust is foreclosed or a
conveyance in lieu of foreclosure is made for any reason, Tenant shall,
notwithstanding any subordination, attorn to and become the Tenant of the
successor-in interest to Landlord, at the option of such successor-in
interest. Tenant covenants and agrees to execute and deliver, upon demand by
Landlord and in the form requested by Landlord, any additional documents
evidencing the priority of subordination or this Lease with respect to any
such ground leases or underlying leases or the lien of any such mortgage or
deed of trust. Should Tenant fail to sign and return any such documents
within ten (10) business days of request. Tenant shall be in default.
Notwithstanding the foregoing so long as Tenant is not in default, its quiet
possession of the Premises will not be disturbed, and any subordination
agreement shall so provide.
28. ESTOPPEL CERTIFICATE.
(a) Within ten (10) days following any written request which Landlord may
make from time to time, Tenant shall execute and deliver to Landlord a
statement, in a form substantially similar to the form of Exhibit "E",
certifying: (I) the date of commencement of this Lease; (ii) the fact that
this Lease is unmodified and in full force and effect (or, if there have
been modifications hereto, that this Lease is in full force and effect, and
stating the date and nature of such modifications), (iii) the date to which
the rental and other sums payable under this Lease have been paid; (iv) that
there are no current defaults under this Lease by either Landlord or Tenant
except as specified in Tenant's statement; and (v) such other matters
requested by Landlord. Landlord and Tenant intend that any statement
delivered pursuant to this Paragraph 28 may be relied upon by any mortgagee,
beneficiary, purchaser or prospective purchaser of the Building or any
interest therein.
(b) Tenant's failure to deliver such statement within such time shall be
conclusive upon Tenant (I) that this Lease is in full force and effect,
without modification except as may be represented by Landlord, (ii) that
there are no uncured defaults in Landlord's performance, and (iii) that not
more than one (1) month's rental has been paid in advance. Tenant's failure
to deliver said statement to Landlord within ten (10) working days of
receipt shall constitute a default under this Lease and Landlord may, at
Landlord's option, terminate the Lease, provided written notice of such
termination is received by Tenant prior to Landlord's receipt of statement.
29. BUILDING PLANNING.
30. RULES AND REGULATIONS.
Tenant shall faithfully observe and comply with the "Rules and Regulations",
a copy of which is attached hereto and marked Exhibit F, and all reasonable
and nondiscriminatory modifications thereof and additions thereto from time
to time put into effect by Landlord. Landlord shall not be responsible to
Tenant for the violation or non-performance by any other tenant or occupant
of the Building of any of said Rules and Regulations. Landlord shall make
all reasonable efforts to cause other tenants to abide by said rules and
regulations.
31. CONFLICT OF LAWS.
This Lease shall be governed by and construed pursuant to the laws of the
State of California.
32. SUCCESSORS AND ASSIGNS.
Except as otherwise provided in this Lease, all of the covenants, conditions
and provisions of this Lease shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns.
33. SURRENDER OF PREMISES.
The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work a merger. and shall. at the option of
Landlord, operate as an assignment to it of any or all subleases or
subtenancies. Upon the expiration or termination of this Lease, Tenant shall
peaceably surrender - Premises and ail alterations and additions thereto,
broom clean the Premises, leave-the Premises in good order, repair and
condition, reasonable wear and tear excepted, and comply with the provisions
of Paragraph 15. The delivery of keys to any employee of Landlord or to
Landlord's agent or any employee thereof shall not be sufficient to
constitute a termination of this Lease or a surrender of the Premises.
34. PROFESSIONAL FEES
(a) If Landlord should bring suit for possession of the Premises, for the
recovery of any sum due under this Lease, or because of the breach of any
provisions of this Lease, or for any other relief against Tenant hereunder,
or in the event of any other litigation
<PAGE>
between the parties with respect to this lease, then all costs and expenses,
including without limitation, its actual professional fees such as
appraisers', accountants' and attorneys' fees, incurred by the prevailing
party therein shall be paid by the other party
which obligation on the part of the other party shall be deemed to have
accrued on the date of the commencement of such and shall be enforceable
whether or not the action is prosecuted to judgment.
(b) If Landlord is named as a defendant in any suit brought against
Tenant in connection with or arising out of Tenant's occupancy hereunder,
Tenant shall pay to Landlord its reasonable costs and expenses incurred in
such suit, including without limitation, actual professional fees such as
appraisers', accountants' and attorneys' fees.
35. PERFORMANCE BY TENANT.
All covenants and agreements to be performed by Tenant under any of
the terms of this Lease shall be performed by Tenant at Tenant's sole cost
and expense and without any abatement of rent. If Tenant shall fail to pay
any sum of money owed to any party other than Landlord, for which it is
liable hereunder, or if Tenant shall fail to perform any other act on its
part to be performed hereunder, and such failure shall continue beyond any
applicable cure period, Landlord may, without waiving or releasing Tenant
from obligations of Tenant, but shall not be obligated to, making any such
payment or perform any such other act to be made or performed by Tenant. All
sums so paid by Landlord and all necessary incidental costs together with
interest thereon at the maximum, rate permissible by law, from the date of
such payment by Landlord, shall be payable to Landlord on demand. Tenant
covenants to pay any such sums, and Landlord shall have (in addition to any
other right or remedy of Landlord) all rights and remedies in the event of
the non-payment thereof by Tenant as are set forth in Paragraph 25.
36. MORTGAGEE PROTECTION.
In the event of any default on the part of Landlord, Tenant will give notice
by registered or certified mail to any beneficiary of a deed of trust or
mortgage covering the Premises whose address shall have been furnished to
Tenant, and shall offer such beneficiary or mortgagee a reasonable
opportunity to cure the default, including time to obtain possession of the
Premises by power of sale or a judicial foreclosure, if such should prove
necessary to effect a cu e. Landlord shall provide name and address(s) of
all such beneficiaries within ten (10) days or executing the Lease.
37. DEFINITION OF LANDLORD.
The term 'Landlord', as used in this Lease, so far as covenants or
obligations on the part of Landlord are concerned, shall be limited to mean
and include only the owner or owners. at the time in question. of the fee
title of the Premises or the lessees under any ground lease. if any. In the
event of any transfer, assignment or other conveyance or transfers of any
such title, Landlord herein named (and in case of any subsequent transfers
or conveyances, the then grantor) shall be automatically freed and relieved
from and after the date of such transfer, assignment or conveyance of all
liability as respects the performance of any covenants or obligations on the
part of Landlord contained in this Lease thereafter to be performed. Without
further agreement, the transferee of such title shall be deemed to have
assumed and agreed to observe and perform any and all obligations of
Landlord hereunder, during its ownership of the Premises. Landlord may
transfer its interest in the Premises without the consent of Tenant and such
transfer or subsequent transfer shall not be deemed a violation on
Landlord's part of any of the terms and conditions of this Lease.
38. WAIVER.
The waiver by Landlord of any breach of any term, covenant or
condition herein contained shall not be deemed to be a waiver of any
subsequent breach of the same or any other term, covenant or condition
herein contained. nor shall any custom or practice which may grow up between
the parties in the administration of the terms hereof be deemed a waiver of
or in any way affect the right of Landlord to insist upon the performance by
Tenant in strict accordance with said terms. The subsequent acceptance of
rent hereunder by Landlord shall not be deemed to be a waiver of any
preceding breach by Tenant of any term, covenant or condition of this Lease,
other than the failure of Tenant to pay the particular rent so accepted,
regardless of Landlord's knowledge of such preceding breach at the time of
acceptance of such rent. No acceptance by Landlord of a lesser sum than the
basic rental and additional rent or other sum then due shall be deemed to be
other than on account of the earliest installment of such rent or other
amount due, nor shall any endorsement or statement on any check or any
letter accompanying any check be deemed an accord and satisfaction, and
Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance of such installment or other amount or pursue
any other remedy in this Lease provided.
39. IDENTIFICATION OF TENANT.
If more than one person executes this lease as Tenant. (a) each of
them is jointly and severally liable for the keeping, observing and
performing of all of the terms, covenants, conditions. provisions and
agreements of this Lease to be kept, observed and performed by Tenant, and
(b) the term "Tenant" as used in this Lease shall mean and include each of
them jointly and severally. The act of or notice from. or notice or refund
to, or the signature of any one or more of them, with respect to the tenancy
of this Lease, including. but not limited to, any renewal, extension,
expiration, termination or modification of this Lease, shall be binding upon
each and all of the persons executing this Lease as Tenant with the same
force and effect as if each and all of them had so acted or so given or
received such notice or refund or so signed.
<PAGE>
40. PARKING.
Unless Tenant is in default hereunder, Tenant shall be entitled to the
number of vehicle parking spaces designated in paragraph 1(k), provided that
a portion of such vehicle parking spaces shall be for visitor parking for
the Building. The portion of such vehicle parking spaces to be allocated to
visitor parking shall be determined by multiplying Tenant's Percentage times
the aggregate number of visitor parking spaces for the Building, as such
number of visitor parking spaces may be changed by Landlord from time to
time though such changes shall not materially interfere with Tenants or
Tenant's employees' invitees' parking. Such visitor parking spaces shall
not be restricted to Tenant's visitors or invitees, but may be utilized by
any individuals visiting the Building or the Development upon the
sixty-first (61st) month of the Lease term, Tenant's us of its vehicle
parking spaces which have not been designated as visitor parking spaces
shall be subject to a monthly parking fee for such spaces. Landlord may
assign any unreserved and unassigned parking spaces and/or make all or a
portion of such spaces reserved, if it determines in its sole discretion
that is necessary for orderly and efficient parking. Tenant stall not use
more parking spaces than said number. In the event Landlord has not assigned
specific spaces to Tenant. Tenant shall not use any spaces which have been
so specifically assigned by Landlord to other tenants or for such other uses
as visitor parking or which have been designated by governmental entities
with competent jurisdiction as being restricted to certain uses.
(a) Tenant shall not permit or allow any vehicles that belong to or are
controlled by Tenant or Tenant's employees, suppliers, shippers, customers
or invitees to be loaded, unloaded or parked in areas other than those
designated by Landlord for such activities.
(b) Tenant permits or a allows any of the prohibited activities described
in this Paragraph 40. then Landlord shall have the right, without notice, in
addition to such other rights and remedies that it may have, to remove or
tow away the vehicle involved
and charge the cost to Tenant, which cost shall be immediately payable upon
demand by Landlord.
(c) Landlord reserves the right at any time to substitute an equivalent
number of parking spaces in a parking structure or subterranean parking
facility or in a surface parking area within a reasonable distance of the
Premises.
(d) The use by Tenant. its employees and invitees, of the parking facilities
of the Building shall be on the terms and conditions set forth in Exhibit
"G" attached hereto and by this reference incorporated herein, and shall be
subject to such other agreement between Landlord and Tenant as may
hereinafter be established.
41. FORCE MAJEURE.
Landlord shall have no liability whatsoever to Tenant on account of
(a) the inability of Landlord to fulfill, or delay in fulfilling. any of
Landlord's obligations under this Lease by reason of strike, other labor
trouble, governmental preemption of priorities or other controls in
connection with a national or other public emergency, or shortages of fuel,
supplies or labor resulting therefrom or any other cause. whether similar or
dissimilar to the above, beyond Landlord's reasonable control; or (b) any
failure or defect in the supply quantity or character of electricity or
water furnished to the Premises. by reason of any requirement, act or
omission of the public utility or others furnishing the Building with
electricity or water, or for any other reason, whether similar or dissimilar
to the above. beyond Landlord's reasonable control. If this Lease specifies
a time period for performance of an obligation of Landlord that time period
shall be extended by the period of any delay in Landlord's performance
caused by any of the events of force majeure described above. Tenant shall
have no liability whatsoever to Landlord on account of (a) the inability of
Tenant to RM, or delay in fulfilling, any of Tenant's obligations under this
Lease other than the payment of rent or other monetary obligations by reason
of strike, other labor trouble, governmental pre-emption of priorities or
other controls in connection with a national or other public emergency, or
shortages of fuel, supplies or labor resulting therefrom, or any other
cause, whether similar or dissimilar to the above, beyond Tenant's
reasonable control.
42. TERMS AND HEADINGS.
The words "Landlord" and "Tenant" as used herein shall include the
plural as well as the singular. Words used in any gender include other
genders. The paragraph headings of this Lease are not a part of this Lease
and shall have no effect upon the construction or interpretation of any part
hereof.
43. EXAMINATION OF LEASE.
Submission of this instrument for examination or signature by Tenant
does not constitute a reservation of or option for lease. and it is not
effective as a lease or otherwise until execution by and delivery to both
Landlord and Tenant.
44. TIME.
Time is of the essence with respect to the performance of every
provision of this Lease in which time of performance is a factor.
45. PRIOR AGREEMENT OR AMENDMENTS.
This Lease contains all of the agreements of the parties hereto with
respect to any matter covered or mentioned in the Lease, and no prior
agreement or understanding pertaining to any such matter shall be effective
for any purpose. No provisions of this Lease may be amended or added to
except by an agreement in writing signed by the parties hereto or their
respective successors- in - interest.
<PAGE>
<PAGE>
46. SEPARABILITY.
Any provision of this Lease which shall prove to be invalid, void or
illegal in no way affects, impairs or invalidates any other provision
hereof, and such other provisions shall remain in full force and effect.
47. RECORDING.
Neither Landlord nor Tenant shall record this Lease nor a short form
memorandum thereof without the consent of the other.
48. LIMITATION ON LIABILITY.
In consideration of the benefits accruing hereunder, Tenant and all
successors and assigns covenant and agree that. in the event of any actual
or alleged failure, breach or default hereunder by Landlord:
(a) The sole and exclusive remedy shall be against the Landlord's
interest in the Building:
(b) No partner of Landlord shall be sued or named as a party in any
suit or action (except as may be necessary to secure jurisdiction of the
partnership);
(c) No service of process shall be made against any partner of
Landlord (except as may be necessary to secure jurisdiction of the
partnership);
(d) No partner of Landlord shall be required to answer or otherwise
plead to any service of process;
(e) No judgment will be taken against any partner of Landlord:
(f) Any judgment taken against any partner of Landlord may be vacated
and set aside at any time nunc pro tunc:
(g) No writ of execution will ever be levied. against the assets of
any partner of Landlord;
(h) The obligations of Landlord under this Lease do not constitute
personal obligations of the individual partners. directors. officers or
shareholders of Landlord, and Tenant shall not seek recourse against the
individual partners. directors, officers or shareholders of Landlord or any
of their personal assets for satisfaction of any liability in respect to
this Lease;
(I) These covenants and agreements are enforceable both by Landlord
and also by any partner of Landlord.
49. TRAFFIC IMPACT.
Tenant acknowledges that traffic control and flow is a major concern
of the City of Irvine, of Landlord and of each tenant in the Building and
surrounding buildings. Therefore, Tenant agrees that it will cooperate with
landlord in reasonable efforts which may be undertaken by Landlord
independently or in cooperation with the City of Irvine or other property
owners to alleviate the traffic impact of the Building on the local area
streets and highways.
50. AIR TRAFFIC.
Tenant acknowledges that the Building and the area in which the
Building is located is subject to sight, sound and overflight by general
aviation aircraft.
51. MODIFICATION FOR LENDER.
If, in connection with obtaining construction. interim or permanent
financing for the Building the lender shall request reasonable modifications
in this Lease as a condition to such financing, Tenant will not unreasonably
withhold, delay or defer its consent thereto, provided that such
modifications do not increase the obligations of Tenant hereunder or
materially adversely affect the leasehold interest hereby created or
Tenant's rights hereunder.
52. FINANCIAL STATEMENTS.
At any time during the term of this Lease, not more than once annually
shall upon ten (10) days prior written notice from Landlord, provide
Landlord with a current financial statement and financial statements of the
two (2) years prior to the current financial statement yetar. Suc statement
shall be prepared in accordance with generally accepted accounting
principles and, if such is the normal practice of Tenant, shall be audited
by an independent certified public accountant.
53. QUIET ENJOYMENT.
Landlord covenants and agrees with Tenant that upon Tenant paying the
rent required under this lease and paying all other
<PAGE>
charges and performing all of the covenants and provisions aforesaid on
Tenant's part to be observed and performed under this Lease. Tenant shall
and may peaceably and quietly have, hold and enjoy the Premises in
accordance with this Lease.
54. TENANT AS CORPORATION.
It Tenant executes this Lease as a corporation, then Tenant and the
persons executing this Lease on behalf of Tenant represent and warrant that
the individuals executing this Lease on Tenant's behalf are duly authorized
to execute and deliver this Lease on its behalf in accordance with a duly
adopted resolution of the board of directors of Tenant, a copy of which is
to be delivered to landlord on execution hereof, and in accordance with the
by-laws of Tenant and that this Lease is binding upon Tenant in accordance
with its terms.
IN WITNESS WHEREOF, the parties have executed this Lease as of the
date first above written.
LANDLORD: ADDRESS:
a California limited partnership
KZ3
By: KOLL VON KARMAN ASSOCIATES, 18500 Von Karman Avenue
a California general Suite 120
partnership, as Managing Irvine, California 92715
General Partner
By: THE KOLL COMPANY,
a California. corporation, as
its Managing Gener Partner
By:/s/Jana Turner
Its: Vice President
TENANT: ADDRESS:
CRUTTENDEN & CO., INC.
A California, Corporation 18301 Von Karman Avenue
Suite 100
By:/s/Jeffrey L. Guttfredson/CFO Irvine, California 92715
By:
<PAGE>
RIDER TO OFFICE BUILDING LEASE
DATED MARCH 8, 1991
BY AND BETWEEN KZ3, A CALIFORNIA LIMITED PARTNERSHIP
AS "LANDLORD" AND
CRUTTENDEN & CO., INC., A CALIFORNIA CORPORATION,
AS"TENANT"
55. ANNUAL BASIC RENTAL INCREASES: Notwithstanding Paragraph 5 of the
Lease, the rent will be as follows in years two (2) through ten (10):
Year 2 - $1.55 per rentable square foot per month,
$18,184.60 per month,
$218,215.20 per annum.
Year 3 - $1.65 per rentable square foot per month,
$19,357.80 per month,
$232,293.60 per annum.
Year 4 - $1.75 per rentable square foot per month,
$20,531.00 per month,
$246,372.00 per annum.
Year 5 - $1.85 per rentable square foot per month,
$21,704.20 per month,
$260,450.40 per annum.
Year 6 - $2.15 per rentable square foot per month,
$25,223.80 per month,
$302,685.60 per annum.
Year 7 - $2.25 per rentable square foot per month,
$26,397.00 per month,
$316,764.00 per annum.
Year 8 - $2.35 per rentable square foot per month,
$27,570.20 per month,
$330,842.40 per annum.
Year 9 - $2.45 per rentable square foot per month,
$28,743.40 per month,
$344,920.80 per annum.
Year 10- $2.55 per rentable square foot per month,
$29,916.60 per month,
$358,999.20 per annum.
<PAGE>
56. RENTAL ABATEMENT DURING TERM: Landlord shall provide Tenant with
months one (1) through ten (10) free of rent. Additionally, Landlord. shall
provide Tenant with months eleven (11) through fourteen (14) at one-half
(1/2) rent.
57. PARKING: Parking for the building shall be provided as per the following:
A) Visitor Parking: A specific sufficient section shall be set aside
within the surface and/or parking structure for visitor parking.
This parking shall be at a charge to the invitees with the rate
being established by Landlord from time to-time, presently the
initial fifteen (15) minutes are free of charge, subject to change
over the term of the Lease. Tenant may elect to validate such
parking for their guests. Validation costs shall be at or below
posted rates and available in thirty (30) minute increments.
B) Unreserved Employee Parking: Landlord shall lease to Tenant
forty-three (43) unreserved employee parking spaces. Throughout the
Lease term, Tenant shall pay the prevailing parking rental rate
(currently $50.00 per stall per month) for all such spaces allocated
to Tenant. All such unreserved employee parking spaces shall be
available to all tenants on a non-exclusive, in-common
basis within the non-visitor portions of the parldng facilities.
Tenant's parking rent shall be abated for all applicable unreserved
parking stalls for the initial sixty (60) months of the Lease term.
Commencing on the sixty-first (61st) month, Tenant shall pay $50.00
per stall on a monthly basis as additional rent
for all such unreserved employee parking spaces for the balance of
the initial Lease term. Landlord shall increase Tenant's unreserved
parking allocation commencing in the thirteenth (13th) month to
forty-eight (48) stalls, and commencing in the twenty-fifth (25th)
month, Tenant's unreserved parking allocation shall be increased to
fifty-three (53) stalls.
3. Reserved Employee Parking: Landlord shall lease to Tenant three (3)
reserved parking spaces. Tenant shall pay the prevailing parking
rental rate (currently $100.00 per stall per month) for all such
spaces allocated to Tenant. Tenant's parking rent shall be abated
for three (3) reserved parldng spaces for the initial
sixty (60) months of the Lease term. Commencing on the sixty-first
(61st)month, Tenant shall, pay $100.00 per stall on a monthly basis
as additional rent for all such reserved parldng spaces for the
balance of the initial Lease term.
58. OPTION TO EXPAND: (a) Subject to the terms of this Paragraph 58 and
Paragraph 60, entitled "Options," Landlord hereby grants to Tenant the
option ("Expansion Option ") to amend the Lease to expand the Premises to
include not less than 2,000
<PAGE>
nor more than 4,000 rentable square feet located on the fourth (4th) or
eighth (8th) floors (the "Expansion Space"). To the extent the location of
the Expansion Space is not specifically designated above, Tenant's
"Expansion Notice" (as defined below) shall specify the area and size of
space (within the foregoing parameters) into which Tenant would like to
expand the Premises. After considering Tenant's desires, the exact location
and size of the Expansion Space shall be selected by Landlord, in its
discretion, within the foregoing parameters and identified to Tenant in
writing delivered to Tenant by Landlord ("Landlord's Notice") within thirty
(30) days following Landlord's receipt of Tenant's Expansion Notice. Only if
and to the extent the location of the Expansion Space is not specifically
designed above, Tenant shall have the right, within five (5) days following
receipt of Landlord's Notice, to deliver a writing to Landlord rescinding
Tenant's Expansion Notice with respect to the Expansion Space not
specifically designated above and designated by Landlord in Landlord's
Notice. Tenant's failure to timely deliver such a rescission to Landlord
shall be deemed to be Tenant's satisfaction with the location and size of
the Expansion Space as designated by Landlord in Landlord's Notice.
The Expansion Option is subject to the condition that Landlord receive from
Tenant. written notice ("Expansion Notice") of Tenant's election to exercise
the Expansion Option no earlier than the last day of the thirtieth (30th)
month of the Term and no later than the last day of the thirty-sixth (36th)
month of the Term.
If Tenant properly exercises the Expansion Option, the Expansion Space will
be added to the Premises currently leased by Tenant under the Lease
effective as of the date the Expansion Space is delivered to Tenant in the
condition described below, which date shall be between the thirty-sixth
(36th) and sixtieth (60th) months of the Term. Landlord's Notice shall
contain Landlord's good-faith estimate of the date the Expansion Space will
be delivered to Tenant in the condition described below. Landlord's Notice
shall in any event specify the approximate number of rentable square feet of
the Expansion Space.
All terms and conditions for said option space shall remain in place, except
that the rent for the space shall be at the then fair market value. The fair
market value for the Premises shall be an amount equal to the fair market
rental value of the Premises, as determined herein, but shall in no event be
less than the Annual Basic Rental payable for the last month of the then
current year of the Lease. Landlord shall determine the fair market rental
value of the Premises by using its best good faith judgment. Such fair
market rental value shall be determined by Landlord in accordance with the
projected (to the commencement of such Option to Extend) prevailing market
rentals for similar space in Class "A" commercial office buildings in the
Orange County
<PAGE>
Airport marketplace. In determining such fair market rental value, Landlord
shall specifically exclude any consideration of Tenant's occupancy or use of
the Premises in place as of the end of the term or the previous Option to
Extend, as applicable. Landlord shall use its best efforts to deliver to
Tenant written notice of such fair market rental value and the new Annual
Basic Rental applicable to such Option to Extend within thirty (30) days
after Landlord's receipt of an Option Notice. Tenant shall have fifteen (15)
days ("Tenant's Review Period") after receipt of Landlord's notice of such
new Annual Basic Rental to reasonably object thereto in writing. In the
event Tenant objects to such new Annual Basic Rental submitted by Landlord,
Landlord and Tenant shall attempt in good faith to agree upon such new
Annual Basic Rental within fifteen (15) days following Tenant's Review
Period (the "Outside Agreement Date"), then each party's determination shall
be submitted to arbitration in accordance with Paragraph (c) hereof. Failure
of Tenant to so object in writing within such period shall conclusively be
deemed its approval of the new Annual Basic Rental determined by Landlord as
set forth above.
Landlord and Tenant shall each appoint one arbitrator who shall by
profession be a real estate appraiser who shall have been active over the
five (5) year period ending on the date of such appointment in the appraisal
of commercial properties in the Orange County Airport Marketplace. Each such
arbitrator shall be appointed within (30) c4ys after the Outside Agreement
Date.
The two arbitrators so appointed shall within fifteen (15) days of the date
of the appointment of the last appointed arbitrator agree upon and appoint a
third arbitrator who shall be qualified under the same criteria set forth
hereinabove for qualification of the initial two arbitrators.
Landlord and Tenant shall each submit a figure for the new Annual Basic
Rental for the Premises to the appointed arbitrators. Ile determination of
the arbitrators shall be limited solely to the issue of whether Landlord's
or Tenant's submitted new Annual Basic Rental for the Premises is the
closest to the actual new Annual Basic Rental for the Premises as determined
by the arbitrators, taking into account the requirements of Paragraph (b)
and this Paragraph (c) regarding same.
The three arbitrators shall within thirty (30) days of the appointment of
the third arbitrator reach a decision as to whether the parties shall use
Landlord's or Tenant's submitted new Annual Basic Rental, and shall notify
Landlord and Tenant thereof. Such decision shall be based upon the projected
prevailing fair market rental for similar space in Class "A" commercial
office buildings in the Orange County Airport Marketplace.
<PAGE>
The decision of the majority of the three arbitrators shall be binding
upon Landlord and Tenant.
If either Landlord or Tenant fails to appoint an arbitrator within the
time period in Paragraph (c)(I) hereinabove, the arbitrator appointed by
one of them shall reach a decision, notify Landlord and Tenant thereof,
and such arbitrator's decision shall be binding upon Landlord and Tenant.
If the two arbitrators fail to agree upon and appoint a third arbitrator,
both arbitrators shall be dismissed and the matter to be decided shall be
forthwith submitted to arbitration under the provisions of the American
Arbitration Association.
In the event that the new Annual Basic Rental is not established prior to
end of the initial term of the Lease or the Option Term then in effect,
the Annual Basic Rental immediately payable at the commencement of such
Option Term shall be the Annual Basic Rental payable in the immediately
preceding month. Notwithstanding the above, once the fair market rental is
determined in accordance with this section, the Tenant shall be required
to pay to Landlord, with the next payment of rental due hereunder, the
aggregate amount by which such fair market rental for such month and
a4,.prior months during the Option Term exceeds the aggregate Annual Basic
Rental paid to Landlord for such months pursuant to this subsection.
59. OPTION TO EXTEND: (a) Subject to the provisions of section 60 below,
Landlord hereby grants to Tenant the option to extend ("Option to Extend")
the term of this Lease for one (1) period of five (5) years ("Option
Term*). The Option to Extend must be exercised, if at all, by written
notice ("Option Notice" received by Landlord not later than one hundred
eighty (180) days and not earlier than two hundred seventy (270) days
prior to the expiration of the initial term of this Lease. Provided that
Tenant has properly exercised an Option to Extend, the term of this Lease
shall be extended for five (5) years and all of the terms, covenants and
conditions of the Lease shall remain unmodified and in full force and
effect, except that the Annual Basic Rental shall be modified as set forth
in subsection (b) below.
(b) The Annual Basic Rental payable for the Option Term shall be an amount
equal to the fair market rental value of the Premises, as determined
herein, but shall in no event be less than the Annual Basic Rental payable
for the last month of the basic term of the Lease. Landlord shall
determine the fair market rental value of the Premises by using its best
good faith judgment. Such fair market rental value shall be determined by
Landlord in accordance with the projected (to the commencement of
<PAGE>
such Option to Expand) prevailing market rentals for similar space in Class
"A" commercial office buildings in the Orange County Airport marketplace.
in determining such fair market rental value, Landlord shall specifically
exclude any consideration of Tenant's occupancy or use of the Premises in
place as of the end of the term. Landlord shall use its best efforts to
deliver to Tenant written notice of such fair market rental value and the
new Annual Basic Rental applicable to such Option to Expand within thirty
(30) days after Landlord's receipt of an Option-Notice. Tenant shall have
fifteen (15) days ("Tenant's Review Period") after receipt of Landlord's
notice of such new Annual Basic Rental to reasonably object thereto in
writing. In the event Tenant objects to such new Annual Basic Rental
submitted by Landlord, Landlord and Tenant shall attempt in good faith to
agree upon such new Annual Basic Rental within fifteen (15) days following
Tenant's Review Period (the *Outside Agreement Date"), then each party's
determination shall be submitted to arbitration in accordance with
Paragraph (C) hereof. Failure of Tenant to so object in writing within such
period shall conclusively be deemed its approval of the new Annual Basic
Rental determined by Landlord as set forth above.
(c)(i) Landlord and Tenant shall each appoint one arbitrator who shall by
profession be a real estate appraiser who shall have been active over the
five (5) year period ending on the date of such appointment in the
appraisal of commercial properties in the Orange County Airport
Marketplace. Each such arbitrator shall be appointed within thirty (30)
days after the Outside Agreement Date.
(ii) The two arbitrators so appointed shall within fifteen (15) days of the
date of the appointment of the Last appointed arbitrator agree upon and
appoint a third arbitrator who shall be qualified under the same criteria
set forth hereinabove for qualification of the initial two arbitrators.
(iii) Landlord and Tenant shall each submit a figure for the new Annual
Basic Rental for the Premises to the appointed arbitration. The
determination of the arbitrators shall be limited solely to the issue of
whether Landlord's or Tenant's submitted new Annual Basic Rental for the
Premises is the closest to the actual new Annual Basic Rental for the
Premises as determined by the arbitrators, taking into account the
requirements of Paragraph (b) and this Paragraph (C) regarding same.
(iv) The three arbitrators shall within thirty (30) days of the appointment
of the third arbitrator reach a decision as to whether the parties shall
use Landlord's or Tenant's submitted new Annual Basic Rental, and shall
notify Landlord and Tenant thereof. Such decision shall be based upon the
projected prevailing fair market rental for similar space in Class "A"
commercial office buildings in the Orange County Airport Marketplace.
<PAGE>
(v) The decision of the majority of the three arbitrators shall be binding
upon Landlord and Tenant.
(vi) If either Landlord or Tenant fails to appoint an arbitrator within the
time period in Paragraph (c)(I) hereinabove, the arbitrator appointed by
one of them shall reach a decision, notify Landlord and Tenant thereof, and
such arbitrator's decision shall be binding upon Landlord and Tenant.
(vii) If the two arbitrators fail to agree upon and appoint a third
arbitrator, both arbitrators shall be dismissed and the matter to be
decided shall be forthwith submitted to arbitration under the provisions of
the American Arbitration Association.
(viii) In the event that the new Annual Basic Rental is not established
prior to end of the initial term of the Lease or the Option Term then in
effect, the Annual Basic Rental immediately payable at the commencement of
such Option Tenn shall be the Annual Basic Rental payable in the
immediately preceding month. Notwithstanding the above, once the fair
market rental is determined in accordance with this section, the Tenant
shall be required to pay to Landlord, with the next payment of rental due
hereunder, the aggregate amount by which such fair market rental for such
month and all prior months during the Option Term exceeds the aggregate
Annual Basic Rental paid to Landlord for such months pursuant to this
subsection.
60. OPTIONS:
(a) Definition. As used in this section the word "Option" has the following
meaning: (i) the Option to Expand pursuant to Section 58 herein, and (ii)
the Option to Extend, the term, of this Lease pursuant to Section 59 herein.
(b) Options Personal. Each Option granted to Tenant in this Lease is
personal to the original Tenant and may be exercised only by the original
Tenant while occupying the Premises who does so without the intent of
thereafter assigning this Lease or subletting the Premises or any portion
thereof, and may not be exercised or be assigned, voluntarily or
involuntarily, by and person or entity other than Tenant; provided,
however, any purchase of substantially all of the business and assets of
Tenant, who is otherwise an acceptable assignee of Tenant under this Lease,
shall be entitled to exercise any such options in accordance with this
Lease. The Options, if any, herein granted to Tenant are not assignable
separate and apart from this Lease, nor may any Option be separated from
this Lease in any manner, either by reservation or otherwise.
<PAGE>
(C) Effect of Default on Options.
(I) Tenant shall have no right to exercise an Option,
notwithstanding any provision of the grant of Option to the
contrary: (A) during the time commencing from the date Landlord
gives to Tenant a notice of default and continuing until the
non-compliance alleged in said notice of default is cured; (B)
during the period of time commencing on the day after a monetary
obligation to Landlord is due from Tenant and unpaid (without any
necessity for notice thereof to Tenant) and continuing until the
obligation is paid; (C) in the event Landlord has given to Tenant
two or more notices of material default, whether or not the defaults
are cured, during the twelve (12) month period of time immediately
prior to the time Tenant attempts to exercise the subject Option; or
(D) if Tenant has committed any non-curable breach or is otherwise
in default under any of the terms, covenants or conditions of this
Lease.
(ii) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Tenant's inability to
exercise an Option because of the provisions of the immediately
preceding paragraph.
(iii) All rights of Tenant under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding
Tenant's due and timely exercise of the Option if, after such
exercise prior to the commencement of the Option Term:
(A) Tenant fails to pay to Landlord a monetary obligation of
Tenant for a period of thirty (30) days after such obligation
becomes due (without any necessity of Landlord to give notice
thereof to Tenant);
(B) Tenant fails to commence to cure a non-monetary default within
thirty (30) days after the date that Landlord gives notice to
Tenant of such default and/or Tenant fails thereafter to
diligently prosecute said cure to completion;
(C) Landlord gives to Tenant two (2) or more notices of default,
whether or not the defaults are cured;
(D) If Tenant has committed any non-curable breach or is otherwise
I material default under any of the terms, covenants and
conditions of this Lease.
<PAGE>
The decision of the majority of the three arbitrators shall be binding
upon Landlord and Tenant.
If either Landlord or Tenant fails to appoint an arbitrator within the
time period in Paragraph (c)(I) hereinabove, the arbitrator appointed by
one of them shall reach a decision, notify Landlord and Tenant thereof,
and such arbitrator's decision shall be binding upon Landlord and Tenant.
If the two arbitrators fail to agree upon and appoint a third arbitrator,
both arbitrators shall be dismissed and the matter to be decided shall be
forthwith submitted to arbitration under the provisions of the American
Arbitration Association.
In the event that the new Annual Basic Rental is not established prior to
end of the initial term of the Lease or the Option Term then in effect,
the Annual Basic Rental immediately payable at the commencement of such
Option Term shall be the Annual Basic Rental payable in the immediately
preceding month. Notwithstanding the above, once the fair market rental is
determined in accordance with this section, the Tenant shall be required
to pay to Landlord, with the next payment of rental due hereunder, the
aggregate amount by which such fair market rental for such month and
a4,.prior months during the Option Term exceeds the aggregate Annual Basic
Rental paid to Landlord for such months pursuant to this subsection.
59. OPTION TO EXTEND: (a) Subject to the provisions of section 60 below,
Landlord hereby grants to Tenant the option to extend ("Option to Extend")
the term of this Lease for one (1) period of five (5) years ("Option
Term*). The Option to Extend must be exercised, if at all, by written
notice ("Option Notice" received by Landlord not later than one hundred
eighty (180) days and not earlier than two hundred seventy (270) days
prior to the expiration of the initial term of this Lease. Provided that
Tenant has properly exercised an Option to Extend, the term of this Lease
shall be extended for five (5) years and all of the terms, covenants and
conditions of the Lease shall remain unmodified and in full force and
effect, except that the Annual Basic Rental shall be modified as set forth
in subsection (b) below.
(b) The Annual Basic Rental payable for the Option Term shall be an amount
equal to the fair market rental value of the Premises, as determined
herein, but shall in no event be less than the Annual Basic Rental payable
for the last month of the basic term of the Lease. Landlord shall
determine the fair market rental value of the Premises by using its best
good faith judgment. Such fair market rental value shall be determined by
Landlord in accordance with the projected (to the commencement of
<PAGE>
such Option to Expand) prevailing market rentals for similar space in Class
"A" commercial office buildings in the Orange County Airport marketplace.
in determining such fair market rental value, Landlord shall specifically
exclude any consideration of Tenant's occupancy or use of the Premises in
place as of the end of the term. Landlord shall use its best efforts to
deliver to Tenant written notice of such fair market rental value and the
new Annual Basic Rental applicable to such Option to Expand within thirty
(30) days after Landlord's receipt of an Option-Notice. Tenant shall have
fifteen (15) days ("Tenant's Review Period") after receipt of Landlord's
notice of such new Annual Basic Rental to reasonably object thereto in
writing. In the event Tenant objects to such new Annual Basic Rental
submitted by Landlord, Landlord and Tenant shall attempt in good faith to
agree upon such new Annual Basic Rental within fifteen (15) days following
Tenant's Review Period (the *Outside Agreement Date"), then each party's
determination shall be submitted to arbitration in accordance with
Paragraph (C) hereof. Failure of Tenant to so object in writing within such
period shall conclusively be deemed its approval of the new Annual Basic
Rental determined by Landlord as set forth above.
(c)(i) Landlord and Tenant shall each appoint one arbitrator who shall by
profession be a real estate appraiser who shall have been active over the
five (5) year period ending on the date of such appointment in the
appraisal of commercial properties in the Orange County Airport
Marketplace. Each such arbitrator shall be appointed within thirty (30)
days after the Outside Agreement Date.
(ii) The two arbitrators so appointed shall within fifteen (15) days of the
date of the appointment of the Last appointed arbitrator agree upon and
appoint a third arbitrator who shall be qualified under the same criteria
set forth hereinabove for qualification of the initial two arbitrators.
(iii) Landlord and Tenant shall each submit a figure for the new Annual
Basic Rental for the Premises to the appointed arbitration. The
determination of the arbitrators shall be limited solely to the issue of
whether Landlord's or Tenant's submitted new Annual Basic Rental for the
Premises is the closest to the actual new Annual Basic Rental for the
Premises as determined by the arbitrators, taking into account the
requirements of Paragraph (b) and this Paragraph (C) regarding same.
(iv) The three arbitrators shall within thirty (30) days of the appointment
of the third arbitrator reach a decision as to whether the parties shall
use Landlord's or Tenant's submitted new Annual Basic Rental, and shall
notify Landlord and Tenant thereof. Such decision shall be based upon the
projected prevailing fair market rental for similar space in Class "A"
commercial office buildings in the Orange County Airport Marketplace.
<PAGE>
(v) The decision of the majority of the three arbitrators shall be binding
upon Landlord and Tenant.
(vi) If either Landlord or Tenant fails to appoint an arbitrator within the
time period in Paragraph (c)(I) hereinabove, the arbitrator appointed by
one of them shall reach a decision, notify Landlord and Tenant thereof, and
such arbitrator's decision shall be binding upon Landlord and Tenant.
(vii) If the two arbitrators fail to agree upon and appoint a third
arbitrator, both arbitrators shall be dismissed and the matter to be
decided shall be forthwith submitted to arbitration under the provisions of
the American Arbitration Association.
(viii) In the event that the new Annual Basic Rental is not established
prior to end of the initial term of the Lease or the Option Term then in
effect, the Annual Basic Rental immediately payable at the commencement of
such Option Tenn shall be the Annual Basic Rental payable in the
immediately preceding month. Notwithstanding the above, once the fair
market rental is determined in accordance with this section, the Tenant
shall be required to pay to Landlord, with the next payment of rental due
hereunder, the aggregate amount by which such fair market rental for such
month and all prior months during the Option Term exceeds the aggregate
Annual Basic Rental paid to Landlord for such months pursuant to this
subsection.
60. OPTIONS:
(a) Definition. As used in this section the word "Option" has the following
meaning: (i) the Option to Expand pursuant to Section 58 herein, and (ii)
the Option to Extend, the term, of this Lease pursuant to Section 59 herein.
(b) Options Personal. Each Option granted to Tenant in this Lease is
personal to the original Tenant and may be exercised only by the original
Tenant while occupying the Premises who does so without the intent of
thereafter assigning this Lease or subletting the Premises or any portion
thereof, and may not be exercised or be assigned, voluntarily or
involuntarily, by and person or entity other than Tenant; provided,
however, any purchase of substantially all of the business and assets of
Tenant, who is otherwise an acceptable assignee of Tenant under this Lease,
shall be entitled to exercise any such options in accordance with this
Lease. The Options, if any, herein granted to Tenant are not assignable
separate and apart from this Lease, nor may any Option be separated from
this Lease in any manner, either by reservation or otherwise.
<PAGE>
(C) Effect of Default on Options.
(I) Tenant shall have no right to exercise an Option,
notwithstanding any provision of the grant of Option to the
contrary: (A) during the time commencing from the date Landlord
gives to Tenant a notice of default and continuing until the
non-compliance alleged in said notice of default is cured; (B)
during the period of time commencing on the day after a monetary
obligation to Landlord is due from Tenant and unpaid (without any
necessity for notice thereof to Tenant) and continuing until the
obligation is paid; (C) in the event Landlord has given to Tenant
two or more notices of material default, whether or not the defaults
are cured, during the twelve (12) month period of time immediately
prior to the time Tenant attempts to exercise the subject Option; or
(D) if Tenant has committed any non-curable breach or is otherwise
in default under any of the terms, covenants or conditions of this
Lease.
(ii) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Tenant's inability to
exercise an Option because of the provisions of the immediately
preceding paragraph.
(iii) All rights of Tenant under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding
Tenant's due and timely exercise of the Option if, after such
exercise prior to the commencement of the Option Term:
(A) Tenant fails to pay to Landlord a monetary obligation of
Tenant for a period of thirty (30) days after such obligation
becomes due (without any necessity of Landlord to give notice
thereof to Tenant);
(B) Tenant fails to commence to cure a non-monetary default within
thirty (30) days after the date that Landlord gives notice to
Tenant of such default and/or Tenant fails thereafter to
diligently prosecute said cure to completion;
(C)Landlord gives to Tenant two (2) or more notices of default,
whether or not the defaults are cured;
(D) If Tenant has committed any non-curable breach or is otherwise
I material default under any of the terms, covenants and
conditions of this Lease.
<PAGE>
61. ATHLETIC CLUB: Upon execution of a Lease document, the KZ3 partnership
shall provide to Tenant six (6) health memberships free of the initial
membership fee in the Sports Club/Irvine. Tenant shall be responsible for
the monthly dues and charges thereafter.
62. SECONDARY BUILDING SIGN: Upon approval by the City of Irvine, Landlord
will give Tenant approval for an eyebrow Building sign. All costs of
installation, repair and removal of such sign will be the obligation of
Tenant. The location of such sign will be mutually agreed upon by both
parties prior to Lease execution (see Exhibit 'H'). The size, style and type
of sign permitted will be subject to the Declaration of Covenants,
Conditions and Restrictions for the Development and all applicable laws,
regulations and ordinances of the City of Irvine and must also be consistent
with the sign criteria of Koll Center Irvine, if any. All sign rights
granted to Tenant win be personal to Tenant and may not be assigned,
transferred or otherwise conveyed to any assignee, subtenant or other party
without Landlord's express written consent, which Landlord may withhold in
its discretion.
63. TENANT REFURBISHMENT ALLOWANCE: Provided Tenant is not in default of
any term, condition or covenant of the Lease, at the beginning of the
sixty-first (61st) month of the Lease term, Landlord shall professionally
clean the carpets and repaint the Tenant's premises with building standard
paint.
64. SIZE OF PREMISES ADJUSTMENT: Landlord and Tenant hereby agree to adjust
the size of the Premises as called for in the Lease in accordance with
an exact
determination as a result of the development of a finalized floor
plan. Such
amendment of the Lease shall amend correspondingly Section 1 (o)
(Annual Basic
Rent), Section l(p) (Operating Expense Allowance), Section l(q) (Tenant's
Percentage), Section l(i) (Rentable Square Feet), Section l(r)
(Security Deposit) Exhibit B, Section 7(a) (Payment of Cost of the
Tenant Improvements). Landlord
shall warrant that the load factor used to convert usable square
footage to rentable
square footage is consistent with American National Standard Institute
Publication
ANSI 265.1-1980 (the 'B.O.M.A.' standard).
65. CONTINUOUS OPERATION AND TENANT'S CONDUCT: Tenant covenants and
agrees to occupy the Premises upon commencement of the Term and
thereafter to continuously operate and conduct within the Premises the
business it is permitted operate and conduct under the provisions of
this Lease during normal business hours, Mondays through Fridays 7:00
a.m. to 5:00 p.m. (excluding legal holidays); provided however, Tenant
shall not be obligated to continuously operate during -and to the
extent (i) any portion of the Premises may be untenantable by reason
of fire or other
<PAGE>
casualty or government intervention; (ii) Tenant is making reasonable
repairs to the Premises; or (iii) Tenant is reasonably constructing or
altering any portion of the Premises pursuant to an approved sublease.
Tenant agrees to conduct its business at all times in a first-class manner
consistent with reputable business standards and practices and shall keep
the Premises in a neat, safe, clean and orderly condition consistent with
the terms of this Lease recognizing that the Premises is ground floor space
visible to all other tenants and visitors of the Building. Accordingly, in
addition to all other rights and remedies set forth in this Lease, Landlord
shall have the right to periodically inspect the Premises and to require
Tenant to make such repairs, replacements or perform such other maintenance
as may reasonably be necessary to keep the Premises in a first-class state
of repair and condition consistent with the condition of the Building and
all other ground floor space including, but not limited to, periodic
refurbishment and replacement of floor and wall coverings. Nothing in the
foregoing provisions of this subparagraph shall be deemed in any way to
prohibit or restrict Tenant from operating the Premises during such hours in
addition to those set forth hereinabove as Tenant may elect.
If at any time after the Commencement Date Tenant fails to open the Premises
for business and operate therefrom either for any period of five (5)
consecutive business days during which Tenant is not exempted from operating
as provided above, Landlord may, in its sole discretion, terminate this
Lease by giving Tenant express written notice thereof within thirty (30)
days after the last day during any such applicable period on which Tenant
was not open for business and operating from the Premises, in which event
this Lease shall terminate automatically as of the date on which such notice
is given. Any such termination shall not alter or impair any rights or
remedies held by or available to either party hereto under the provisions of
this I=m on account of any default occurring before such termination.
66. It is the expectation of Tenant, and Landlord hereby agrees, that
Landlord shall act reasonably and in good faith when taking action that
might frustrate the spirit in which the Base Year was negotiated. Such
that Landlord shall not unreasonably reduce expenditures during the base
year period of the Lease (the calendar year 1992), and consequently,
disproportionately or indiscreetly increase discretionary, variable or any
other expenses in years thereafter.
If Tenant shall dispute the amount set forth in any Actual Statement
described above in Paragraph 6, Tenant shall. have the right not later
than thirty (30) days following receipt of such Actual Statement to cause
Landlord's books and records with respect to the preceding calendar year
to be audited by a: certified public accountant mutually acceptable to
Landlord and Tenant; provided, however, Tenant shall pay any such
<PAGE>
disputed amount pending completion of such audit. The amounts payable
under Paragraph 6 by Landlord to Tenant or Tenant to Landlord, as the case
may be, shall be appropriately adjusted on the basis of such audit. If
such audit discloses a liability for further refund by Landlord to Tenant
in excess of ten percent (10%) of the payments previously made by Tenant
for such calendar year, the cost of such audit shall be borne by Landlord;
otherwise the cost of such audit shall be borne by Tenant. If Tenant shall
not request an audit in accordance with the provisions of Paragraph 6
within ninety (90) days of receipt of any Actual Statement, such Actual
Statement shall be conclusively binding upon Landlord and Tenant.
Notwithstanding the foregoing, for purposes of this Lease, 'operating
expenses' shall not include any of the following costs:
Any ground lease rentals.
Costs, including permit, license and inspection costs, incurred with
respect to the installation of improvements for other lessees or occupants
of the Office Building or Project or incurred in renovating or otherwise
improving, decorating, painting or redecorating vacant space for lessees or
other occupants of the Office Building Project.
Expenses in connection with services or other benefits which are not
offered to Lessee but which are provided to other lessees or occupants
of the Office Building Project, not consistent with other class "A"
high-rise office buildings within the Orange County Airport area
marketplace.
Costs incurred by Lessor due to the violation by Lessor or any lessee
or occupant of the Office Building Project (other than Lessee) of the
terms and conditions of any lease of space in the Office Building
Project.
Overhead and profit increments paid to Lessor or to subsidiaries or
affiliates of Lessor for goods and/or services in the Office Building
Project to the extent the same exceeds the costs of such goods and/or
services rendered by unaffiliated third parties on a competitive basis
or any compensation paid to clerks, attendants or other persons
commercial concessions operated by Landlord.
Services provided, taxes attributable to, and costs incurred in
connection with the operation of any retail or restaurant facilities
in the Office Building Project.
<PAGE>
Costs incurred in connection with upgrading the Office Building
Project to comply with handicap, hazardous. material, fire and safety
codes or any other laws applicable to the Premises prior to the date
of this Lease.
Tax penalties incurred as a result of Lessor's negligence, inability
or unwillingness to make payments when due, except to the extent
attributable to Lessee's failure to make payments to Lessor for taxes
in accordance with this Lease.
Costs arising from the presence of Hazardous Materials in or about the
Premises of the Office Building Project, including without limitation
Hazardous Materials in the ground water or soil, which either (i)
arose prior to the Commencement Date, or (ii) are not attributable to
Lessee.
Costs arising from Lessor's charitable or political contributions.
Costs to repair any structural components.
Capital costs for sculpture, painting or other objects of art.
Lessor's general corporate overhead and general administrative expenses.
Capital expenditures incurred because of Landlord's failure to comply with
laws enacted on or before the date the Building received its Temporary
certificate of Occupancy, or the equivalent.
Costs incurred by Landlord due to the negligence of Landlord or its agents or
employees, the violation by Landlord of the terms and conditions of any
lease space in the Building or Landlord's failure to adhere to standards
of prudence then observed by Landlord or comparable office buildings in
the vicinity of the Building.
Interest, points and fees on debt or amortization on any mortgage or
mortgages
encumbering the Building or the land upon which the Building is situated.
Rentals and other related expenses incurred in leasing air conditioning
systems, elevators or other equipment ordinarily considered of a capital
nature, except equipment not affixed to the Building which is used in
providing janitorial or similar services.
<PAGE>
Advertising and promotional expenditures, and cost of signs in on or about
the Building identifying the owner of the Building or any tenant of the
Building Other than directory signs available to all tenants of the Building.
Costs incurred by Landlord for the repair of damage to the Building to the
extent that Landlord is reimbursed by insurance proceeds.
Bad debt expenses.
Costs of installing or operating and maintaining any specialty service
operated by Landlord, such as an observatory, broadcast facility, luncheon
club, athletic club or any other specialty service other am services
available to tenants of the Building without extra charge.
Attorneys' fees and other costs and expenses incurred in connection with
negotiations or disputes with present or prospective tenant or other
occupants of the Building or any brokerage commissions or any other leasing
fees.
Costs of additional insurance carried by Landlord for new or broader
coverage which is not carried by Landlord during the Base Year and which is
not commonly carried by landlords of similar first-class office building
projects in the Orange County Airport area.
In addition, Landlord agree s that if the taxes for the entire Building or
project are unreasonably increased due to extraordinary improvements within
the Building, and if the tax assessor confirms that such extraordinary
improvements are the source of the tax increase, Landlord shall insure that
Tenant bears no such portion of excess tax increase.
All Building equipment necessary for normal building or project operation
will be Purchased as required for normal project operations. The costs of
said equipment will not be charged to Operating Expenses on a cash basis,
but amortized over useful life in accordance with generally accepted
accounting principals.
All accounting, legal and other consulting expenses shall be restricted
specifically to the prorata share required for the Building and/or Project,
and such costs shall not disproportionately increase in future years.
<PAGE>
Landlord agrees that the purchase of supplies, materials and tools shall be
reasonable and customary and be used only for this Building or Project. Such
purchases will not unreasonably increase or be modified during the Lease
term disproportionate to normal building and project operation needs.
Landlord has no prior knowledge of any types of assessments which would
effect Tenant's prorata. share of Operating Expenses which would not be
included in the Base Year as defined within this Lease.
Commencing with the first (1st) anniversary of the Commencement Date and
continuing thereafter to and including the sixtieth (60th) month of the Term
of the Lease, the portion of Operating Expenses which constitute
"Controllable Cost so (as defined below), shall not increase over such four
(4) year period at an average rate in excess of five percent (5 %) per
annum. During the period from months sixty-one (61) through ninety (90) of
the Term of the Lease, Controllable Costs shall not increase beyond the
"Secondary Cap." The Secondary Cap " shall mean an average rate per annum.
equal to the greater of (I) five percent (5 %) per annum, or (ii) the
average annual cost of living increase between the first (lst) month and the
sixtieth (60th) month of the Term of this Tea (which shall be determined by
comparing the Consumer Price index - Urban Wage Earners and Clerical Workers
- - Los AngelesAnaheim-Riverside, California, Base 1982-84 ("CPI") compiled by
the U.S. Department of Labor, Bureau of labor Statistics, for month one (1)
with the CP1 for month sixty (60), and dividing any such total increase by
five (5)). During the period from months ninety-one (91) through one-hundred
twenty (120) of the Term of the Lease, Controllable Costs shall not increase
beyond the "Final Cap." The Final Cap shall mean an average rate per annum
of the greater of (x) the Secondary Cap, or (y) the average annual CPI
increase between the sixty-first (61st) month through the ninetieth (90th)
month of the Term of the Lease. The raw specified in clause (y) shall be
computed by comparing the CPI for month sixty-one (61) of the Term with the
CPI for month ninety (90) of the Term, and dividing any such total increase
by 2.5. For purposes of illustration, if the total CPI increase from the
first (lst) month of the Term to the sixtieth (60th) month of the Term is
thirty-five percent (35 %), then the Secondary Cap shall be seen percent (7
%). Similarly, if the total CPI increase from -the sixty-first (61st) to the
ninetieth (90th) month of the Term is twenty percent (20 %), the Final Cap
shall be eight percent (8 %). Controllable Costs shall mean all Operating
Expenses which can increase or decrease at the independent and sole
discretion of Landlord, as opposed to increases or decreases which are
industry-wide or are caused by third parties
<PAGE>
or over which Landlord has no independent control. By way of illustration
but not limitation, Operating Expenses paid to a public utility, insurer and
taxing authority for utilities, insurance, real property taxes, and costs of
operating, maintaining and repairing the Building, Common Areas and Parking
Facilities at the level of a Qualified Building as required by this Lease,
as contrasted with the cost of operating, maintaining and repairing the
Building, Common Areas and Parking Facilities at a level below that of a
Qualified Building. -Landlord agrees that approximately every two (2) years
Landlord shall rebid -the janitorial, security, landscape and parking
service contracts for the Building.
67. EARLY OCCUPANCY: Subject to all the terms and conditions of this
Lease, except for the payment of rent, Landlord shall provide to
Tenant a period of early occupancy within the Premises prior to the
commencement of this Lease for thirty (30) days at no charge.
68. WITH BASIC LEASE: In the event of any conflict between the printed
portion of this Lease and the provisions of this Rider, Sections 55
through 67, the provisions of this Rider shall prevail.
"LANDLORD" "TENANT"
KZ3, CRUTTENDEN & CO., INC.,
A California Limited Partnership A California Corporation
By: KOLL VON KARMAN ASSOCIATES,
A California General
Partnership, as Managing By:/s/Jeffrey L. Guttfredson
General Partner
Title: CFO
By: THE KOLL COMPANY a
California Corporation, as Date: March 8, 1991
its Managing General Partner
By:/s/Jana Turner
Its: Vice President
<PAGE>
DIAGRAM - Ground Floor Plan for 18301 Von Karman Ave.
EXHIBIT "A-I"
<PAGE>
DIAGRAM - Koll Center Irvine
EXHIBIT "A-II"
<PAGE>
DIAGRAM - Floor Plan for 18301 Von Karman Ave.
EXHIBIT "A-III"
<PAGE>
<PAGE>
CHART - PRICING NOTES
EXHIBIT "A-IV"
<PAGE>
CHART - KOLL CONSTRUCTION KZ-3, LEASEHOLD IMPROVEMENTS, STANDARD COSTS
EXHIBIT "A-V"
<PAGE>
CHART - KOLL CONSTRUCTION KZ-3, LEASEHOLD IMPROVEMENTS, NON-STANDARD COSTS
EXHIBIT "A-VI"
<PAGE>
CHART - KOLL CONSTRUCTION KZ-3, LEASEHOLD IMPROVEMENTS, NON-STANDARD COSTS
EXHIBIT "A-VII"
<PAGE>
CHART - KOLL CONSTRUCTION KZ-3, QUALIFICATIONS
EXHIBIT "A-VIII"
<PAGE>
EXHIBIT B
WORK LETTER AGREEMENT
This work Letter Agreement, is entered into as of the 8th day of
March, 1999 by and between KZ3, a California limited partnership
("Landlord") and Cruttenden & CO.,Inc., California Corporation ('Tenant').
RECITALS:
A. Concurrently with the execution of this Work Letter Agreement, Landlord
and Tenant have entered into a lease (the 'Lease' covering certain premises
(the "Premises") more particularly described in Exhibit A-l" attached to the
Lease.
B. In order to induce Tenant to enter into the Lease (which is hereby
incorporated by reference to the extent that the provisions of this Work
Letter Agreement may apply thereto) and in consideration of the mutual
covenants hereinafter contained, Landlord and Tenant hereby agree as follows:
1. COMPLETION SCHEDULE.
Within ten (10) days after the execution of the Lease, Landlord shall
deliver to Tenant, for Tenant's review and approval, a schedule (the "Work
Schedule') setting forth a timetable for the planning and completion of the
installation of the Tenant improvements to bop constructed in the Premises,
and the Commencement Date for the term of the Lease. The Work Schedule shall
set forth each of the various items of work to be done by or approval to be
given by Landlord and Tenant in connection with the completion of the Tenant
Improvements. Such Schedule shall be submitted to Tenant for its approval
and. upon approval by both Landlord and Tenant. such Schedule shall become
the basis for completing the Tenant Improvement work. If Tenant shall fail
to approve the Work Schedule, as it may be modified after discussions
between Landlord and Tenant, within five (5) working days after the date
such Schedule is first received by Tenant, Landlord may. at its option,
terminate the Lease and all of its obligations thereunder.
2. TENANT IMPROVEMENTS.
Reference herein to'"Tenant Improvements" shall include all work to be done
in the Premises pursuant to the Tenant Improvement Plans described in
Paragraph 3 below, including, but not limited to, partitioning, doors,
ceilings, floor coverings, wall finishes (including paint and
wall-covering), electrical (including lighting, switching, telephones,
outlets. etc.), plumbing, heating, ventilating and air conditioning, fire
protection, cabinets and other millwork.
3. TENANT IMPROVEMENT PLANS.
Immediately after the execution of the Lease. Tenant agrees to meet with
Landlord's architect and/or space planner for the purpose of preparing a
space plan for the layout of the Premises. Based upon such space plan,
Landlord's architect shall prepare final working drawings and specifications
for the Tenant Improvements. Such final working drawings and specifications
may referred to herein as the "Tenant Improvement Plans." The Tenant
Improvement Plans must be consistent with Landlord's standard specifications
(the 'Standards") for tenant improvements for the Building.
4. NON-STANDARD TENANT IMPROVEMENTS.
Landlord shall permit Tenant to deviate from the Standards for the Tenant
Improvements; provided that (a) the deviations shall not be of a lesser
quality that the Standards; Landlord shall permit Tenant to deviate from the
Standards for the Tenant Improvements. provided it not be of a lesser
quality than the Standards; (b) the total lighting for the Premises shall be
consistent with the Space Plan 'A-III'; (C) the deviations conform to
applicable governmental regulations and necessary governmental permits and
approvals have been secured: (d) the deviations do not require building
service beyond the level normally provided to other tenants in the Building
and do not overload the floors: and (e) Landlord has determined in its
reasonable discretion that the deviations are of a nature and quality are
consistent with the overall objectives of the Landlord for the Building.
5. FINAL PRICING AND DRAWING SCHEDULE.
After the preparation of the space plan and after Tenant's written approval
thereof. in accordance with the Work Schedule, Landlord shall cause its
architect to prepare and submit to Tenant the final working drawings and
specifications referred to in Paragraph 3 hereof. Such working drawings
shall be approved by Landlord and Tenant in accordance with the Work
Schedule and shall thereafter be submitted to the appropriate, governmental
body by Landlord's architect for plan checking and the issuance of a
building permit. Landlord, with Tenant's cooperation and prior reasonable
approval, shall cause to be made any changes in the plans and specifications
o necessary to obtain the building permit. Concurrent with the plan
checking, Landlord shall have prepared a final pricing for Tenant's
approval, in accordance with the Work Schedule, taking into account any
modifications which may be required to reflect changes in the plans and
specifications required by the City County hi h the Premises are located.
After final approval of the working drawings, no further changes to the
Tenant Improvement Plans may be made without the prior written approval from
both Landlord and Tenant, and then only after agreement by Tenant to pat any
excess costs resulting from the design and/or construction of such changes.
Tenant hereby acknowledges that any such changes shall be subject to the
terms of Paragraph 8 hereof.
<PAGE>
6. CONSTRUCTION OF TENANT IMPROVEMENTS.
After the Tenant Improvement Plans have been prepared and approved, the
final pricing has been approved and a building permit for the Tenant
Improvements has been issued, Landlord shall enter into a construction
contract with its contractor for the installation of the Tenant Improvements
in accordance with the Tenant Improvement Plans. Landlord shall supervise
the completion of such work and shall use its best efforts to secure
substantial completion of the work in accordance with the Work Schedule. The
cost of such work shall be paid as provided in Paragraph 7 hereof. Landlord
shall not be liable for any direct or indirect damages as a result of delays
in construction beyond Landlord's reasonable control. including. but not
limited to, acts of God, inability to secure governmental approvals or
permits, governmental restrictions. strikes. availability of materials or
labor or delays by Tenant (or its architect or anyone performing services on
behalf of Tenant).
7. PAYMENT OF COST OF THE TENANT IMPROVEMENTS.
(a) Landlord hereby grants to Tenant a "Tenant Allowance" of Thirty-seven
and NO/100 Dollars IS $37.00 per square foot of Usable Area (as defined
below) of the Premises for a total of Three Hundred Seventy-nine Dollars $
379,990.00. Such Tenant Allowance shall be used only for:
(I) Payment of the cost of preparing the space plan and the final working
drawings and specifications. including mechanical, electrical, plumbing and
structural drawings and of all other aspects of the Tenant Improvement
Plans. The Tenant Allowance will not be used for the payment of
extraordinary design work not included within the scope of Landlord's
building standard improvements or for payments to any other consultants,
designers or architects other than Landlord's architect and/or space planner.
(ii) The payment of plan check, permit and license, fees relating to
construction of the Tenant Improvements.
(iii) Construction of the Tenant Improvements. including, without
limitation, the following:
(1) Installation within the Premises of all partitioning, doors, floor
coverings, ceilings, wall coverings and painting. millwork and similar items.
(2) All electrical wiring, lighting fixtures, outlets and switches, and
other electrical work to be installed within the Premises.
(3) The furnishing and installation of all duct work. terminal boxes.
diffusers and accessories required for the completion of the heating.
ventilation and air conditioning systems within the Premises, including the
cost of meter and key control for after-hour air conditioning.
(4) Any additional Tenant requirements including. but not limited to, odor
control, special heating, ventilation and air conditioning, -noise or
vibration control or other special systems.
(5) All fire and life safety control systems such as fire walls, sprinklers,
halon, fire alarms, including piping. wiring and accessories installed
within the Premises.
(6) All plumbing, fixtures, pipes and accessories to be installed
within the Premises.,
(7) Testing and inspection costs.
(8) Contractor's fees, including but not limited to any fees based on
general conditions.
(iv) All other costs to be expended by Landlord in the construction of the
Tenant Improvements, including those costs incurred by, Landlord for
construction of elements of the Tenant Improvements in the Premises, which
construction was performed by Landlord prior to the execution of this Lease
by Landlord and Tenant (i.e., during or after the construction of the base
Building) and which construction is for the benefit of tenants and is
customarily performed by Landlord prior to the execution of leases for such
space in the Building for reasons of economics (examples of such
construction would include the extension of mechanical (including heating,
ventilating and air conditioning systems] and electrical distribution
systems outside of the core of the Building, wall construction, column
enclosures and painting outside of the core of the Building. ceiling hanger
wires and window treatment).
(b) The cost of each item shall be charged against the Tenant Allowance. In
the event that the cost of installing the Tenant improvements, as
established by Landlord's final pricing schedule. shall exceed the Tenant
Allowance. or if any of the Tenant Improvements are not to be paid out of
the Tenant Allowance as provided in Paragraph 7(a) above, the excess shall
be paid by Tenant to Landlord prior to the commencement of construction of
the Tenant Improvements.
(C) In the event that, after the Tenant improvement Plans have been prepared
and a price therefore established by Landlord, Tenant shall require any
changes or substitutions to the Tenant Improvement Plans, any additional
costs thereof shall be paid by Tenant to Landlord prior to the commencement
of such work. Landlord shall have the right to decline Tenant's request for
a change to the Tenant Improvement Plans if such changes are inconsistent
with Paragraphs 3 and 4 above, or if the change would, in Landlord's
opinion, unreasonably delay construction of the Tenant Improvements.
<PAGE>
(d) In the event that Tenant modified the Space Plan, per Exhibit 'A-III',
the cost of the Tenant Improvements increases as set forth in Landlord's
final pricing due to the requirements of any governmental agency, Tenant
shall pay Landlord the amount of such increase within five (5) days of
Landlord written notice; provided. however, that Landlord shall first apply
toward such increase any remaining balance in the Tenant Allowance.
(e) Any unused portion of the Tenant Allowance upon completion of the Tenant
Improvements shall be refunded to Tenant or be available to Tenant as a
credit against any obligations of Tenant under the Lease up to a maximum of
Four Dollars ($4.00) per useable square foot. Any unused portion beyond the
($4.00) amount shall go to Landlord.
(f) As used in this Work Letter Agreement, the term "Usable Area" means the
area of the Premises, as determined by measuring the area within the bounds
of the inside surface of the glass in the outer wall of the Building and the
surface facing the Premises of all partitions separating the Premises from
the, Building core, adjoining tenant space and public corridors or other
common areas. No deductions shall be made for space occupied by structural
or functional columns or other projections. The Usable Area of the Premises
is 10,270 square feet, and is consistent with the B.O.M.A. standards
applicable.
8. COMPLETION AND RENTAL COMMENCEMENT DATE.
The commencement of the term of the Lease and Tenant's obligation for the
payment of rental under the Lease shall commence until the earlier of the
following two dates: (I) the date upon which Tenant takes possession of the
Premises; or the date upon which the Tenant Improvements have been
substantially completed as determined reasonably by Landlord's architect;
provided that. if there shall be a delay in substantial completion of the
Tenant Improvements as a result of:
(a) Tenant's failure to approve any item or perform any other obligation in
accordance with and by the date specified in the Work Schedule;
(b) Tenant's request for materials, finishes or installations other
than those readily available;
(C) Tenant's changes in the Tenant Improvement Plans after the
approval by Tenant;
(d) Tenant's request to deviate from the Standards for Tenant
Improvements;
then the commencement of the term of the Lease and the rental commencement
date shall be accelerated by the number days of such delay. Landlord shall
immediately notify Tenant of such delay. The Tenant Improvements shall be
deemed substantially complete notwithstanding the fact that minor details of
construction, mechanical adjustments or decorations which do not materially
interfere with Tenant's use and enjoyment of the
Premises remain to be performed (items normally referred to as "punch list"
items).
IN WITNESS WHEREOF, this Work Letter Agreement is executed as of the date
first above written.
LANDLORD: TENANT:
KZ3, CRUTTENDEN & CO., INC.,
a California limited partnership A California Corporation
By: KOLL VON KARMAN ASSOCIATES, By:/s/Jeffrey L.
Guttfredson
a California general
partnership, as Managing By:
General Partner
By: THE KOLL COMPANY,
a California corporation, as
its Managing General
Partner
By:/s/Jana Turner
Its: Vice President
<PAGE>
EXHIBIT C
NOTICE OF LEASE TERM DATES AND
TENANT'S PERCENTAGE
To:_______________________________________
Date:_______________
_______________________________________
_______________________________________
Re: Lease dated ____________________, 19___between KZ3, a California limited
partnership
, Landlord, and Tenant concerning Suite located at 18301 Von Karmam
Avenue, Irvine, California.
Gentlemen:
In accordance with the subject Lease, we wish to advise and/or confirm as
follows:
1. That the Premises have been accepted herewith by the Tenant as being
substantially complete in accordance with the subject Lease and that there
is no deficiency in construction.
2. That the Tenant has possession of the subject Premises and acknowledges
that under the provisions of the subject Lease the term of said Lease shall
commence as of_______________for a term of_________________________ ending on
3. That in accordance with the subject Lease, rental commenced to accrue on
4. If the commencement date of the subject Lease is other than the first day
of the month, the first billing will contain a pro rata adjustment. Each
billing thereafter shall be for the full amount of the monthly installment
as provided for in said Lease.
5. Rent is due and payable in advance on the first day of each and every
month during the term of said Lease. Your rent checks should be made payable
to
________________________________________________________________________at
_______________________________________.
6. The exact number of rentable square feet within the Premises is
_______________square feet.
7. Tenant's Percentage, as adjusted based upon the exact number of rentable
square feet within the Premises, is ____________%.
AGREED AND ACCEPTED
LANDLORD: TENANT:
KZ3,
a California limited partnership
By:
By:
By: KOLL VON KARMAN ASSOCIATES, By:
a California general
partnership. as Managing
General Partner .
By; THE KOLL COMPANY, a
California corporation, as
its Managing General
Partner
By:
Its:
INTENTIONALLY LEFT BLANK
<PAGE>
EXHIBIT D
STANDARDS FOR UTILITIES AND SERVICES
The following Standards for utilities and services are in effect. Landlord
reserves the right to adapt nondiscriminatory modifications and additions
hereto.
As long as Tenant is not in default under any of the terms,
conditions, provisions or agreements of this Lease, Landlord shall:
1. Provide non-attended automatic elevator facilities Monday through
Friday, except holidays from 7 A.M. to 6 P.M., and on one elevator available
at all other times.
2. On Monday through Friday, except holidays, from 7 A.M. to 6 P.M., and
on Saturday mornings from 8 A.M. to 12 noon (and other times for a
reasonable additional charge to be fixed by Landlord), ventilate the
Premises and furnish air conditioning or heating on such days and
hours, when in the reasonable judgment of Landlord it may be required
for the comfortable occupancy of the Premises. The air conditioning
system achieves maximum cooling when the window coverings are closed.
Landlord shall not be responsible for room temperatures if Tenant does
not keep all window coverings in the Premises closed whenever the
system is in operation. Tenant agrees to cooperate fully at all times
with Landlord, and to abide by all reasonable regulations and
requirements which Landlord may prescribe for the proper function and
protection of said air conditioning system. Tenant agrees not to
connect any apparatus. device conduit or pipe to the Building chilled
and hot water air conditioning supply lines. Tenant further agrees
that neither Tenant nor its servants, employees, agents, visitors,
licensees or contractors; shall at any time enter mechanical
installations or facilities of the Building or adjust, tamper with,
touch or otherwise in any manner affect said installations or
facilities. The cost of maintenance and service calls to adjust and
regulate the air conditioning system shall be charged to Tenant if the
need for maintenance work results from either Tenant's adjustment of
room thermostats or Tenant's failure to comply with its obligations
under this section, including keeping window coverings closed as
needed. Such work shall be charged at hourly rates equal to then
current journeymen's wages for air conditioning mechanics.
3. Landlord shall furnish to the Premises, during the usual business
hours on business days, electric current as required by the Building
standard office lighting and fractional horsepower office business
machines in an amount not to exceed .025 KWH per square foot per
normal business day. Tenant agrees, should its electrical installation
or electrical consumption be in excess of the aforesaid quantity or
extend beyond normal business hours, to reimburse Landlord monthly for
the measured consumption at the average cost per kilowatt hour charged
to the Building during the period. If a separate meter is not
installed at Tenant's cost, such excess cost will be established by an
estimate agreed upon by Landlord and Tenant, and if the parties fail
to agree, as established by an independent licensed engineer. Tenant
agrees not to use any apparatus or device in, or upon, or about the
Premises which may in any way increase the amount of such services
usually furnished or supplied to said Premises, and Tenant further
agrees not to connect any apparatus or device with wires, conduits or
pipes, or other means by which such services are supplied, for the
purpose of using additional or unusual amounts of such services
without written consent of Landlord. Should Tenant use the same to
excess, the refusal on the part of Tenant to pay upon demand of
Landlord the amount established by Landlord for such excess charge
shall constitute a breach of the obligation to pay rent under this
Lease and shall entitle Landlord to the rights therein granted for
such breach. At all times Tenant's use of electric current shall never
exceed the capacity of the feeders to the Building or the risers or
wiring installation and Tenants shall not install or use or permit the
installation or use of any computer or electronic data processing
equipment in the Premises without the prior written consent of Landlord.
4. Water will be available in public areas for drinking and lavatory
purposes only, but it Tenant requires, uses or consumes water for any
purposes. in addition to ordinary drinking and lavatory purposes, of
which fact Tenant constitutes Landlord to be the sale judge, Landlord
may install a water meter and thereby measure Tenant's water
consumption for all purposes. Tenant shall pay Landlord for the cost
of the meter and the cost of the installation thereof and throughout
the duration of Tenant's occupancy Tenant shall keep said meter and
installation equipment in good working order and repair at Tenant's
own cost and expense. in default of which Landlord may cause such
meter and equipment to be replaced or repaired and collect the cost
thereof from Tenant. Tenant agrees to pay for water consumed, as shown
on said meter, as and when bills are rendered. and on default in
making such payment, Landlord may pay such charges and collect the
same from Tenant. Any such costs or expenses incurred, or payments
made by Landlord for any of the reasons or purposes hereinabove stated
shall be deemed to be additional rent payable by Tenant and
collectible by Landlord as such.
3. Provide janitor service to the Premises, provided the same are used
exclusively as offices, and are kept reasonably in order by Tenant.
and it to be kept clean by Tenant, no one other than persons approved
by Landlord shall be permitted to enter the Premises for such
purposes. If the Premises are not used exclusively as offices, they
shall be kept clean and in order by Tenant, at Tenant's expense, and
to the satisfaction of Landlord, and by persons approved by Landlord.
Tenant shall pay to Landlord the cost of removal of any of Tenant's
refuse and rubbish to the extent that the same exceeds the refuse and
rubbish usually attendant upon the use of the Premises as offices.
Landlord reserves the right to stop service of the elevator, plumbing,
ventilation, air conditioning and electric systems, when necessary, by
reason of accident or emergency or for repairs, alterations or improvements,
in the judgment of Landlord desirable or necessary to be made, until said
repairs, alterations or improvements, shall have been completed, and shall
further have no responsibility or liability for failure to supply elevator
facilities, plumbing, ventilating, air conditioning or electric service,
when prevented
<PAGE>
from so doing by strike or accident or by any cause beyond Landlord's
reasonable control, or by laws, rules. orders, ordinances. directions
regulations or requirements of any federal, state, county or municipal
authority or failure of gas. oil or other suitable fuel supply or inability
by exercise of reasonable diligence to obtain gas, oil or other suitable
fuel. It is expressly understood and agreed that any covenant on Landlord's
part to furnish any service pursuant to any of the terms, covenants,
conditions, provisions or agreements of this Lease, or to perform any act or
thing for the benefit of Tenant, shall not be deemed breached if Landlord is
unable to furnish or perform the same by virtue of a strike or labor trouble
or any other Cause whatsoever beyond Landlord's control.
<PAGE>
EXHIBIT E
TENANT ESTOPPEL CERTIFICATE
The undersigned, KZ3, a California limited partnership ("Landlord'), with a
mailing address c/o 18500 Von Karman Avenue , Suite 120, Irvine, CA and
__________________________ ("Tenant'), hereby certify to
___________________________________________________________________ as follows:
1. Attached hereto is a true, correct and complete copy of that certain
lease dated 19____, between Landlord and Tenant (the "Lease"). which demises
premises located at
__________________________________________________________The Lease is now
in full force and effect and has not been amended, modified or supplemented,
except as set forth in Paragraph 4 below.
2. The term of the Lease commenced
on______________________________________19_____.
3. The term of the Lease shall expire
on___________________________________19_____.
4. The Lease has (initial one):
(_______)not been amended, modified, supplemented, extended, renewed or
assigned.
(________)been amended, modified, supplemented, extended, renewed or
assigned by the following described agreements copies of which
are attached hereto:
________________________________________________________________________
________________________________________________________________________
5. Tenant has accepted and is now in possession of said premises.
6. Tenant and Landlord acknowledge that the Lease will be assigned
to_______________________________ and that no modification, adjustment,
revision or cancellation of the Lease or amendments thereto shall be
effective unless written consent
of_______________________________________________ is obtained, and that
until further notice, payments under the Lease may continue as heretofore.
7. The amount of fixed monthly rent is $_____________________.
8. The Amount of security deposits (if any) is $______________________. No
other security deposits have been made.
9. Tenant is paying the full lease rental which has been paid in full as of
the date hereof. No rent under the Lease has been paid for more than thirty
(30) days in advance of its due date.
10. All work required to be performed by Landlord under the Lease has been
completed.
11. That Tenant Knows of, no defaults on the part of the Landlord or Tenant
under the Lease.
12. Tenant has no defense as to its obligations under the Lease and claims
no set-off or counterclaim against Landlord.
13. Tenant has no right to any concession (rental or otherwise) or similar
compensation in connection with renting the space it occupies except as
provided in the lease.
All provisions of the Lease and the amendments thereto (if any) referred to
above are hereby ratified.
The foregoing certification is made with the knowledge
that____________________________________is about to fund a loan to Landlord
and that_______________________________________________________is relying
upon the representations herein made in funding such loan.
INTENTIONALLY LEFT BLANK
<PAGE>
IN WITNESS WHEREOF, this Certificate has been duly executed and delivered by
the authorized officers of the undersigned as of______________________, 19____.
LANDLORD:
KZ3, ADDRESS:
a California limited partnership
KZ3
By: KOLL VON KARMAN ASSOCIATES, 18500 Von Karman Avenue
4 California general Suite 120
partnership, as Managing Irvine, California 92715
General Partner
By: THE KOLL COMPANY, a
California corporation, as
its Managing General
Partner
By:_____________________________
Its:____________________________
TENANT: ADDRESS:
______________________________________
________________________________
By:___________________________________
________________________________
By:___________________________________
________________________________
"INTENTIONALLY LEFT BLANK
<PAGE>
<PAGE>
EXHIBIT F
RULES AND REGULATIONS
1. Except as specifically provided in the Lease to which these Rules and
Regulations are attached, no sign, placard, picture, advertisement.
name or notice shall be installed or displayed on any part of the
outside or inside of the Building without
the prior written consent of Landlord. Landlord shall have the right
to remove, at Tenant's expense and without notice, any sign,
installed or displayed in violation of this rule. All approved signs
or lettering on doors and walls shall be printed, painted, affixed or
inscribed at the expense of Tenant by a person approved by Landlord.
2. If Landlord objects in writing to any curtains, blinds, shades,
screens or hanging plants or other similar objects attached to or used
in connection with any window or door of the Premises, or placed on
any windowsill, which is visible from the exterior of the Premises,
Tenant shall immediately discontinue such use. Tenant shall not place
anything against or glass partitions or doors or windows which may
appear unsightly from outside the Premises. L
3. Tenant shall not obstruct any sidewalks, halls, passages, exits.
entrances, elevators, escalators or stairways of the Building The
halls. passages, exits. entrances, shopping malls, elevators,
escalators an stairways are not open to the general public, but are
open. subject to reasonable regulations, to Tenant's business invite .
Landlord shall in all cases retain the right to control and prevent
access thereto of all persons whose presence in the reasonable
judgment of Landlord would be prejudicial to the,,safety, character,
reputation and interest of the Building and its tenants: provided that
nothing herein contained shall be construed to prevent such access to
persons with whom any tenant normally deals in the ordinary course of
its business, unless such persons are engaged in illegal or unlawful
activities. No tenant and no employee or invitee of any tenant shall
go upon the roof of the Building.
4. The directory of the Building will be provided exclusively for the
display of the name and location of tenants only and Landlord reserves
the right to exclude any other names therefrom.
5. All cleaning and janitorial services for the Building and the Premises
shall be provided exclusively through Landlord, and except with the
written consent of Landlord, no person or persons other than those
approved by Landlord shall be employed by Tenant or permitted to enter
the Building for the purpose of cleaning the same. Tenant shall not
cause any unnecessary labor by carelessness or indifference to the
good order and cleanliness of the Premises.
6. Landlord will furnish Tenant, free of charge, with two keys to each
door lock in the Premises. Landlord may make a reasonable charge for
any additional keys. Tenant shall not make or have made additional
keys, and Tenant shall not alter any lock or install a new additional
lock or bolt on any door of its Premises. Tenant, upon the termination
of its tenancy, shall deliver to Landlord the keys of all doors which
have been furnished to Tenant, and in the event of loss of any keys so
furnished, shall pay Landlord therefore.
7. If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with, Landlord's
instructions in their installation.
8. The Building freight elevator(s) shall be available for use by all
tenants in the Building, subject to such reasonable scheduling as
Landlord, in its discretion, shall deem appropriate. No equipment,
materials, furniture, packages, supplies, merchandise or other
property will be received in the Building or carried in the elevators
except between such hours and in such elevators as May be designated
by Landlord. Tenant's initial move in and subsequent deliveries of
bulky items, such as furniture, safes ,and similar items shall,
unless otherwise agreed in writing by Landlord, be made during the
hours of 6:00 p.m. to 6:00 a.m. or on Saturday or Sunday. Deliveries
during normal office hours shall be limited to normal office supplies
and other small items. No deliveries shall. be made which impede or
interfere with other tenants or the operation of the Building.
9. Tenant shall not place a load upon any floor of the Premises which
exceeds the load per square foot which such floor was designed to
carry and which is allowed by law. Landlord shall have the right to
prescribe the weight, size and position of all equipment, materials,
furniture or other property brought into the Building. Heavy objects
shall, if considered necessary by Landlord, stand on such platforms as
determined by Landlord to be necessary to properly distribute the
weight, which platforms shall be provided at Tenant's expense.
Business machines and mechanical equipment belonging to Tenant, which
cause noise or vibration that May be transmitted to the structure of
the Building or to any space therein to such a degree as to be
objectionable to Landlord or to any tenants in the Building, shall be
placed and maintained by Tenant, at Tenant's expense, on vibration
eliminators or other devices sufficient to eliminate noise or
vibration. The persons employed to move such equipment in or out of
the Building must be acceptable to Landlord. Landlord will not be
responsible for loss or damage to, any such equipment or other
property from any cause, and all damage done to the Building by
maintaining or moving such equipment or other property shall be
repaired at the expense of Tenant.
10. Tenant shall not use or keep in the Premises any kerosene, gasoline or
inflammable or combustible fluid or material other than those limited
quantities necessary for the operation or maintenance of office
equipment. Tenant shall not use or permit to be used in the Premises
any foul or noxious gas or substance, or permit or allow the Premises
to be occupied or used in a manner offensive or objectionable to
Landlord or other occupants of the Building by reason of noise, odors
or vibrations, nor shall Tenant bring into or keep in or about the
Premises any birds or animals.
<PAGE>
11. Tenant shall not use any method of heating or air conditioning other
than that supplied by Landlord.
12. Tenant shall not waste electricity, water or air conditioning and
agrees to cooperate fully with Landlord to assure the most effective
operation of the Building's heating and air conditioning and to comply
with any governmental energy-saving rules, laws or regulations of
which Tenant has actual notice, and shall refrain from attempting to
adjust controls. Tenant shall keep corridor doors closed, and shall
close window coverings at the end of each business day.
13. Landlord reserves the right, exercisable without notice and without
liability to Tenant. to change the name and street address of the
Building.
14. Landlord reserves the right to exclude from the Building between the
hours of 6 p.m. and 7 a.m. the following day, or such other hours as
may be established from time to time by Landlord, and on Sundays and
legal holidays, any person unless that person is known to the person
or employee in charge of the Building and has a pass or is properly
identified. Tenant shall be responsible for all persons for whom it
requests passes and shall be liable to Landlord for all acts of such
persons. Landlord shall not be liable for damages for any error with
regard to the admission to or exclusion from the Building of any
person. Landlord reserves the right to prevent access to the Building
in case of invasion, mob. riot, public excitement or other commotion
by closing the doors or by other appropriate action.
15. Tenant shall close and lock the doors of its Premises and entirely
shut off all water faucets or other water apparatus, and electricity,
gas or air outlets before tenant and its employees leave the Premises.
Tenant shall be responsible for any damage or injuries sustained by
other tenants or occupants of the Building or by Landlord for
noncompliance with this rule.
16. Tenant shall not obtain for use on the Premises ice, drinking water,
food, beverage, towel or other similar services or accept barbering or
bootblacking service upon the Premises, except at such hours and under
such regulations as may be fixed by Landlord.
17. The toilet rooms, toilets, urinals, wash bowls and other apparatus
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be
thrown therein. The expense of any breakage, stoppage or damage
resulting from the violation of this rule shall be borne by the tenant
who, or whose employees or invitees, shall have caused it.
18. Tenant shall not sell, or permit the sale at retail of newspapers,
magazines, periodicals, theater tickets or any other goods or
merchandise to the general public in or on the Premises. Tenant shall
not make any room-to-room solicitation of business from other tenants
in the Building. Tenant shall not use the Premises for any business or
activity other than that specific provided for in Tenant's Lease.
19. Tenant shall not install any radio or television antenna, loudspeaker
or other devices on the roof or exterior walls of the Building Tenant
shall not interfere with radio or television broadcasting or reception
from or in the Building or elsewhere.
20. Tenant shall not mark, drive nails, screw or drill into the
partitions, woodwork or plaster or in any way deface the Premises or
any part thereof, except in accordance with the provisions of the
Lease pertaining to alterations, except hanging pictures and other
customary decorations. Landlord reserves the right to direct
electricians as to where and how telephone and telegraph wires are to
be introduced to the Promises. Tenant shall not cut or bore holes for
wires. Tenant shall not affix any floor covering to the floor of the
Premises in any manner except as approved by Landlord. Tenant shall
repair any damage resulting from noncompliance with this rule. Tenant
shall not install, maintain or operate upon the premises any vending
machines without the written consent of Landlord.
21. Tenant shall not install, maintain or operate upon the premises any
vending machines without the written consent of Landlord.
22. Canvassing, soliciting and distribution of handbills or any other
written material. and peddling in the Building are prohibited. and
Tenant shall cooperate to prevent such activities.
23. Landlord reserves the right to exclude or expel from the Building any
person who, in Landlord's judgement, is intoxicated or under the
influence of liquor or drugs or who is in violation of any of the
Rules and Regulations of the Building.
24. Tenant shall store all its trash and garbage within its premises or in
other facilities provided by Landlord. Tenant Shall not place in any
trash box or receptacle any material which cannot be disposed of in
the ordinary and customary manner of trash and garbage disposal. All
garbage and refuse disposal shall be made in accordance with
directions issued from time to time by Landlord.
25. The Premises shall not be used for the storage of merchandise held for
sale to the general public, or for lodging or for manufacturing of any
kind, nor shall the Premises be used for any improper, immoral or
objectionable purpose. No cooking shall be done or permitted on the
Premises without Landlord's consent, except that use by Tenant of
Underwriters' Laboratory approved equipment for brewing coffee, tea,
hot chocolate and. similar beverages or use of microwave ovens for
employee use shall be permitted, provided that such equipment and use
is in accordance with all applicable, federal, state, county and city
laws, codes, ordinances, rules and regulations.
<PAGE>
26. Tenant shall not use in any space or in the public halls of the
Building any hand truck except those equipped with rubber tires and
side guards or such other material-handling equipment as Landlord may
approve. Tenant shall not bring any other vehicles of any kind into
the Building.
27. Without the written consent of Landlord, Tenant shall not use the name
of the Building in connection with or in promoting or advertising the
business of Tenant except as Tenant's address.
28. Tenant shall comply with all safety fire protection and evacuation
procedures and regulations established by Landlord or any governmental
agency.
29. Tenant assumes any and all responsibility for protecting its Premises
from theft, robbery and pilferage, which includes keeping doors locked
and other means of entry to the Premises closed.
30. Tenant's requirements will be attended to only upon appropriate
application to the Building management office by an authorized
individual. Employees of Landlord shall not perform any work or do
anything outside of their regular duties unless under special
instructions from Landlord, and no employee of Landlord will admit any
person (Tenant or otherwise) to any office without specific
instructions from Landlord.
31. Landlord may waive any one or more of these Rules and Regulations for
the benefit of Tenant or any other tenant, but no ,such waiver by
Landlord shall be construed as a waiver of such Rules and Regulations
in favor of Tenant or any other tenant or prevent Landlord from
thereafter enforcing any such Rules and Regulations against any or all
of the tenants of the Building.
32. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole in part, the terms,
covenants, agreements and conditions of the Lease.
33. Landlord reserves the right to make such other and reasonable Rules
and Regulations as, its reasonable judgment, may from time to time be
needed for safety and security, for care and cleanliness of the
Building and for the preservation of good order therein. Tenant agrees
to abide by all such Rules and Regulations hereinabove stated and any
additional rules and regulations which are adopted.
34. Tenant shall be responsible for the observance of all of the foregoing
rules by Tenant's employees, agents, clients. customers, invitees and
guests.
<PAGE>
EXHIBIT G
PARKING RULES AND REGULATIONS
The following rules and regulations shall govern use of the parking
facilities which are appurtenant to the Building.
1. All claimed damage or loss must be reported and itemized in writing
delivered to the parking facility office within ten (1.0) business
days after any claimed damage or loss occurs. Any claim not so made is
waived. Landlord has the option to make repairs at its expense of any
claimed damage within two business days after filing of any claim. In
all court actions the burden of proof to establish a claim remains
with Tenant. Court actions by Tenant for any claim must be filed
within ninety days from date of parking in court of jurisdiction where
a claimed loss occurred. Landlord is not responsible for damage by
water, fire, or detective brakes, or parts, of for the act or
omissions of others, or for articles left in the car The total
liability of Landlord is limited to $250.00 for all damages or loss to
any car Landlord is not responsible for loss of use.
2. Tenant shall not park or permit the parking of any vehicle under its
company in any parking areas designated by Landlord as areas for
parking by visitors to the Building. Tenant shall not leave vehicles
in the parking areas overnight nor park any vehicles in the parking
areas other than automobiles, motorcycles, motor driven or non-motor
driven bicycles or four wheeled trucks.
3. Parking stickers or any other device or form of identification
supplied by landlord as a condition of use of the Parking Facilities
shall remain the property of Landlord. Such parking identification
device must be displayed as requested and may not be mutilated in any
manner. The serial number of the parking identification device may not
be obliterated. Devices are not transferable and any device in the
possession of an unauthorized holder will be void.
4. No overnight or extended term storage of vehicles shall be permitted.
5. Vehicles must be parked entirely within painted stall lines of a
single parking stall.
6. All directional signs and arrows must be observed.
7. The speed limit within all parking areas shall be 5 miles per hour.
8. Parking is prohibited:
(a) in areas not striped for parking;
(b) in aisles;
(c) where "no parking" signs are posted;
(d) on amps
(e) in cross-hatched areas; and
(f) in such other areas as may be designated by Landlord or Landlord's
Parking Operator.
9. Every parker is required to park and lock his own vehicle. All
responsibility for damage to vehicles is assumed by the parker.
10. Loss or theft of parking identification devices from automobiles must
be reported to the garage manager immediately and a lost or stolen
report must be filed by the customer at that time. Landlord has the
right to exclude any car from the parking facilities that does not
have an identification device.
11. Any parking identification devices reported lost or stolen found on
any unauthorized car will be confiscated and the illegal holder will
be subject to prosecution.
12. Lost or stolen devices found by the purchaser must be reported to the
Parking Facility Office immediately to avoid confusion.
l3. Washing, waxing, cleaning or servicing of any vehicle in any area not
specifically reserved for such purpose is prohibited.
14. Tenant shall acquaint all persons to whom Tenant assigns parking
spaces of these Rules and Regulation. Parking Facility managers or
attendants are not authorized to make or allow any exception$ to these
Rules and Regulations.
15. Landlord reserves the right to refuse the sale of monthly stickers or
other parking identification devices to any tenant or person and/or
his agents or representatives who willfully refuse to comply with
these Rules and Regulations and all unposted City, State or Federal
ordinances, laws or agreements.
l6. Landlord reserves the right to modify and/or adopt such other
reasonable and non-discriminatory rules and regulations for the
parking facilities as it deems necessary for the operation of the
parking facilities. Landlord may refuse to permit any person who
violates these rules to park in the parking facilities, and any
violation of the rules shall subject the car to removal.
<PAGE>
DIAGRAM - TENANT SIGN EXHIBIT
EXHIBIT "H" - Page 1 of 2
<PAGE>
DIAGRAM - TENANT SIGN EXHIBIT
EXHIBIT "H" - Page 2 of 2
<PAGE>
AMENDMENT NO. 1 TO OFFICE BUILDING LEASE
THIS AMENDMENT NO. 1 TO OFFICE BUILDING LEASE is made as of this 17th day of
June, 1992, by and between KZ3, a California Limited Partnership,
(hereinafter 'Landlord") and CRUTTENDEN & COMPANY, INC., a California
Corporation, (hereinafter 'Tenant').
RECITALS
The parties hereto are "Landlord" and"Tenant" under that certain Office
Building Lease ("Lease") dated March 8, 1991, covering space on the first
(lst) floor of the building located at 18301 Von Karman Avenue, Irvine,
California, in the project known as Koll Center Irvine.
The parties hereto mutually desire to amend the Lease as hereinafter
provided, effective as of June 17, 1992.
WITNESSETH
The parties agree to amend the Lease as hereinafter provided.
1. Term Commencement Date: In accordance with Section I of the Office
Building Lease dated March 8, 199 1, the term shall commence on June 28,
1991 and terminate June 27,2001.
2. Rent Commencement Date: Rent for the Premises in accordance with
Section 5(a) 'Annual Basic Rent' shall commence June 28, 1991.
Except as modified herein, all other terms and conditions of said Lease
dated March 8, 1901 as amended, between the parties above described shall
remain unchanged and in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No.1 to
Office Building Lease as of the day and year first above written.
"LANDLORD": ADDRESS:
KZ3, 18500 Von Karman Avenue,
a California Limited Partnership Suite 120
Irvine, CA 92715
By: KOLL VON KARMAN ASSOCIATES,
a California General Partnership,
as Managing General Partner
By: KOLL MANAGEMENT SERVICES, INC
a Delaware Corporation,
As Agent for the Managing General Partner
By: /s/Barry A. Katz
Its: Portfolio Manager
Date: 5/13/93
'TENANT': ADDRESS:
CRUTTENDEN & COMPANY, INC. 18301 Von Karman Avenue,
a California Corporation Suite 100
Irvine, CA 92715
By:/s/Jeffrey L. Guttfredson
Its: Secretary/Treasurer
<PAGE>
AMENDMENT NO. 2 TO OFFICE BUILDING LEASE
THIS AMENDMENT NO. 2 TO OFFICE BUILDING LEASE ("Amendment") is made as of
this 30th day of June, 1993, by and between KZ3, a California limited
partnership ("Landlord'), and Cruttenden & Co., Inc., a California
Corporation ("Tenant"), with reference to the facts set forth in the
Recitals below.
RECITALS
A. Tenant and Landlord are parties to that certain Office Building Lease
dated March 8, 1991 (the "Original Lease") and Amendment No. I thereto,
dated June 28, 1991 pursuant to which Landlord leased to Tenant certain
space on the ground floor (the 'Original Premises') of that certain office
building located in Irvine, California, commonly known as 18301 Von Karman
Avenue (the "Building"). The Original Premises presently leased by Tenant
consists of approximately 11,732 rentable square feet and is commonly known
as Suite 100.
B. The Original Lease, as amended by Amendment No. 1, shall hereafter be
co1lectively referred to as the 'Lease". Capitalized terms not defined
herein have the meanings given to such terms in the Lease.
C. Landlord and Tenant desire to further amend the Lease to expand the
Original Premises as hereinafter provided.
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Landlord and Tenant agree as follows:
1. Description of Premises. Landlord hereby leases to Tenant and
Tenant hereby leases from Landlord, upon all of the terms and conditions of
the Lease as amended hereby, an additional approximately 5,307 rentable
square feet (4,645 usable square feet) on, the third (3rd) floor of the
Building, commonly known as Suite 300 ("Additional Premises"), making the
total area leased by Tenant pursuant to the Lease as amended hereby,
approximately 17,039 rentable square feet (collectively, the 'New
Premises'). The Additional Premises is more particularly described and shown
on Exhibit "A' which is attached hereto and made a part hereof by this
reference. Except as otherwise set forth in this Amendment, all references
in the Lease to the term "Premises' shall mean the New Premises, including
the Additional Premises.
2. Term and Commencement Date. The term for the Additional Premises shall
be for a five (5) year period, commencing on the date the Tenant
Improvements in the Additional Premises are substantially completed as
contemplated under Paragraph 5 of this Amendment below and terminating five
(5) years thereafter (the 'Additional Premises Term').
3. Annual Basic Rent. Effective as of the commencement of the
Additional Premises Term, continuing for the duration of the Additional
Premises Term, and n6twithstanding anything to the contrary contained in the
Lease, the Monthly Basic Rent for the Additional Premises during the
Additional Premises Term shall be as follows:
<PAGE>
Year 1- $1.25 per rentable sq.ft. per month
$6,633.75 per month;
Year 2 - $1.30 per rentable sq.ft. per month
$6,899.10 per month;
Years 3-5- $1.60 per rentable sq.ft. per month
$8,491.20 per month.
4. Operating Expenses and Tenant's Percentage: The Operating Expense
Allowance for the Additional Premises shall be Tenant's Percentage of actual
Operating Expenses for the Additional Premises for the 1993 calendar year.
Tenant shall have no pass through of Operating Expenses during the initial
twelve (12) months of the Additional Premises Term. Tenant's Percentage for
the Additional Premises shall be 2.4174%.
5. Delivery of Possession of Additional Premises to Tenant. Landlord shall
deliver possession of the Additional Premises to Tenant when the 'Tenant
Improvements" therein have been substantially completed by Landlord as
provided in Paragraph 3(c) of, and the Additional Premises shall be improved
in accordance with, the Work Letter Agreement attached hereto as Exhibit "B".
6. Parking. Effective as of the commencement of the Additional Premises
Term, parking for the Additional Premises shall be provided pursuant to and
in accordance with the following:
a) Unreserved Employee Parking. So long as the Lease as
amended hereby is in eff6ct, Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord up to twenty-three (23) unreserved employee
parking spaces. As consideration for the use of such unreserved parking
spaces, Tenant agrees to pay to Landlord, as additional rent under the
Lease, the prevailing parking rate (currently $55.00 per stall per month)
for each such unreserved parking space as established by Landlord from time
to time. Tenant agrees to pay Landlord the additional rent for such
unreserved parking spaces monthly, concurrently with each monthly payment of
Monthly Basic Rent. All unreserved employee parking spaces will be made
available to Tenant, its employees and all other tenants and employees of
the Development entitled to use such parking facilities, on a non-exclusive,
in common basis. Despite the foregoing to the contrary, and so long as
Tenant is not in default under the Lease as amended hereby, Tenant's parking
rent shall be abated for all twenty-three (23) unreserved parking stalls
applicable to the Additional Premises for the Additional Premises Term.
<PAGE>
b) Reserved Parking: So long as the Lease as amended hereby is in effect,
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord up
to three (3) reserved parking spaces. As consideration for the use of such
reserved parking spaces, Tenant agrees to pay to Landlord, as additional
rent under the Lease, the prevailing parking rate (currently $115.00 per
stall per month) for each such reserved parking space as established by
Landlord from time to time. Tenant agrees to pay Landlord the additional
rent for such reserved parking spaces monthly, concurrently with each
monthly payment of Monthly Basic Rent. De.V1ite the foregoing to the
contrary, and so long as Tenant is not in default under the Lease as unended
hereby, Tenant's parking rent shall be abated for all three (3) reserved
parking stalls applicable to the Additional Premises for the Additional
Premises Term.
c) Use of Unreserved and Reserved Parking Spaces: With
respect to reserved parking, Tenant shall use only the parking space(s)
specifically designated by Landlord for use by Tenant. With respect to
unreserved employee parking, Tenant shall not use any spaces which have been
specifically assigned by Landlord to other tenants or occupants or for other
uses such as visitor parking or which have been designated by any
governmental entity as being restricted to certain uses. Tenant shall be
obligated to lease the reserved and unreserved parking spaces specified
herein throughout the Term of the Lease and shall not be entitled to any
additional reserved or unreserved parking privileges applicable to the
Premises for the remainder of the Term. of the Lease; provided, however, if
at any time Tenant desires to increase or reduce the number of reserved or
unreserved parking spaces it leases under the terms of this Lease, within
parameters described in this Paragraph, Tenant may notify Landlord in
writing of such desire the and Landlord shall have the right, in its sole
and absolute discretion, to either (a) approve such requested increase in
the number of parking spaces allocated to Tenant (with an appropriate
increase to the additional rent payable by Tenant for such additional spaces
based on the then prevailing parking rates), (b) approve such requested
decrease in the number of parking spaces allocated to Tenant (with an
appropriate reduction in the additional rent, if any, payable by Tenant to
Landlord hereunder (for such eliminated parking spaces), or (c) disapprove
such requested increase or decrease in the number of parking spaces leased
to Tenant. Promptly following receipt of Tenant's written request, Landlord
shall provide Tenant with written notice of its decision, including a
statement of any adjustments to the additional rent payable by Tenant to
Landlord for parking under the Lease, if applicable.
d) General Provisions: Landlord reserves the right to set and
increase monthly fees and/or daily and hourly rates for parking privileges
from time to time during the Term of the Lease. Tenant shall be solely
responsible for the cost of any "reserved parking" signs required for
Tenant's reserved parking stalls within the parking structure. Landlord may
assign any unreserved and unassigned parking spaces and/or make all or any
portion of such spaces reserved, if Landlord reasonably determines that it
is necessary for orderly and efficient parking. Failure to pay for the lease
of any particular parking spaces may be treated by Landlord as a failure to
pay rent as required under the Lease, and, in addition to all other
<PAGE>
remedies available to Landlord under the Lease, at law or in equity,
Landlord may elect to
recapture such parking spaces for the balance of the Term of this Lease if
Tenant does not cure such failure to pay within the applicable cure period
set forth in the Defaults and Remedies section of the Lease. Tenant's
parking rights and privileges described herein are personal to Tenant and
may not be assigned or transferred, or otherwise conveyed, without
Landlord's prior written consent, which consent Landlord may withhold in its
sole and absolute discretion. In any event, under no circumstances may
Tenant's parking rights and privileges be transferred, assigned or otherwise
conveyed separate and apart from Tenant's interest in the Lease.
7. Existing Lease Obligation: The term of Tenant's existing lease with
Landlord dated February 5, 1992 ('Existing Lease") for Suite 470 ("Existing
Space"), effective upon the mutual execution of this Amendment, shall be
extended at $1.40 per rentable square foot per month until the commencement
of the Additional Premises Term, at which time the Existing Lease shall
terminate and Tenant shall vacate and surrender the Existing Space to
Landlord in the same condition as when Tenant took possession of the
Existing Space, with the exception of reasonable wear and tear.
8. Right to Lease: (a) Subject to the terms of this Paragraph 8 and
Paragraph 10 below, entitled "Options," Tenant shall have a continuing right
to lease (the "Right to Lease") the approximately 1,400 rentable square feet
on the third (3rd) floor of the Building depicted on Exhibit 'A" attached to
this Amendment (the 'First Offer Space') to the extent the First Offer Space
becomes available for le= to third parties after the expiration of any
existing lease for such space during the Additional Premises Term, including
the expiration of all renewal or extension options under such leases, and
after the existing tenant or occupant vacates such space. Tenant's Right to
Lease is subject and subordinate to the rights of all other existing tenants
of the Building with prior rights relative to the First Offer Space or any
portion thereof. Landlord's Economic Terms (as defined below) will be
delivered to Tenant only after Landlord has appropriately notified and
received negative responses from all other tenants with rights in the First
Offer Space superior to Tenant's rights.
(b) Promptly following written request ("Tenant Request") by
Tenant (which may not be given more than twice in any twelve (12)
consecutive month period), Landlord will give Tenant written notice of the
availability of the First Offer Space and the date the existing tenant or
occupant, if any, is expected to vacate such space ("Landlord's Availability
Notice'). Within five (5) days following delivery of Landlord's
Availability Notice, Tenant will have the right to, in writing, request from
Landlord a written statement setting forth the basic economic terms,
including, but not limited to, Landlord's determination of the Monthly Basic
Rent, Tenant Improvement Allowance, if any, and all other economic terms and
conditions (collectively, the "Economic Terms'), upon which Landlord is
willing to lease the First Offer Space either to Tenant or to a third party.
Such Economic Terms will represent Landlord's reasonable determination of
the fair market rental rate for the First Offer Space determined by Landlord
with reference to the parameters set forth in Paragraph 9(c) of this
Amendment below.
<PAGE>
(c) Within five (5) business days after receipt of the Economic Terms from
Landlord, Tenant must give Landlord written notice pursuant to which Tenant
shall elect to either (i) lease the First Offer Space upon such Economic
Terms and the same non-Economic Terms as set forth in the Lease as amended
hereby with respect to the Premises, or (ii) refuse to lease such First
Offer Space. Tenant's failure to timely choose either clause (i) or clause
(ii) above will be deemed to be Tenant's choice of clause (ii) above.
(d) If Tenant chooses (or is deemed to have chosen) clause (c)(ii) above,
then Tenant's Right to Lease the First Offer Space will be null and void
until Tenant once again validly delivers to Landlord a Tenant Request, in
which event, the procedures and sequences set forth above will be followed.
If Tenant exercises its Right to Lease as provided herein, the parties will
promptly thereafter execute an additional amendment to the Lease to include
the First Offer Space in the Premises and to document the lease terms thereof.
9. Option to Extend: (a) Subject to the terms of this Paragraph 9 and
Paragraph 10, entitled "Options," Landlord hereby grants to Tenant an option
(the "Extension Option') to extend the Additional Premises Term for an
additional period of approximately thirty-three (33) months (the "Option
Term") to be conterminous with the term of the Original Lease (which shall
expire June 27, 2001), on the same terms, covenants and conditions as
provided for in this Amendment during the Additional Premises Term, except
that all economic terms such as, without limitation, Monthly Basic Rent, an
Operating Expense Allowance, if any, parking charges, partially abated rent,
etc., shall be established based on the "fair market rental rate' for the
Additional Premises for the Option Term as defined and determined in
accordance with the provisions of this Paragraph 9 below.
(b) The Extension Option must be exercised, if at all, by written notice
('Extension Notice') delivered by Tenant to Landlord no earlier than the
date which is two hundred seventy (270) days, and no later than the date
which is one hundred eighty (180) days prior to the expiration of the
Additional Premises Term.
(c) The term 'fair market rental rate' as used in this
Amendment shall mean Landlord's reasonable and good faith determination of
the annual amount per rentable square foot, projected during the relevant
period, that a willing, comparable, non-equity tenant (excluding sublease
and assignment transactions) would pay, and a willing, comparable landlord
of a comparable Class "A" quality office building located in the Newport
Beach-Irvine-Costa Mesa airport area ('Comparison Area') would accept, at
arm's length (what Landlord is accepting in current transactions for the
Building may be considered), for space comparable size, quality and floor
height as the leased area at issue taking into account the age, quality and
layout of the existing improvements in the leased area at issue and taking
into account items that professional real estate brokers customarily
consider, including, but not limited to, rental rates, office space
availability, tenant size, tenant improvement allowances, operating expenses
and
<PAGE>
allowance, parking charges, free rent, free parking and any other lease
concessions, if any, then being charged or granted by Landlord or the
lessors of such similar office buildings. The fair market rental rate will
be an effective rate not specifically including, but accounting for, the
applicable lease concessions described above.
(d) Landlord's determination of the fair market rental rate shall be
delivered to Tenant in writing ("Landlord's Determination") within fifteen
(15) days following Landlord's receipt of the Extension Notice. If Tenant
reasonably objects to Landlord's Determination, then Tenant shall have the
right, by delivering written notice to Landlord within fifteen (15) days
following Tenant's receipt of Landlord's Determination, to rescind Tenant's
Extension Notice, in which event, Tenant's Extension Option shall be void
and of no further force or effect.
10. OPTIONS:
(a) Definition. As used in this Paragraph, the word "Option" has the
following meaning:
(i) The Right to Law Additional Space pursuant to Paragraph 8
herein; and
(ii) The Extension Option pursuant to Paragraph 9 herein.
(b) Options Personal. Each Option granted to Tenant is personal to the
original Tenant executing this Amendment and may be exercised only by the
original Tenant executing this Amendment while occupying the entire
Additional Premises without the intent of thereafter assigning the Lease as
amended hereby or subletting the Additional Premises and may not be
exercised or be assigned, voluntarily or involuntarily, by and person or
entity other than the original Tenant executing this Amendment. The
Options, if any, granted to Tenant under this Amendment are not assignable
separate and apart from the Lease as amended hereby, nor may any Option be
separated from the Lease as amended hereby in any manner, either by
reservation or otherwise.
(c) Effect of Default on Options. Tenant shall have no right to
exercise any Option, notwithstanding any provision of the grant of Option to
the contrary, and Tenant's exercise of any Option may be nullified by
Landlord and deemed of no further force or effect, if W Tenant shall be in
default of any monetary obligation or material non-monetary obligation under
the terms of the Lease as amended hereby (or if Tenant would be in such
default under the Lease as amended hereby, but for the passage of time or
the giving of notice, or both) as of Tenant's exercise of the Option in
question or at any time after the exercise of any such Option and prior to
the commencement of the Option event, or (H) Landlord has given Tenant two
(2) or mom notices of default, whether & ~~t such defaults are subsequently
cured, during any twelve (12) consecutive month period of the Additional
Premises Term.
11. First Month's Rent and Security D=sit: Tenant shall deposit with
Landlord the first,(lst) month's rent relative to the Additional Premises
upon execution of this Amendment in the event Tenant vacates the Existing
Space in accordance with the terms of the Existing Lease and Tenant is not
otherwise in default under the Existing Lease, then Tenant's Security
<PAGE>
Deposit of $3,045.00 held by Landlord under the Existing Lease will be
applied to the total Security Deposit of $9,340.32 due with respect to the
Additional Premises. The difference of $6,295.32 (or such appropriate
greater amount, in the event some or all of the $3,045.00 Security Deposit
is unavailable) shall be paid by Tenant to Landlord on or before the date
Tenant takes occupancy of the Additional Premises.
12. Brokers: Landlord shall be responsible for the payment of a commission
based upon the transactions contemplated in this Amendment to Meridian
Pacific, in accordance with Landlord's separate agreement with said broker.
If any additional claims for brokers' or finders.' fees in connection with
the transactions contemplated by this Amendment arise, then Tenant hereby
agrees to indemnify, protect, hold harmless and defend Landlord (with
counsel satisfactory to Landlord) from and against any such claims if they
shall be based upon any statement, representation or agreement made by
Tenant, and Landlord hereby agrees to indemnify, protect, hold harmless and
defend Tenant (with counsel satisfactory to Tenant) if such claims are based
upon any statement, representation or agreement made by Landlord.
13. Refurbishment of Original Premises: Landlord hereby grants to
Tenant the right to refurbish the Original Premises in accordance with the
terms of Paragraphs 14 and 16 of the Original Lease and Rather in accordance
with the space plan dated May 10, 1993 prepared by Gensler & Associates
(with such modifications thereto as may be approved by Landlord in writing).
Tenant shall be entirely responsible for the costs incurred by Landlord (or
its contractor) in refurbishing the Original Premises (the "Original
Premises Refurbishment Work"). Tenant shall reimburse Landlord for the costs
of the Original Premises Refurbishment Work within ten (10) days following
receipt of copies of invoices therefor. Such payments by Tenant shall.
constitute additional rent due under the Lease as amended hereby. To the
extent the costs of the Original Premises Refurbishment Work do not exceed
$17,070.00, Tenant may elect to amortize such amount in the form of
additional rent due under the Lease with respect to the Original Premises
over the balance of the Original Lease term. Tenant acknowledges that the
Original Premises Refurbishment Work will be conducted in the Original
Premises while Tenant is in occupancy thereof and paying rent pursuant to
the terms of the Lease. Although Landlord will use commercially reasonable
efforts to minimize any interruptions to Tenant's business in the Original
Premises as a result of the conduct of the Original Premises Refurbishment
Work, Tenant acknowledges that interruptions or inconveniences may occur and
agrees to hold Landlord harmless therefrom. No such interruptions or
inconveniences shall constitute an eviction of Tenant from the Original
Premises, whether constructive or otherwise and Tenant shall in any event be
responsible for-paying Monthly Basic Rent relative to the Original Premises
pursuant to and in accordance with the terms of the Lease.
<PAGE>
14. No Other Modifications: The parties agree that Paragraphs 56, 58, 61
and 67 of the Original Lease are no longer of any force or effect.
IN WITNESS THEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
'LANDLORD' 'TENANT'
KZ3, CRUTTENDEN & CO., INC.,
A California limited partnership A California Corporation
By: KOLL VON KARMAN ASSOCIATES,
a California general By:/s/Jeffrey L.
Guttfredson
partnership, as Managing
General Partner Title: CFO
By: KOLL MANAGEMENT SERVICES, INC.,
A Delaware Corporation
As Agent
By:/s/Barry A. Katz
Its: Portfolio Mgr
[7/9/93]
<PAGE>
DIAGRAM - EXHIBIT A TO AMENDMENT NO. 2 TO OFFICE BUILDING LEASE
8301 VON KARMAN AVE. - 3RD FLOOR PLAN
<PAGE>
EXHIBIT'B'
WORK LETTER AGREEMENT
THIS WORK LETTER AGREEMENT ("Work Letter Agreement') is entered into as of
the 3Oth day of June, 1993 by and between KZ3 a California limited
partnership ("Landlord") and Cruttenden & Co., Inc., a California
Corporation ('Tenant').
RECITALS:
A. Concurrently with the execution of this Work Letter Agreement,
Landlord and Tenant have entered into a lease amendment (the 'Lease')
covering certain premises described in such am6ndment as the Additional
Premises (the 'Premises") more particularly described in the Lease. All
terms not defined herein shall have the same meaning as set forth in the
Lease. To the extent applicable, the provisions of the Lease are hereby
incorporated herein by this reference.
B. In order to induce Tenant to enter into the Lease and in consideration
of the mutual covenants hereinafter contained, Landlord and Tenant hereby
agree as follows:
1 . TENANT IMPROVEMENTS. Landlord shall construct and, except as
provided below to the contrary, pay for the entire cost of constructing the
tenant improvements ('Tenant Improvements') described in Schedule " 1 "
attached hereto (the "Plans"). Tenant may request changes to the Plans
provided that (a) the changes shall not be of a lesser quality than
Landlord's standard specifications for tenant improvements for the
Building, as the same may be changed from time to time by Landlord (the
"Standards"); (b) the changes conform to applicable governmental regulations
and necessary governmental permits and approvals can be secured; (c) the
changes do not require building service beyond the levels normally provided
to other tenants in the Building; (d) the changes do not have any adverse
affect on the structural integrity or systems of the Building; (e) the
changes will not, in Landlord's opinion, unreasonably delay construction of
the Tenant Improvements; and (f) Landlord has determined in its sole
discretion that the changes are of a nature and quality consistent with the
overall objectives of Landlord for the Building. If Landlord approves a
change requested by Tenant, then as a condition to the effectiveness of
Landlord's approval, Tenant shall pay to Landlord upon demand by
Landlord the increased cost attributable to such change as reasonably
determined by Landlord. To the extent any such change results in a delay of
completion of construction of the Tenant Improvements, then such delay shall
constitute a delay caused by Tenant as described below. Landlord shall
provide documentation to Tenant for Tenant's approval prior to commencement
of the change order for any increased costs and changes.
2. CONSTRUCTION OF TENANT IMPROVEMENTS: Upon Tenant's payment to
Landlord of the total amount of the cost of any changes to the Plans, if
any, Landlord's contractor shall commence and diligently proceed with the
construction of the Tenant Improvements, subject to Tenant Delays (as
described in Paragraph 4 below) and Force Majeure Delays (as described in
Paragraph 5 below). Promptly upon the commencement of the Tenant
Improvements, Landlord shall furnish Tenant with a construction schedule
letter setting forth the projected completion dates therefor and showing the
deadlines for any actions required to be taken by Tenant during such
construction and Landlord may from time to time during construction of the
Tenant Improvements modify such schedule. Improvements shall be completed
in a good workmanlike manner and in accordance with manufacturers' standards.
<PAGE>
(a) Tenant's failure to timely perform any of its obligations
pursuant to this Work Letter Agreement, including any failure to complete,
on or before the due date therefor, any action item which is Tenant's
responsibility pursuant to the Work Schedule or any schedule delivered by
Landlord to Tenant pursuant to this Work Letter Agreement.
(b) Tenant's changes to the Plans;
(c) Tenant's request for materials, finishes, or installations which
are not readily available or which are incompatible with the Standards;
(d) any delay of Tenant in making payment to Landlord for Tenant's
share of any costs in excess of the cost of the Tenant Improvements as
described in the Plans; or
(e) any other act or failure to act by Tenant, Tenant's employees,
agents, architects, independent contractors, consultants and/or any other
person performing or required to perform services an behalf of Tenant.
5. FORCE MAJEURE DELAYS. For purposes of this Work Letter, 'Force
Majeure Delays' shall mean any actual delay beyond the reasonable. control
of Landlord in the construction of the Tenant Improvements, which is not a
Tenant Delay and which is caused by, without limitation, any one or more of
the following:
(a) Strikes or labor disturbances;
(b) War;
(c) Fire;
(d) Earthquake, flood or other natural disaster,
(e) Unusual and unforeseeable delay not within the reasonable
control of Landlord or its General Contractor or its General Contractor's
subcontractors (excluding financial inability) in transportation of
materials or equipment and the unavailability of reasonable substitutes
therefor;
(f) Casualties; or
(g) Governmental action or inaction (including failure, refusal or
delay in issuing permits, approvals and/or authorizations), or injunction,
permit appeal or court order requiring cessation of construction taking
place in the Premises and/or the Building.
6. FREIGHT ELEVATOR. Landlord shall, consistent with its
obligation to other tenants in the Building, make the freight elevator
reasonably available to Tenant in connection with initial decorating,
furnishing and moving into the Premises. Tenant shall pay for any
after-hours staffing of the freight elevator. The hours for use of freight
elevator are during non-business hours which are before 7:00 a.m. and after
6:00 p.m., Monday through Friday, and before 8:00 a.m. and after 12:00 Noon
on Saturday and all day Sunday.
IN WITNESS WHEREOF, the undersigned Landlord and Tenant have executed this
Work Letter Agreement as of the date of the Lease.
<PAGE>
'LANDLORD' 'TENANT'
K23, CRUTTENDEN & CO., INC.,
A California limited partnership A California Corporation
By: KOLL VON KARMAN ASSOCIATES, By:/s/Jeffrey L. Guttfredson
a California general
partnership, as Managing Title: CFO
General Partner
By: KOLL MANAGEMENT SERVICES, INC.,
A Delaware Corporation
As Agent for the Managing
General Partner
By:/s/Barry A. Katz
Its: Portfolio Mgr
<PAGE>
DIAGRAM - FLOOR PLAN
EXHIBIT B TO AMENDMENT NO. 2 TO OFFICE BUILDING LEASE - Page 1 of 2
<PAGE>
CHART - PRICING NOTES
EXHIBIT B TO AMENDMENT NO. 2 TO OFFICE BUILDING LEASE - Page 2 of 2
<PAGE>
BASEMENT RENTAL AGREEMENT
THIS AGREEMENT is made and entered into on July 15, 1993 by and between KZ3
(hereinafter referred to as "Landlord") and Cruttenden & Co., Inc.
(hereinafter referred to as "Tenant").
Tenant desires to lease from Landlord certain Areas specifically known as
"9", "10" and "11", consisting of approximately 86 square feet, 86 square
feet, and 92 square feet respectively, located in the basement of the
building at 18301 Von Karman Avenue, Irvine, California, for the purpose of
storage.
In consideration of the covenants and promises each to the other made
herein, the parties hereto agree as follows:
1. PREMISES: Landlord agrees to lease to Tenant and Tenant agrees to
lease from Landlord a total of approximately 264 square feet of storage space.
2. TERM: This Agreement shall commence July 26, 1993 and continue on a
month-tomonth basis; cancellable by either party with thirty (30) days prior
written notice.
3. RENT: Tenant agrees to pay to Landlord as rental for the premises
described in paragraph 1 herein the sum of $264.00 per month for the space,
payable on or before the first day of each and every calendar mouth during
the term hereof; however, the first month's rent shall be prorated in the
event the premises are not occupied on the fint day of the Lease calendar
month.
3.1 Rent Default: If Tenant has not paid the rent by the tenth (10th)
day of the month, said amount is deemed delinquent and will be
interest-bearing at the rate of 10% per annum retroactive to the first day
of the month for which the rent has not been paid.
4. IMPROVEMENTS: Tenant agrees to take space in an "as is" basis.
<PAGE>
5. DEFAULT: The occurrence of either of the following events shall
constitute a material default and breach of this Lease by Tenant
(permitting Landlord, at Landlord's option, to terminate this Agreement):
(a) The failure by Tenant to make any payment of rent or any other payment
required to be made by Tenant hereunder, as and when due, where such
failure continues for a period of three (3) days after written notice
thereof from Landlord to tenant.
(b) The failure by Tenant to observe or perform any of the provisions of
this Lease to be observed or performed by Tenant, other than described in
paragraph (a) above, where such failure shall continue for a period of ten
(10) days after written notice thereof from Landlord to Tenant.
6. INSURANCE: Landlord does not have personal property damage insurance
covering Tenant's property. Landlord shall not be liable to Tenant, or to
any other person, for any damages on account of loss, damage or theft to
personal property, except for any damages caused by the gross negligence of
Landlord its employees or agents.
7. ENTIRE AGREEMENT, MERGER AND WAIVER: This Basement Rental
Agreement expresses and contains the entire agreement of the parties hereto
and there are no warranties, representations or agreements between them
except as herein contained. This Agreement may not be modified, amended or
supplemented except by a document in writing signed by both Landlord and
Tenant. No consent given or waiver made by Landlord of any breach by Tenant
of any provision of this Agreement shall operate or be construed in any
manner as a waiver of any other provision.
8. SUCCESSORS AND ASSIGNS: The covenants and conditions herein contained
shall apply to and bind the heirs, successors, executors, administrators and
assigns of the parties hereto.
<PAGE>
9. NOTICE TO LESSOR: Any notice to Landlord regarding a breach of this
Agreement or termination thereof shall be sent to Landlord at:
18500 Von Karman Avenue, Suite 120, Irvine, CA 92715
LANDLORD
KZ3
A California Limited Partnership
By: KOLL VON KARMAN
ASSOCIATES,
A California general
partnership, as Managing
General Partner
By:/s/Barry A. Katz
Its: Portfolio Mgr
TENANT
CRUTTENDEN & CO., INC.
A California Corporation
By: /s/Jeffrey L. Guttfredson
Title: CFO
<PAGE> SATELLITE ANTENNA LICENSE AGREEMENT
This Satellite Antenna License Agreement ('Agreement') is made as of the 1st
day of April, 1994 by and between KZ3, a California Corporation
('Licensor'), and Cruttenden & Company, Inc., a California Corporation
("Licensee").
RECITALS
Licensor is the owner of certain real property located at 18301 Von Karman
Avenue, Irvine, CA 927 15 ("Property"), and the office building situated
thereon ("Building").
Licensee is a tenant of Licensor pursuant to that certain Office Building
Lease dated March 8, 1991 and Licensee desires to obtain permission to place
a satellite antenna on the roof of the Building.
The parties agree that Licensee's right to perform certain acts on
Licensor's property is upon and subject to the terms, covenants, and
conditions herein set forth, and Licensee covenants as a material part of
the consideration for this License to keep and perform each and all said
terms, covenants, and conditions and the parties further agree that this
License is made upon condition of such performance.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth the parties hereto agree as follows:
1. INCORPORATION OF RECITALS. The foregoing Recitals are incorporated
herein by this reference.
2. GRANT OF LICENSE. Licensor hereby grants Licensee a license to place
on the
roof oi the Building a satellite antenna the specifications for which are
described in Exhibit "A" to this Agreement ('Satellite Antenna'). The
Satellite Antenna shall be installed on the roof of the Building at the
location and in the manner described in Exhibit "B" to this Agreement.
3. TERM This Agreement is terminable at will upon thirty (30) days
written notice
by Licensor to Licensee.
4. DESCRIPTION OF LICENSE. This Agreement shall not be construed as a
lease, nor as a grant to Licensee of any present or any fit= right or
interest in the Property or Building, nor shall the expenditure of any
sum of money by Licensee for the purchase or lease of the Satellite
Antenna, for the installation thereof on the Building or for any fee
paid to Licensor pursuant to this Agreement be construed as granting
Licensee any right to continue this License against Licensor's will.
In the event Licensor elects, in its sole and absolute discretion, to
terminate this license, Licensee hereby assumes any and all risks
associated with the cost of installation, removal, or restoration of
the Building or any other related cost or inconvenience resulting
therefrom. Licensee agrees not to enter into any agreements with any
other entity or person where such agreement may contain either express
or implied terms with respect to any right or obligation to maintain
or continue this Agreement. Licensee agrees to indemnify and hold
<PAGE>
Licensor free and harmless from and against any obligation to any party
which may claim any right as to the maintenance of the Satellite Antenna, or
the receipt of any signal received therefrom.
5. ASSIGNMENT. This License is personal to the Licensee. It is not
assignable
and any attempt to assign this License will render it null and void.
6. LICENSE FEE. Licensee agrees to pay Licensor $100.00 per month License
Fee") for each satellite for every month of the first year in which this
License is in effect. Said fee is due on the first day of each month.
Licensor reserves the right to increase the License Fee after one year and
upon thirty (30) days written notice to Licensee. Amount shall not exceed
ten percent (10%) per year over initial lease term.
7. INCLUSION OF OTHER USERS. Licensor and Licensee agree that the
signalwhich is to be received by the Satellite Antenna may be one which
other tenants located in the Building may be interested in receiving. In
the event that any other tenant of the Building desires to obtain said
signal, Licensee agrees to provide said signal to any such tenant for the
same fee as the license fee set forth above in Paragraph 6 or such
adjusted fee as it may charge from time to time pursuant to agreement
between Licensor and Licensee. If the license fee set forth above in
Paragraph 6 or such adjusted fee is not sufficient to cover maintenance
costs associated with the operation of the Satellite Antenna, Licensee may
charge a reasonable fee to such tenant to cover a proportionate share of
such costs. Licensee shall pay to Licensor one-half of any such fee paid
to it by any other tenant pursuant to this Paragraph 7. Licensee shall be
responsible for all costs associated with the use or receipt of the signal
by any other tenant.
8. MAINTENANCE AND REPAIR. Licensee shall be solely responsible for the
costs of installing and painting to blend with existing roof and mechanical
equipment screen, maintaining and repairing the Satellite Antenna.
Additionally, Licensee shall upon the removal of the Satellite Antenna
repair and restore the roof and any other affected portions of the Building
to their original condition prior to the installation of the Satellite
Antenna, including but not limited to the removal of any' and all cables
and the repair and restoration of the Building caused thereby. Licensor in
its sole discretion shall have the right upon the termination of this
License to require that all cables installed by Licensee in and through the
Building in connection with the installation and use of the Satellite
Antenna be left in place and abandoned to the benefit of Licensor. In the
event that Licensor elects abandonment of such cable, Licensor shall pay to
Licensee the sum of one dollar ($1.00) as payment in full for purchase of
all cables, connectors, and other equipment pertinent to the installation
of the Satellite Antenna.
9. INSURANCE. Licensee agrees to reimburse Licensor for any additional
cost of insurance attributed to the installation of the Satellite
Antenna on the Building. Additionally, Licensee shall maintain Broad
Form General Liability Insurance, covering both property and
liability, covering the Satellite Antenna in the minimum amount of
$1,000,000.00 Proof of said insurance shall be provided to
<PAGE>
Licensor before commencement of the installation of the Satellite
Antenna. Licensor shall be named as an additional insured on said
insurance.
10. UTILITIES. Licensee shall provide all utilities necessary for the
Satellite
Antenna at its own cost and expense, and shall pay for the maintenance and
service of said utilities.
11. GOVERNMENTAL APPROVALS. Licensee shall obtain all governmental
approvals and permits required for the installation of the Satellite
Antenna and shall submit same to Licensor prior to the installation of
the Satellite Antenna.
12. NOTICE BEFORE INSTALLATION. Licensee shall pay when due all claims for
labor or materials furnished or alleged to have b~en furnished and
give Licensor not less than five (5) business days notice prior to the
commencement of any work at the Building. Licensor shall have the
right to post notices of non-responsibility in or on the Building as
provided by law.
13. REMOVAL. Upon termination of this License for any reason whatsoever,
at the
Licensor's option, Licensee shall remove the Satellite Antenna, cables and
all
other improvements associated therewith at Licensee's own cost and
expense, and Licensee shall repair any damage to the Building occasioned
by the installation or removal thereof If Licensee fails to perform its
obligations pursuant to this Paragraph 13, Licensor may, at its option,
perform Licensee's obligations and put the same in good order and repair
and upon demand, Licensee will reimburse Licensor for such expenses with
interest at the maximum legal rate.
14. INDEMNIFICATION. Licensee shall indemnify and hold harmless Licensor
against and from any and all claims arising from the Satellite
Antenna, related improvements, grant of rights or exercise thereof,
under this License, including operation of the Satellite Antenna, and
electrical power interruptions caused by the Satellite Antenna or its
use. Licensee shall further indemnify and hold harmless Licensor
against and from any and all claims arising from any breach or default
in the performance of any obligation on Licensee's part to be
performed under the terms of this License, or arising from any act,
neglect, fault or omission of the Licensee from and against all costs,
including attorney's fees, expenses and liabilities incurred in
connection with such claim or any action or proceeding brought
thereon; and in case any action or proceeding be brought against
Licensor by reason of any such claim, Licensee, upon notice from
licensor, shall defend the same at Licensee's expense by counsel
satisfactory to Licensor. Licensee, as a material part of the
consideration to Licensor, hereby assumes all risk of damage to
property or injury to person in, upon or about the Building and the
Satellite Antenna from any cause whatsoever.
15. ENTIRE AGREEMENT. This instrument contains the entire agreement
between the parties relating to their respective rights and
obligations. Any oral representations or modifications concerning this
instrument shall be of no force in effect. Any subsequent modification
must be in writing, signed by all the parties.
16. ATTORNEYS' FEES. In the event of any controversy, claim or dispute
relating to this instrument, the License, or breach thereof, the
prevailing party shall be entitled to recover from the losing party
reasonable expenses, attorneys' fees and
<PAGE>
all costs of suit.
17. SEVERABILITY. Any provision of this License which shall prove to be
invalid,
void or illegal in no way affects, impairs or invalidates any other
provision
hereof, and such other provisions shall remain in full force and
effect.
18. WAIVER. The waiver by Licensor of any breach of any term, covenant or
condition herein contained shall not be deemed to be a waiver of any
subsequent breach of the same or any other t=, covenant or condition
herein contained, nor shall any custom or practice which may transpire
between the parties in the administration of the terms hereof be deemed a
waiver of or in any way affect the right of Licensor to insist upon the
performance by Licensee in strict accordance with said terms. The
subsequent acceptance of the License Fee by Licensor shall not be deemed
to be a waiver of any preceding breach by Licensee of any term covenant or
condition of this License other than the failure of Licensee to pay the
particular License Fee so accepted, regardless of Licensor's knowledge of
such preceding breach at the time of acceptance of such fee.
19. TIME. Time is of the essence with respect to the performance of every
provision of this License.
LICENSOR LICENSEE
KZ3 CRUTTENDEN & CO., INC.
A California Limited Partnership A California Corporation
BY: KOLL VON KARMAN BY:/s/Jeffrey L. Guttfredson
ASSOCIATES,
A California General ITS: Senior Vice President
Partnership, as Managing
General Partner
BY:/s/Barry A. Katz
ITS: Vice President
<PAGE>
BASEMENT RENTAL AGREEMENT
THIS AGREEMENT is made and entered into on April 1, 1994 by and between KZ3
(hereinafter referred to as "Landlord") and Cruttenden & Co. Inc.
(hereinafter referred to as "Tenant").
Tenant desires to lease from Landlord certain Areas specifically known as
Space "8" consisting of approximately 37 square feet located in the basement
of the building at 18301 Von Karman Avenue, Irvine, California, for the
purpose of storage.
In consideration of the covenants and promises each to the other made
herein, the parties hereto agree as follows:
1. PREMISES: Landlord agrees to lease to Tenant and Tenant agrees to lease
from Landlord a total of approximately 37 square feet of storage space.
2. TERM: This Agreement shall commence January 1, 1994 and continue on a
month-tomonth basis; cancellable by either party with thirty (30) days-prior
written notice.
3. RENT: Tenant agrees to pay to Landlord as rental for the premises
described in paragraph I herein the sum of $37.00 per month for the space,
payable on or before the first day of each and every calendar month during
the term hereof; however, the first month's rent shall be prorated in the
event the premises are not occupied on the first day of the Lease calendar
month.
3.1 Rent Default: If Tenant has not paid the rent by the tenth (I 0th) day
of the month, said amount is deemed delinquent and will be interest-bearing
at the rate of 10% per annum retroactive to the first day of the month for
which the rent has not been paid.
4. IMPROVEMENTS: Tenant agrees to take space in an "as is" basis.
5. DEFAULT: The occurrence of either of the following e vents shall
constitute a material
default and breach of this Lease by Tenant (permitting Landlord, at
Landlord's option, to terminate this Agreement):
(a) The failure by Tenant to make any payment of rent or any other payment
required to be made by Tenant hereunder, as and when due, where such failure
continues for a period of three (3) days after written notice thereof from
Landlord to tenant.
(b) The failure by Tenant to observe or perform any of the provisions of
this Lease to be observed or performed by Tenant, other than described in
paragraph (a) above, where such failure shall continue for a period of ten
(10) days after written notice thereof from Landlord to Tenant.
<PAGE>
6. INSURANCE Landlord does not have personal property damage insurance
covering Tenant's property. Landlord shall not be liable to Tenant, or to
any other person, for any damages on account of loss, damage or theft to
personal property, except for any damages caused by the gross negligence of
Landlord its employees or agents.
7. ENTlRE AGREEMENT, MERGER AND WAIVER: This Basement Rental Agreement
expresses and contains the entire agreement of the parties hereto and there
are no warranties, representations or agreements between them except as
herein contained. This Agreement may not be modified, amended or
supplemented except by a document in writing signed by both Landlord and
Tenant. No consent given or waiver made by Landlord of any breach by Tenant
of any provision of the Agreement shall operate or be construed in any
manner as a waiver of any other provision.
8. SUCCESSORS AND ASSIGNS: The covenants and conditions herein contained
shall apply to and bind the heirs, successors, executors, administrators and
assigns of the parties hereto.
9. NOTICE TO LESSOR: Any notice to Landlord regarding a breach of this
Agreement or termination thereof, shall be sent to Landlord at.
18500 Von Karman Avenue, Suite 120, Irvine, CA 92715
LANDLORD TENANT
KZ3 CRUTTENDEN & CO., INC.
A California Limited Partnership A California Corporation
By: KOLL VON KARMAN By:/s/Jeffrey L. Guttfredson
ASSOCIATES,
A California general Its: Senior Vice President
partnership, as Managing
General Partner
By:/s/Barry A. Katz
Its: Vice President
<PAGE>
AMENDMENT NO. 3 TO OFFICE BUILDING LEASE
THIS AMENDMENT NO. 3 TO OFFICE BUILDING LEASE ("Amendment) is made as
of this 15th day of May, 1995, by and between 18301 Associates, L.P., a
California limited partnership (successor in interest to KZ3, a California
limited partnership) ('Landlord), and
Cruttenden Roth, Inc., a California corporation (successor in interest to
Cruttenden & Co.. Inc., a California corporation) ("Tenant"), with reference
to the facts set Forth in the Recitals below.
RECITALS
A. Tenant and Landlord are parties to that certain Office Building
Lease dated March 8, 1991 (the "Original Lease") Amendment No. 1 thereto
dated June 28, 1991, pursuant to which Landlord leased to Tenant
approximately 11,732 rentable square feet of space on the ground floor, and
Amendment No. 2 thereto, dated June 30, 1993, pursuant to which Landlord
leased to Tenant approximately 5,307 rentable square feet of space on the
third (3rd) floor (the "Original Premises") of that certain office building
located in Irvine, California, commonly known as 18301 Von Karman Avenue
(the "Building"). The Original Premises presently leased by Tenant consists
of approximately 17,039 rentable square feet and is commonly known as Suite
100 and Suite 300.
B. The Original Lease, as amended by Amendment No. 1 and Amendment
No. 2 shall hereafter be collectively referred to as the "Lease."
Capitalized terms not defined herein have the meanings given to such terms
in the Lease.
C. Landlord and Tenant desire to further amend the Lease to expand
the Original Premises as hereinafter provided.
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Landlord and Tenant agree as follows:
1. Description of Premises: Landlord hereby leases to Tenant and
Tenant hereby leases from Landlord, upon all of the terms and conditions of
the Lease as amended hereby an additional approximately 1,412 rentable
square feet (1,236 usable square feet) on the third (3rd) floor of the
Building, commonly known as Suite 360 ("Additional Premises"), making the
total area leased by Tenant, pursuant to the Lease as amended hereby,
approximately 18.451 rentable square feet (collectively, the "Now
Premises"). The Additional Premises is more particularly described and shown
on Exhibit"A" which is attached hereto and made a part hereof by this
reference. Except as otherwise set forth in this Amendment all references in
the Lease to the term "Premises" shall mean the New Premises, including the
Additional Premises.
2. Term and Commencement Date: The term for the Additional Premises
shall be for a forty-two (42) month period, commending on May 15, 1995, and
terminating forty-two (42) months thereafter on November 14, 1998 (the
"Additional Premises Term").
3. Annual Basic Rent Effective as of the commencement of the
Additional Premises Term, and continuing for the duration of the Additional
Premises Term, and notwithstanding anything to the contrary contained in the
Lease, the Monthly Basic Rent for the Additional Promises during the
Additional Promises Term shall be as follows:
Months 1-42: $1.45/rentable square foot/month;
$2,047.40/month
4. Operating Expense and Tenant's Percentage: The Operating Expense
Allowance for the Additional Premises shall be Tenant's Percentage of actual
Operating Expenses for the Additional Premises for the 1993 calendar year.
Tenant's Percentage for the Additional Premises shall be .6423%.
5. Delivery of Possession of Premises to Tenant: Provided this
Amendment is fully executed and delivered, Landlord shall deliver possession
of the Promises no later than May15, 1995.
6. Parking: Effective as of the commencement of the Additional
Premises Term, parking for the Additional Promises shall be provided
pursuant to and in accordance with the following:
<PAGE>
Unreserved Employee Parking: So long as the Lease as amended
hereby is in effect, Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord rive (5) unreserved employee parking spaces for the
Additional Premises, As consideration for the use of such unreserved parking
spaces, Tenant agrees to pay to Landlord, as additional rent under the
Lease, the prevailing parking rate (currently $S5.00 per stall per month)
for each such unreserved parking space as established by Landlord from time
to time. Tenant agrees to pay Landlord the additional rent for such
unreserved parking spaces monthly, concurrently with each monthly payment of
Monthly Basic Rent. All unreserved employee parking spaces will be made
available to Tenant, its employees and all other tenants and employees of
the Development entitled to use such parking facilities, on a non-exclusive,
in-common basis. Despite the foregoing to the contrary, and so long as
Tenant is not in default under the Lease as amended hereby, Tenant's parking
rent shall be reduced to Thirty and 00/100 Dollars ($30.00) per space per
month for all five (5) unreserved parking stalls applicable to the
Additional Premises.
7. Tenant Improvements: Landlord, at its sole cost and expense,
shall provide tenant improvements (the"Tenant Improvements") for the
Premises as set forth on Exhibit "B" attached hereto. Said Tenant
Improvements shall be installed at a time which is mutually agreed upon
between Landlord and Tenant Landlord shall not initially install the "cased
opening" between Suites 300 and 360. Tenant shall have the option to have
Landlord install said opening by providing Landlord with no less than thirty
(30) days prior written notice of such request should Tenant find that the
installation of such opening is desirable to Tenant.
Tenant hereby acknowledges that Landlord shall install the
Tenant Improvements while Tenant is in occupancy of the Premises, therefore,
although Landlord shall use commercially reasonable efforts to minimize
inconvenience to Tenant, Tenant agrees to hold Landlord and its contractors
harmless from any damage or inconvenience caused to Tenant as a result of
such construction activity, unless Landlord or its contractors are grossly
negligent.
8. Option to Extend: Tenant shall be granted the same option to
extend for the Additional Premises described herein as set forth in
paragraph 9 (and subject to paragraph 10) of Amendment No. 2.
9. First Month's Rent and Security Deposit: Upon execution of this
Amendment, Tenant shall deposit with Landlord the first (1st) month's rent
relative to the Additional Premises and an additional security deposit for
the Additional Premises in the amount of Two Thousand Two Hundred Fifty-Two
and 14/100 Dollars ($2,252.14) which shall be held in accordance with the
terms of the lease.
10. Hazardous Materials: (a) Definitions. (1) "Hazardous Materials"
shall mean any substance: (i) that now or in the future is regulated or
governed by, requires investigation or remediation under, or is defined as a
hazardous waste, hazardous substance. pollutant or contaminant under any
governmental statute, code, ordinance, regulation, rule or order, and any
amendment thereto, including for example only the Comprehensive
Environmental Response Compensation and Liability Act, 42 U.S.C. Section9601
et seq, and the Resource Conservation and Recovery Act, 42 U.S.C.
Section6901 et seq., or (ii) that is toxic, explosive, corrosive, flammable.
radioactive~ve, carcinogenic, dangerous or otherwise hazardous, including
gasoline, diesel, petroleum hydrocarbons, polychlorinated biphenyls (PCBs),
asbestos, radon and urea formaldehyde foam insulation.
(2.) 'Environmental Requirements" shall mean all present and
future laws, orders, permits, licenses, approvals. authorizations and other
requirements of any kind applicable to Hazardous Materials.
(3) "Handle' shall mean any installation, handling,
generation, storing. treatment, use, disposal, discharge, release,
manufacture, refinement. presence, migration, emission, abatement, removal.
transportation, or any other activity of any type in connection with or
involving Hazardous Materials by Tenant or its agents, employees.
contractors. licensees, assignees, sublessees or representatives
(collectively, "Representatives') or its guests, customers, invitees, or
visitors (collectively, "Visitors").
(4) "Environmental Losses" shall mean all costs and expenses
of any kind, damages, foreseeable and unforeseeable consequential damages,
fines and penalties incurred in connection with any violation of an
compliance with Environmental Requirements and all losses of any kind
attributable to the diminution of value, loss of use or adverse effects on
marketability or use of any portion of the Premises or Property.
<PAGE>
(b) Tenant's Covenants. No Hazardous Materials shall be Handled at
or about the Premises or Property without Landlord's prior written consent,
which consent may be granted, denied, or conditioned upon compliance with
Landlords requirements, all in Landlord's absolute discretion.
Notwithstanding the foregoing, normal quantities and use of those Hazardous
Materials customarily used in the conduct of general office activities, such
as cooler fluids and cleaning supplies, may be used and stored at the
Premises without Landlord's prior written consent. Tenant's activities at or
about the Premises and Property and the Handling of all Hazardous Materials
shall comply at all times with all Environmental Requirements. At the
expiration or termination of the Lease. Tenant shall promptly remove from
the Premises and Property all Hazardous Materials Handled at the Premises or
the Property. Tenant shall keep Landlord fully and promptly informed of all
Handling of Hazardous Materials, Tenant shall be responsible and liable for
the compliance with all of the provisions of this Section by all of Tenant's
Representatives and Visitors. and all of Tenants obligations under this
Section (including its indemnification obligations under paragraph (e)
below) shall survive the expiration or termination of this Lease.
(c) Compliance. Tenant covenants and warrants that it shall. at its
own expense, promptly take all actions required by any governmental agency
or entity in connection with the Handling of Hazardous Materials at or about
the Premises or Property, including inspection and testing, performing all
cleanup, removal and remediation work required with respect to those
Hazardous Materials, complying with all closure requirements and
post-closure monitoring, and filling all required reports or plans. All of
the foregoing work and all Handling of all Hazardous materials shall be
performed in a good, safe and workmanlike manner by consultants qualified
and licensed to undertake such work and in a manner that will not interfere
with Landlord's use, operation, leasing and sale of the Property and other
tenants' quiet enjoyment of their premises in the Property. Tenant shall
deliver to Landlord prior to delivery to any governmental agency, or
promptly after receipt from any such agency, copies of all permits,
manifests, closure or remedial action plans. notices, and all other
documents relating to the, Handling of Hazardous Materials at or about the
Promises or Property. Tenant shall remove, at its own expense, by bond or
otherwise all liens or charges of any Kind filed or recorded against the
Premises or Property In connection with the Handling of Hazardous Materials,
within ten (20) days after the filing or recording of such lien or charge
and if Tenant fails to do so, Landlord shall have the right, but not the
obligation, to remove the lien or charge at Tenants expense in any manner
Landlord deems expedient.
(d) Landlord's Rights. Landlord shall have the right, but not the
obligation, to enter the Premises at any reasonable time (i) to confirm
Tenant' s compliance with the provisions of this Section, and (ii) to
perform Tenant's obligations under this Section if Tenant has failed to do
so, Landlord shall also have the right to engage qualified Hazardous
Materials consultants to inspect the Promises and review the Handling of
Hazardous Materials, including review of all permits, reports, plans, and
other documents regarding same. Tenant shall pay the costs of Landlord's
consultants' fees and all costs incurred by Landlord in performing Tenant's
obligations under this Section. Landlord shall use reasonable efforts to
minimize any interference with Tenant's business caused by Landlord's entry
into the Premises, but Landlord shall not be responsible for any'
interference caused thereby.
(e) Tenant's Indemnification. Tenant agrees to indemnify, defend and
hold harmless Landlord and its partners and their directors, officers,
shareholders, employees and agents from all Environmental Losses and all
other claims, losses, damages, liabilities, costs and expenses of every
kind, including reasonable attomeys' and consultants' fees and costs,
incurred at any time and arising from or in connection with the Handling of
Hazardous Materials at or about the Premises or Property or Tenant's failure
to comply in full with all Environmental Requirements with respect to the
Premises.
11. Brokers. Landlord shall not be responsible for the payment of a
commission based upon the transaction contemplated in this Amendment to any
real estate broker claiming to represent Tenant if any claims for brokers'
or finders' fees in connection with the transactions contemplated by this
Amendment arise, then Tenant hereby agrees to indemnify, protect, hold
harmless and defend Landlord (with counsel reasonably satisfactory to
Landlord) from and against any such claims if they shall be based upon any
statement, representation or agreement made by Tenant, and Landlord hereby
agrees to indemnify, protect, hold harmless and defend Tenant (with counsel
reasonably satisfactory to Tenant) if such claims are based upon any
statement, representation or agreement made by Landlord.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
'TENANT' 'LANDLORD'
CRUTTENDEN ROTH, INC., 18301 Associates, L.P.,
a California corporation A California limited
partnership
By: Opportunity Capital
Partners, L.P.,
By: /s/Walter Cruttenden a California limited
partnership
General Partner
Print Name: Walter Cruttenden
By: Office
Opportunity Corporation,
Print Title: Chairman a California corporation,
General Partner
By: /s/William
Wilson III
Date: 5/22/95
By: /s/R.
Matthew Moran
Date: 5/22/95
<PAGE>
DIAGRAM - Koll Center Irvine, Apple Computer Building
EXHIBIT "A" - Amendment No. 3
<PAGE>
DIAGRAM OF PREMISES
EXHIBIT "B" - Amendment No. 3
<PAGE>
AMENDMENT NO. 4 TO OFFICE BUILDING LEASE
This AMENDMENT NO. 4 TO OFFICE BUILDING LEASE ("Fourth Amendment") is
made as of October _, 1995, by and between 18301 Associates, L.P., a
California limited partnership (successor in interest to KZ3, a California
limited partnership, "Landlord"), and CRUTTENDEN ROTH INCORPORATED, a
California corporation (successor in interest to Cruttenden & Co., Inc., a
California corporation; "Tenant"), with reference to the facts set forth in
the Recitals below.
RECITALS
A. Tenant and Landlord are parties to that certain Office Building
Lease dated March 8, 1991 (the "Original Lease"), pursuant to which Landlord
leased to Tenant approximately 11,732 rentable square feet of space on the
ground floor ("Suite 100") of the office building at 18301 Von Karman Avenue
in Irvine, California (the "Building"), Amendment No. I dated June 17, 1992
(the "First Amendment"), pursuant to which the parties confirmed the
commencement and expiration dates of the term of the Original Lease,
Amendment No. 2 dated June 30, 1993 (the "Second Amendment"), pursuant to
which Landlord leased to Tenant approximately 5,307 rentable square feet of
space on the third floor of the Building ("Suite 300"), and Amendment No. 3
dated May 15, 1995 (the 'Third Amendment'), pursuant to which Landlord
leased to Tenant approximately 1,412 rentable square feet of additional
space on the third floor of the Building ("Suite 360"). The Original Lease.
as amended by the First Amendment, the Second Amendment and the Third
Amendment, is referred to below as the "Lease." Capitalized terms not
defined herein have the meanings given to such terms in the Lease.
B. Landlord and Tenant desire further to amend the Lease to provide
for further expansion of the Premises by approximately 13,622 net additional
rentable square feet, by adding all of the office space on the seventh floor
of the Building (approximately 20,341 rentable square feet; "Suite 700") to
the Premises and deleting Suite 300 (approximately 5.307 rentable square
feet) and Suite 360 (approximately 1,412 rentable square feet) from the
Premises, and to clarify and amend certain provisions of the Lease in
conjunction therewith, all as set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants and agreements contained herein. and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Landlord and Tenant agree as follows:
1. Addition of Suite 700. Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord, upon and subject to all of the terms,
conditions and provisions of the Lease as amended by this Fourth Amendment,
an additional 20,341 rentable square feet of space on the seventh floor of
the Building, as more particularly described and shown on Exhibit "A" which
is attached hereto and made a part hereof by this reference ("Suite 700").
2. Term With Respect to Suite 700. The term of the Lease with respect
to Suite 700 shall commence on the date Landlord's Work in Suite 700 is
substantially completed as provided in the Construction Rider attached
hereto as Exhibit "B" and made a part hereof
<PAGE>
this reference (or, in the event of any "Tenant Delays," as defined in the
Construction Rider, the date on which Landlord's Work could have been
substantially completed had there been no such Tenant Delays), or on any
earlier date an which Tenant commences operation of Tenant's business in
Suite 700 (the "Suite 700 Commencement Date"), and shall expire upon
expiration of the term of the Lease on June 27, 2001 (subject to extension
or sooner termination as provided in the Lease). During the term of the
Lease with respect to Suite 700, Suite 700 shall be included in the
"Premises" for all purposes under the Lease (including, without limitation,
Tenants Option to Extend as provided in Paragraph 59 of the Original Lease).
3. Adjustment of Annual Basic Rent. Effective commencing on (and
including) the Suite 700 Commencement Date, and continuing throughout the
remainder of the initial term of the Lease thereafter (through June 27,
2001), in addition to the Annual Basic Rent provided for in the Lease with
respect to Suite 100 (and, subject to termination as provided below, for
Suite 300 and Suite 360), Tenant shall pay $31,528.55 ($1.55 per rentable
square foot) per month as additional Monthly Basic Rent for Suite 700.
4. First Month's Rent: Additional Security Deposit. Upon execution
of this Fourth Amendment, Tenant shall pay $33,958.55 on account of the
first month's rent (including parking charges) for Suite 700 and deposit
with Landlord an additional $23,986.09 security deposit to be added to the
existing security deposit pursuant to Paragraph 7 of the Lease. Provided
that Tenant vacates Suite 300 and Suite 360 as provided below and is not
otherwise in default under the Lease, then the $9,340.32 security deposit
held by Landlord pursuant to the Second Amendment and the $2,252.14 security
deposit held by Landlord pursuant to the Third Amendment (a total of
$11,592.46) shall be applied to the total additional security deposit of
$35,578.55 which Tenant agrees to make in connection with Tenant's lease of
Suite 700 pursuant to this Fourth Amendment.
5. Remodeling Work. As soon as may be reasonably practicable after
execution of this Fourth Amendment, Landlord shall cause Landlord's
contractor to modify the existing improvements in Suite 700 and to perform
certain other work in Suite 700 ("Landlord's Work") as provided in the
Construction Rider. Landlord currently anticipates that Landlord's Work
will be substantially completed on December 26, 1995. Tenant shall be
responsible for any structural modifications or engineering required in
connection with Tenant's use of the Premises or any work or proposed work in
Suite 700 (but the cost of any such engineering required in connection with
Landlord's Work shall be subject to the S70,000 remodeling allowance
provided by Landlord as provided above). To the best of Landlord's
knowledge, the improvements and modifications currently proposed by Tenant
(and included in Landlord's Work) will not require structural modifications
or engineering, other than that reflected in the preliminary pricing
previously delivered to Tenant.
6. Deletion of Suite 300 and Suite 360. As soon as may be reasonably
practicable (and in all events within 30 days) after the Suite 700
Commencement Date, Tenant shall vacate and surrender Suite 300 and Suite 360
and the Lease with respect to Suite 300 and Suite 360 shall terminate (with
the same force and effect as if the term of the Lease with respect to Suite
300 and Suite 360 were amended to expire on such date instead of November
14, 1998) and Tenant shall have no right or option to extend with respect to
Suite 300 or Suite 360.
<PAGE>
7. Parking. Effective commencing on the Suite 700 Commencement Date
(and continuing throughout the term of the Lease thereafter). Landlord shall
provide parking as set forth in Paragraph 57 of the Original Lease, subject
to the provisions of Paragraph 6 of the Second Amendment and Paragraph 6 of
the Third Amendment, except that Tenant shall no longer be entitled to the
number of unreserved and reserved parking spaces or the abatement of parking
charges provided for in the Second Amendment with respect to Suite 300 or in
the Third Amendment with respect to Suite 360, but shall instead be provided
with parking for Suite 700 as set forth below.
(a) Unreserved Employee Parking. Landlord shall lease to Tenant
an additional 81 unreserved employee parking spaces for which Tenant shall
pay as additional rent on a monthly basis $30.00 per stall per month from
(and including) the Suite 700 Commencement Date through the day preceding
the third anniversary of the Suite 700 Commencement Date and $50.00 per
stall per month throughout the initial term thereafter.
(b) Additional Unreserved Employee Parking. Additionally,
Cruttenden Roth Incorporated, so long as it continues to occupy all of the
Premises free from any assignment, sublease or other transfer of any of
Tenant's interest in the Lease as amended by this Fourth Amendment and is
not in breach or default beyond any applicable cure periods (it being
intended that these additional parking rights are strictly personal to
Cruttenden Roth Incorporated and not transferable to or exerciseable by or
for the benefit of any transferee), shall have the right on an as-needed
basis, to lease up to a total of 27 additional unreserved spaces at the same
rates as provided in clause (a) above, provided, however, that Landlord at
any time and from time to time may terminate Tenant's rights with respect to
all or any portion of these 27 additional spaces if needed to accommodate
other tenants or to stay within parking allocations made to Landlord by the
Koll Center Irvine Southwest Owners Association, all as determined by
Landlord in Landlord's sole and absolute discretion.
(c) Reserved Employee Parking. Landlord shall lease to Tenant
an additional three reserved employee parking spaces for which Tenant shall
pay as additional rent on a monthly basis $115.00 per stall per month;
provided, however, that so long as Tenant is not in default (beyond any
applicable cure periods) under the Lease as amended by this Fourth
Amendment, the parking charges for these three reserved spaces shall be
abated for the initial term.
(d) Parking Charges During Extended Term. If Tenant exercises
Tenant's Option to Extend pursuant to Paragraph 59 of the Original Lease,
Tenant Shall during the extension term pay prevailing parking rates (as such
rates may change from time to time) for all parking allocated to Tenant
under the Lease as amended by this Fourth Amendment.
8. Brokerage Commissions. Following execution and delivery of this
Fourth Amendment, and within 30 days after the Suite 700 Commencement Date,
Landlord shall pay Tenant's broker, EQUIS, a commission equal to the sum of
(x) two percent (2%) of the difference between the Base Rental payable for
Suite 700 for the first five years following the Suite 700 Commencement Date
and the remaining Base Rental that would have been payable for Suite 300 and
Suite 360 if the Lease was not being terminated early with respect to Suite
WO and Suite 360 as provided above; plus (y) one percent (1%) of the Base
Rental for Suite 700 for the period from the fifth anniversary of the Suite
700 Commencement Date through
<PAGE>
June 27,2001. if any other claims for brokers' or finders' fees in
connection with the transactions contemplated by this Fourth Amendment
arise, then Tenant shall indemnify, protect, hold harmless and defend
Landlord (with counsel reasonably satisfactory to Landlord) from and against
any such claims if they shall be based upon any statement, representation or
agreement made by Tenant, and Landlord agrees to indemnify. protect hold
harmless and defend Tenant (with counsel reasonably satisfactory to Tenant)
if such claims are based upon any statement, representation or agreement
made by Landlord.
9. Operating Expenses and Tenant's Percentage. The Operating Expense
Allowance for Suite 700 shall be Tenant's Percentage for Suite 700 of actual
Operating Expenses for the 1996 calendar year. Tenant's Percentage for Suite
700 shall be 9.264% (the 20,341 square foot rentable area of Suite 700,
divided by the total rentable area of the Building), In addition, Tenant
shall continue to pay Tenant's Percentage of the Operating Expenses paid or
incurred by Landlord in excess of the Operating Expense Allowance for Suite
100 as provided in the Original Lease (with Operating Expenses determined by
Generally Accepted Accounting Practices, calculated assuming the Building is
100% fully occupied, and calculated for a full year of operation, as
provided in the Original Lease), except that the exclusions from Operating
Expenses set forth in Paragraph 66 of the Original Lease shall be modified
as follows:
(i)The sixth bulleted subparagraph at the bottom of page 11 of
the Rider to the Original Lease (the "Rider") shall be modified to read as
follows: "Services provided, taxes attributable to, and costs incurred in
connection with the operation of any retail or restaurant facilities in the
Building, except to the extent that such services, taxes or costs are
consistent with the services, taxes and costs incurred in connection with
office space uses in the Building."
(ii) The last sentence of the final bulleted subparagraph of
Paragraph 66, on page 15 of the Rider (provisions concerning certain service
contracts) shall be deleted.
(iii) For purposes of determining Tenant's Percentage of the
Operating Expenses paid or incurred by Landlord in excess of the Operating
Expense Allowance for Suite 700, the sixth bulleted subparagraph on page 13
of the Rider (concerning additional insurance costs) shall be inapplicable
(but such provisions shall continue to apply for purposes of determining
Tenant's Percentage of the Operating Expenses paid or incurred by Landlord
in excess of the Operating Expense Allowance for Suite 100).
(iii) For purposes of determining Tenant's Percentage of the
Operating Expenses paid or incurred by Landlord in excess of the Operating
Expense Allowance for Suite 700, the final bulleted subparagraph of
Paragraph 66, beginning on page 14 of the Rider and continuing onto page 15
of the Rider (providing for certain 'caps" on Operating Expenses) shall be
inapplicable (but such provisions shall continue to apply for purposes of
determining Tenant's Percentage of the Operating Expenses paid or incurred
by Landlord in excess of the Operating Expense Allowance for Suite 100).
10. Provisions of Lease No Longer Applicable. Except only as
otherwise provided to the contrary in this Fourth Amendment, the provisions
of the Second Amendment (other than Paragraph 14 of the Second Amendment
concerning certain provisions of the Original Lease no longer of any force
or effect), and the provisions of the Third Amendment (other than Paragraph
<PAGE>
10 of the Third Amendment concerning Hazardous Materials), are no longer
applicable and are no longer of any force or effect. Tenant shall have no
further Option to Expand or other right to lease additional space of any
kind. Tenant's only remaining option is the Option to Extend pursuant to
Paragraph 59 of the Original Lease, as amended by this Fourth Amendment.
11. Clarification of Certain Lease Provisions. Paragraph 63 of the
Original Lease (concerning refurbishment of the Premises) shall apply with
respect to Suite 100 as provided in the Lease, but shall not apply with
respect to Suite 700). Notwithstanding any provisions in the Lease to the
contrary, Tenant acknowledges that the rentable area of the Building, the
rentable area of Suite 100, the rentable area of Suite 300, the rentable
area of Suite 360, the rentable area of suite 700, and other rentable and
usable area calculations for purposes of the Lease as amended by this Fourth
Amendment have been performed for Landlord by Stevenson Systems. in
accordance with customary procedures based on a modified SOMA Standard
(under which certain ground floor common areas are included in calculating
the load factor for office space on all floors and perimeter measurements
are made to the glass line). The preceding sentence is intended to confirm
the method used for calculation of rentable areas, but any and all rights of
the parties under the Lease to have space remeasured (to confirm or
determine rentable areas using such method) shall continue to apply and
shall not be deemed to have been deleted by virtue of the preceding
sentence. Notwithstanding anything to the contrary in subparagraph (g) of
Paragraph 23 of the Original Lease, the Lease shall not be terminated in the
event of a casualty during the last 12 months of the term if Landlord elects
to repair, reconstruct or restore the Premises.
12. Supplemental Air Conditioning. Tenant shall continue to be
responsible for operation, maintenance and repair of all supplemental air
conditioning equipment installed in the Premises for Tenant and shall at all
times maintain in effect an air conditioning system maintenance and service
contract reasonably satisfactory to Landlord, with an air conditioning
service contractor reasonably satisfactory to Landlord, providing for
regular maintenance and service of such supplemental air conditioning
equipment Tenant acknowledges and agrees that no more than a total of three
tons of air-cooled (as opposed to water-cooled) supplemental air
conditioning equipment may be employed on any floor at any time. To the
greatest extent reasonably practicable and permissible under applicable laws
and tariffs, the electrical supply for the supplemental air conditioning
shall (at Tenants cost) be separately metered. Tenant shall pay Landlord for
the cost of all such electricity as billed by Landlord monthly (or at such
other intervals not more frequently than monthly as Landlord may elect).
13. Reaffirmation of Lease. Except as set forth in this Fourth
Amendment, the provisions of the Lease shall remain unchanged and in full
force and effect.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have entered into and executed
this Fourth Amendment as of October __, 1995.
TENANT: LANDLORD:
CRUTTENDEN ROTH INCORPORATED, 18301 ASSOCIATES, L.P.,
a California corporation a California Limited Partnership
By: OPPORTUNITY CAPITAL PARTNERS.
L.P.,
a California limited
partnership
Its Administrative General
Partner
By: /s/Edward J. Hall
Name: Edward J. Hall
Title: Chief Financial Officer By: OFFICE OPPORTUNITY
CORPORATION,
A California corporation
Its General Partner
By: ___________________________
Name:__________________________
Title:_________________________
By: /s/William Wilson III
Name: William Wilson III
Title: President
By: /s/R. Matthew Moran
` Name: R. Matthew Moran
Title: CFO
<PAGE>
<DIAGRAM
EXHIBIT A - SUITE 700
<PAGE>
EXHIBIT B
ATTACHED TO AND FORMING A PART OF
AMENDMENT NO. 4 TO OFFICE BUILDING LEASE
BETWEEN
18301 ASSOCIATES, L.P., AS LANDLORD,
AND
CRUTTENDEN ROTH INCORPORATED, A$ TENANT ("LEASE")
CONSTRUCTION RIDER
1. Landlord's Work. As soon as may be reasonably practicable after
execution of the attached Amendment No. 4 to Office Lease (the "Amendment"),
Landlord shall cause 2 contractor designated by Landlord to modify the
existing improvements in Suite 700 and to perform certain other work in
Suite 700 ("Landlord's Work" or the "Tenant Improvements"), as shown on the
space plan developed by Gensler & Associates dated October 24, 1995 and
approved by Ed Hall of Cruttenden Roth Incorporated (the "Space Plan").
1.1. Plans. The Tenant Improvements shall be constructed substantially as
shown on the Space Plan, utilizing Building Standard materials and finishes
(except as otherwise specified on the Space Plan). The preliminary cost
estimate prepared by Landlord's contractor is attached as Exhibit B-1.
As soon as may be reasonably practicable after execution and delivery of the
Amendment, Landlord shall cause the Space Planner to prepare and deliver to
Tenant detailed plans and specifications sufficient to permit the
construction of the Tenant Improvements by Landlord's contractor
("Construction Documents"). Tenant shall respond to the Construction
Documents within five (5) Business Days after receipt thereof, specifying
any changes or modifications Tenant desires in the Construction Documents.
The Space Planner will then revise the Construction Documents and resubmit
them to Tenant for its approval. Tenant shall approve or disapprove the same
within three (3) Business Days after receipt. After Tenant approves the
Construction Documents, Landlord will provide Tenant with a guaranteed
maximum cost quote from Landlord's contractor. Tenant shall approve the same
within three (3) Business Days after receipt. The revised Construction
Documents and cost estimate, as approved by Tenant, are hereinafter referred
to as the "Final Construction Documents" and "Final Cost Quote," respectively.
1.2. Construction. Upon approval by Tenant of the Final Construction
Documents and the Final Cost Quote, Landlord shall authorize Landlord's
contractor to proceed with Landlord's Work. The Tenant Improvements shall be
deemed to be "Substantially Completed" when they have been completed in
accordance with the
<PAGE>
Final Construction Documents except for finishing details, minor omissions.
decorations and mechanical adjustments of the type normally found on an
architectural "punch list". (The definition of Substantially Completed shall
also define the terms "Substantial Completion" and "Substantially Complete.")
Upon Substantial Completion of the Tenant Improvements and before Tenant
takes possession of the Premises, Landlord and Tenant shall inspect the
Premises and jointly prepare a "punch list"of agreed items of construction
remaining to be completed. Landlord shall complete the items set forth in
the punch list as soon as reasonably possible. Tenant shall cooperate with
and accommodate Landlord and its workers in completing the items on the
punch list.
1.3. Cost of Tenant Improvements. Landlord shall pay for the cost of
Landlord's Work, including all normal costs of space planning, drawings,
city fees, permits, contractor's overhead and fees, and costs of
construction; provided, however, that Landlord's contribution to the costs
of Landlord's Work shall not be applied to costs associated with Tenants
work, if any, such as wiring, cabling, furniture and fixtures; and provided,
further, that in no event shall the total cost to be borne by Landlord for
Landlord's Work exceed $70,000.
Landlord shall contribute up to $70,000 toward the cost of the construction
and installation of the Tenant Improvements, If and to the extent that the
total cost of Landlord's Work exceeds $70,000, Tenant shall pay the excess
(the "Additional Cost"), to Landlord within 30 days after Tenants receipt of
written request therefor from Landlord. Landlord may request that Tenant pay
Landlord 50% of the Additional Cost based upon the Final Cost Quote prior to
the commencement of construction of the Tenant Improvements and that Tenant
pay the balance of the actual Additional Cost upon Substantial Completion of
the Tenant Improvements. Landlord will use reasonable care in preparing cost
estimates, but Tenant acknowledges that they are estimates only and do not
limit Tenants obligation to pay for the actual Additional Cost of the Tenant
Improvements, whether or not it exceeds the estimated amounts.
1.4. Changes. If Tenant requests any change, addition or alteration in
or to any Final Construction Documents ("Changes"), Landlord shall cause the
Space Planner to prepare additional Plans implementing such Change. As soon
as practicable after the completion of such additional Construction
Documents, Landlord shall notify Tenant of the estimated cost of the
Changes. Within three (3) working days after receipt of such cost estimate,
Tenant shall notify Landlord in writing whether Tenant approves the Change.
If Tenant approves the Change, Landlord shall proceed with the Change and
Tenant shall be liable for any Additional Cost resulting from the Change. If
Tenant fails to approve the Change within such three (3) day period,
construction of the Tenant Improvements shall proceed as provided in
accordance with the original Construction Documents.
<PAGE>
1.5. Delays. Tenant shall be responsible for, and shall pay to Landlord,
any and all costs and expenses incurred by Landlord in connection with any
delay in the commencement or completion of any Tenant Improvements and any
increase in the cost of Tenant Improvements caused by: (i) Tenant's failure
timely to approve any Construction Documents or cost quotes within the time
periods required herein, or failure timely to perform any action item which
is Tenant's responsibility pursuant to the Work Schedule attached as Exhibit
B-2 (including, without limitation, Tenant's responsibility to obtain all
requisite permits and approvals for Tenant's telephone and data cabling and
commence installation of Tenants cabling as scheduled on November 27, 1995,
and to complete installation of Tenant's cabling by November 30, 1995). (ii)
any delays in obtaining any items or materials constituting part of the
Tenant Improvements requested by Tenant, (iii) any Changes, (iv) any failure
by Tenant to pay any installment of Additional Cost within 30 days after
tenant's receipt of written request therefor from Landlord as provided in
Paragraph 1.3 above, or (v) any other delay requested or caused by Tenant
(collectively, "Tenant Delays").
2. Delivery of Suite 700. Upon Substantial Completion of the Tenant
Improvements, Landlord shall deliver possession of Suite 700 to Tenant. If
Landlord has not Substantially Completed the Tenant Improvements and
tendered possession of Suite 700 to Tenant on or before the currently
anticipated Substantial Completion date, or if Landlord is unable for any
other reason to deliver possession of Suite 700 to Tenant on or before such
date, neither Landlord nor its representatives shall be liable to Tenant for
any damage resulting from the delay in completing such construction
obligations and/or deWering possession to Tenant and the Amendment shall
remain in full force and effect unless and until it is terminated under the
express provisions of this Paragraph. If any delays in Substantially
Completing the Tenant Improvements are attributable to Tenant Delays, then
Suite 700 shall be deemed to have been Substantially Completed and delivered
to Tenant on the date on which Landlord could have Substantially Completed
the Tenant Improvements and tendered Suite 700 to Tenant but for such Tenant
Delays.
Notwithstanding the foregoing, if the Commencement Date has not occurred or
been deemed to have occurred by April 1, 1995, either party, by written
notice to the other party given within ten (10) days after April 1, 1995,
may terminate this Lease without any liability to the other party; provided,
however, that (1) if the Commencement Date is delayed due to Tenant Delays,
one day shall be added to the April 1. 1995 date above for each day of
Tenant Delay: (2) if the delay in the Commencement.Date is caused by delays
of the type described in Section 26 - Force Majeure of the Lease, and if
Tenant elects to terminate as provided above, then Tenant shall reimburse
Landlord, within thirty (30) days after receipt of notification from
Landlord of the amounts due, for any amounts expended by Landlord for the
construction and installation of the Tenant Improvements. If Tenant fails
to perform any of Tenant's obligations under this Construction Rider within
the time periods specified herein, Landlord may, in lieu of terminating the
Lease under the foregoing provisions, treat such failure of performance as
an Event of Default under the Lease.
<PAGE>
3. Tenant's Early Access to Suite 700. Landlord shall permit Tenant
to enter Suite 700 to install data and telephone systems, furniture.
fixtures and equipment upon and subject to all of the terms, conditions and
provisions of the Lease. as amended by the Amendment, except that no Basic
Rent shall be payable for Suite 700 on account of any period prior to the
Suite 700 Commencement Date, provided that Tenant does not thereby increase
the cost of, delay or in any manner interfere with the efficient and
economical completion of Landlord's Work. Prior to such entry of the
Premises, Tenant shall provide evidence reasonably satisfactory to Landlord
that Tenant's insurance, as described in the Lease, shall be in effect as of
the time of such entry.
Tenant agrees that Landlord shall not be liable in any way for any injury,
loss or damage which may occur to any of Tenants property placed upon or
installed in Suite 700 prior to Substantial Completion, the same being at
Tenant's sole risk, and Tenant shall be liable for all injury, loss or
damage to persons or property arising as a result of such entry into Suite
700 by Tenant or its contractors, agents or employees.
4. Ownership of Tenant Improvements. All Tenant Improvements, whether
installed by Landlord or Tenant, shall become a part of the Premises, shall
be the property of Landlord and, subject to the provisions of the Lease,
shall be surrendered by Tenant with the Premises, without any compensation
to Tenant at the expiration or termination of the Lease in accordance with
the provisions of the Lease.
IBM Customer Agreement
Thank you for doing business with us. We strive to provide you with
high quality Products and Services. If, at any time, you have any
questions or problems, or are not completely satisfied, please let us know.
Our goal is to do our best for you.
This IBM Customer Agreement (called the "Agreement")
covers business transactions you may do with us to
purchase Machines, license Programs, and acquire
Services.
This Agreement and its applicable Attachments and
Transaction Documents are the complete agreement
regarding these transactions, and replace any prior
oral or written communications between us.
By signing below for our respective Enterprises,
both of us agree to the terms of this Agreement.
Once signed, 1) any reproduction of this Agreement,
an Attachment, or Transaction Document made by
reliable means (for example, photocopy or
facsimile)is considered an original and 2) all
Products and Services you order under this Agreement are
subject to it.
Agreed to: Agreed to:
2Themart.com International Business Machines
Corporation
By /s/Dominic J. Magliarditi By /s/Humberto Mundo
Authorized signature Authorized signature
Name (type or print): Name (type or print):
Dominic J. Magliarditi Humberto Mundo
Date: January 25, 1999 Date: January 25, 1999
Enterprise number: 6020475 Agreement number: VGY1816
Enterprise address: IBM address:
2Themart.com 2929 N. Central Avenue
5405 Alton Parkway Phoenix, AZ 85012
Irvine, CA 92604
After signing, please return a copy of this Agreement to the "IBM
address" shown above.
<PAGE>
IBM Customer Agreement
Table of Contents
Section Title
Page
Part 1 - General . . . . . . . . . . . . . . . . 3
1.1 Definitions. . . . . . . . . . . . . .. . . . 3
1.2 Agreement Structure. . . . . . . . . . 4
1.3 Delivery . . . . . . . . . . . . . . . . . . . 4
1.4 Charges and Payment. . . . . . . . . 5
1.5 Changes to the Agreement Terms . . .. 5
1.6 IBM Business Partners. . . . . . . . .. . . . 6
1.7 Mutual Responsibilities. . . . . . . .. . . . 6
1.8 Your Other Responsibilities. . . . . .. . . . 6
1.9 Patents and Copyrights . . . . . . . .. . . . 7
1.10 Limitation of Liability . . . . . . .. . . . 7
1.11 Agreement Termination . . . . . . . .. . . . 8
1.12 Geographic Scope. . . . . . . . . . .. . . . 8
1.13 Governing Law . . . . . . . . . . . .. . . . 8
Part 2 - Warrant . . . . . . . . . . . .. . . . 9
2.1 The IBM Warranties . . . . . . . . . . 9
2.2 Extent of Warranty . . . . . . . . . .. . . . 9
2.3 Items Not Covered by Warranty . . . .. . . .10
Part 3 - Machines. . . . . . . . . . . .. . . . . . .11
3.1 Title and Risk of Loss . . . . . . . .. . . .11
3.2 Production Status . . . . . . . . . .. . . .11
3.3 Installation . . . . . . . . . . . . .. . . .11
3.4 Licensed Internal Code . . . . . . . .. . . .11
3.5 Machine Code . . . . . . . . . . . . .. . . .12
Part 4 - Programs. . . . . . . . . . . . . . . . . . . .13
4.1 License. . . . . . . . . . . . . . . . . . . . . . . . .13
4.2 License Details. . . . . . . . . . . . . . . .13
4.3 Program Components Not Used on the Designated
Machine. . . . .. . . . . . . .13
4.4 Distributed System License Option. . . . . . . . . .13
4.5 Program Testing . . . . . . . . . . . . . . .13
4.6 Packaged Programs . . . . . . . . . . . . . .14
4.7 Program Protection . . . . . . . . . . . . . .14
4.8 Program Services . . . . . . . . . . . . . . .14
4.9 License Termination. . . . . . . . . . . . . .14
Part 5 - Services . . . . . . . . . . . . . . . . .. . . .15
5.1 IBM Services . . . . . . . . . . . . . . .. .15
5.2 Personnel . . . . . . . . . . . . . . . . .. . . .15
5.3 Materials Ownership and License. .. .15
5.4 Changes to Service Terms . . . . . . . . .15
5.5 Renewal. . . . . . . . . . . . . . . . . . . . .. .16
5.6 Termination and Withdrawal . . . . .. . .16
5.7 Service for Machines
(during and after warranty). . . . . . . .. . .16
5.8 Maintenance Coverage . . . . . . . . . . . . .17
<PAGE>
IBM Customer Agreement
Part 1 - General
1.1 Definitions
Customer-set-up Machine is an IBM Machine that you install
according to our instructions.
Date of Installation is the following:
1. for an IBM Machine we are responsible for installing, the
business day after the day we install it or, if you defer
Installation, make it available to you for subsequent
installation by us;
2. for a Customer-set-up Machine and a non-IBM Machine, the
second business day after the Machines standard transit
allowance period; and
3. for a Program, the latest of -
a. the day after its testing period ends,
b. the second business day after the Program s standard transit
allowance period,
c. the date, specified in a Transaction Document, on
which we authorize you to make a copy of the Program, or
d. the date you distribute a copy of a chargeable component in
support of your authorized use of the Program.
Designated Machine is either 1) the machine on which you will use a
Program
for processing and which we require you to identify to us by
type/model and
serial number, or 2) any machine on which you use the Program if we
do not
require you to provide this identification to us.
Enterprise is any legal entity (such as -a corporation) and the
subsidiaries it owns by more than 50 percent. The term 'Enterprise"
applies
only to the portion of the enterprise located in the United States or
Puerto Rico.
Machine is a machine, its features, conversions, upgrades,
elements, or
accessories, or any combination of them. The term "Machine"
includes an IBM
Machine and any non-IBM Machine (including other equipment) that we
may
provide to you.
Materials are literary works or other works of authorship (such as
programs, program listings, programming tools, documentation, reports,
drawings and similar works) that we may deliver to you as part of a
Service. The term "Materials" does not include Programs or Licensed
Internal Code.
Product is a Machine or a Program.
Program is the following, including the original and all whole or
partial
copies:
1. machine-readable instructions and data;
2. components;
3. audio-visual content (such as images, text, recordings, or
pictures); and
4. related licensed materials.
The term "Program" includes an IBM Program and any non-IBM Program
that we
may provide to you. The term does not include Licensed Internal
Code or
Materials.
Service is performance of a task, provision of advice and counsel,
assistance, or access to a resource (such as access to an information
database) we make available to you.
Specifications is a document that provides information specific to a
Product. For an IBM Machine, we call the document "Official Published
Specifications." For an IBM Program, we call it "Licensed Program
Specifications," or "License Information."
<PAGE>
Specified Operating Environment is the Machines and Programs with
which a
Program is designed to operate, as described In the Programs
Specifications.
1.2 Agreement Structure
Attachments
Some Products and Services have terms in addition to those we
specify in
this Agreement. We provide the additional terms in documents called
"Attachments," which are also part of this Agreement. Attachments
will be
signed by both of us it requested by either of us.
Transaction Documents
For each business transaction, we will provide you with the
appropriate
"Transaction Documents" that confirm the specific details of the
transaction. Transaction Documents will be signed. by both of us it
requested by either of us. The following are examples of Transaction
Documents with examples of the information they may contain:
1. addenda (contract-period duration, start date, and
total quantity);
2. exhibits (eligible Products by category);
3. Invoices (item, quantity, and amount due);
4. statements of work (scope of Services, responsibilities,
deliverables, completion criteria, estimated schedule or
contract period, and charges); and
5. supplements (Machine quantity and type ordered, price,
estimated shipment date, and warranty period).
Conflicting Terms
If there is a conflict among the terms In the various documents,
those of an Attachment prevail over those of this Agreement. The terms
of a Transaction Document prevail over those of both of these documents.
Our Acceptance of Your Order
A Product or Service becomes subject to this Agreement when we
accept your order by doing any of the following:
1. sending you a Transaction Document;
2. shipping the Machine or making the Program available
to you; or
3. providing the Service.
Your Acceptance of Additional Terms
You accept the additional terms in an Attachment or Transaction
Document by doing any of the following:
1. signing the Attachment or Transaction Document;
2. using the Product or Service, or allowing others to do
so; or
3. making any payment for the Product or Service.
1.3 Delivery
We will try to meet your delivery requirements for Products and Services
you order, and will inform you of their status. Transportation charges, if
applicable, will be specified in a Transaction Document.
<PAGE>
1.4 Charges and Payment
The amount payable for a Product or Service will be based on one or more of
the following types of charges:
1. one-time (for example, the price of a Machine);
2. recurring (for example, a periodic charge for Programs or
measured use of Services);
3. time and materials (for example, charges for hourly
Services); or
4. fixed price (for example, a specific amount agreed to
between us for a custom Service).
Depending on the particular Product, Service, or circumstance, additional
charges may apply (such as special handling or travel related expenses). We
will inform you in advance whenever additional charges apply.
Recurring charges for a Product begin on its Date of Installation. Charges
for Services are billed as we specify which may be in advance, periodically
during the performance of the at Service, or after the Service is completed.
Amounts are due upon receipt of invoice and payable as we specify in a
Transaction Document. You agree to pay accordingly, Including any late
payment fee.
If any authority imposes a duty, tax, levy, or foe, excluding those based
on our not income, upon any transaction under this Agreement, then you
agree to pay that amount as specified in the invoice or supply exemption
documentation. You are responsible for personal property taxes for each
Product from the date we ship it to you.
One-time and recurring charges may be based on measurements of actual or
authorized use (for example, number of users or processor size for
Programs, motor readings for maintenance Services, or connect time for
network Services). You agree to provide actual usage data if we specify. If
you make changes to your environment that impact Use charges (for example,
change processor size or configuration for Programs), you agree to promptly
notify us and pay any applicable charges. Recurring charges will be
adjusted accordingly. Unless we agree otherwise, we do not give credits or
refunds for charges already due or paid. In the event that we change the
basis of measurement, our terms for changing charges will apply.
We may increase recurring charges for Products and Services, as well as
labor rates and minimums for Services provided under this Agreement, by
giving you three months written notice. An increase applies on the first
day of the invoice or charging period on or after the effective date we
specify in the notice.
We may increase one-time charges without notice. However, an increase to
one-time charges does not apply to you if 1) we receive your order before
the announcement date of the increase and 2) one of the following occurs
within three months after our receipt. of your order:
1. we ship you the Machine or make the Program available to you;
2. you make an authorized copy of a Program or distribute a
chargeable component of a Program to another Machine; or
3. a Program s increased use charge becomes due.
You receive the benefit of a decrease in charges for amounts which become
due on or after the effective date of the decrease.
Services for which you prepay must be used within the applicable contract
period. Unless we specify otherwise, we do not give credits or refunds for
unused prepaid Services.
1.5 Changes to the Agreement Terms
In order to maintain flexibility in our business relationship, we may
change the terms of this Agreement by giving you three months written
notice. However, these changes are not retroactive. They apply, as of the
effective date we specify in the notice, only to new orders
<PAGE>
and on-going transactions (such as licenses, except that changes to license
termination terms are effective only for now orders). Part 5 of this
Agreement contains additional provisions for changes to the terms of
individual Service transactions.
Otherwise, for a change to be valid, both of us must sign it. Additional or
different terms in any written communication from you (such as an order)
are void.
1.6 IBM Business Partners
We have signed agreements with certain organizations (called "IBM
Business Partners") to promote, market, and support certain Products and
Services.
When you order our Products or Services (marketed to you by IBM Business
Partners) under this Agreement, we confirm that we are responsible for
providing the Products or Services to you under the warranties and other
terms of this Agreement. We are not responsible for 1) the actions of IBM
Business Partners, 2) any additional obligations they have to you, or
3) any products or services that they supply to you under their agreements.
1.7 Mutual Responsibilities
Both of us agree that under this Agreement:
1. neither of us grants the other the right to use its
trademarks, trade names, or other designations in any promotion
or publication without prior written consent;
2. all information exchanged is nonconfidential. If either of us
requires the exchange of confidential information, it will be
made under a signed confidentiality agreement;
3. each is free to enter into similar agreements with others;
4. each grants the other only the licenses and eights specified.
No other licenses or rights (including licenses or rights under
patents) are granted;
5. each may communicate with the other by electronic means and
such communication is acceptable as a signed writing. An
identification code (called a "user ID") contained in an
electronic document is sufficient to verify the sanders identity
and the documents authenticity;
6. each will allow the other reasonable opportunity to comply
before it claims that the other has not met its obligations;
7. neither of us will bring a legal action more than two years
after the cause of action arose; and
8. neither of us is responsible for failure to fulfill any
obligations due to causes beyond its control.
1.8 Your Other Responsibilities
You agree:
1. not to assign, or otherwise transfer, this Agreement or your
rights under this Agreement, delegate your obligations, or resell
any Service, without our prior written consent. Any attempt to do
so is void;
2. to acquire Machines with the intent to use them within your
Enterprise and not for reselling, leasing, or transferring to a
third party, unless either of the following applies
a. you are arranging lease-back financing for the
Machines, or
b. you purchase them without any discount or allowance,
and do not remarket them in competition with our
authorized remarketers;
3. to allow us to install mandatory engineering changes (such as those
required for safety) on a Machine. Any parts we remove become our property.
You represent that you have the permission from the owner and any lien
holders to transfer ownership and possession of removed parts to us;
4. that you are responsible for the results obtained from the use of the
Products and Services;
<PAGE>
5. to provide us with sufficient, free, and safe access to your facilities
for us to fulfill our obligations; and
6. to comply with all applicable export and import laws and regulations.
1.9 Patents and Copyrights
For purposes of this Section, the term "Product" includes Materials (alone
or in combination with Products we provide to you as a system) and Licensed
Internal Code.
If a third party claims that a Product we provide to you infringes that
party s patent or copyright, we will defend you against that claim at our
expense and pay all costs, damages, and attorney s fees that a court
finally awards, provided that you:
1. promptly notify us in writing of the claim; and
2. allow us to control, and cooperate with us in, the defense and any
related settlement negotiations.
If such a claim is made or appears likely to be made, you agree to permit
us to enable you to continue to use the Product, or to modify it, or
replace it with one that is at least functionally equivalent. If we
determine that none of these alternatives is reasonably available, you
agree to return the Product to us on our written request. We will then give
you a credit equal to:
1.for a Machine, your net book value provided you have followed gone
rally-accepted accounting principles;
2. for a Program, the amount paid by you or 12 months charges (whichever
is less); and
3. for Materials, the amount you paid us for the Materials.
This is our entire obligation to you regarding any claim of infringement.
Claims for Which We are Not Responsible
We have no obligation regarding any claim based on any of the
following:
1. anything you provide which is incorporated into a Product;
2. your modification of a Product, or a Program's use in other than its
Specified Operating Environment,
3. the combination, operation, or use of a Product with other Products not
provided by us as a system, or the combination, operation, or use of a
Product with any product, data, or apparatus that we did not provide; or
4. infringement by a non-IBM Product alone, as opposed to its combination
with Products we provide to you as a system.
1.10 Limitation of Liability
Circumstances may arise where, because of a default on our part or other
liability, you are entitled to recover damages from us. In each such
instance, regardless of the basis on which you are entitled to claim
damages from us (including fundamental breach, negligence,
misrepresentation, or other contract or tort claim), we are liable for no
more than:
1. payments referred to in our patents and copyrights terms
described above;
2. damages for bodily injury (including death) and damage to real property
and tangible personal property; and
3. the amount of any other actual direct damages up to the greater of
$100,000 or the charges (if recurring, 12 months charges apply) for the
Product or Service that is the subject of the claim. For purposes of this
item, the term "Product" Includes Materials and Licensed Internal Code.
This limit also applies to any of our subcontractors and Program
developers. It is the maximum for which we and our subcontractors and
Program developers are collectively responsible.
<PAGE>
Items for Which We are Not Liable
Under no circumstances are we, our subcontractors, or Program developers
liable for any of the following:
1. third-party claims against you for damages (other than those
under the first two items listed above);
2. loss of, or damage to, your records or data; or
3. special, incidental, or indirect damages or for any economic
consequential damages (including lost profits or savings), even
if we are informed of their possibility.
1.11 Agreement Termination
You may terminate this Agreement on written notice to us following the
expiration or termination, of your obligations.
Either of us may terminate this Agreement if the other does not comply with
any of its terms, provided the one who is not complying is given written
notice and reasonable time to comply.
Any terms of this Agreement which by their nature extend beyond the
Agreement termination remain in effect until fulfilled, and apply
to both of our respective successors and assignees.
1.12 Geographic Scope
All your rights, all our obligations, and all licenses (except for Licensed
Internal Code and as specifically granted) are valid only in the United
States and Puerto Rico.
1.13 Governing Law
The laws of the State of Now York govern this Agreement.
Nothing in this Agreement affects any statutory rights of consumers that
cannot be waived or limited by contract.
<PAGE>
IBM Customer Agreement
Part 2 - Warranties
2.1 The IBM Warranties
Warranty for IBM Machines
For each IBM Machine, we warrant that it:
1. is free from defects in materials and workmanship; and
2. conforms to its Specifications.
The warranty period for a Machine is a specified, fixed period commencing
on its Date of Installation., During the warranty period, we provide repair
and exchange Service for the Machine, without charge, under the type of
Service we designate for the Machine.
If a Machine does not function as warranted during the warranty period and
we are unable to either 1) make it do so, or 2) replace it with one that is
at least functionally equivalent, you may return it to us and we will
refund your money.
Additional terms regarding Service for Machines during and after the
warranty period are contained in Part 5.
Warranty for IBM Programs
For each warranted IBM Program, we warrant that when it is used in the
Specified Operating Environment, it will conform to its Specifications.
The warranty period for a Program expires when its Program Services are no
longer available. During the warranty period, we provide defect-related
Program Services without charge. Program Services are available for a
warranted Program for at least one year following its general availability.
If a Program does not function as warranted during the first year after you
obtain your license and we are unable to make it do so, you may return
the Program to us and we will refund your money. To be eligible, you must
have obtained your license while Program Services (regardless of the remaining
duration) were available for it. Additional terms regarding Program Services
are contained in Part 4.
Warranty for IBM Services
For each IBM Service, we warrant that we perform it:
1. using reasonable care and skill; and
2. according to its current description (including any completion
criteria) contained in this Agreement, an Attachment, or a
Transaction Document.
Warranty for Systems
Where we provide Products to you as a system, we warrant that they are
compatible and will operate with one another. This warranty is in addition
to our other applicable warranties.
2.2 Extent of Warranty
If a Machine is subject to federal or state consumer warranty laws, our
statement of limited warranty included with the Machine applies in place
of these Machine warranties.
<PAGE>
The warranties will be voided by misuse, accident, modification, unsuitable
physical or operating environment, operation in other than the Specified
Operating Environment, improper maintenance by you, removal or alteration of
Product or parts identification labels, or failure caused by a product for
which we are not responsible.
THESE WARRANTIES ARE YOUR EXCLUSIVE
WARRANTIES AND REPLACE ALL OTHER
WARRANTIES OR CONDITIONS, EXPRESS
OR IMPLIED, INCLUDING, BUT NOT LIMITED
TO, THE IMPLIED WARRANTIES OR CONDITIONS
OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
2.3 Items Not Covered by Warranty
We do not warrant uninterrupted or error-free operation
of a Product or Service or that we will correct all defects.
We will identify IBM Products that we do not warrant.
Unless we specify otherwise, we provide Materials,
non-IBM Products, and non-IBM Services
WITHOUT WARRANTIES OF ANY KIND.
However, non-IBM manufacturers, suppliers, or
publishers may provide their own warranties to you.
<PAGE>
IBM Customer Agreement
Part 3 - Machines
3.1 Title and Risk of Loss
When we accept your order, we agree to sell you
the Machine described in a Transaction Document.
We transfer title to you or, if you choose, your lessor
when we ship the Machine. However, we reserve a
purchase money security interest in the Machine until we
receive the amounts due. For a feature, conversion, or
upgrade involving the removal of parts which become
our property, we reserve the security interest until we
receive the amounts due and the removed parts.
You agree to sign an appropriate document to permit
us to perfect our purchase money security interest.
We bear the risk of loss for the Machine up to and
including its Date of Installation. Thereafter, you
assume the risk.
3.2 Production Status
Each IBM Machine is manufactured from now parts, or
now and used parts. In some cases, a Machine may not
be now and may have been previously installed.
Regardless of a Machine's production status, our
appropriate warranty terms apply.
3.3 Installation
For the Machine to function properly, it must be installed
in a suitable physical environment. You agree to provide
an environment meeting the specified requirements
for the Machine.
We have standard installation procedures. We will
successfully complete these procedures before we
consider an IBM Machine (other than a Machine
for which you defer installation or a Customer-set-up
Machine) Installed.
You are responsible for installing a Customer-set-up
Machine (we provide instructions to enable you to do
so) and a non-IBM Machine.
Machine Features, Conversions, and Upgrades
We sell features, conversions, and upgrades for
installation on Machines, and, in certain instances,
only for installation on a designated, serial-numbered
Machine. Many of these transactions involve
the removal of parts and their return to us. As
applicable, you represent that you have the
permission from the owner and any lien
holders to 1) install features, conversions,
and upgrades and 2) transfer ownership and
possession of removed parts (which become
our property) to us. You further represent
that all removed parts are genuine, unaltered,
and in good working order. A part that replaces
a removed part will assume the warranty
or maintenance Service status of the replaced part.
You agree to allow us to install the feature,
conversion, or upgrade within 30 days of
its delivery. Otherwise, we may terminate
the transaction and you must return the feature,
conversion, or upgrade, to us at your expense.
3.4 Licensed Internal Code
Certain Machines we specify (called "Specific
Machines") use Licensed Internal Code (called
"Code"). We own copyrights in Code or have
the right to license Code. We or a third party own
all copies of Code, including all copies made from
them.
We will identify each Specific Machine in a
Transaction Document. If you are the rightful
possessor of a Specific Machine, we grant you a
license to use the Code (or any replacement we
provide) on, or in conjunction with, only the
Specific Machine, designated by serial
<PAGE>
number, for which the Code is provided. We license the Code to only one
rightful possessor at a time.
Under each license, we authorize you to do only the
following:
1. execute the Code to enable the Specific Machine to
function
according to its Specifications;
2. make a backup or archival copy of the Code (unless we
make one
available for your use), provided you reproduce the
copyright
notice and any other legend of ownership on the copy. You
may use
the copy only to replace the original, when necessary; and
3. execute and display the Code as necessary to maintain
the
Specific Machine.
You agree to acquire any replacement for, or additional copy of, Code
directly from us in accordance with our standard policies and practices.
You also agree to use that Code under these terms.
You may transfer possession of the Code to another party only with the
transfer of the Specific Machine. If you do so, you must 1) destroy all
your copies of the Code that were not provided by us, 2) either give the
other party all your IBM provided copies of the Code or destroy them, and
3) notify the other party of these terms. We license the other party when
it accepts those terms by initial use of the Code, These terms apply to all
Code you acquire from any source.
Your license terminates when you no longer rightfully possess the Specific
Machine.
Actions You May Not Take
You agree to use the Code only as authorized above. You may not do, for
example, any of the following:
1. otherwise copy, display, transfer, adapt, modify, or
distribute the Code (electronically or otherwise), except as we
may authorize in the Specific Machines Specifications or in
writing to you;
2. reverse assemble, reverse compile, or otherwise translate the
Code unless expressly permitted by applicable law without the
possibility of contractual waiver;
3. sublicense or assign the license for the Code; or
4. lease the Code or any copy of it.
3.5 Machine Code
For certain Machines we may provide basic input/output system code,
utilities, diagnostics, device drivers, or microcode (collectively called
"Machine Code"). This Machine Code is licensed under the terms of the
agreement provided with it.
<PAGE>
IBM Customer Agreement
Part 4 - Programs
4.1 License
When we accept your order, we grant you a nonexclusive, nontransferable
license to use the Program. Programs are owned by International Business
Machines Corporation or one of its subsidiaries ("IBM") or an IBM supplier
and are copyrighted and licensed (not sold).
4.2 License Details
Under each license, we authorize you to:
1. use the Programs machine-readable portion on only the Designated
Machine. If the Designated Machine is inoperable, you may use
another Machine temporarily. If the Designated Machine cannot
assemble or compile the Program, you may assemble or compile the
Program on another Machine.
If you change a Designated Machine previously identified to us, you
agree to notify us of the change and its effective date;
2. use the Program to the extent of authorizations you have acquired;
3. make and install copies of the Program, to support the level
of use authorized, provided you reproduce the copyright notices
and any other legends of ownership on each copy or partial copy; and
4. use any portion of the Program we 1) provide in source form,
or 2) mark restricted (for example, "Restricted Materials of
IBM") only to
a. resolve problems related to the use of the Program, and
b. modify the Program so that it will work together with other
products.
You agree to comply with any additional terms we may place on a Program. We
identify these in the Program s Specifications or in a Transaction Document.
Actions You May Not Take
You agree not to:
1. reverse assemble, reverse compile, or otherwise
translate the Program; or
2. sublicense, rent, or lease the Program.
4.3 Program Components Not Used on the Designated Machine
Some Programs have components that are designed for use on machines other
than the Designated Machine on which the Program is used. You may make
copies of a component and its documentation In support of your authorized
use of the Program provided you notify us of the components actual date of
distribution.
4.4 Distributed System License Option
For some Programs, you may make a copy under a Distributed System License
Option (called a "DSLO" copy). We charge less for a DSLO copy than we do
for the original license (called the "Basic" license). In return for the
lesser charge, you agree to do the following while licensed under a OSLO:
1. have a Basic license for the Program;
2. provide problem documentation and receive Program Services (if
any) only through the location of the Basic license; and
<PAGE>
3. distribute to, and install on, the DSLO s Designated Machine, any
release, correction, or bypass that we provide for the Basic license.
4.5 Program Testing
We provide a testing period for certain Programs to help you evaluate if
they meet your needs. If we offer a testing period., it will start 1) the
second business day after the Program s standard transit allowance period,
or 2) on another date specified in a Transaction Document. We will inform
you of the duration of the Programs testing period.
We do not provide testing periods for DSLO copies.
4.6 Packaged Programs
We provide certain Programs together with their own license agreements.
These Programs are licensed under the terms of the agreements provided with
them.
4.7 Program Protection
For each Program, you agree to:
1. ensure that anyone who uses it (accessed either locally or
remotely) does so only for your authorized use and complies with
our terms regarding Programs; and
2. maintain a record of all copies and provide it to us at our
request.
4.8 Program Services
We provide Program Services for warranted Programs and for selected other
Programs. If we can reproduce your reported problem in the Specified
Operating Environment, we will issue defect correction information, a
restriction, or a bypass. We provide Program Services for only the
unmodified portion of a current release of a Program.
We provide Program Services 1) on an on-going basis (with at least six
months written notice before we terminate Program Services), 2) until the
date we specify, or 3) for a period we specify.
4.9 License Termination
You may terminate the license for a Program on one month s written notice,
or at any time during the Programs testing period.
Licenses for certain replacement Programs may be acquired for an upgrade
charge. When you acquire these replacement Programs, you agree to terminate
the license of the replaced Programs when charges become due, unless we
specify otherwise.
We may terminate your license if you fail to comply with its terms. If we
do so, your authorization to use the Program is also terminated.
<PAGE>
IBM Customer Agreement
Part 5 - Services
5.1 IBM Services
Services may be either standard offerings or Customized to your specific
requirements. Each Service transaction may include one or more Services that:
1. expire at task completion or an agreed upon date;
2. automatically renew as another transaction with a specified
contract period. Renewals will continue until either of us
terminates the Service; or
3. do not expire and are available for your use until either of us
terminates the Service.
5.2 Personnel
Each of us is responsible for the supervision, direction, and control of
our respective personnel.
We reserve the right to determine the assignment of our personnel.
We may subcontract a Service, or any part of it, to subcontractors selected
by us.
5.3 Materials Ownership and License
We will specify Materials to be delivered to you. We will identify them as
being "Type I Materials," "Type 11 Materials," or otherwise as we both
agree. If not specified, Materials will be considered Type 11 Materials.
Type I Materials are those, created during the Service performance period,
in which you will have all right, title, and interest (including ownership
of copyright). We will retain one copy of the Materials. You grant us 1) an
irrevocable, nonexclusive, worldwide, paid-up license to use, execute,
reproduce, display, perform, distribute (internally and externally) copies
of, and prepare derivative works based on Type I Materials and 2) the right
to authorize others to do any of the former.
Type II Materials are those, created during the Service performance period
or otherwise (such as those that preexist the Service), in which we or
third parties have all right, title, and interest (including ownership of
copyright). We will deliver one copy of the specified Materials to you. We
grant you an irrevocable, nonexclusive, worldwide, paid-up license to use,
execute, reproduce, display, perform, and distribute, within your
Enterprise only, copies of Type II Materials.
Each of us agrees to reproduce the copyright notice and any other legend of
ownership on any copies made under the licenses granted in this Section.
Any idea, concept, know-how, or technique which relates to the subject
matter of a Service and is developed or provided by either of us, or
jointly by both of us, in the performance of a Service may (subject to
applicable patents and copyrights) be freely used by either of us.
5.4 Changes to Service Terms
We may change the terms of Services that are renewable or non-expiring by
giving you three months written notice. However, these changes are not
retroactive. They apply immediately to renewal transactions and as of the
effective date we specify in the notice to all existing transactions. If we
make a change to the terms of a renewable Service that 1) affects your
current contract period and 2) you consider unfavorable, on your request,
we will defer it until the and of that contract period.
<PAGE>
When both of us agree to change any Services statement of work other than as
described above, we will prepare a written description of the agreed change
(called a "Change Authorization"), which both of us must sign. The terms of
a Change Authorization prevail over those of the statement of work and any
of its previous Change Authorizations.
5.5 Renewal
Renewable Services renew automatically for a same length contract period
unless either of us provides written notification (at least one month prior
to the and of the current contract period) to the other of its decision not
to renew.
5.6 Termination and Withdrawal
Either of us may terminate a Service if the other does not most its
obligations concerning the Service.
You may terminate a non-expiring Service, without adjustment charge, on one
month s written notice to us provided you have met all minimum requirements
specified in the applicable Attachments and Transaction Documents.
You may terminate a renewable Service or a non-expiring maintenance
Service, without adjustment charge, on notice to us provided you have met
all minimum requirements specified in the applicable Attachments and
Transaction Documents and any of the following circumstances occur:
1 . you permanently remove the eligible Product, for which the
Service is provided, from productive use within your Enterprise;
2. the eligible location, for which the Service is provided, is no
longer controlled by you (for example, because of sale or closing
of the facility);
3. an increase in the Service charges, either alone or in
combination with prior increases over the previous twelve months,
is more than the maximum specified in the applicable Service
Transaction Document. If no maximum is specified, then this
circumstance does not apply; or
4. the Machine has been under maintenance Services for at least
six months and you give us one month 3 written notice prior to
terminating the maintenance Service.
For all other circumstances, you may terminate an expiring or renewable
Service on one month s written notice to us but such termination will
result in adjustment charges equal to the lesser of:
1. the charges remaining to complete the contract period; or
2. one of the following if specified in the Transaction Document.
a. the charges remaining to complete the contract period multiplied by the
adjustment factor specified, or
b. the amount specified.
You agree to pay us for all Services we provide and any Products and
Materials we deliver through Service termination and any charges we incur
in terminating subcontracts.
We may withdraw a renewable or non-expiring Service or support for an
eligible Product on three months written notice to you. If we withdraw a
Service for which you have prepaid and we have not yet fully provided it to
you, we will give you a prorated refund.
Any terms which by their nature extend beyond termination or
withdrawal remain in effect until fulfilled and apply to respective
successors and assignees.
5.7 Service for Machine (during and after warranty)
We provide certain types of repair and exchange Service either at your
location or at a service center to keep Machines in, or restore them to,
conformance with their Specifications We will inform you of the available
types of Service for a Machine. We may repair the failing Machine or
exchange it at our discretion.
<PAGE>
When the type of Service requires that you deliver the failing Machine to
us, you agree to ship it suitably packaged (prepaid unless we specify
otherwise) to a location we designate. After we have repaired or exchanged
the Machine, we will return it to you at our expense unless we specify
otherwise. We are responsible for lots of, or damage to, your Machine while
it is 1) in our possession or 2) in transit in those cases where we are
responsible for the transportation charges.
You agree to:
1. obtain authorization from the owner to have us service a Machine
that you do not own; and
2. where applicable, before we provide Service
a. follow the problem determination, problem analysis, and service
request procedures that we provide,
b. secure all programs, data, and funds contained in a Machine, and
c. inform us of changes in a Machine a location.
When Service involves the exchange of a Machine or part, the item we
replace becomes our property and the replacement becomes yours. You
represent that all removed items are genuine and unaltered. The replacement
may not be now, but will be in good working order and at least functionally
equivalent to the item replaced. The replacement assumes the warranty or
maintenance Service status of the replaced item. Before we exchange a
Machine or part, you agree to remove all features, parts, options,
alterations, and attachments not under our service. You also agree to
ensure that the item is free of any legal obligations or restrictions that
prevent its exchange.
Any feature, conversion, or upgrade we service must be Installed on a
Machine which is 1) for certain Machines, the designated, serial-numbered
Machine and 2) at an engineering-change level compatible with the feature,
conversion, or upgrade.
Repair and exchange Services do not cover:
1. accessories, supply items, and certain parts, such as batteries,
frames, and covers;
2. Machines damaged by misuse, accident, modification, unsuitable
physical or operating environment, or improper maintenance by you;
3. Machines with removed or altered Machine or parts identification
labels;
4. failures caused by a product for which we are not responsible; or
5. service of Machine alterations.
We manage and install engineering changes that apply to IBM Machines and
may also perform preventive maintenance.
We provide maintenance Services for selected non-IBM Machines.
5.8 Maintenance Coverage
When you order Machine maintenance Services under this Agreement, we will
inform you of the date on which the maintenance Services will begin. We may
inspect the Machine within one month following that date. If the Machine is
not in an acceptable condition for service, you may have us restore it for
a charge. Alternatively, you may withdraw your request for maintenance
Services. However, you will be charged for any maintenance Services which
we have performed at your request.
<PAGE>
IBM Proposal
for
2TheMart.com, Inc. Phase 0 Solution Design
Prepared for
2TheMart.com, Inc.
5405 Alton Parkway, Suite 471
Irvine, CA 92604
February 02, 1999
This document is confidential and is intended solely for
2TheMart.com 's internal use.
<PAGE>
February 2, 1999
IBM Corporation
The information in this proposal shall not be disclosed outside 2TheMart.com
and shall not be duplicated, used or disclosed in whole or in part for any
purpose other then to evaluate the proposal. If a contract is awarded to IBM
as a result of or in conjunction with the submission of this proposal,
2TheMart.com shall have the right to duplicate, use or disclose the data to
the extent provided by the contract. This restriction does not limit the
right of 2TheMart.com to use the information contained in the data if it is
obtained from another source without restriction.
The enclosed Statement of Work is governed by the terms and conditions of
the IBM Customer Agreement or Agreement for Services. Both the Agreement and
this Statement of Work must be signed to initiate this project
<PAGE>
Table of Contents
1.0 Executive Summary . . . . . . . . . . . . . . . . . . . . .Page 2
2.0 Statement of Work. . . . . . . . . . . . . . . . . . . . . .Page 3
2.1 Project Scope. . . . . . . . . . . . . . . . . . . . .Page 3
2.2 Key Assumptions. . . . . . . . . . . . . . . . . . . .Page 4
2.3 IBM Responsibilities . . . . . . . . . . . . . . . . .Page 8
2.3.1 Project Management . . . . . . . . . . . . . .Page 8
2.3.2 Joint Requirements Definition Session. . . . .Page 9
2.3.3 Solution Design. . . . . . . . . . . . . . . Page 10
2.4 2TheMart.com Responsibilities . . . . . . . . . . . Page 10
2.4.1 2TheMart.com Project Manager . . . . . . . . Page 10
2.4.2 Copyright Clearance and Usage Agreements . . Page 10
2.5 Deliverable Materials. . . . . . . . . . . . . . . . Page 11
2.6 Completion Criteria. . . . . . . . . . . . . . . . . Page 11
2.7 Estimated Schedule . . . . . . . . . . . . . . . . . Page 11
2.8 Charges. . . . . . . . . . . . . . . . . . . . . . . Page 12
Appendix A. Deliverable Guidelines. . . . . . . . . . . . . . Page 13
A.1 Project Plan . . . . . . . . . . . . . . . . . . . . Page 13
A.2 Bimonthly Status Reports . . . . . . . . . . . . . . Page 13
A.3 Requirements Summary Document. . . . . . . . . . . . Page 13
A.4 2TheMart.com Phase O Solution Design Document. . . . Page 14
Appendix B. Project Change Control Procedure. . . . . . . . . Page 15
Appendix C. Approval Process for Project Deliverables . . . . Page 16
Appendix D. Signature Document. . . . . . . . . . . . . . . . Page 17
<PAGE>
1.0 Executive Summary
The Internet and e-business have emerged as key strategic weapons
for companies competing in the global marketplace. Many
organizations am expanding, if not re-purposing their mission, to
extend their reach and value by employing these versatile now
business tools and the channel. Critical to a successful
implementation, however, comes the due diligence to understand the
effectiveness Of such endeavors as a viable, operative business.
At the request of 2TheMart.com IBM Interactive Media is proposing to
gather requirements, analyze and design a Web solution using a Phase
0 Solution Design Engagement The result of Interactive Media's
analysis, which will be described in the 2TheMart.com Phase 0
Solution Design Document of which components will be delivered in
iterative fashion is a plan for a Web Application that responds to
2TheMart.com's stated requirements.
Companies competing in the global marketplace now recognize that
Internet technologies can deliver increasingly valuable strategic
tools. E-business solutions that leverage the web to sell, market,
and communicate are helping many organizations gain revenues, build
market share,and enhance the strength of their customer
relationships. Flexible, scalable, and robust e-business solutions
require substantial analysis, planning, and coordination among
experts from multiple disciplines to be implemented successfully.
IBM Interactive Media, at 2TheMart.com's request proposes to analyze
and design a Web solution for a Phase 0 Solution Design Engagement.
A document describing a Web Application that addresses
2TheMart.com's stated requirements will be delivered in multiple
iterations.
This Document is a Proposal and a Statement of Work to conduct a
Phase 0 Solution Design Engagement.2.0 Statement of Work
<PAGE>
2.0 Statement of Work
This Statement of Work defines the scope of work to be accomplished
by IBM under the terms and conditions of the IBM Customer Agreement
# VGY1816. The tasks to be performed by IBM are defined and an
estimated schedule is provided. In addition, the responsibilities of
2TheMart.com are listed.
Changes to this Statement of Work Will be processed in accordance
with the procedure described in Appendix B "Project Change Control
Procedure".
The investigation and the implementation of changes may result in
modifications to the Estimated Schedule, charges, and/or other terms
of the Agreement.
The following are incorporated in and made part of this Statement of
Work:
Appendix A. "Deliverable Guidelines"
Appendix B. "Project Change Control Procedure"
Appendix C. "Approval Process for Project Deliverables"
Appendix D. "Signature Document"
2.1 Project Scope
The Scope of this project is to:
1. Conduct a three day Joint Requirements Definition session to
facilitate the definition and capture of 2TheMart.com 's business,
technical and design requirements. The session will be facilitated
by IBM Personnel.
2. Development of a recommended high level application design and
technical solution that meets the defined requirements.
3. Development of a budget planning estimate and schedule for the
implementation of the proposed solution.
<PAGE>
2.2 Key Assumptions
This Statement of Work and IBM's estimate are based on the following
assumptions. Any deviation from these assumptions will be handled in
accordance with the Project Change Control process described in
Appendix B. "Project Change Control Procedure".
General Assumptions
In pricing the development of the 2TheMart.com Solution Design, the
following general assumptions have been made:
1. 2TheMart.com names a Project Manager to manage the project
approvals, content delivery as well as the different groups
within their company so that information consistently flows
through one person, rather than several.
2. 2TheMart.com will provide ail appropriate graphic assets,
logos, color palettes, and pertinent assets for the interface
and navigation per the Project Plan. images and photos will be
provided electronically as PICT, TIFF or JPEG images where
possible, or as high quality prints no smaller than 2 inches by
3 inches, and no larger than 8.5 inches by 11 inches.
3. IBM will provide personnel for this effort, ending on the date
specified in the Agreement Signature Document page. IBM will
review each of the Deliverables with the designated
2TheMart.com Project Manager once they are ready for review.
4. IBM will not begin work on any requested project modifications
without providing a specific cost and schedule, via a Project
Change Request.
5. 2TheMart.com assumes all responsibilities for the copyright
clearance and license and usage agreements for any and all
content provided to IBM, or to be included in the 2TheMart.com
Solution Design Document.
6. The delivery schedule of the 2TheMart.com Solution Design
Document is contingent upon timely receipt of assets and
milestone approvals from 2TheMart.com. Any delays may impact
the final delivery date.
7. 2TheMart.com agrees to provide approvals of deliverables per
the approval process described in Appendix C. "Approval
Process for Project Deliverables".
8. 2TheMart.com will identify and schedule the appropriate
internal resources who will participate-pate In the three day
facilitated JRD session.
9. The three day JRD session will be held at the IBM Interactive
Media location in Atlanta, GA.
10. The actual period of performance will be determined at the
time work is authorized under this Agreement, based upon
schedule and availability of resources.
<PAGE>
11. The price and schedule information in this document are for
the Solution Design Phase only. A price and schedule to
develop the application will be provided following the Joint
Requirements Definition Session and subsequent analysis, via
a Statement or Statements of Work or PCR's.
12. Should IBM make available any components of the Solution
Design prior to the Final 2TheMart.com Solution Design
Document then any changes to components requested by
2TheMart.com will result in a PCR, per the process outlined
In Appendix B of this Agreement.
Technical Assumptions
13. The technical solution provided will be at a system
architecture level, not a detail design level. Detail design
sufficient to begin application coding will require
additional efforts that are not a part of this Scope of Work,
but may occur at a later date under a separate Statement of
Work or PCR.
14. This engagements' deliverables are not to support prototype
development.
15. The technical solution provided will focus on meeting 2The
Mart.com's business requirements defined in the Joint
Requirements Definition Session, rather than on a detailed
analysis of the strengths and weaknesses of competitor's web
sites.
Creative Assumptions
16. Design impressions am intended to communicate initial
findings and potential user Interface requirements only
17. Design impressions am not intended to represent "Branding",
as a full Branding engagement for digital applications will
require additional efforts that are not a part of this Scope
of Work, but may occur at a later date under a separate
Statement of Work or PCR.
18. The Information Design provided in the Solution Design
engagement is not meant to identify or design the back end
fulfillment architecture or work flow. it is only intended to
map user navigation. Any technical information will be
delivered as part of deliverable A.4, Solution Design section
"Technical Description".
Year 2000 Assumptions
19. IBM is not providing any Year 2000 services under this
Statement of Work IBM Product Specifications specify the Year
2000 readiness of the IBM Products. IBM does not make any
representations regarding the Year 2000 readiness of non-IBM
Products.
Under the terms of this Statement of Work IBM is not
responsible for 1) 2TheMart.com products, 2) a third party's
products (including products 2TheMart.com licenses from IBM
subcontractors) or 3) IBM's previously Installed Products,
("Other Products") to correctly process or properly exchange
accurate data with the Products or deliverables IBM
<PAGE>
provides. IBM will be relieved of obligation under this
Statement of Work due to the inability of such Other Products
to correctly process or property exchange accurate date data
with the Products or deliverables IBM provides to
2TheMart.com. 2TheMart.com acknowledges that it is
2TheMart.com's responsibility to assess their current systems
and take appropriate action to migrate to Year 2000 ready
systems.
<PAGE>
2TheMart.com Personnel
2TheMart.com personnel who will be assigned to this project will
have the technical, marketing communications and project
management skills necessary to participate in the Solution Design
effort.
IBM and Subcontractor Personnel
IBM will provide services under this Statement of Work during
normal business hours, 8:30 am to 5:16 pm Monday through Friday,
except holidays.
IBM may elect to use subcontractor personnel to perform a portion
of the proposed work.
2TheMart.com will be charged for travel time that exceeds one hour
round trip from the point of departure.
<PAGE>
2.3 IBM Responsibilities
2.3.1 Project Management
Task Description: IBM will provide project management for the IBM
Responsibilities in this
Statement of Work.
The objective of this task is to establish a framework for project
communications, reporting, procedural and contractual activity, The IBM
Project Manager Wit be responsible for this task. The following subtasks
will be performed:
1. Project Planning
Review this Agreement and the contractual responsibilities of both
parties with the 2TheMart.com Project Manager.
Prepare a Project Plan which identifies and assigns tasks, major
milestones for the efforts of the project team, the estimated dates on
which they are estimated to occur and indications of critical path.
Coordinate the establishment of the project environment
Develop a change control plan.
Develop a status reporting plan.
2. Project Tracking and Reporting
Measure, track and evaluate progress against the Project Plan.
Resolve deviations from the Project Plan with the 2TheMart.com Project
Manager.
Review project tasks, schedules, and resources and make changes or
additions, as appropriate.
Conduct regularly scheduled meetings with the 2TheMart.com Project
Manager to review project status.
Prepare Bimonthly Status Reports.
Administer the Project Change Control Procedure.
Review and analyze Project Change Requests.
Review the work products being produced by the project team prior to
delivery to 2TheMart.com
Completion Criteria: This task will be complete when the IBM
Responsibilities described in this Statement of Work have been completed,
according to their completion criteria.
Deliverables: The following items will be delivered to 2TheMart.com as a
result of this task:
1. Project Plan
2. Bimonthly Status Reports
<PAGE>
2.3.2 Joint Requirements Definition Session
Task Description: The objective of this task is to conduct a three day
session to facilitate the definition and capture of 2TheMart.com's
interactive media requirements and objectives. This session will address the
following topics:
1. Interactive Design Overview
Discussion of goals and purpose
2. Business Environment
Discussion regarding external, internal and fiscal issues/drivers, legal
considerations and competitive information goals, purpose, and
targeted audience
3. Application Function Model
High-level identification of functions and requirements necessary to
support the client requirements
4. Creative/Aesthetic User Interface Requirements
High-level review of 2TheMart.com's position as it relates to Internet
presence.
Definition for a future interface and its design characteristics and a
review of current client assets
Gather and verify the information needed to initiate design
impressions that will provide the reference for future Digital Branding
exercises representative of 2TheMarts' brand, by exploring issues
including web target segments and positioning.
5. Technical Requirements and Considerations
Definition of current and planned technical infrastructure/systems and
hardware requirements
6. Support and Maintenance requirements
7. Critical Success Factors
8. Prioritization of Requirements
Completion Criteria: This task will be complete upon written approval of the
Requirements Summary Document by the 2TheMart.com Project Manager, per the
approval process described in Appendix C.
Deliverables: The following items will be delivered to 2TheMart.com as a
result of this task:
1. Requirements Summary Document.
<PAGE>
2.3.3 Solution Design
Task Description: The objective of this task is to create a high-level
recommended solution that represent the visual, navigational and technical
design requirements, plus an estimated budget and schedule for
implementation of the solution.
Completion Criteria: This task will be complete upon written approval of the
2TheMart.com Phase 0 Solution Design Document by the 2TheMart.com Project
Manager per the approval process described in Appendix C. In order to
facilitate quicker review, the individual sections of this document will be
delivered as they are brought to completion.
Deliverables: The following item will be delivered to 2TheMart.com as a
result of this task:
2TheMart.com corn Phase 0 Solution Design Document, see Appendix A,A.4
for details
2.4 2TheMart.com Responsibilities
The responsibilities listed in this section are in addition to those
responsibilities specified in the Agreement, and are to be provided at no
charge to IBM. IBM's performance is predicated upon the following
responsibilities being fulfilled by 2TheMart.com
2.4.1 2TheMart.com Project Manager
Prior to the start of this Statement of Work under the Agreement,
2TheMart.com will designate a person, called the 2TheMart.com Project
Manager, to whom all IBM communications will be addressed and who has the
authority to act for 2TheMart.com In all aspects of the contract.
The responsibilities of the 2TheMart.com Project Manager include:
1. Serve as the interface between the IBM project team and all
2TheMart.com departments participating in this project.
2. With the IBM Project Manager, administer Project Change Control in
accordance with Appendix B. Project Change control Procedure.
3. Attend project status meetings either in person or by phone.
4. Obtain and provide information data. decisions and approvals, in a
timely manner in accordance with the Project Plan.
5. Resolve deviations from project plans which maybe caused by
2TheMart.com.
6. Help resolve project issues and escalate issues within the
2TheMart.com organization, as necessary.
<PAGE>
2.4.2 Copyright Clearance and Usage Agreements
2TheMart.com assumes all responsibilities for the copyright clearance and
license and usage agreements for any and all content provided to IBM, or to
be included in the 2TheMart.com Solution Design Document.
2.5 Deliverable Materials
The following deliverables are classified as Type II Materials, as defined
in the IBM Customer Agreement, and will be delivered to 2TheMart.com under
this Statement of Work.
Project Plan
Bimonthly Status Reports
Requirements Summary Document
2TheMart.com Phase 0 Solution Design Document
Type II Materials are those, created during the Service performance period
or otherwise (such as those that preexist the Service), in which we or third
parties have all right, title, and interest (including ownership of
copyright). We will deliver one copy of the specified Materials to you. We
grant you an irrevocable, nonexclusive, worldwide, paid-up license to use,
execute, reproduce, display, perform, and distribute, within your Enterprise
only, copies of Type II Materials.
2.6 Completion Criteria
IBM shall have fulfilled its obligations under this Statement of Work of
this Agreement when any one of the following first occurs:
IBM accomplishes the tasks described in "IBM Responsibilities", including
delivery to the 2TheMart.com Project Manager of the materials listed in
"Deliverable Materials".
IBM provides the number of hours for services specified in "Charges" or in
any subsequent Change Authorization.
2TheMart.com or IBM terminates the Project in accordance with the provisions
of the Agreement.
Additional agreements will be required for any maintenance and continued
relationship beyond the period of performance of this Agreement.
2.7 Estimated Schedule
The services will be performed during the period specified in the Statement
of Work for Project Support Services (Custom Services) found in Appendix D.
"Signature Document".
<PAGE>
Currently, the project duration is estimated for eight weeks from the JRD
session.
The estimated schedule will be revalidated and adjusted at the end of the
Joint Requirements Definition Session.
<PAGE>
2.8 Charges
Based an our understanding of 2TheMart.com 's requirements, IBM will provide
an estimated 1,895 hours of service, at an hourly rate of $199, for an
estimated funding requirement of $377, 105, plus a 2% admin fee.
In addition, 2TheMart.com will reimburse IBM for the actual hours and actual
travel and living expenses incurred in providing these services.
IBM will prebill 2TheMart.com 50% of the total contract hours, due before
work begins.
2TheMart.com will be invoiced monthly for the actual hours and travel and
living expenses used during the previous month.
Invoices are payable upon receipt.
This offer is valid until February 12, 1999 unless otherwise extended in
writing by IBM.
<PAGE>
Appendix A. Deliverable Guidelines
A.1 Project Plan
Purpose: IBM will provide a 2 to 3 page Project Plan advising the
2TheMart.com Project Manager of the planned IBM activities, budget estimates,
and schedule with milestones.
Content: The plan will consist of the following, as appropriate:
Activities planned - high level description of major tasks and milestones
with identification of appropriate deliverables and planned review cycle.
Schedule - Schedule for each high level task with associated milestones and
deliverables
A.2 Bimonthly Status Reports
Purpose: IBM will provide Bimonthly Status Reports advising the 2TheMart.com
Project Manager of the progress and status of the IBM activities. The report
will outline the IBM activities and describe the status of tasks worked on
during that period. Significant accomplishments, milestones, and problems
will be identified.
Content: The report will consist of the following, as appropriate:
Activities performed during the reporting period
Activities planned for the next reporting period
Hours summary
Hours originally estimated
Hours expended during this reporting period
Hours expended to date
Estimated remaining hours
Problems, concerns, and recommendations
Other items of importance
A.3 Requirements Summary Document
Purpose: IBM will provide a summarized requirements document
Content: The report describes the requirements documented in the
facilitated session and contains 5-10 pages consisting of:
Client Requirements
<PAGE>
A.4 2TheMart.com Phase 0 Solution Design Document
Purpose: This document describes the recommended solution and represents the
deliverable based on the Client Requirements gathered at the Joint Requirements
Definition Session.
Content: The document, produced as a series of Interim deliverables, will
consist of the following sections:
Executive Summary: This section is a 2-3 page overview of the project which
will consist of the following:
Introduction
The Challenge
The Recommended Solution
Budget and Planning Estimates
Solution Design: This section describes the graphical and technical solution
recommended based on the requirements and contains 20-30 pages consisting of:
Information Design
High Level Navigational Flow
Navigational Narrative Description
Graphical User Interface Design
Visual Treatments - four high-level design studies, each will have a unique logo
treatment, complementing an appropriate look and fear
Treatment Narrative Description
Technical Description
Architectural Diagram
Technical Narrative Description
Budget and Planning Estimate: This section represents a high-level estimate
of both the cost and time to develop the solution and contains 1-2 pages
consisting of:
Gantt chart representing the estimated time and development effort required
to implement the solution.
Estimated Cost - Represents the development cost based on the recommended
solution design
<PAGE>
Appendix B. Project Change Control Procedure
The following provides a detailed process to follow if a change to this
Statement of Work of this Agreement is required.
A Project Change Request (PCR) will be the vehicle for communicating change. The
PCR must describe the change, the rationale for the change and the effect the
change will have on the project.
The designated Project Manager of the requesting party will review the
proposed change and determine whether to submit the request to the other party.
Both Project Managers will review the proposed change and approve it for
further investigation or reject it. IBM will specify any charges for such
investigation. If the investigation is authorized, the Project Managers Will
sign the PCR which will constitute approval for the investigation charges.
IBM will invoice 2TheMart.com for any such charges. The investigation will
determine the effect that the implementation of the PCR will have on price,
schedule and other terms and conditions of the Agreement
A written Change Authorization and/or Project Change Request (PCR) must be
signed by both parties to authorize implementation of the investigated changes.
<PAGE>
Appendix C. Approval Process for Project Deliverables
IBM and 2TheMart.com acknowledge that one of the keys to success in this
project is a working relationship that respects the strengths, abilities,
and responsibilities of each company. Therefore, the approval process for
materials delivered by this work should fundamentally focus attention on
whether or not we are jointly meeting the overall
requirements of 2TheMartcom. Therefore, for each formal deliverable from IBM
to 2TheMart.com under this Statement of Work, the process will be:
1. The IBM Project Manager will deliver the materials to 2TheMart.com
designated Project Manager.
2. 2TheMart.com Project Manager will arrange for the proper personnel in the
2TheMart.com organization to review the materials. He/she will then
consolidate all feedback in written form back to IBM's Project Manager,
3. The feedback should contain either a letter of approval or a letter of
disapproval.
In the case of disapproval, the feedback should describe the specific
instances where the material does not meet 2TheMart.com 's requirements.
For each instance of disapproval, 2TheMart.com must specify the criteria
required to gain approval.
4. The feedback to IBM should be complete within three (3) business days
of receiving the materials.
5. The IBM Project Manager will specify the plans to correct each
disapproval instance in writing to 2TheMart.com.
6. IBM will make corrections to the deliverables to 2TheMart.com approval
criteria. If, in the judgment of either IBM's or 2TheMart.com Project
Manager, the changes
required are beyond the scope of the original Statement of Work or
extensive enough to warrant, the changes will be handled using the
Project Change Control Procedure in Appendix B.
<PAGE>
Appendix D. Signature Document
IBM Customer Agreement
Statement of Work for Project Support Services
Custom Services
This document is a Statement of Work to either the IBM Customer Agreement or
the IBM Agreement for Services. If used with the IBM Agreement for Services,
no machines or licensed program products may be acquired under this
Statement of Work. Such items are available only under the terms of 1) the
IBM Customer Agreement (or any equivalent agreement signed by both of us) or
2) the applicable third-party agreement.
Scope of Services, Completion Criteria, Charges, and other applicable terms:
See Statement of Work in attached proposal dated February 02, 1999, section
Statement of Work, entitled "2TheMart. com, IBM Phase 0 Solution Design".
Each of us agrees that the complete agreement between us about these
Services will consist of 1) this Statement of Work and 2) the IBM Customer
Agreement or IBM Agreement for Services, as applicable, (or any equivalent
agreement signed by both of us).
Agreed to: 2TheMart.com Agreed to: International Business Machines
By /s/Dominic J. Magliarditi By /s/Jess Rico
Authorized Signature Authorized Signature
Name: Dominic J. Magliarditi Name:
Date: 2-3-99 Date:
Customer Number: 6020475 Reference Agreement Number #VGY1818
Customer Address:
5406 Alton Parkway, Ste. 741
Irvine, CA 92604 Statement of Work Number:
IBM Office Number:
Customer "Bill To" Address, if different:
IBM Office Address:
Project Name or identifier: 2TheMart Phase 0
Estimated Start Date: February 15,1999
Estimated End Date: April 30, 1999
Services Group Address: 3200 Windy Hill Road
Atlanta, GA 30339
<PAGE>
IBM PROPOSAL
FOR
2TheMart.com Web Site
Application Development
Prepared for
2TheMart.com
1830 Von Karman Ave.
Irvine, CA 92612
May 28, 1999
IBM
Global Services
This document is confidential and is intended solely for
2TheMart.com's internal use.
<PAGE>
May 28, 1999
IBM Global Services
600 Anton Boulevard
Costa Mesa, CA 92626
The information in this proposal shall not be disclosed outside
2TheMart.com and shall not be duplicated, used or disclosed in
whole or in part for any purpose other than to evaluate the
proposal. If a contract is awarded to IBM as a result of or in
conjunction with the submission of this proposal, 2TheMart.com
shall have the right to duplicate, use or disclose the data to the
extent provided by the contract. This restriction does not limit
the right of 2TheMart.com to use the information contained in the
data if it is obtained from another source without restriction.
The enclosed Statement of Work is governed by the terms and
conditions of the IBM Customer Agreement or Agreement for Services.
Both the Agreement and this Statement of Work must be signed to
initiate this project
This offer is valid until June 28 1999 unless otherwise extended in
writing by IBM.
<PAGE>
TABLE OF CONTENTS
1.0 EXECUTIVE SUMMARY Page 2
2.0 STATEMENT OF WORK Page 3
2.1 Project Scope Page 3
2.2 Key Assumptions Page 4
2.3 IBM Responsibilities Page 9
2.3.1 Project Management Page 9
2.3.2 Final Detailed Solution Design Page 10
2.3.3 Graphic Production Page 11
2.3.4 Technical Development Page 11
2.3.5 Test and Quality Assurance Page 12
2.4 2TM Responsibilities Page 12
2.4.1 2TM Project Manager Page 13
2.4.2 Defining Events and Information for the 2TheMart.com
Web Site Page 13
2.4.3 Copyright Clearance and Usage Agreements Page 13
2.5 Deliverable Materials Page 13
2.6 Completion Criteria Page 14
2.7 Estimated Schedule Page 14
2.8 Charges Page 15
2.9 Year 2000 Page 16
2.10 Required Consents Page 16
2.11 Laws, Regulations and Statutes Page 17
2.12 Services Warranty Page 17
2.13 Special Terms & Conditions Page 17
APPENDIX A. EXCLUDED FUNCTIONALITY Page 18
APPENDIX B. PROJECT CHANGE CONTROL PROCEDURE Page 19
APPENDIX C. APPROVAL PROCESS FOR PROJECT DELIVERABLES Page 20
APPENDIX D. DELIVERABLE GUIDELINES Page 21
D.1 Biweekly Status Report Page 21
D.2 Project Plan Page 21
D.3 Final Detailed Solution Design Page 22
D.4 Processed Graphical Elements Page 22
D.5 Cut Guides Page 22
D.6 Beta Version of 2TheMart.com Web Site Page 22
D.7 Final Tested Version of the 2TheMart.com Web Site Page 23
APPENDIX E. SIGNATURE DOCUMENT Page 24
<PAGE>
1.0 EXECUTIVE SUMMARY
At the request of 2TheMart.com (2TM), IBM engaged in understanding
and analyzing 2TM's business environment, goals, strategies and
objectives, in order to determine how interactive tools and
technologies can be applied effectively to 2TheMart.com's business.
The result of IBM's analysis set forth a plan for an Internet
based solution that addresses 2TheMart.com business goals and
needs. The solution is development of an online auction web site.
The model used by IBM to identify this solution and to define its
high-level requirements also enabled 2TM to define its Value
Propositions for such a site:
The 2TheMart.com Web Site should maintain a critical mass of
items in all categories.
The 2TheMart.com Web Site user's site experience should be
focused on ease of use, ease of navigation and superior
searchability.
The 2TheMart.com Web Site should provide premium services to
both Buyers and Sellers to enhance the user experience.
IBM considered these Value Proposition Statements while creating
the Phase 0 Solution Design Document components, all components of
which were delivered to 2TheMart.com as of April 30, 1999. The
following proposed project takes the defined value proposition to
the next step. It supports 2TM in designing, building and
implementing its online auction web site.
This Document is a Proposal and a Statement of Work to execute the
plan to develop an online auction site.
<PAGE>
2.0 STATEMENT OF WORK
This Statement of Work defines the scope of work to be accomplished
by IBM under the terms and conditions of the IBM Customer Agreement
VGY1816 (Agreement). The tasks to be performed by IBM are defined
and an estimated schedule is provided. In addition, the
responsibilities of 2TheMart.com are listed.
Changes to this Statement of Work will be processed in accordance
with the procedure described in Appendix B. "Project Change Control
Procedure".
The investigation and the implementation of changes may result in
modifications to the Estimated Schedule, Charges, and/or other
terms of the Agreement.
The following are incorporated in and made part of this Statement
of Work:
W APPENDIX A. "Excluded Functionality"
W APPENDIX B. "Project Change Control Procedure"
W APPENDIX C. "Approval Process for Project Deliverables"
W APPENDIX D. "Deliverable Guidelines"
W APPENDIX E. "Signature Document"
2.1 PROJECT SCOPE
The Scope of this project is to:
1. Design, build, and test the 2TheMart.com Web Site.
Development will be built using IBM's Net.Commerce as the core and
the Auction Gallery function of the Net.Commerce auction.
<PAGE>
2.2 KEY ASSUMPTIONS
This Statement of Work and IBM's estimate are based on the
following assumptions. Any deviation from these assumptions will
be handled in accordance with the Project Change Control process
described in Appendix B. "Project Change Control Procedure".
GENERAL ASSUMPTIONS
IBM has utilized the 2TheMart.com Phase 0 Solution Design
Document sections: Information Design, Graphical User Interface
Design, and Technical Solutions as the requirements baseline for
estimating this effort. Functionality referenced in that document
which are excluded from this proposal are listed in Appendix A.
"Excluded Functions"
2TM assigns a Project Manager to manage the project
approvals, content delivery, coordinate and communicate with 2TM
personnel so that information consistently flows through one
person, rather than several.
2TM approves design and content, as well as provides required
assets and information within the agreed upon time frames detailed
in the Project Plan.
If it becomes necessary for 2TM to provide any appropriate
graphic assets, logos, color palettes and pertinent assets for the
interface and navigation per the Project Plan, these will be
provided electronically, where possible, or as high quality prints
no smaller than 2 inches by 3 inches, and no larger than 8.5
inches by 11 inches.
IBM provides personnel for this effort, ending on the date
specified in the Agreement Signature Document page. IBM will
review each project deliverable with the designated 2TM Project
Manager once they are ready for review.
IBM will not begin work on any requested project
modifications without providing a specific cost and schedule, via
a Project Change Request (PCR).
2TM assumes all responsibilities for the copyright clearance
and license and usage agreements for any and all content to be
loaded to the 2TheMart.com Web Site.
The delivery schedule of the web site is contingent upon
timely receipt of assets and milestone approvals from 2TM. Any
delays may impact the final delivery date.
2TM agrees to provide approvals of deliverables per the
approval process described in Appendix C. "Approval Process for
Project Deliverables".
Pricing assumes that development will adhere to the
production schedule and approval process as outlined in the
Estimated Schedule Section 2.6 and per the approval process
described in Appendix C.
2TM will assume all risks and liability as a result of any
abuse or misuse of this site (chats, discussion areas, store use,
transactions, etc.).
<PAGE>
All 2TheMart Responsibilities for asset and milestone
approvals from 2TheMart must be received at the times specified in
the project plan. Any delays will impact IBM's ability to deliver
the specified functionality by the delivery date and will result
in an automatic adjustment of the schedule incentive payment dates
on a day for day basis.
The project does not allow time for content/asset analysis or
management. This requires that all content/assets provided by
2TheMart are acceptable, as is, with no modification. If any
content/assets received require modification or editing, IBM will
advise 2TheMart of the required modifications/editing via the PCR
process as described in Appendix B, Project Change Control Procedure.
Any changes to the scope of work and/or assumptions may
require a PCR and may impact schedule and/or budget.
DEVELOPMENT ASSUMPTIONS
CREATIVE DEVELOPMENT ASSUMPTIONS
Media Requirements
1. 2TM is responsible for any royalty fees required for
photographs used.
2. 2TM will provide needed assets per the Project Plan.
Graphical Interface Design
1. This estimate is based on the design 2TM has selected out
of the 2TheMart.com Phase 0 Solution Design Document. This
design will be used as the basis for the final creative
treatment produced by IBM during the Final Detailed Solution
Design tasks. Once this final creative treatment is approved by
2TM, any changes will be considered out of scope and require a PCR.
2. 2TM must approve the selected design direction for
production and implementation of the application to begin, in
accordance with the approval process, Appendix C.
3. Design implementation will occur after information design
is completed and approved by 2TM, per Appendix C. Any
information design changes after that time are considered out of
scope and will require a PCR.
4. The interface will be optimized for a screen resolution of
640x480, but it will be flexible to accommodate users with a
screen resolution of 800x600.
5. The 2TheMart.com Web Site will be optimized for the
Web-safe palette.
6. This estimate does not include style guides.
7. IBM will accept photo ready print images; however, scanning
and digitizing images will increase the estimated number of
graphic hours associated with the project, thereby increasing
the total price of the engagement. In this event the increase
in project scope will be addressed using a PCR.
8. A .GIF animation of the logo will be integrated into the
application design. Additional animations and video compression
are not included in this estimate.
Content/Editorial
1. 2TM will provide a single point of contact whom the IBM
editor can consult for content and style issues.
<PAGE>
2. IBM will write the navigational text and other instructional
information to be contained within the public areas of the
2TheMart.com Web Site. This content will be delivered to the
client for approval in accordance with the approval process.
3. Any other content besides the navigational and instructional
text mentioned above will be provided by 2TM.
4. All content from 2TM will receive client approval prior to
IBM's receipt.
5. 2TM will provide Subject Matter Experts (SMEs) for any
original content IBM creates for the project.
6. Any 2TM-supplied content will be grammatically and factually
correct, (i.e., spelling of names and locations, dates,
technical jargon, etc.). Editing and research of
client-supplied content is not a part of this Statement of Work.
7. All content received from 2TM should be Microsoft Word
compatible. If content cannot be delivered in digital format a
PCR will be required for re-keying text effort.
Information Design
1. The functional templates will be based on the functionality
identified in the 2TheMart.com Phase 0 Solution Design Document,
currently estimated at 94 pages.
TECHNICAL DEVELOPMENT ASSUMPTIONS
The 2TM Web Site will be built using IBM's Net.Commerce,
including the Net.Commerce auction code, as its core.
2TM will provide the development server environment for
this project to IBM within 3 weeks of the project start. The
cost of said machines is not included within this SOW estimate.
IBM will conduct a Package Evaluation, during which time
IBM will finalize package selection for Commerce Auction, Chat,
Bulletin Board System (BBS), Frequently Asked Questions (FAQ),
web metrics, reporting tools, and virus protection. This
process does not include analysis of Chat-like customer service
alternatives (other than to provide information on the Business
Evolution product) or a Billing system.
A password will be required each time the Chat or
Bulletin Board areas are entered and when a bid is entered or
maintained.
It is assumed that a Chat and Bulletin Board product can
be found that can be integrated with Net.Commerce to allow
single update of user id and possibly password. If one cannot
be found, a separate chat registration may be required or
custom developed which is not within scope of project and will
require a PCR.
A placeholder for a link to the cybercast area will be
made, but actual cybercast and related material is not part of
project scope.
2TM will establish relationships to allow the use of
escrow from within the 2TheMart Web Site rather than with link
to escrow site. IBM assumes that this consists of an
escrow-related tutorial of (15) static HTML pages and links to
a 2TM version of the escrow pages that are served from the
escrow services server. These pages would have the 2TheMart
<PAGE>
Web Site look with navigation bar and tool bar, as well as all
necessary links back to the 2TheMart Web Site. Coding of these
pages is assumed to be the responsibility of escrow service
with arrangements to e made by 2TheMart. IBM will work with
2TM-provided escrow provider to define the integration of this
service within the 2TheMart Web Site.
2TM will establish necessary business relationships to
support credit card verification.
2TM must define the period of time that the closed
auction archive will house auction information, after which
time such information will be deleted.
The 2TM billing system is a separate effort outside the
scope of this proposal. IBM assumes the billing system will
bill sellers for services rendered on site. The 2TheMart.com
Web Site must pass a file of billable events to the billing
systems; these events include listings, winning bid amounts and
premium services. The billing system is responsible for
applying any discounts or keeping track of account balances.
The billing system must also pass invoices to the e-commerce
site for display to customers when they query account billing
status. 2TM is responsible for providing the billing system.
For large sellers, billing setup will be done by 2TM
through its billing system. For public sellers, setup is part
of registration but it is the responsibility of the billing
system to actually bill the seller. Public sellers must supply
credit card information to register on the 2TheMart Web Site.
IBM will design the 2TheMart Web Site to provide the billing
transactions to the 2TM billing system.
The load of initial product data will be the
responsibility of 2TM. Product and auction schedule
information must be provided in a single, computer readable
format prescribed by IBM; the estimate allows for assistance in
four iterations of data load. For the initial launch, it is
assumed that data for no more than 10 distributors will be
loaded. IBM's estimate for this assistance effort is limited
to 80 hours.
Reporting tools will be recommended by IBM as part of
package selection, but specifics of individual reports used for
administration of the site or for distribution to large
retailers is beyond the scope of this estimate.
Orders will be sent to large sellers as an encrypted
report or flat file. A single format will be used for all
large vendors.
Broadcast of live video feed of customer service will be
simulated using a still image that may be updated by 2TM.
Chat-like customer service capability is beyond the scope
of this effort. A link will be provided to a 2TM-provided
customer service capability. Any other integration of such
capability into the web site has not been considered as part of
this estimate.
Types of auction supported will consist of single item
regular (Yankee), multiple item regular auction, and True Dutch.
The Auction Gallery function of the Net.Commerce auction
code will be used to provide the
<PAGE>
2MartCart capability.
Modifications will be made to support 2TM specific functions
and presentation, currently estimated at 32 hours.
Bids can be retracted. 2TM must set specific rules as to
when this is allowed.
Winner notification will be performed through e-mail.
(Net.Commerce contains an internal messaging capability that
may be retained in addition to standard e-mail. This will be
evaluated during detailed design.) Notification is sent to
winners and to the seller. Notification will not be sent to
losers.
The tutorial is static HTML with "previous" and "next"
links that link a user to each of the topics. IBM's estimate
is based on the development of 20 pages.
Registration verification and profile modification will
be implemented as described in the Technical Solutions section
of the 2TheMart.com Phase 0 Solution Design Document.
Sellers will have the ability to save information used
repetitively. The specific fields to be saved will be defined
during Detailed Solution Design.
The large seller maintenance tool will be based on the
IBM Mass Import, Catalog Architect or another existing asset to
support the manual scheduling of auctions as well as purchasing
of premium services for specific items.
The ticker and clock will open in their own browser
window. They will utilize automated client pull technology for
synchronization of current server information.
The seller interface used by public sellers will be web
based and allow addition or maintenance of one product/auction
at a time.
The ability to order appraisal services or accept current
ratings from eBay has not been included in this estimate.
TESTING ASSUMPTIONS
Target Testing Platforms: Operating Systems: Win '95 -- Full
function testing, Mac OS 8 -- Regression testing only;
Browsers: Netscape 3.0 and 4.x, Microsoft Internet Explorer 3.03
and 4.x, AOL 3.0 and 4.0-Regression testing only.
All code will have been Unit Tested and executed on the
minimum browser platforms before the start of testing.
All content will have been reviewed and approved by 2TM before
the start of testing.
All content will have been incorporated into the Web Site
before the start of testing.
Testing will take place on the development server provided by
2TM.
Testing will be conducted Monday through Friday during normal
business hours within IBM's Atlanta facility or another of IBM's
choosing.
<PAGE>
2TM PERSONNEL
2TM personnel who will be assigned to this project will
have the technical skills necessary to participate in the Web
Application development effort.
IBM AND SUBCONTRACTOR PERSONNEL
IBM will provide services under this Statement of Work
during normal business hours, 9:00 am to 5:00 pm Monday through
Friday, except holidays.
IBM may elect to use subcontractor personnel to perform a
portion of the proposed work. If IBM plans to use a
subcontractor for any portion of the proposed work, 2TheMart
will be informed in advance.
OTHER
Services for follow-on support are not included in this
Agreement. IBM would be pleased to respond to 2TM for the
addition of these services.
Hosting services are not included as part of this
Statement of Work.
2TM is responsible for the purchase and licensing of all
third party software. Any associated costs (i.e., licensing
fees, etc.) with third party software are not included in this
estimate.
2.3 IBM RESPONSIBILITIES
2.3.1 PROJECT MANAGEMENT
TASK DESCRIPTION: IBM will provide project management for the IBM
Responsibilities in this Statement of Work.
The objective of this task is to establish a framework for project
communications, reporting, procedural and contractual activity. The
IBM Project Manager will be responsible for this task. The
following subtasks will be performed:
1. Project Planning
- Review this Agreement and the contractual
responsibilities of both parties with the 2TM Project Manager.
- Prepare a detailed Project Plan which identifies and
assigns tasks, major milestones for the efforts of the project
team, the estimated dates on which they are estimated to occur
and indications of critical path.
- Coordinate the establishment of the project environment.
- Develop a change control plan.
- Develop a status reporting plan.
<PAGE>
2. Project Tracking and Reporting
- Measure, track and evaluate progress against the Project Plan.
- Resolve deviations from the Project Plan with the 2TM Project Manager.
- Review project tasks, schedules, and resources and make
changes or additions, as appropriate.
- Conduct regularly scheduled meetings with the 2TM Project
Manager to review project status.
- Prepare Biweekly Status Reports.
- Administer the Project Change Control Procedure.
- Review and analyze Project Change Requests.
- Review the work products being produced by the project
team prior to delivery to 2TM.
COMPLETION CRITERIA: This task will be complete when the IBM
Responsibilities described in this Statement of Work have been
completed, according to their completion criteria.
DELIVERABLES:
1. Biweekly Status Reports
2. Project Plan
2.3.2 FINAL DETAILED SOLUTION DESIGN
TASK DESCRIPTION: The objective of this task is to refine the
2TheMart.com Phase 0 Solution Design Document and prepare the final
Detailed Design, as well as to obtain 2TM's authorization prior to
proceeding with production. This task consists of the following
subtasks:
1. Produce the final Detailed Creative Design, which consists of
refined detailed versions of :
- Visual Treatments
- Navigation and Branching Document
- Functional Templates for each screen identified within
the Navigation and Branching Document.
2. Produce the final Detailed Technical Design, consisting of:
- Package Evaluation of the following software components
of the 2TheMart Web Site: Chat, Bulletin Board System (BBS),
Frequently Asked Questions (FAQ), web metrics, reporting tools,
and virus protection
- Programming Architecture
- Database Specification
3. Conduct design review of the Detailed Design Documents and
budget, schedule and Project Plan with 2TM Project Manager. In the
event that the revised requirements impact cost and/or schedule,
document, as required, the changes via the Project's Change Control
Procedure.
COMPLETION CRITERIA: This task will be complete upon written
approval by the 2TM Project Manager of the Detailed Solution
Design, per the approval process described in Appendix C.
<PAGE>
DELIVERABLES:
1. Final Detailed Solution Design, consisting of:
- Creative Treatment
- Navigation and Branching Document
- Functional Templates for each screen identified within
the Navigation and Branching Document
2.3.3 GRAPHIC PRODUCTION
TASK DESCRIPTION: The objective of this task is to design, create,
and produce the graphic elements for the 2TheMart.com Web Site
based on the approved Final Detailed Solution Design. This task
includes the following subtasks:
1. Confirm aesthetic design to create final production graphics:
2. Design and produce all graphic elements:
- Develop screen layouts.
- Produce graphic elements.
3. Optimize all graphical elements for performance:
- Create cut-guides.
- Apply Web-safe palette to cut graphics.
4. Manage Editorial Content.
COMPLETION CRITERIA: This task will be complete when the graphic
elements of the web site have been completed, delivered to the IBM
Technical Development Team, and approved by 2TM in writing, per the
approval process described in Appendix C.
DELIVERABLES:
1. Processed graphic elements
2. Cut guides
2.3.4 TECHNICAL DEVELOPMENT
TASK DESCRIPTION: The objective of this task is to program and
develop the technical elements for the 2TheMart.com Web Site based
on the approved Final Detailed Solution Design. This task includes
the following subtasks:
1. Program and author the functionality, navigation and
interactivity code.
2. Develop and design the backend database infrastructure.
3. Post the Web Application on a staging server for review and
approval from the 2TM project team.
COMPLETION CRITERIA: This task will be complete when the elements
of the web site have been assembled, functionality is implemented,
and the Beta Version of the 2TheMart.com Web Site and Test Plan
have been approved by 2TM in writing, per the approval process
described in Appendix C, and approval to proceed to testing is
granted.
<PAGE>
DELIVERABLES:
1. Beta Version of the 2TheMart.com Web Site
2.3.5 TEST AND QUALITY ASSURANCE
TASK DESCRIPTION: The objective of this task is to test the
2TheMart.com Web Site's user interface, navigation and technical
functionality. This task includes of the following subtasks:
1. Develop Test Plan
2. Test the Beta Version for functionality and navigation:
- Functional testing to include validation of logic and
navigation.
3. Refine programming and coding based on testing results and
baseline measurements.
4. Complete compatibility testing for the specified platforms.
5. Deliver and install the Tested Version of the 2TheMart.com Web
Site in the 2TM production environment.
6. Complete final regression testing in the 2TM production
environment.
COMPLETION CRITERIA: This task will be complete upon written
approval by the 2TM Project Manager of the Final Tested Version of
the 2TheMart.com Web Site, per the approval process described in
Appendix C.
DELIVERABLES:
1. Final Tested Version of the 2TheMart.com Web Site
2.4 2TM RESPONSIBILITIES
The responsibilities listed in this section are in addition to
those responsibilities specified in the Agreement and are to be
provided at no charge to IBM. IBM's performance is predicated upon
the following responsibilities being fulfilled by 2TM.
2.4.1 2TM PROJECT MANAGER
Prior to the start of this Statement of Work under the Agreement,
2TM will designate a person, called the 2TM Project Manager, to
whom all IBM communications will be addressed and who has the
authority to act for 2TM in all aspects of the contract. The
responsibilities of the 2TM Project Manager include:
1. Serve as the interface between the IBM project team and all 2TM
departments participating in this project.
2. With the IBM Project Manager, administer Project Change Control
in accordance with Appendix B. "Project Change Control Procedure".
3. Participate in all project status meetings either in person or
by phone.
4. Obtain and provide information, data, decisions and approvals,
in a timely manner in accordance with Project Plan and Appendix C.
"Approval Process for Project Deliverables"
<PAGE>
5. Resolve deviations from Project Plans which may be caused by 2TM.
6. Help resolve project issues and escalate issues within the 2TM
organization, as necessary.
2.4.2DEFINING EVENTS AND INFORMATION FOR THE 2THEMART.COM WEB SITE
2TM assumes all responsibilities for defining the events and the
information related to any events to be presented on the
2TheMart.com Web Site.
2.4.3 COPYRIGHT CLEARANCE AND USAGE AGREEMENTS
2TM assumes all responsibilities for the electronic copyright
clearance and usage agreements for any and all content to be loaded
on the 2TheMart.com Web Site.
2.5 DELIVERABLE MATERIALS
The following deliverables are classified as Type II Materials, as
defined in the IBM Customer Agreement, and will be delivered to 2TM
under this Statement of Work. These are defined in Appendix D.
"Deliverable Guidelines"
- Monthly Status Report
- Project Plan
- Final Detailed Solution Design
- Processed Graphic Elements
- Cut Guides
- Beta Version of the 2TheMart.com Web Site
- Final Tested Version of the 2TheMart.com Web Site
Type II Materials are those, created during the Service performance
period or otherwise (such as those that preexist the Service), in
which IBM or third parties have all right, title, and interest
(including ownership of copyright). IBM will deliver one copy of
the specified Materials to 2TM. IBM grants you an irrevocable,
nonexclusive, worldwide, paid-up license to use, execute,
reproduce, display, perform and distribute, within your Enterprise
only, copies of Type II Materials.
2.6 COMPLETION CRITERIA
IBM shall have fulfilled its obligations under this Statement of
Work of this Agreement, when any one of the following first occurs:
- IBM accomplishes the tasks described in "IBM
Responsibilities", including delivery to 2TM of the materials
listed in "Deliverable Materials".
- IBM provides the number of hours for services specified
in "Charges" or in any subsequent Change Authorization.
- 2TM or IBM terminates the Project in accordance with the
provisions of the Agreement.
Additional agreements will be required for any maintenance and
continued relationship beyond the period of performance of this
Agreement.
<PAGE>
2.7 ESTIMATED SCHEDULE
The services will be performed during the period specified in the
Statement of Work for Project Support Services (Custom Services)
found in Appendix E. "Signature Document "
The following high-level estimated project schedule is included:
- ------------
Task Name
2THM PRODUCTION PLAN Qtr 2, 1999 Qtr3, 1999
Project Management M1 M2 M3 M4 M5 M6
Phase 2 - Final Detailed
Design xxxxxxxxxxxxxxxxxxxxxxxxxxx
Detailed Creative
Design xxxxxxxxxxxxxxxxxxxxxxxxxxx
Package Evaluation xxxxxxxxxxxxxxxxx
Detailed Technical
Design xx
Phase 3 - Production and
Technical Development xxxxxxxxxxxxxxxxxxxxxxx
Technical Development xxxxxxxxxxxxxxxxxx
Creative Development xxxxxxxxxxxxx
Phase 4 - Testing and
Quality Assurance xxxxxxxxxxxxxxx
Implementation & Delivery xxxxxx
- ---------
<PAGE>
2.8 Charges
IBM will provide an estimated 9986 hours of services at an hourly
rate of $200 and scheduled service charges of $1,997,200.00, plus a
1% Administration Fee.
In addition, 2TM will reimburse IBM for the actual travel and
living expenses incurred in providing these services, currently
estimated at 2%.
IBM will be pre-billed 2TheMart.com monthly for estimated service
hours. Actual travel and living expenses used during the previous
month will be invoiced to 2TheMart.com monthly. These invoices
will be payable upon receipt.
The final invoice will be held until all SOW work is completed.
And, 2TheMart may hold IBM's final invoice for this SOW for an
additional 30 days upon receipt.
The target delivery date for the 2TheMart.com Web Site is currently
10/8/99. This is the date when the 2TM production servers will be
at the hosting site with the application code loaded and running.
In the event that IBM delivers the 2TheMart.com Web Site system per
the completion criteria prior to the agreed-to target date, 2TM
agrees to pay IBM an early completion bonus based on the following
delivery dates:
Number of Days Total Bonus
Delivered Early Amount
15 or more $100,000
7-14 $ 50,000
1-6 $ 25,000
In the event that IBM delivers the 2TheMart.com Web Site system
after the agreed-to target date, IBM agrees to deduct from amounts
owed by 2TM, a late delivery penalty based on the following
delivery dates:
Number of Days Total Bonus
Delivered Late Amount
15 or more $100,000
7-14 $ 50,000
1-6 $ 25,000
IBM and 2TM agree that the late delivery penalty listed above is
2TM's sole and exclusive remedy, and IBM's exclusive liability, for
any late delivery of the 2TheMart.com Web Site under this Statement
of Work. This late delivery penalty shall not apply in the case of
delays due to: (i) the availability of system hardware or software,
or (ii) the readiness of the hosting site. This late delivery
penalty shall also not apply in the case of delays caused by: (i)
failures of the key assumptions stated in this Statement of Work,
or (ii) 2TM's failure to meet its responsibilities as stated in
this Statement of Work or the Agreement. If delays in the schedule
are caused by 2TM (e.g., failure to staff the project
appropriately, delays by 2TM of critical decisions), Project Change
Control may be utilized to change the target date and revise any
applicable bonuses or
<PAGE>
penalties.
2.9 YEAR 2000
"Year 2000 Ready" means that the IBM Product or deliverable when
used in accordance with IBM associated documentation, is capable of
correctly processing, providing and/or receiving date data within
and between the twentieth and twenty-first centuries, provided that
all products (for example, hardware, software, and firmware) used
with the IBM Product or deliverable properly exchange accurate date
data with it.
A specification for 2TheMart.com Web Site code (Type II Material)
developed by IBM as a part of this engagement provides that such
code will be Year 2000 ready. The 2TheMart.com Web Site code, on
the date it is delivered, will perform to this specification.
However, IBM is not providing any Year 2000 services under this
Statement of Work. IBM Product Specifications specify the Year
2000 readiness of the IBM Products. IBM does not make any
representations regarding the Year 2000 readiness of the non-IBM
Products.
Under the terms of this Statement of Work we are not responsible
for 1) your products, 2) a third party's products (including
products you license from our subcontractors) or 3) IBM's
previously installed Products, ("Other Products") to correctly
process or properly exchange accurate date data with the Products
or deliverables we provide. We will be relieved of our obligations
under this Statement of Work due to the inability of such Other
Products to correctly process or properly exchange accurate date
data with the Products or deliverables we provide to you. You
acknowledge that it is your responsibility to assess your current
systems and take appropriate action to migrate to Year 2000 ready
systems.
2.10 REQUIRED CONSENTS
2TM will promptly obtain and provide to IBM all Required Consents
necessary for IBM to provide the Services described in this
Statement of Work. A Required Consent means any consents or
approvals required to give IBM and IBM subcontractors the right or
license to access, use and/or modify (including creating
derivative works) the hardware, software, firmware and other
products that 2TM uses or will use, without infringing the
ownership or license rights (including patent and copyright) of the
providers or owners of such products.
2TM will indemnify, defend and hold IBM, IBM affiliates and
subcontractors harmless from and against any and all claims,
losses, liabilities and damages (including reasonable attorneys'
fees and costs) arising from or in connection with any claims
(including patent and copyright infringement) made against IBM,
alleged to have occurred as a result of 2TheMart.com's failure to
provide any Required Consents.
IBM will be relieved of the performance of any obligations that may
be affected by 2TheMart.com's failure to promptly obtain and
provide any Required Consents to IBM.
2.11 LAWS, REGULATIONS AND STATUTES
<PAGE>
2TM is responsible for the identification and interpretation of any
applicable laws, regulations, and statutes that affect the 2TM
applications to which IBM will have access during this project. It
is the responsibility of 2TM to ensure that the applications meet
the requirements of those laws, regulations, and statutes.
2.12 SERVICES WARRANTY
For each IBM Service, IBM warrants that we will perform it: (1) in
a workmanlike manner, and (2) according to its current description
(including any completion criteria) contained in this Statement of
Work. If 2TM discovers, within a sixty (60) day period after the
date this Statement of Work ends, that a Service provided by IBM is
not as warranted, 2TM shall notify IBM in writing of the specific
deficiency, and IBM shall promptly make reasonable efforts to
correct the deficiency at its own expense. If IBM is unable to
correct the deficiency, then 2TM's sole and exclusive remedy, and
IBM's exclusive liability under this warranty, will be to refund
the amount 2TM paid for that part of the Services. This warranty
is subject to the provisions stated in Part 2 of the Agreement.
2.13 SPECIAL TERMS & CONDITIONS
Subject to the terms of the Agreement, IBM's Interactive Media
Center in Atlanta agrees that, for a period of ninety (90) days
after the date on which IBM gives 2TM the Final Tested Version of
the 2TheMart.com Web Site per the completion criteria of Task
2.3.5, entitled Test and Quality Assurance, it will not re-license
the custom application code for the 2TheMart.com Web Site that was
developed for 2TM under this Statement of Work (excluding any
pre-existing material) by implementing the code in a production
environment for the following listed companies:
1. EBay
2. Amazon
3. Yahoo Auctions
4. Lycos Auctions
5. Excite Auctions
Nothing contained in this provision shall limit IBM's Interactive
Media Center in Atlanta from: (i) independently developing, or
using residual ideas, concepts, know-how and techniques to develop,
similar application code for itself or any third party, (ii)
providing products or services to others who compete with 2TM, or
(iii) assigning or re-assigning its employees in any way it may
choose. If the Statement of Work is terminated prior to the
successful delivery of the Final Tested Version, this provision
will also be terminated.
<PAGE>
APPENDIX A. EXCLUDED FUNCTIONALITY
The following list defines items within the 2TheMart.com Phase 0
Solution Design Document which are not part of this Statement of Work:
1. Specific functions, as defined in the Phase 0 Solution Design
Document:
a. 2TheMart Store
b. Live user-to-user chat
c. Automatically generated customer service live video feed
d. Enhanced search capability, such as synonym search
e. Automated system status reporting
f. Pager Notification
g. Toolkit
h. Chat-like customer service capability; however, a link will
be provided to a 2TM-provided customer service capability. Any
other integration of such capability into the web site is not
part of this scope.
i. Cybercast and related material; however, a placeholder for
link to cybercast area will be made.
j. The ability to order appraisal services or accept current
ratings from eBay.
2. All costs and services for third-party software.
3. Training
4. Focus Group Facilitation and Usability Testing
5. Post-production Support and Maintenance
6. Hosting Services
7. Initiatives that require information design support, such as
marketing or branding efforts.
<PAGE>
APPENDIX B. PROJECT CHANGE CONTROL PROCEDURE
The following provides the detailed process to follow if a change
to this Statement of Work of this Agreement is required.
A Project Change Request (PCR) will be the vehicle for
communicating change. The PCR must describe the change, the
rationale for the change and the effect the change will have on
the project in terms of IBM-provided estimates (scope, hours and
schedule).
The designated Project Manager of the requesting party will
review the proposed change and determine whether to submit the
request to the other party.
Both Project Managers will review the proposed change and
approve it for further investigation or reject it. IBM will
specify any charges for such investigation. If the
investigation is authorized, the Project Managers will sign the
PCR which will constitute approval for the investigation
charges. IBM will invoice 2TM for any such charges. The
investigation will determine the effect that the implementation
of the PCR will have on price, schedule and other terms and
conditions of the Agreement.
A written Change Authorization and/or Project Change Request
(PCR) must be signed by both parties to authorize implementation
of the investigated changes.
<PAGE>
APPENDIX C. APPROVAL PROCESS FOR PROJECT DELIVERABLES
IBM and 2TM acknowledge that one of the keys to success in this
project is a working relationship that respects the strengths,
abilities and responsibilities of each company. Therefore, the
approval process for materials delivered by this work should
fundamentally focus attention on whether or not IBM and 2TM are
jointly meeting the overall project requirements. Therefore, for
each formal deliverable from IBM to 2TM under this Statement of
Work, the process will be:
The IBM Project Manager will deliver the materials to 2TM
designated Project Manager.
2TM Project Manager will arrange for the proper personnel in
the 2TM organization to review the materials. He/she will then
consolidate all feedback in written form back to IBM's Project
Manager.
The feedback should contain either a letter of approval or a
letter of disapproval. In the case of disapproval, the feedback
should describe the specific instances where the material does
not meet the 2TM requirements. For each instance of
disapproval, 2TM must specify the criteria required to gain
approval.
The feedback to IBM should be complete within three (3)
business days of receiving the materials.
The IBM Project Manager will specify the plans to correct each
disapproval instance in writing to 2TM.
IBM will make corrections to the deliverables to 2TM approval
criteria. If, in the judgment of either IBM's or 2TM's Project
Manager, the changes required are beyond the scope of the
original Statement of Work or extensive enough to warrant, the
changes will be handled using the Project Change Control
Procedure in Appendix B.
<PAGE>
APPENDIX D. DELIVERABLE GUIDELINES
D.1 BIWEEKLY STATUS REPORT
PURPOSE: IBM will provide Monthly Status Reports advising the 2TM
Project Manager of the progress and status of the IBM activities.
The report will outline the IBM activities and describe the status
of tasks worked on during that period. Significant
accomplishments, milestones, and problems will be identified.
CONTENT: The report will consist of the following, as appropriate:
- Activities performed during the during the reporting period.
- Activities planned for the next reporting period.
- Hours summary
* Hours originally estimated
* Hours expended during this reporting period
* Hours expended to date
* Estimated remaining hours
- Project change control summary
- Problems, concerns, and recommendations
- Other items of importance
D.2 PROJECT PLAN
PURPOSE: IBM will provide a Project Plan advising the 2TM Project
Manager of the planned IBM activities, budget estimates and
schedule with milestones.
CONTENT: The plan will consist of the following, as appropriate:
- - Activities planned - high level description of major tasks and
milestones with identification of appropriate deliverables and
planned review cycle.
- - Budget Estimates - estimate of budgeted hours for each high
level task.
- - Schedule - schedule for each high level task with associated
milestones and deliverables
<PAGE>
D.3 FINAL DETAILED SOLUTION DESIGN
PURPOSE: IBM will provide a Final Detailed Solution Design which
will incorporate revisions from the 2TheMart.com Phase 0 Solution
Design Document to reach an agreement on the visual, navigational
and technical design requirements of the 2TheMart.com Web Site.
CONTENT: The document will consist up to 30 pages of the
following, as appropriate:
- - Creative Treatment - One high level design study based on the
studies from the 2TheMart.com Phase 0 Solution Design Document
with requested revisions and enhancements.
- - High Level Navigation and Branching Document depicting
navigational flow. (If revised from the Phase 0 Solution Design
Document)
- - Functional Templates that define the general location and
function of major screen elements for each screen defined within
the Branching Document.
D.4 PROCESSED GRAPHICAL ELEMENTS
PURPOSE: IBM will provide processed graphic elements to be
incorporated into the final tested version of the 2TheMart.com Web
Site.
CONTENT: The processed graphic elements contain all the final
screen elements. These are either .GIF or .JPG type files dithered
down to a web safe palette.
D.5 CUT GUIDES
PURPOSE: IBM will provide graphic cut guides to 2TM as a guideline
for any future graphic or programming changes to the 2TheMart.com
Web Site.
CONTENT: The graphic cut guides consist of a series of diagrams
detailing the on-screen coordinates of the processed graphic
elements.
D.6 BETA VERSION OF 2THEMART.COM WEB SITE
PURPOSE: IBM will provide a Beta Version of the 2TheMart.com Web
Site for the IBM testing department and the 2TM project team to
test the application.
CONTENT: The Beta Version of the 2TheMart.com Web Site will
consist of the following, as appropriate:
- - Beta Version of the Web Application hosted on an IBM staging
server with most of the functionality of the application intact.
<PAGE>
D.7 FINAL TESTED VERSION OF THE 2THEMART.COM WEB SITE
PURPOSE: IBM will provide the final, tested 2TheMart.com Web Site
to the appropriate hosting service to be selected by the 2TM
project team.
CONTENT: The final, tested 2TheMart.com Web Site will consist of
the following, as appropriate:
- - All graphics, code and databases which make up the final,
tested 2TheMart.com Web Site
<PAGE>
IBM
Appendix E. Signature Document
CUSTOMER AGREEMENT
STATEMENT OF WORK FOR PROJECT SUPPORT SERVICES
CUSTOM SERVICES
This document is a Statement of Work to either the IBM Customer
Agreement or the IBM Agreement for Services. If used with the IBM
Agreement for Services, no machines or licensed program products
may be acquired under this Statement Of Work. Such items are
available only under the terms of 1) the IBM Customer Agreement (or
any equivalent agreement signed by both of us) or 2) the applicable
third-party agreement.
Scope of Services, Completion Criteria, Charges, and other
applicable terms:
See Statement of Work in attached proposal dated May 28, 1999,
section Statement of Work, entitled "2TheMart.com Web Site".
Each of us agrees that the complete agreement between us about
these Services will consist of 1) this Statement of Work and 2) the
IBM Customer Agreement or IBM Agreement for Services, as
applicable, (or any equivalent agreement signed by both of us).
Agreed to: 2TheMart.com Agreed to: International
Business Machines
By /s/Dominic J. Magliarditi /s/Jess Rico
Authorized Signature Authorized Signature
Name: Dominic J. Magliarditi Name:Jess Rico
Date: 5-29-99 Date: 6-1-99
Customer Number: Reference Agreement Number: VGY1816
Customer Address: IBM Office Number:
Customer "Bill To" Address, if different:
IBM Office Address:
Project Name or Identifier: 2TheMart.com Web Site
IBM Service Address: 600 Anton Blvd.
Costa Mesa, CA 92626
Estimated Start Date: May 3, 1999
Estimated End Date: October 08, 1999
Exodus Communications, Inc.
Internet Data Center Services Agreement
This Internet Data Center Services Agreement (this "Agreement") is made
effective as of the Submission Date (April 29, 1999) indicated in
the initial Internet Data Center Services Order Form accepted by Exodus, by
and between Exodus Communications, Inc. ("Exodus") and the customer
identified below ("Customer").
Parties:
Customer Name: 2TheMart.com, Inc.
Address: 18301 Von Karman, Ste. 700
Irvine, CA 92612
Phone: 949-477-1200
Fax: 949-477-1221
Exodus Communications, Inc.
2831 Mission College Blvd.
Santa Clara, CA 95055-1838
Phone: (408) 346-2200
Fax: (408) 346-2420
1. Internet Data Center Services.
Subject to the terms and conditions of this Agreement, during the term of
this Agreement, Exodus will provide to Customer the services
described in the Internet Data Center Services Order Form(s) ("IDC Services
Order Form(s)") accepted by Exodus, or substantially similar services if such
substantially similar services would provide Customer with substantially
similar benefits ("Internet Data Center Services"). All IDC Services Order
Forms accepted by Exodus are incorporated herein by this reference, each as
of the Submission Date indicated in such form.
2. Fees and Billing.
2.1 Fees. Customer will pay all fees due according to the IDC
Services Order Form(s).
2.2 Billing Commencement. Billing for Internet Data Center Services,
other than Setup Fees, indicated in the initial IDC Services Order Form
shall commence on the earlier to occur of (i) the "Installation Date"
indicated in the initial IDC Services Order Form, regardless of whether
Customer has commenced use of the Internet Data Center Services, unless
Customer is unable to install the Customer Equipment and/or use the
Internet Data Center Services by the Installation Date due to the fault of
Exodus, then billing will not begin until the date Exodus has remedied such
fault and (ii) the date the "Customer Equipment" (Customer's computer
hardware and other tangible equipment, as identified in the Customer Equipment
List which is incorporated herein by this reference) is placed by Customer in
the "Customer Area" (the portion(s) of the Internet Data Centers, as
defined in Section 3.1 below, made available to Customer hereunder for the
placement of Customer Equipment) and is operational. All Setup Fees will be
billed upon receipt of a Customer signed IDC Services Order Form. In the event
that Customer orders additional Internet Data Center Services, billing
for such services shall commence on the date Exodus first provides such
additional Internet Data Center Services to Customer or as otherwise agreed
to by Customer and Exodus.
2.3 Billing and Payment Terms. Customer will be billed monthly in
advance of the provision of Internet Data Center Services, and payment of
such fees will be due within thirty (30) days of the date of each Exodus
invoice. All payments will be made in U.S. dollars. Late payments
hereunder will accrue interest at a rate of one and one-half percent
(1 1/2%) per month, or the highest rate allowed by applicable law,
whichever is lower. If in its judgment Exodus determines that Customer
is not creditworthy or is otherwise not financially secure, Exodus may,
upon written notice to Customer, modify
the payment terms to require full payment before the provision of
Internet Data Center Services or other assurances to secure Customer's
payment obligations hereunder.
2.4 Taxes. All payments required by this Agreement are exclusive
of all national, state, municipal or other governmental excise, sales,
value-added, use, personal property, and occupational taxes, excises,
withholding taxes and obligations and other levies now in force or enacted
in the future, all of which Customer will be responsible for and will pay
in full, except for taxes based on Exodus' net income.
3. Customer's Obligations.
3.1 Compliance with Law and Rules and Regulations. Customer agrees
that Customer will comply at all times with all applicable laws and
regulations and Exodus' general rules and regulations relating to its
provision of Internet Data Center Services, as updated by Exodus from
time to time ("Rules and Regulations"). Customer acknowledges that Exodus
exercises no control whatsoever over the content of the information passing
through its sites containing the Customer Area and equipment and facilities
used by Exodus to provide Internet Data Center Services ("Internet Data
Centers"), and that it is the sole responsibility of Customer to ensure
that the information it transmits and receives complies with all applicable
laws and regulations.
3.2 Customer's Costs. Customer agrees that it will be solely
responsible, and at Exodus's request will reimburse Exodus, for all
costs and expenses(other than those included as part of the
Internet Data Center Services and except as otherwise expressly
provided herein) it incurs in connection with
this Agreement.
3.3 Access and Security. Customer will be fully responsible for any
charges, costs, expenses (other than those included in the Internet
Data Center Services), and third party claims that may result from its
use of, or access to, the Internet Data Centers and/or the Customer Area
including but not limited to any unauthorized use of any access devices
provided by Exodus hereunder. Except with the advanced written consent of
Exodus, Customer's access to the Internet Data Centers will be limited solely
to the individuals identified and authorized by Customer to have access to the
Internet Data Centers and the Customer Area in accordance with this
Agreement, as identified in the Customer Registration Form, as
amended from time to time, which is hereby incorporated by this reference
("Representatives").
3.4 Restrictions on Resale of IDC Services. Customer shall not,
without the prior written consent of Exodus (which may be withheld in its sole
discretion), resell the Internet Data Center Services to any third
parties.
3.5 Insurance.
(a) Minimum Levels. Customer will keep in full force and effect
during the term of this Agreement: (i) comprehensive general liability
insurance in an amount not less than $5 million per occurrence for
bodily injury and property damage; (ii) employer's liability insurance
in an amount not less than $1 million per occurrence; and (iii) workers'
compensation insurance in an amount not less than that required by
applicable law. Customer also agrees that it will, and will be solely
responsible for ensuring that its agents (including contractors and
subcontractors) maintain, other insurance at levels no less than those
required by applicable law and customary in
Customer's and its agents' industries.
(b) Certificates of Insurance. Prior to installation of any Customer
Equipment in the Customer Area, Customer will furnish Exodus with
certificates of insurance which evidence the minimum levels of
insurance set forth above.
(c) Naming Exodus as an Additional Insured. Customer agrees that
prior to the installation of any Customer Equipment, Customer will cause its
insurance provider(s) to name Exodus as an additional insured and
notify Exodus in writing of the effective date thereof.
4. Confidential Information.
4.1 Confidential Information. Each party acknowledges that it
will have access to certain confidential information of the other party
concerning the other party's business, plans, customers, technology, and
products, including the terms and conditions of this Agreement ("Confidential
Information"). Confidential Information will include, but not be
limited to, each party's proprietary software and customer information.
Each party agrees that it will not use in any way, for its own account or the
account of any third party, except as expressly permitted by this Agreement,
nor disclose to any third party (except as required by law or to that
party's attorneys, accountants and other advisors as reasonably necessary),
any of the other party's Confidential Information and will take reasonable
precautions to protect the confidentiality of such information.
4.2 Exceptions. Information will not be deemed Confidential
Information hereunder if such information: (i) is known to the receiving party
prior to receipt from the disclosing party directly or indirectly from a
source other than one having an obligation of confidentiality to the disclosing
party;
(ii) becomes known (independently of disclosure by the disclosing
party) to the receiving party directly or indirectly from a source
other than one having an obligation of confidentiality to the
disclosing party; (iii)becomes publicly known or otherwise ceases
to be secret or confidential, except through a breach of this Agreement
by the receiving party; or (iv) is independently developed by the receiving
party.
5. Representations and Warranties.
5.1 Warranties by Customer.
(a) Customer Equipment. Customer represents and warrants that it
owns or has the legal right and authority, and will continue to own or
maintain the legal right and authority during the term of this Agreement, to
place and use the Customer Equipment as contemplated by this Agreement. Customer
further represents and warrants that its placement, arrangement, and
use of the Customer Equipment in the Internet Data Centers complies with the
Customer Equipment Manufacturer's environmental and other
specifications.
(b) Customer's Business. Customer represents and warrants that
Customer's services, products, materials, data, information and
Customer Equipment used by Customer in connection with this Agreement as well
as Customer's and its permitted customers' and users' use of the
Internet Data Center Services (collectively, "Customer's Business") does not
as of the Installation Date, and will not during the term of this Agreement
operate in any manner that would violate any applicable law or regulation.
(c) Rules and Regulations. Customer has read the Rules and
Regulations and represents and warrants that Customer and Customer's
Business are currently in full compliance with the Rules and
Regulations, and will remain so at all times during the term
of this Agreement.
(d) Breach of Warranties. In the event of any breach, or reasonably
anticipated breach, of any of the foregoing warranties, in addition
to any other remedies available at law or in equity, Exodus will have the
right immediately, in Exodus' sole discretion, to suspend any
<PAGE>
related Internet Data Center Services if deemed reasonably
necessary by Exodus to prevent any
harm to Exodus and its business.
5.2 Warranties and Disclaimers by Exodus.
5.2(a) Service Level Warranty. In the event Customer
experiences any of the following and Exodus determines in its
reasonable judgment that such inability was caused by Exodus' failure
to provide Internet Data Center Services for reasons within Exodus'
reasonable control and not as a result
of any actions or inactions of Customer or any third parties (including
Customer Equipment and third party equipment), Exodus will, upon
Customer's request in accordance with paragraph (iii) below, credit Customer's
account as described below:
(i) Inability to Access the Internet (Downtime). If Customer is
unable to transmit and receive information from Exodus' Internet Data
Centers (i.e., Exodus' LAN and WAN) to other portions of the Internet
because Exodus failed to provide the Internet Data Center Services
for more than fifteen (15) consecutive minutes, Exodus will credit Customer's
account the pro-rata connectivity charges (i.e., all bandwidth related
charges) for one (1) day of service, up to an aggregate maximum credit of
connectivity charges for seven (7) days of service in any one calendar (1)
month. Exodus' scheduled maintenance of the Internet Data Centers and
Internet Data Center Services, as described in the Rules and Regulations, shall
not be deemed to be a failure of Exodus to provide Internet Data Center
Services. For purposes of the foregoing, "unable to transmit and receive"
shall mean sustained packet loss in excess of 50% based on Exodus'
measurements.
(ii) Packet Loss and Latency. Exodus does not proactively
monitor the packet loss or transmission latency of specific customers.
Exodus does, however, proactively monitor the aggregate packet loss and
transmission latency within its LAN and WAN. In the event that
Exodus discovers (either from its own efforts or after being notified by
Customer) that Customer is experiencing packet loss in excess of one
percent (1%) ("Excess Packet Loss") or transmission latency in excess
of 120 milliseconds round trip time (based on Exodus' measurements)
between any two Internet Data Centers within
Exodus' U.S. network (collectively, "Excess Latency", and with
Excess Packet Loss "Excess Packet Loss/Latency"), and Customer
notifies Exodus (or confirms that Exodus has notified Customer),
Exodus will take all actions necessary to determine the source of the Excess
Packet Loss/Latency.
(A) Time to Discover Source of Excess Packet Loss/Latency;
Notification of Customer. Within two (2) hours of discovering the
existence of Excess Packet Loss/Latency, Exodus will determine whether the
source of the Excess Packet Loss/Latency is limited to the Customer Equipment
and the Exodus equipment connecting the Customer Equipment to Exodus' LAN
("Customer Specific Packet Loss/Latency"). If the Excess Packet Loss/Latency
is not a Customer Specific Packet Loss/Latency, Exodus will determine the
source of the Excess Packet Loss/Latency within two (2) hours after
determining that it is not a Customer Specific Packet Loss/Latency.
In any event, Exodus will notify Customer of the source of the Excess
Packet Loss/Latency within sixty (60) minutes after identifying the source.
(B) Remedy of Excess Packet Loss/Latency. If the
Excess Packet Loss/Latency remedy is within the sole control of Exodus, Exodus
will remedy the Excess Packet Loss/Latency within two (2) hours of determining
the source of the Excess Packet Loss/Latency. If the Excess Packet
Loss/Latency is caused from outside of the Exodus LAN or WAN, Exodus will
notify Customer and will use commercially reasonable efforts to notify the
party(ies) responsible for the source and cooperate with it(them) to resolve
the problem as soon as possible.
(C) Failure to Determine Source and/or Resolve Problem.
In the event that Exodus is unable to determine the source of and remedy
the Excess Packet Loss/Latency within the time periods described above (where
Exodus was solely in control of the source), Exodus will credit Customer's
account the pro-rata connectivity charges for one (1) day of service for
every two (2) hours after the time periods described above that it takes
Exodus to resolve the problem, up to an aggregate maximum credit of
connectivity charges for seven (7) days of service in any one (1) month.
(iii) Customer Must Request Credit: To receive any of the credits
described in this section 5.2(a), Customer must notify Exodus within three (3)
business days from the time Customer becomes eligible to receive a
credit. Failure to comply with this requirement will forfeit Customer's
right to receive a credit.
(iv) Remedies Shall Not Be Cumulative; Maximum Credit: In the event
that Customer is entitled to multiple credits hereunder arising from the
same event, such credits shall not be cumulative and Customer shall be
entitled to receive only the maximum single credit available for such event.
In no event will Exodus be required to credit Customer in any one (1)
calendar month connectivity charges in excess of seven (7) days of service.
A credit shall be applied only to the month in which there was the incident that
resulted in the credit. Customer shall not be eligible to receive any
credits for periods in which Customer received any Internet Data Center
Services free of charge.
(v) Termination Option for Chronic Problems: If, in any single
calendar month, Customer would be able to receive credits totaling fifteen
(15) or more days (but for the limitation in paragraph (iv) above) resulting
from three (3) or more events during such calendar month or, if any
single event entitling customer to credits under paragraph 5.2(a)(i) exists
for a period of eight (8) consecutive hours, then, Customer may terminate this
Agreement for cause and without penalty by notifying Exodus within five (5)
days following the end of such calendar month. Such termination will be
effective thirty (30) days after receipt of such notice by Exodus.
This warranty does not apply to any Internet data center services that
expressly exclude this warranty (as described in the specification
sheets for such products). This Section 5.2(a) states customer's sole and
exclusive remedy for any failure by Exodus to provide Internet Data Center
Services.
(b) No Other Warranty. Except for the express warranty set out in
subsection (a) above, the Internet Data Center Services are provided
on an "as is" basis, and Customer's use of the Internet Data Center
Services is at its own risk. Exodus does not make, and hereby disclaims,
any and all other Express and/or implied warranties, including, but not limited
to, warranties of merchantability, fitness for a particular purpose,
noninfringement and title, and any warranties arising from a course of dealing,
usage,or trade practice. Exodus does not warrant that the Internet Data Center
Services will be uninterrupted, error-free, or completely secure.
(c) Disclaimer of Actions Caused by and/or Under the Control of Third
Parties. Exodus does not and cannot control the flow of data to or
from Exodus' Internet Data Centers and other portions of the internet.
Such flow depends in large part on the performance of internet services
provided or controlled by third parties. At times, actions or inactions caused
by these third parties can produce situations in which Exodus' customers'
connections to the Internet (or portions thereof) may be impaired or disrupted.
Although Exodus will use commercially reasonable efforts to take
actions it deems appropriate to remedy and avoid such events, exodus cannot
guarantee that they will not occur. Accordingly, Exodus disclaims any and all
liability resulting from or related to such events.
6. Limitations of Liability.
6.1 Personal Injury. Each Representative and any other persons visiting
the Internet Data Centers does so at its own risk and Exodus assumes no
liability whatsoever for any harm to such persons resulting from any cause
other than exodus' negligence or willful misconduct resulting in personal
injury to such persons during such a visit.
6.2 Damage to Customer Equipment or Business. Exodus assumes no liability
for any damage to, or loss relating to, Customer's Business resulting from
any cause whatsoever. Certain Customer Equipment, including but not limited
to Customer Equipment located on CyberRacks, may be directly accessible by
other customers. Exodus assumes no liability for any damage to, or
loss of, any Customer Equipment resulting from any cause other than exodus'
gross negligence or willful misconduct. To the extent Exodus is liable
for any damage to, or loss of, the Customer Equipment for any reason, such
liability will be limited solely to the then-current value of the Customer
Equipment.
6.3 Exclusions. Except as specified in Sections 6.1 and 6.2, in no event
will Exodus be liable to Customer, any Representative, or any third party
for any claims arising out of or related to this Agreement, Customer
Equipment, Customer's Business or otherwise, and any lost revenue, lost
profits, replacement goods, loss of technology, rights or services,
incidental, punitive, indirect or consequential damages, loss of data, or
interruption or loss of use of service or of any Customer Equipment or
Customer's Business, even if advised of the possibility of such damages,
whether under theory of contract, tort (including negligence), strict
liability or otherwise.
6.4 Maximum Liability. Notwithstanding anything to the contrary in this
Agreement, Exodus's maximum aggregate liability to Customer related to or in
connection with this Agreement will be limited to the total amount paid by
Customer to Exodus hereunder for the prior Twelve (12) month period.
6.5 Customer's Insurance. Customer agrees that it will not pursue any
claims against Exodus for any liability Exodus may have under or relating to
this Agreement until Customer first makes claims against Customer's
insurance provider(s) and such insurance provider(s) finally resolve(s) such
claims.
6.6 Basis of the Bargain; Failure of Essential Purpose. Customer
acknowledges that Exodus has set its prices and entered into this Agreement
in reliance upon the limitations of liability and the disclaimers of
warranties and damages set forth herein, and that the same form an essential
basis of the bargain between the parties. The parties agree that the
limitations and exclusions of liability and disclaimers specified in this
Agreement will survive and apply even if found to have failed of their
essential purpose.
7. Indemnification.
7.1 Exodus' Indemnification of Customer. Exodus will indemnify, defend
and hold Customer harmless from and against any and all costs, liabilities,
losses, and expenses (including, but not limited to, reasonable attorneys'
fees) (collectively, "Losses") resulting from any claim, suit, action, or
proceeding (each, an "Action") brought against Customer alleging (i) the
infringement of any third party registered U.S. copyright or issued U.S.
patent resulting from the provision of Internet Data Center Services
pursuant to this Agreement (but excluding any infringement contributorily
caused by Customer's Business or Customer Equipment) and (ii) personal
injury to Customer's Representatives from Exodus's gross negligence or
willful misconduct.
7.2 Customer's Indemnification of Exodus. Customer will indemnify,
defend and hold Exodus, its affiliates and customers harmless from and
against any and all Losses resulting from or arising out of any Action
brought by or against Exodus, its affiliates or customers alleging: (a) with
respect to the Customer's Business: (i) infringement or misappropriation
<PAGE>
of any intellectual property rights; (ii) defamation, libel, slander,
obscenity, pornography, or violation of the rights of privacy or publicity;
or (iii) spamming, or any other offensive, harassing or illegal conduct or
violation of the Rules and Regulations; (b) any damage or destruction to the
Customer Area, the Internet Data Centers or the equipment of Exodus or any
other customer by Customer or Representative(s) or Customer's designees; or
(c) any other damage arising from the Customer Equipment or Customer's
Business.
7.3 Notice. Each party will provide the other party prompt written notice
upon of the existence of any such event of which it becomes aware, and an
opportunity to participate in the defense thereof.
8. Term and Termination.
8.1 Term. This Agreement will be effective for a period of (25) months
from the Installation Date, unless earlier terminated according to the
provisions of this Section 8. The Agreement will automatically renew for
additional terms of one (1) year each.
8.2 Termination.
(a) For Convenience.
(i) By Customer During First Thirty Days. Customer may terminate this
Agreement for convenience by providing written notice to Exodus at any time
during the thirty (30) day period beginning on the Installation Date.
(ii) By Either Party. Either party may terminate this Agreement for
convenience at any time effective after the (25th) twenty fifth month
following the Installation Date by providing ninety (90) days' prior written
notice to the other party at any time thereafter.
(b) For Cause. Either party will have the right to terminate this
Agreement if: (i) the other party breaches any material term or condition
of this Agreement and fails to cure such breach within thirty (30) days
after receipt of written notice of the same, except in the case of failure
to pay fees, which must be cured within five (5) days after receipt of
written notice from Exodus; (ii) the other party becomes the subject of a
voluntary petition in bankruptcy or any voluntary proceeding relating to
insolvency, receivership, liquidation, or composition for the benefit of
creditors; or (iii) the other party becomes the subject of an involuntary
petition in bankruptcy or any involuntary proceeding relating to insolvency,
receivership, liquidation, or composition for the benefit of creditors, if
such petition or proceeding is not dismissed within sixty (60) days of
filing.
8.3 No Liability for Termination. Neither party will be liable to the
other for any termination or expiration of this Agreement in accordance with
its terms.
8.4 Effect of Termination. Upon the effective date of expiration or
termination of this Agreement: (a) Exodus will immediately cease providing
the Internet Data Center Services; (b) any and all payment obligations of
Customer under this Agreement will become due immediately; (c) within thirty
(30) days after such expiration or termination, each party will return all
Confidential Information of the other party in its possession at the time of
expiration or termination and will not make or retain any copies of such
Confidential Information except as required to comply with any applicable
legal or accounting record keeping requirement; and (d) Customer will remove
from the Internet Data Centers all Customer Equipment and any of its other
property within the Internet Data Centers within five (5) days of such
expiration or termination and return the Customer Area to Exodus in the same
condition as it was on the Installation Date, normal wear and tear excepted.
If Customer does not remove such property within such five-day period,
Exodus will have the option to (i) move any and all such property to secure
storage and charge Customer for the cost of such removal and storage, and/or
(ii) liquidate the property in any reasonable manner.
8.5 Customer Equipment as Security. In the event that Customer fails to
pay Exodus all amounts owed Exodus under this Agreement when due, Customer
Agrees that upon written notice, Exodus may take possession of any Customer
Equipment and store it, at Customer's expense, until taken in full or
partial satisfaction of any lien or judgment, all without being liable to
prosecution or for damages.
8.6 Survival. The following provisions will survive any expiration or
termination of the Agreement: Sections 2, 3, 4, 5, 6, 7, 8 and 9.
9. Miscellaneous Provisions.
9.1 Force Majeure. Except for the obligation to pay money, neither party
will be liable for any failure or delay in its performance under this
Agreement due to any cause beyond its reasonable control, including act of
war, acts of God, earthquake, flood, embargo, riot, sabotage, labor shortage
or dispute, governmental act or failure of the Internet, provided that the
delayed party: (a) gives the other party prompt notice of such cause, and
(b) uses its reasonable commercial efforts to correct promptly such failure
or delay in performance.
9.2 No Lease. This Agreement is a services agreement and is not intended
to and will not constitute a lease of any real or personal property.
Customer acknowledges and agrees that (i) it has been granted only a license
to occupy the Customer Space and use the Internet Data Centers and any
equipment provided by Exodus in accordance with this Agreement, (ii)
Customer has not been granted any real property interest in the Customer
Space or Internet Data Centers, and (iii) Customer has no rights as a tenant
or otherwise under any real property or landlord/tenant laws, regulations,
or ordinances. For good cause, including the exercise of any rights under
Section 8.5 above, Exodus may suspend the right of any Representative or
other person to visit the Internet Data Centers.
9.3 Marketing. Customer agrees that Exodus may refer to Customer by trade
name and trademark, and may briefly describe Customer's Business, in Exodus'
marketing materials and web site. Customer hereby grants Exodus a license
to use any Customer trade names and trademarks solely in connection with the
rights granted to Exodus pursuant to this Section 9.3.
9.4 Government Regulations. Customer will not export, re-export,
transfer, or make available, whether directly or indirectly, any regulated
item or information to anyone outside the U.S. in connection with this
Agreement without first complying with all export control laws and
regulations which may be imposed by the U.S. Government and any country or
organization of nations within whose jurisdiction Customer operates or does
business.
9.5 Non-Solicitation. During the period beginning on the Installation
Date and ending on the first anniversary of the termination or expiration of
this Agreement in accordance with its terms, Customer agrees that it will
not, and will ensure that its affiliates do not, directly or indirectly,
solicit or attempt to solicit for employment any persons employed by
Exodus during such period.
9.6 Governing Law; Dispute Resolution, Severability; Waiver. This
Agreement is made under and will be governed by and construed in accordance
with the laws of the State of California (except that body of law
controlling conflicts of law) and specifically excluding from application to
this Agreement that law known as the United Nations Convention on the
International Sale of Goods. Any dispute relating to the terms,
interpretation or performance of this Agreement (other than claims for
preliminary injunctive relief or other pre-judgment remedies) will be
resolved at the request of either party through binding arbitration.
Arbitration will be conducted in Santa Clara County, California, under the
rules and procedures of the Judicial Arbitration and Mediation Society
("JAMS"). The parties will request that JAMS appoint a single arbitrator
possessing knowledge of online services agreements; however the arbitration
will proceed even if such a person is unavailable. In the event any
provision of this Agreement is held by a tribunal of competent jurisdiction
to be contrary to the law, the remaining provisions of this Agreement will
remain in full force and effect. The waiver of any breach or default of
this Agreement will not constitute a waiver of any subsequent breach or
default, and will not act to amend or negate the rights of the waiving
party.
9.7 Assignment; Notices. Customer may not assign its rights or delegate
its duties under this Agreement either in whole or in part without the prior
written consent of Exodus, except that Customer may assign this Agreement in
whole as part of a corporate reorganization, consolidation, merger, or sale
of substantially all of its assets. Any attempted assignment or delegation
without such consent will be void. Exodus may assign this Agreement in
whole or part. This Agreement will bind and inure to the benefit of each
party's successors and permitted assigns. Any notice or communication
required or permitted to be given hereunder may be delivered by hand,
deposited with an overnight courier, sent by confirmed facsimile, or mailed
by registered or certified mail, return receipt requested, postage prepaid,
in each case to the address of the receiving party indicated on the
signature page hereof, or at such other address as may hereafter be
furnished in writing by either party hereto to the other. Such notice will
be deemed to have been given as of the date it is delivered, mailed or sent,
whichever is earlier.
9.8 Relationship of Parties. Exodus and Customer are independent
contractors and this Agreement will not establish any relationship of
partnership, joint venture, employment, franchise or agency between Exodus
and Customer. Neither Exodus nor Customer will have the power to bind the
other or incur obligations on the other's behalf without the other's
prior written consent, except as otherwise expressly provided herein.
9.9 Entire Agreement; Counterparts. This Agreement, including all
documents incorporated herein by reference, constitutes the complete
and exclusive agreement between the parties with respect to the subject
matter hereof, and supersedes and replaces any and all prior or
contemporaneous discussions, negotiations, understandings and agreements,
written and oral, regarding such subject matter. This Agreement may be executed
in two or more counterparts, each of which will be deemed an original,
but all of which together shall constitute one and the same instrument.
Customer's and Exodus' authorized representatives have read the
foregoing and all documents incorporated therein and agree and accept
such terms effective as of the date first above written.
CUSTOMER EXODUS
2THEMART.COM, INC. EXODUS COMMUNICATIONS, INC
Signature:/s/Dominic J. Magliarditi Signature:/s/Sue Irvine
Print Name:Dominic J. Magliarditi Print Name: Sue Irvine
Title: President Title: Contracts Mgr
2THEMART.COM, INC.
EXECUTIVE EMPLOYMENT AGREEMENT
2THEMART.COM, INC.
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement") is made and
entered into this 1st day of February, 1999, by and between
Steven W. Rebeil (hereinafter referred to as "Employee"), and
2TheMart.com, Inc., an Oklahoma corporation, (hereinafter
referred to as "Company") with reference to the following facts
and objectives:
RECITALS
A. Employee has been providing services as the Chairman of the
Board and Chief Executive Officer and related activities as an
Employee of the Company.
B. Company is a corporation organized and in good standing
under the laws of the State of Oklahoma and desires to employ
Employee under the terms and conditions of this Agreement.
NOW, THEREFORE, in reliance on the foregoing Recitals, and in
consideration of the mutual promises and covenants contained
herein,Company and Employee hereby agree as follows:
1. Employment. During the term hereof, Company hereby employs
Employee and Employee hereby accepts and agrees to furnish
Company with all the Employee's skills and abilities under the
designation as the Chairman of the Board and Chief Executive
Officer of the Company.
2. Duties. During the term of the Agreement, Employee shall
devote all of Employee's services, best efforts, and all
reasonable work time (excluding vacation and personal time)
toward his employment with the Company, to further Company's
interests and to perform diligently and in good faith such duties
as are or may be, from time to time, required by Company in
connection with his employment hereunder. The Employee shall, at
all times, comply with the policies and procedures promulgated by
the Company. The making of passive and personal investments and
conducting private business affairs not inconsistent with the
Agreement by the Employee shall not be prohibited under this
Agreement.
3. Company's Authority. Employee shall perform in proper form
orders, directions, and policies by the Company to the Employee
periodically not inconsistent with the provisions of this
Agreement. Employee agrees to accept the decisions of the
Company in the establishment and amendment of working facilities,
conditions, and hours of employment, including all fringe
benefits, not otherwise agreed upon herein.
4. Term. The term of this Agreement shall begin on February 1,
1999 (the "Effective Date") and shall be for a period of five (5)
years, with automatic renewal terms of equal length subject to
the Company's prior written notification of one hundred eighty
(180)days before
<PAGE>
the expiration of the original term of its
decision not to renew this Agreement, beginning on the Effective
Date of this Agreement.
5. Compensation.
(a) Base Salary. In consideration of the faithful
performance of the above duties and responsibilities to and
on behalf of the Company, the Company agrees to pay the
Employee during the period of Employee's employment with
Company a base annual salary of $150,000.00 (the "Base
Salary"), increasing to an annual salary of $200,000 on July
1, 1999 . The Base Salary shall be due and payable
semimonthly or on a more frequent basis and reviewed at the
Employee's anniversary date by the Board of Directors of
Company; provided, however, that such Base Salary shall in
any event be increased as of January 1 of each calendar year
at a rate greater than the percentage increase in the
National Consumer Price Index, as reported by the United
States Department of Labor for the immediately preceding
calendar year, or as otherwise determined by the Board of
Directors (or Compensation Committee, if any) of the
Company.
(b) Bonus. As further compensation, the Company may pay
the Employee such bonus or bonuses and stock options as may,
from time to time, be awarded or granted to the Employee by
the Company exercising its sole and absolute discretion.
(i) Bonus on Opening of Web Site. Upon the opening of
the Company's Web Site it is developing (the "Web
Site"), Employee shall be paid a bonus as determined by
the Company.
(c) Employment Taxes. Unless otherwise provided by law,
all compensation paid to the Employee shall be subject to
the customary withholding tax, other employment taxes and
withholding amounts as required with respect to compensation
paid by the Company to the Employee.
6. Split Dollar Life Insurance. The Company agrees to fund a
life insurance policy insuring the life of Employee in the face
amount of $1,000,000.00 wherein the Employee or his designee is
owner and beneficiary of such policy under a split dollar
insurance arrangement. Employee agrees to report the P.S. 58
costs associated with such an arrangement as compensation for
federal income tax purposes.
7. Health Insurance. The Company shall provide, at its
expense, complete family health insurance coverage for the
Employee and his family. The Employee will be eligible to
participate in any other benefit program or plan offered to
similarly situated employees, subject to any limitations or
restrictions associated with said program or plan (such as
waiting periods, vesting schedules, and pre-existing condition
limitations).
8. Business Expenses. Business Expenses of the Employee
incurred in the performance of his duties, including the costs of
attending meetings, promotion, and entertainment
<PAGE>
expenses shall be borne by the Company and reimbursable to Employee upon
presentation of appropriate documentation by the Employee to the
Company and compliance with Company's established practices and
procedures.
9. Automobile and Office. During the term of this Agreement,
Company shall furnish Employee with an automobile and related
expenses (i.e. insurance, maintenance, repairs and gas) for
Employee's business use and other equipment, facilities, and
ancillary services for the performance of Employee's duties.
10. Other Company Benefits. Employee shall be entitled to
participate in all employee benefit programs made available to
Company's executives or salaried employees generally, as such
programs may be offered from time to time.
11. Absences. The Employee shall be entitled to four (4) weeks
away from work for paid vacation. Company may, from time to
time, allow Employee additional time away from employment in the
Company's sole discretion. The parties acknowledge that such
exercise of discretion in one event shall not create a right to
additional time away from employment hereunder. Employee shall
also be permitted reasonable numbers of days away from work for
sick days or leaves of
absences.
12. Death or Disability. Except as otherwise provided in this
Paragraph 12, in the event of Employee's death or "Disability"
(as hereinafter defined) occurring during the term of this
Agreement, Employee or his estate, as the case may be, shall be
entitled to: (i) that portion of any unpaid salary together with
the benefits accrued and earned by Employee hereunder up to and
including the last day of the month in which the death or the
Disability occurs, as the case may be, (ii) any death or
disability-related benefits pursuant to the insurance program set
forth above and any employee benefit plan to which Employee or
his beneficiary may be entitled hereunder; (iii) any unpaid Bonus
Amount earned by the Employee for the prior fiscal year of the
Company and approved by Company if such approval is required
hereunder shall be prorated based upon the length of Employee's
service during the applicable year over 365 days; and (iv) a
payment equal to one year's Base Salary then in effect for
Employee if the remaining term of this Agreement is less
than one year, or, if more than one year remains under the
Agreement, the Estate may elect to continue to receive the
payments due under the Agreement specified as salary. A
"Disability" shall be deemed to have occurred if Employee shall
have been unable to discharge his normal duties and job
description under this Agreement for a period of ninety (90) days
in the aggregate during any consecutive four (4) month period, by
reason of his physical or mental disability of illness. In the
event that Employee is unable to resume a normal work schedule at
the end of said four (4) month period, his employment shall
thereupon terminate at the end of the calendar month in which
such period ends.
13. Termination. Employee's employment with the Company shall
be terminate if any of the following occur:
<PAGE>
(a) At the expiration of the term of this Agreement if
Company gives written notice of its intention not to renew
this Agreement one hundred eighty (180) days prior to the
expiration of the term;
(b) On the death of the Employee;
(c) Whenever the Employee shall fail to cure or rectify a
material breach of any of the terms, covenants and
conditions of this Agreement within thirty (30) days after
Employee receives written notice from the Company to cure
such default (except when terminated for those causes that
allow immediate termination as described in Section 14(b));
(d) For "Cause" as defined in Paragraph 14 below; or
(e) Upon the Disability of the Employee as set forth in
Paragraph 12 above.
14. Definition of "Cause".
(a) For the purposes of this Agreement, the term "Cause"
shall include:
(i) incompetence, failure, inability, or refusal to
perform assigned duties;
(ii) gross negligence, willful misconduct or
breach of fiduciary duty;
(iii) being under the influence of, or use,
sale, distribution, or possession of unauthorized or
illegal drugs or intoxicating beverages while on duty
or on the Company's or a subsidiary's premises;
(iv) willful destruction or defacement of Company's or
a subsidiary's, a customer's, or an employee's
property;
(v) unauthorized disclosure of confidential
information; and
(vi) continued and unexplained absences from work.
(b) For the purposes of this Agreement, Employee shall be
immediately terminated without notice for the following
Causes:
(i) unauthorized entry into Company's secured
non-public
areas;
(ii) falsifying or altering the Company's or a
subsidiary's records;
(iii)theft, embezzlement, fraud or forgery;
<PAGE>
(iv) any act which results or was intended to
result in significant gain or personal enrichment to
the Employee at the Company's expense.
15. Confidential and Secret Information/Company Property.
Employee acknowledges that he will have access to items used in
the Company's business which the Company deems to be secret,
confidential, unique and valuable; were developed by Company at a
great cost and over a long period of time; and that disclosure of
any of these items to anyone other than Company's officers,
directors, agents or authorized employees will cause Company
irreparable injury. Employee agrees that upon termination of this
Agreement, he will return any and all documentary information or
written documents to Company. Such items and information shall
be held in strict confidence by the Employee and shall not be
revealed to any third party unless otherwise required by law.
All other material and property that may be furnished to employee
during the course of his employment with the Company such as
customer lists, customer tracking, automobiles, books and records
shall be and remain the Company's property and shall be returned
to the Company at any time upon demand.
16. Severance Pay. In the event Company terminates Employee's
employment hereunder, Company shall pay to Employee a sum
equivalent to the balance of the salary due to be paid under this
Agreement or 300% of the Base Salary (excluding bonuses and other
compensation), whichever is greater.
17. Change of Control. Immediately upon a Change of Control, if
Executive's employment with Company is terminated within
twenty-four (24) months following such Change of Control, either
without cause or pursuant to this Agreement, in addition to any
other compensation or benefits payable pursuant to this
Agreement, Executive shall be entitled to: Payment in cash equal
to four times his Base Salary, plus immediate vesting of 100% of
all Employee's stock; stock options or other awards to the
Executive under any of the Company's incentive plans. The
Executive's rights upon a Change of Control to benefit under
programs, plans and policies of the Company shall be
determined according to the terms and provisions of such
programs, plans and policies.
18. Arbitration. Any and all disputes, controversies or claims
arising under or in connection with this Agreement other than the
right to injunctive relief as set forth in Paragraph 14 above,
including without limitation, the general validity or
enforceability of this Agreement, shall be governed by the laws
of the State of California, without giving effect to its conflict
of law provisions and shall be submitted to binding arbitration
rules of the American Arbitration Association conducted in Orange
County, California. All expenses of any arbitration shall be
borne equally by the parties. The award to the arbitrator,
including any award of attorney's fees, shall be final and
enforceable in the courts of California. All costs of enforcing
a judgment following the arbitration are to be borne by the
losing party. In reaching his or her decision, the
arbitrator shall have no authority to change or modify any
provision of this Agreement. Each party shall have the right to
discovery in accordance with the California Rules of Civil
Procedure.
<PAGE>
20. Modification. This Agreement shall not be modified,
amended, supplemented, or extended except by written consent
executed by both the Company and Employee, except as expressly
provided herein to the contrary.
21. Assignment. Neither the Employee nor the Company shall
voluntarily subcontract or assign any of their respective rights,
duties, or obligations hereunder without first obtaining the
other party's written consent.
22. Notice. Except as expressly provided to the contrary
herein, any notices or other communications required, permitted,
or made necessary by the terms of this Agreement may be given to
the respective representatives of the Company and the Employee
designated herein by written communication. Written notices
shall be personally delivered to the Company's representative or
the Employee as appropriate or sent by the United States
registered or certified mail, postage prepaid, return receipt
requested, addressed to the Company to its principal corporate
office and to the Employee at the Employee's residential address.
Notices sent by mail shall be deemed made, delivered, and
received on the date of the United States' postmark thereon.
Upon receipt of notice Employee shall have thirty (30) days to
cure or rectify all items described in the Notice. Federal
Express and similar services shall be considered personal service
or delivery. Personal delivery of written notice hereunder may
also be give by facsimile or other electronic transmission
(provided that the sender of a telephone facsimile or
other electronic transmission has received a facsimile
confirmation report showing the number to which the facsimile was
transmitted). Either party may change its address for notice by
giving notice of such change to the other party in the manner
specified in this section.
23. No Waiver. No waiver of any breach or default in any of the
terms and provisions of this Agreement shall be deemed to
constitute or be construed as a waiver of the subsequent breach
of default of the same, similar, or dissimilar nature.
24. Choice of Law and Invalidity. The validity, construction,
performance and effect of this Agreement shall be governed by the
laws of the State of California. In case any one or more of the
provisions contained herein shall for any reason be held to be
invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any
other provisions of this Agreement, but this Agreement shall be
construed as if such invalid, illegal, or unenforceable provision
has never been contained herein. If any one or more provisions
contained herein shall, for any reason, be held to be excessively
broad as to time, duration, geographical scope, activity or
subject, said provision shall be construed by limiting and
reducing it so as to be enforceable to the extent compatible with
the then applicable law, it being the intent of the parties
hereto to give the maximum permitted effect to the restrictions
set forth herein.
25. Interpretation. If necessary to give effect to the terms
and provisions hereof, the masculine, feminine, and neuter gender
in the singular and plural number shall each be deemed to include
the other whenever the context so indicates. To the
unenforceable, it is agreed that the essential terms of this
Agreement shall be and remain enforceable against the parties.
<PAGE>
26. Headings. Headings in this Agreement are inserted
convenience and identification only and are in no way intended to
describe, interpret, define or limit the scope, extent, or intent
of this Agreement or any provision hereof.
27. Counterparts. This Agreement may be executed in any number
of counterparts, any of which may be constituted in the agreement
between the parties hereto.
28. Time. Time is of the essence for all obligations
contemplated in this Agreement.
29. Entire Agreement. This Agreement, and any schedules and
exhibits attached thereto contain and set forth the entire
Agreement between the parties with respect to the subject matter
hereof. All prior negotiations and agreements between the
parties with respect to the scope of this Agreement are mutually
rescinded, replaced, and superseded hereby.
30. Authority. The Company warrants and represents that it is a
corporation organized and existing under the laws of the State of
Oklahoma, that the undersigned is authorized to execute this
Agreement on behalf of the Company; that the employment of the
Employee under the terms of this Agreement has been duly
authorized by the Company.
31. Inurement. Each covenant and condition in this Agreement
shall be binding on, and shall inure solely to the benefit of the
parties to it, their respective heirs, legal representatives,
successors, and assigns.
32. Presumption. This Agreement or any section of this
Agreement shall not be construed against any party due to the
fact that the Agreement or any section of it was drafted by said
party.
IN WITNESS WHEREOF, the parties to this Employment Agreement have
duly executed it on the day and year first above written.
EMPLOYEE: COMPANY:
2THEMART.COM, INC., AN OKLAHOMA
CORPORATION
By:/s/Steven W. Rebeil By:/s/Dominic J. Magliarditi
Steven W. Rebeil Dominic J. Magliarditi,
1818 W. Oceanfront Blvd. President
Newport Beach, California 92660 18301 Von Karman Avenue
7th Floor
Irvine, California 92612
2THEMART.COM, INC.
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement") is made and
entered into this 1st day of February, 1999, by and between Dominic
J. Magliarditi (hereinafter referred to as "Employee"), and
2TheMart.com, Inc., an Oklahoma corporation, (hereinafter referred
to as "Company") with reference to the following facts and objectives:
RECITALS
A. Employee has been providing services as the President, COO,
Secretary and related activities as an Employee of the Company.
B. Company is a corporation organized and in good standing under
the laws of the State of Oklahoma and desires to employ Employee
under the terms and conditions of this Agreement.
NOW, THEREFORE, in reliance on the foregoing Recitals, and in
consideration of the mutual promises and covenants contained herein,
Company and Employee hereby agree as follows:
1. Employment. During the term hereof, Company hereby employs
Employee and Employee hereby accepts and agrees to furnish Company
with all the Employee's skills and abilities under the designation
as the President, Chief Operating Officer and Secretary of the
Company.
2. Duties. During the term of the Agreement, Employee shall
devote all of Employee's services, best efforts, and all reasonable
work time (excluding vacation and personal time) toward his
employment with the Company, to further Company's interests and to
perform diligently and in good faith such duties as are or may be,
from time to time, required by Company in connection with his
employment hereunder. The Employee shall, at all times, comply with
the policies and procedures promulgated by the Company. The making
of passive and personal investments and conducting private business
affairs not inconsistent with the Agreement by the Employee shall
not be prohibited under this Agreement.
3. Company's Authority. Employee shall perform in proper form
orders, directions, and policies by the Company to the Employee
periodically not inconsistent with the provisions of this Agreement.
Employee agrees to accept the decisions of the Company in the
establishment and amendment of working facilities, conditions, and
hours of employment, including all fringe benefits, not otherwise
agreed upon herein.
4. Term. The term of this Agreement shall begin on February 1,
1999 (the "Effective Date") and shall be for a period of five (5)
years, with automatic renewal terms of equal length subject to the
Company's prior written notification of one hundred eighty (180)
days before
<PAGE>
the expiration of the original term of its decision not
to renew this Agreement, beginning on the Effective Date of this
Agreement.
5. Compensation.
(a) Base Salary. In consideration of the faithful
performance of the above duties and responsibilities to and
on behalf of the Company, the Company agrees to pay the
Employee during the period of Employee's employment with
Company a base annual salary of $150,000.00 (the "Base
Salary"), increasing to an annual salary of $200,000 on
July 1, 1999 . The Base Salary shall be due and payable
semimonthly or on a more frequent basis and reviewed at the
Employee's anniversary date by the Board of Directors of
Company; provided, however, that such Base Salary shall in
any event be increased as of January 1 of
each calendar year at a rate greater than the percentage
increase in the National Consumer Price Index, as reported
by the United States Department of Labor for the immediately
preceding calendar year, or as otherwise determined by the
Board of Directors (or Compensation Committee, if any) of
the Company.
(b) Bonus. As further compensation, the Company may pay
the Employee such bonus or bonuses and stock options as may,
from time to time, be awarded or granted to the Employee by the
Company exercising its sole and absolute discretion.
(i) Bonus on Opening of Web Site. Upon the opening of
the Company's Web Site it is developing (the "Web
Site"), Employee shall be paid a bonus as determined by
the Company.
(c) Employment Taxes. Unless otherwise provided by law,
all compensation paid to the Employee shall be subject to
the customary withholding tax, other employment taxes and
withholding amounts as required with respect to compensation
paid by the Company to the Employee.
6. Split Dollar Life Insurance. The Company agrees to fund a life
insurance policy insuring the life of Employee in the face amount of
$1,000,000.00 wherein the Employee or his designee is owner and
beneficiary of such policy under a split dollar insurance
arrangement. Employee agrees to report the P.S. 58 costs associated
with such an arrangement as compensation for federal income tax
purposes.
7. Health Insurance. The Company shall provide, at its expense,
complete family health insurance coverage for the Employee and his
family. The Employee will be eligible to participate in any other
benefit program or plan offered to
similarly situated employees, subject to any limitations or
restrictions associated with said program or plan (such as waiting
periods, vesting schedules, and pre-existing condition limitations).
8. Business Expenses. Business Expenses of the Employee incurred
in the performance of his duties, including the costs of attending
meetings, promotion, and entertainment
<PAGE>
expenses shall be borne by
the Company and reimbursable to Employee upon presentation of
appropriate documentation by the Employee to the Company and
compliance with Company's established practices and procedures.
9. Automobile and Office. During the term of this Agreement,
Company shall furnish Employee with an automobile and related
expenses (i.e. insurance, maintenance, repairs and gas) for
Employee's business use and other equipment, facilities, and
ancillary services for the performance of Employee's duties.
10. Other Company Benefits. Employee shall be entitled to
participate in all employee benefit programs made available to
Company's executives or salaried employees generally, as such
programs may be offered from time to time.
11. Absences. The Employee shall be entitled to four (4) weeks
away from work for paid vacation. Company may, from time to time,
allow Employee additional time away from employment in the Company's
sole discretion. The parties acknowledge that such exercise of
discretion in one event shall not create a right to additional time
away from employment hereunder. Employee shall also be permitted
reasonable numbers of days away from work for sick days or leaves of
absences.
12. Death or Disability. Except as otherwise provided in this
Paragraph 12, in the event of Employee's death or "Disability" (as
hereinafter defined) occurring during the term of this Agreement,
Employee or his estate, as the case may be, shall be entitled to:
(i) that portion of any unpaid salary together with the benefits
accrued and earned by Employee hereunder up to and including the
last day of the month in which the death or the Disability occurs,
as the case may be, (ii) any death or disability-related benefits
pursuant to the insurance program set forth above and any employee
benefit plan to which Employee or his beneficiary may be entitled
hereunder; (iii) any unpaid Bonus Amount earned by the Employee for
the prior fiscal year of the Company and approved by Company if such
approval is required hereunder shall be prorated based upon the
length of Employee's service during the applicable year over 365
days; and (iv) a payment equal to one year's Base Salary then in
effect for Employee if the remaining term of this Agreement is less
than one year, or, if more than one year remains under the
Agreement, the Estate may elect to continue to receive the payments
due under the Agreement specified as salary. A "Disability" shall
be deemed to have occurred if Employee shall have been unable to
discharge his normal duties and job description under this Agreement
for a period of ninety (90) days in the aggregate during any
consecutive four (4) month period, by reason of his physical or
mental disability of illness. In the event that Employee is unable
to resume a normal work schedule at the end of said four (4) month
period, his employment shall thereupon terminate at the end of the
calendar month in which such period ends.
13. Termination. Employee's employment with the Company shall be
terminate if any of the following occur:
<PAGE>
(a) At the expiration of the term of this Agreement if
Company gives written notice of its intention not to renew
this Agreement one hundred eighty (180) days prior to the
expiration of the term;
(b) On the death of the Employee;
(c) Whenever the Employee shall fail to cure or rectify a
material breach of any of the terms, covenants and
conditions of this Agreement within thirty (30) days after
Employee receives written notice from the Company to cure
such default (except when terminated for those causes that
allow immediate termination as described in Section 14(b));
(d) For "Cause" as defined in Paragraph 14 below; or
(e) Upon the Disability of the Employee as set forth in
Paragraph 12 above.
14. Definition of "Cause".
(a) For the purposes of this Agreement, the term "Cause"
shall include:
(i) incompetence, failure, inability, or refusal to
perform assigned duties;
(ii) gross negligence, willful misconduct or
breach of fiduciary duty;
(iii) being under the influence of, or use,
sale, distribution, or possession of unauthorized or
illegal drugs or intoxicating beverages while on duty
or on the Company's or a subsidiary's premises;
(iv) willful destruction or defacement of Company's or
a subsidiary's, a customer's, or an employee's
property;
(v) unauthorized disclosure of confidential
information; and
(vi) continued and unexplained absences from work.
(b) For the purposes of this Agreement, Employee shall be
immediately terminated without notice for the following
Causes:
(i) unauthorized entry into Company's secured
non-public areas;
(ii) falsifying or altering the Company's or a
subsidiary's records;
(iii)theft, embezzlement, fraud or forgery;
<PAGE>
(iv) any act which results or was intended to
result in significant gain or personal enrichment to
the Employee at the Company's expense.
15. Confidential and Secret Information/Company Property. Employee
acknowledges that he will have access to items used in the Company's
business which the Company deems to be secret, confidential, unique
and valuable; were developed by Company at a great cost and over a
long period of time; and that disclosure of any of these items to
anyone other than Company's officers, directors, agents or
authorized employees will cause Company irreparable injury.
Employee agrees that upon termination of this Agreement, he will
return any and all documentary information or written documents to
Company. Such items and information shall be held in strict
confidence by the Employee and shall not be revealed to any third
party unless otherwise required by law. All other material and
property that may be furnished to employee during the course of his
employment with the Company such as customer lists, customer
tracking, automobiles, books and records shall be and remain the
Company's property and shall be returned to the Company at any time
upon demand.
16. Severance Pay. In the event Company terminates Employee's
employment hereunder, Company shall pay to Employee a sum equivalent
to the balance of the salary due to be paid under this Agreement or
300% of the Base Salary (excluding bonuses and other compensation),
whichever is greater.
17. Change of Control. Immediately upon a Change of Control, if
Executive's employment with Company is terminated within twenty-four
(24) months following such Change of Control, either without cause
or pursuant to this Agreement, in addition to any other compensation
or benefits payable pursuant to this Agreement, Executive shall be
entitled to: Payment in cash equal to four times his Base Salary,
plus immediate vesting of 100% of all Employee's stock; stock
options or other awards to the Executive under any of the Company's
incentive plans. The Executive's rights upon a Change of Control to
benefit under programs, plans and policies of the Company shall be
determined according to the terms and provisions of such programs,
plans and policies.
18. Arbitration. Any and all disputes, controversies or claims
arising under or in connection with this Agreement other than the
right to injunctive relief as set forth in Paragraph 14 above,
including without limitation, the general validity or enforceability
of this Agreement, shall be governed by the laws of the State of
California, without giving effect to its conflict of law provisions
and shall be submitted to binding arbitration rules of the American
Arbitration Association conducted in Orange County, California. All
expenses of any arbitration shall be borne equally by the parties.
The award to the arbitrator,
including any award of attorney's fees, shall be final and
enforceable in the courts of California. All costs of enforcing a
judgment following the arbitration are to be borne by the losing
party. In reaching his or her decision, the
arbitrator shall have no authority to change or modify any provision
of this Agreement. Each party shall have the right to discovery in
accordance with the California Rules of Civil Procedure.
<PAGE>
20. Modification. This Agreement shall not be modified, amended,
supplemented, or extended except by written consent executed by both
the Company and Employee, except as expressly provided herein to the
contrary.
21. Assignment. Neither the Employee nor the Company shall
voluntarily subcontract or assign any of their respective rights,
duties, or obligations hereunder without first obtaining the other
party's written consent.
22. Notice. Except as expressly provided to the contrary herein,
any notices or other communications required, permitted, or made
necessary by the terms of this Agreement may be given to the
respective representatives of the Company and the Employee
designated herein by written communication. Written notices shall
be personally delivered to the Company's representative or the
Employee as appropriate or sent by the United States registered or
certified mail, postage prepaid, return receipt requested, addressed
to the Company to its principal corporate office and to the Employee
at the Employee's residential address. Notices sent by mail shall
be deemed made, delivered, and received on the date of the United
States' postmark thereon. Upon receipt of notice Employee shall
have thirty (30) days to cure or rectify all items described in the
Notice. Federal Express and similar services shall be considered
personal service or delivery. Personal delivery of written notice
hereunder may also be give by facsimile or other electronic
transmission (provided that the sender of a telephone facsimile or
other electronic transmission has received a facsimile confirmation
report showing the number to which the facsimile was transmitted).
Either party may change its address for notice by giving notice of
such change to the other party in the manner specified in this section.
23. No Waiver. No waiver of any breach or default in any of the
terms and provisions of this Agreement shall be deemed to constitute
or be construed as a waiver of the subsequent breach of default of
the same, similar, or dissimilar nature.
24. Choice of Law and Invalidity. The validity, construction,
performance and effect of this Agreement shall be governed by the
laws of the State of California. In case any one or more of the
provisions contained herein shall for any reason be held to be
invalid, illegal, or unenforceable in any respect, such invalidity,
illegality, or unenforceability shall not affect any other
provisions of this Agreement, but this Agreement shall be construed
as if such invalid, illegal, or unenforceable provision has never
been contained herein. If any one or more provisions contained
herein shall, for any reason, be held to be excessively broad as to
time, duration, geographical scope, activity or subject, said
provision shall be construed by limiting and reducing it so as to be
enforceable to the extent compatible with the then applicable law,
it being the intent of the parties hereto to give the maximum
permitted effect to the restrictions set forth herein.
25. Interpretation. If necessary to give effect to the terms and
provisions hereof, the masculine, feminine, and neuter gender in the
singular and plural number shall each be deemed to include the other
whenever the context so indicates. To the unenforceable, it is
agreed that the essential terms of this Agreement shall be and
remain enforceable against the parties.
26. Headings. Headings in this Agreement are inserted convenience
and identification only and are in no way intended to describe,
interpret, define or limit the scope, extent, or intent of this
Agreement or any provision hereof.
27. Counterparts. This Agreement may be executed in any number of
counterparts, any of which may be constituted in the agreement
between the parties hereto.
28. Time. Time is of the essence for all obligations contemplated
in this Agreement.
29. Entire Agreement. This Agreement, and any schedules and
exhibits attached thereto contain and set forth the entire Agreement
between the parties with respect to the subject matter hereof. All
prior negotiations and agreements between the parties with respect
to the scope of this Agreement are mutually rescinded, replaced, and
superseded hereby.
30. Authority. The Company warrants and represents that it is a
corporation organized and existing under the laws of the State of
Oklahoma, that the undersigned is authorized to execute this
Agreement on behalf of the Company; that the employment of the
Employee under the terms of this Agreement has been duly authorized
by the Company.
31. Inurement. Each covenant and condition in this Agreement shall
be binding on, and shall inure solely to the benefit of the parties
to it, their respective heirs, legal representatives, successors,
and assigns.
32. Presumption. This Agreement or any section of this Agreement
shall not be construed against any party due to the fact that the
Agreement or any section of it was drafted by said party.
IN WITNESS WHEREOF, the parties to this Employment Agreement have
duly executed it on the day and year first above written.
EMPLOYEE: COMPANY:
2THEMART.COM, INC., AN OKLAHOMA
CORPORATION
By:/s/Dominic J. Magliarditi By:/s/Steven W. Rebeil
Dominic J. Magliarditi Steven W. Rebeil,
735 Helmhill Avenue Chairman of the Board
Las Vegas, Nevada 89123 18301 Von Karman Avenue
7th Floor
Irvine, California 92612
2THEMART.COM, INC.
18301 VON KARMAN AVENUE
7TH FLOOR
IRVINE, CALIFORNIA 92612
TELEPHONE: (949) 757-1630
FACSIMILE: (949) 757-1631
June 6, 1999
VIA FACSIMILE (949-851-1240)
ORIGINAL-U.S. MAIL
Robert Allende
17822 Quintana Lane
Huntington Beach, California 92647
RE: EMPLOYMENT OFFER
Dear Robert:
This letter shall serve as 2TheMart.com, Inc.'s (the
"Company") offer of employment to you to serve as the Chief
Technology Officer ("CTO") of the Company. You understand that
your position and function as CTO will be determined from time to
time by the Board of Directors of the Company. Your duties shall
be to perform all functions generally appropriate for a CTO and
as further described by the Board of Directors. We are very
pleased to offer you the position of CTO with our company in
accordance with the following terms and conditions:
1. BASE SALARY. Your beginning Base Salary will be in the
annualized amount of $125,000, payable bi-weekly (your first
payroll pay date will be March 4, 1999, for which you will
receive one week's pay). Your Base Salary will be increased to
the annualized amount of $150,000 beginning September 1, 1999.
2. BASE SALARY MAKE-UP. On January 1, 2000, we will pay to you
the amount that represents the difference between your beginning
Base Salary and your Base Salary as of 9/1/99, for the time
period that you were being paid the beginning Base Salary. Based
on your start date of March 1, 1999, the "make-up" amount to be
paid to you will be $12,500.
3. STOCK OPTIONS. The Company will grant to you options to
acquire an aggregate of 75,000 shares of common stock of the
Company at an exercise price of $5.00 per share (the "Options").
The Options shall vest as follows:
A. The right to acquire 16,667 shares shall vest on
September 1, 1999, provided you have been continuously employed
by the Company as of that date.
B. The right to acquire an additional 8,333 shares shall
vest on March 1, 2000 provided you have been continuously
employed by the Company as of that vesting date.
<PAGE>
C. Thereafter, the right to acquire 16,667 additional
shares shall vest on March 1 of each successive year, provided
you are continually employed by the Company as of each vesting
date, until the Options are fully vested. The Options shall
fully vest in the event your employment is terminated by the
Company without cause (as defined below). In the event you are
not continuously employed by the Company as of any vesting date,
all Options that have not vested shall become void.
The Company agrees to use its best efforts to register
the shares that underlie the Options by February 1, 2000.
4. VACATION. As an executive of the Company you will be
entitled to 4 weeks paid vacation, to be utilized at the
discretion of the executive. The Company prefers that no
executive take more than 2 weeks of continuous vacation.
5. HEALTH BENEFITS. The Company will provide health insurance
coverage (including dental and vision) for you and your family at
the Company's cost. Our health plan is underwritten by the
Principal Insurance Group, and is a combined PPO/Indemnity type
coverage. We will provide you with additional information on our
health plan under separate cover.
6. EXECUTIVE BENEFITS. As an executive of the Company, you will
be entitled to participate in all other executive benefits as
they are implemented. The Company will be establishing a
retirement plan (i.e. 401K Plan) (probably by the 3rd quarter)
and an Incentive Stock Option Plan (by the 3rd or 4th quarters).
The Company also anticipates establishing a Company car
allowance/plan in the future, of which you will also be entitled
to participate.
7. BONUSES. As an executive of the Company, you will be able
to participate in any annual bonus program implemented by the
Company. The Company's Bonus Plan will be a combination of a
cash based and Incentive Stock Option based plan. A high level
executive such as you would participate in both plans. On the
first anniversary of your employment, the Company will reserve
Incentive Stock Options for an aggregate of up to 50,000 shares
for distribution to you based upon your performance, which
bonuses will be at the discretion of the Board of Directors of
the Company.
8. COMMENCEMENT OF EMPLOYMENT. Your employment will commence on
March 1, 1999.
9. TERMINATION OF EMPLOYMENT. In the event of the termination
of your employment for other than cause, you would be entitled to
continue to receive your Base Salary, payable bi-weekly, for a
period of 3 months. "For cause" shall be defined as follows:
<PAGE>
(i) incompetence, insubordination, failure, inability, or
refusal to perform assigned duties; (ii) gross negligence,
willful misconduct or breach of fiduciary duty; (iii) condition
of a crime(other than minor traffic violations or similar
offenses); (iv) being under the influence of, or use, sale,
distribution, or possession of unauthorized or illegal drugs or
intoxication beverages while on duty or on the Company's or a
subsidiary's premises; (v) willful destruction or defacement of
Company's or a subsidiary's, a customer's, or an employee's
property; (vi) unauthorized disclosure of confidential
information; and (vii) continued and unexplained absences from
work.
You shall be immediately terminated without notice for
the following Causes:
(i) unauthorized entry into Company's secured
non-public areas; (ii) falsifying or altering
the Company's or a subsidiary's records; (iii)
theft, embezzlement, fraud or forgery; (iv)
any act which results or was intended to result in
significant gain or personal enrichment to the you
at the Company's expense; and (vi) any act which
results in substantial injury or embarrassment to
the reputation, business, or business relationship
of Company.
10. CONFIDENTIAL AND SECRET INFORMATION/COMPANY PROPERTY. You
acknowledge that you will have access to items used in the
Company's business which the Company deems to be secret,
confidential, unique and valuable; were developed by Company at a
great cost and over a long period of time; and that disclosure of
any of these items to anyone other than Company's officers,
directors, agents or authorized employees will cause Company
irreparable injury. You agree that upon termination of this
Agreement, you will return any and all documentary information or
written documents to Company. Such items and information shall
be held in strict confidence by the you and shall not be revealed
to any third party unless otherwise required by law. All other
material and property that may be furnished to you during the
course of your employment with the Company such as customer
lists, customer tracking, automobiles, books and records shall be
and remain the Company's property and shall be returned to the
Company at any time upon demand.
Please acknowledge your understanding and agreement of
the terms of your employment with the Company by signing this
letter where noted below.
<PAGE>
If you have any questions, of course, please do not
hesitate to contact me.
Sincerely,
2THEMART.COM, INC.
/s/Dominic J. Magliarditi
Dominic J. Magliarditi
President
DJM:
ACKNOWLEDGED AND AGREED
/s/Robert Allende
Robert Allende
Date:________________________
2THEMART.COM, INC.
18301 VON KARMAN AVENUE
7TH FLOOR
IRVINE, CALIFORNIA 92612
TELEPHONE: (949) 757-1630
FACSIMILE: (949) 757-1631
June 6, 1999
VIA FACSIMILE (770-956-9479)
ORIGINAL-U.S. MAIL
Mark Rosenberg
502 Midenhall Way
Cary, North Carolina 27513
RE: EMPLOYMENT OFFER
Dear Mark:
This letter shall serve as 2TheMart.com, Inc.'s (the
"Company") offer of employment to you to serve as the Vice
President of Marketing and Sales ("VP Marketing") of the Company.
You understand that your position and function as VP Marketing
will be determined from time to time by the Board of Directors of
the Company. Your duties shall be to perform all functions
generally appropriate for a VP Marketing and as further described
by the Board of Directors. We are very pleased to offer you the
position of VP Marketing with our company in accordance with the
following terms and conditions:
1. BASE SALARY. Your beginning Base Salary will be in the
annualized amount of $200,000, payable bi-weekly upon the
commencement of your employment (which we expect to be
approximately May 18, 1999 or sooner, if you are able to begin
sooner).
2. STOCK OPTIONS. The Company will grant to you options to
acquire an aggregate of 125,000 shares of common stock of the
Company at an exercise price of $5.00 per share (the "Options").
The Options shall vest as follows:
A. The right to acquire 12,500 shares shall vest on
the commencement of your employment with the Company.
B. The right to acquire an additional 14,063 shares
shall vest on the date that is six months from the
commencement of your employment, provided you have been
continuously employed by the Company as of that vesting
date.
C. The right to acquire an additional 14,062 shares
shall vest on the date that is twelve months from the
commencement of your employment, provided you have been
continuously employed by the Company as of that vesting
date.
<PAGE>
D. Thereafter, the right to acquire 28,125 additional
shares shall vest on each anniversary date of your
employment of each successive year, provided you are
continually employed by the Company as of each vesting
date, until the Options are fully vested.
The Options shall fully vest in the event your
employment is terminated by the Company without cause
(as defined below). In the event you are not
continuously employed by the Company as of any
vesting date, all Options that have not vested shall
become void.
The Company agrees to use its best efforts to register
the shares at the Company's expense that underlie the
Options by February 1, 2000, or at the earliest date
any SEC registrations take place.
4. VACATION. As an executive of the Company you will be
entitled to 4 weeks paid vacation, to be utilized at the
discretion of the executive. The Company prefers that no
executive take more than 2 weeks of continuous vacation.
5. HEALTH BENEFITS. The Company will provide health insurance
coverage (including dental and vision) for you and your family at
the Company's cost. Our health plan is underwritten by the
Principal Insurance Group, and is a combined PPO/Indemnity type
coverage. We will provide you with additional information on our
health plan under separate cover.
6. EXECUTIVE BENEFITS. As an executive of the Company, you will
be entitled to participate in all other executive benefits as
they are implemented. The Company will be establishing a
retirement plan (i.e. 401K Plan) (probably by the 4th quarter)
and an Incentive Stock Option Plan (probably by the 4th
quarter).
7. BONUSES. As an executive of the Company, you will be able
to participate in any annual bonus program implemented by the
Company. The Company's Bonus Plan will be a combination of a
cash based and Incentive Stock Option based plan. A high level
executive such as you would participate in both plans, based upon
your performance, which bonuses will be at the discretion of the
Board of Directors of the Company.
8. COMMENCEMENT OF EMPLOYMENT. Your employment will commence on
or before May 18, 1999.
9. TERMINATION OF EMPLOYMENT. In the event of the termination
of your employment for other than cause, you would be entitled to
continue to receive your Base Salary, payable bi-weekly, for a
period of 6 months. "For cause" shall be defined as follows:
<PAGE>
(i) incompetence, insubordination, failure, inability,
or refusal to perform assigned duties; (ii) gross
negligence, willful misconduct or breach of fiduciary
duty; (iii) condition of a crime (other than minor
traffic violations or similar offenses); (iv)
being under the influence of, or use, sale,
distribution, or possession of unauthorized or illegal
drugs or intoxication beverages while on duty or on the
Company's or a subsidiary's premises; (v) willful
destruction or defacement of Company's or a
subsidiary's, a customer's, or an employee's property;
(vi) unauthorized disclosure of confidential
information; or (vii) continued and unexplained absences
from work.
You shall be immediately terminated without notice for
the following Causes:
(i) unauthorized entry into Company's secured
non-public areas; (ii) falsifying or altering the
Company's or a subsidiary's records; (iii) theft,
embezzlement, fraud or forgery; (iv) any act which
results or was intended to result in significant gain
or personal enrichment to the you at the Company's
expense; or (vi) any act which
results in substantial injury or embarrassment to the
reputation, business, or business relationship of
Company.
10. CONFIDENTIAL AND SECRET INFORMATION/COMPANY PROPERTY. You
acknowledge that you will have access to items used in the
Company's business which the Company deems to be secret,
confidential, unique and valuable; were developed by Company at a
great cost and over a long period of time; and that disclosure of
any of these items to anyone other than Company's officers,
directors, agents or authorized employees may cause Company
irreparable injury. You agree that upon termination of this
Agreement, you will return any and all documentary information or
written documents to Company. Such items and information shall
be held in strict confidence by the you and shall not be revealed
to any third party unless otherwise required by law. All other
material and property that may be furnished to you during the
course of your employment with the Company such as customer
lists, customer tracking, automobiles, books and records shall be
and remain the Company's property and shall be returned to the
Company at any time upon demand.
11. SIGN ON BONUS. The Company will pay to you as a sign on
bonus the amount of $20,000 upon the commencement of your
employment.
12. RELOCATION EXPENSES. The Company will reimburse you for
your out of pocket relocation expenses for the following items:
A. Real Estate Commission on the sale of your home in
North Carolina.
B. Moving Expenses for the household furnishings and 2
automobiles.
C. 2 round trip airfares for you and your wife for
"house hunting."
D. 1 round trip airfare for you, your wife and 3
children for "house hunting."
<PAGE>
E. Onetime, one-way airfare for you, your wife and 3
children to Orange County, CA.
Please acknowledge your understanding and agreement of the
terms of your employment with the Company by signing this letter
where noted below.
If you have any questions, of course, please do not
hesitate to contact me.
Sincerely,
2THEMART.COM, INC.
/s/Dominic J. Magliarditi
Dominic J. Magliarditi
President
DJM:
ACKNOWLEDGED AND AGREED
/s/Mark Rosenberg
Mark Rosenberg
Date:________________________
[mPRm letterhead]
June 11, 1999
Mr. Mark Rosenberg
2TheMart.com
18301 Von Karman Avenue
Irvine, CA 92612
Dear Mark,
Please consider this letter as an agreement whereby mPRm has been retained
to handle corporate and consumer public relations on behalf of 2TheMart.com
("CLIENT").
Per our conversation, as compensation for our services, it is agreed that
the monthly retainer for basic servicing by mPRm on behalf 2TheMart.com will
be as follows:
- - Twenty Thousand Dollars ($20,000.00) for the month of June.
- - Fifteen Thousand Dollars ($15,000.00) for the months of July & August
- - Twenty Thousand Dollars ($20,000.00) for September 1999 through December
1999.
Should mPRm's services be needed for trade shows, press tours, stunts,
events, staffing or promotions. additional fees will be required at a
mutually agreeable fee.
All fees are payable at the beginning of each billing period. mPRm and
2TheMart.com reserves the right to terminate this agreement by giving Thirty
(30) days notice, provided that if notice is given at a time other than on
the last day of a billing period, the foregoing compensation shall be
pro-rated accordingly.
Out-of-pocket expenses are billed as incurred at cost with no single expense
in excess of Three Hundred Dollars ($300.00) being made without prior
approval by for 2TheMart.com. We add a ten-percent service charge for
outside vendor expenses if they am unable to bill you directly.
<PAGE>
mPRm cannot independently verify factual material supplied by 2TheMart.com
or the 2TheMart.com surrogates, and therefore for 2TheMart.com will
indemnify and hold harmless mPRm for any attorney's fees, claim, loss,
damage, expenses or other legal liabilities based upon information,
representations, reports, news releases or other material prepared by mPRm
based upon factual materials supplied by 2TheMart.com.
mPRm further agrees that it will hold in confidence and trust and will not
make use of, disseminate, or in any way circulate any confidential
information of 2TheMart.com which is supplied to mPRm and/or its
subcontractors -or obtained in writing, orally or by observation by mPRm,
except to the extent necessary for negotiations, discussions, or
consultations with personnel or authorized representatives of 2TheMart.com
in connection with the performance of consulting services by mPRm under this
Agreement, or otherwise as authorized by 2TheMart.co,.
Any controversy or claim arising out of this agreement or the breach hereof,
shall be settled by binding arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, as modified by
the California Arbitration Act, and judgment upon the award rendered by
their arbitrator(s) may be entered in any court having jurisdiction. The
costs of arbitration. including reasonable attorneys' fees, shall be born in
such proportions as the arbitrator(s) determine
If this agreement meets with your approval, please sign, return the
original, and retain the copy for your files.
Best regards,
/s/Rachel McCallister
RMC/ca
ACCEPTED AND AGREED TO:
By: /s/Mark Rosenberg
2TheMart.com
ACCEPTED AND AGREED TO:
By: /s/Rachel McCallister
mPRm Public Relations
cc: Mark Pogachefsky
Julie Gladders
USWeb/CKS
6/17/99,
Mark Rosenberg
Vice President
2theMart.com
Mark,
The purpose of this document is to outline the scope of work for the
creative services retainer. this is the team responsible for reviewing and
developing your entire marketing focus. This will cover development of all
your marketing concepts, creative direction and copy. This creative team
will run with you wherever you want to go. The media services retainer will
be covered in a separate document. The proposed retainer for the creative
services team is $86,000 per month. That dollar amount represents the
following team:
<TABLE>
<S> <C> <C>
Individual Role Time Allocated
Sal Fuentes Executive Sponsor 5%
Robin Martin General Manager, Silicon Valley 3%
Sal Fuentes (Acting) Management Supervisor 25%
TBD Account Manager 100%
Mike Bohrer Associate Creative Director 35%
Jane Devon Digital Creative Director 35%
TBD Senior Writer 25%
Doug Page Senior Business Consultant 25%
TBD Production Manager 63%
</TABLE>
SCOPE OF WORK FOR MARKETING, BRANDING, AND
ADVERTISING ACTIVITIES
Retainer Proposal
6-month deliverables:
1. Strategic Marketing and Positioning Platform
2. Competitive Analysis
3. Segmentation Analysis & Recommendation
4. Communications Roadmap/Media Mix Analysis
5. Creative Explorations for all campaigns
<PAGE>
6. Marketing Communications Plan to be built on top of the media plan
Deliverables:
1. Strategic Marketing and Positioning Platform
Analysis of available qualitative assessments fielded to date
Development of positioning strategy:
Situation analysis
Development of positioning foundation
Quantitative & qualitative support
Concept exploration against positioning
Test concept exploration for resonance against segments
Finalize positioning & strategic platform
2. Competitive Analysis
Retrieving and analyzing competitive advertising (positioning, key
message, competitive framework, product, personality)
Retrieving and analyzing competitive spending
3. Segmentation Analysis & Recommendation
Utilize proprietary and syndicated research
Develop against needs/usage-based segmentation
4. Communications Roadmap & Media Mix Analysis
Preliminary broad-stroke media mix analysis based on
preliminary segmentation, competitive analyses and
quantitative analysis
5. Creative Exploration
Creative concept development, including:
Exploration against working positioning statement
Multiple directions being pursued based on quantitative and
qualitative feedback, additional thoughts
Creation of stimuli material to be used in qualitative testing
Revisions based on qualitative and Client feedback
Storyboard, layout, copy, design, for one multimedia campaign,
including TV spots, radio spots, print/newspaper ads, outdoor, and
online banners.
6. Marketing Communications Plan
<PAGE>
Participation in the planning and development of overall marketing and
marketing communications plan, including objectives, Beta and Launch
plans, promotional plans, strategies and tactics.
Key Provisions
This agreement is dependent on the USWeb/CKS Silicon Valley Office no longer
performing work for the online auction web site EBAY. USWeb/CKS is under no
obligation to resign any other accounts. In return for the resignation of
EBAY, 2theMart is committing to a full one year relationship with USWeb/CKS.
2theMart and USWeb/CKS will review the retainer on a quarterly basis and
adjustments will be made on as needed basis. USWeb/CKS will provide monthly
status reports to reflect our achievement of goals and milestones.
Projects and fees not included as part of retainer:
Costs for outside Qualitative or Quantitative Research
recruiting, moderators, facilities, stimulus material (beyond comprehensive
layouts, concept boards), travel, out-of-pocket costs, imagery, stock or
contracted photography
Cost of web development and implementation
Advertising production costs, including TV, radio, print, newspaper,
direct mail, promotional materials, video, on-line banners, etc.
Travel costs
Out-of-pocket costs including materials, stock or contracted
photography, presentation costs
Tax
Client Approval & Agency Acceptance
Authorization to Proceed
I have read and approve USWeb(CKS scope of work and proposal for a creative
services retainer. I authorize USWeb/CKS to begin our agency of record
relationship on June 26,1999. We will issue a purchase order for the 12
months of this relationship along with our approval signature.
/s/Mark Rosenberg, 2theMart.com Date 6-18-99
This agreement has been accepted by
/s/Salvador Fuentes of USWeb/CKS Date 6/25/99
CO-BRANDING AND ADVERTISING AGREEMENT
THIS CO-BRANDING AND ADVERTISING AGREEMENT (the "Agreement") is made
as of June 21, 1999 (the "Effective Date") by and between I-ESCROW,
INC., with its principal place of business at 1730 S. Amphlett
Blvd., Suite 233, San Mateo, California 94402 ("i-Escrow"), and
2THEMART.COM, INC. having its principal place of business at 18301
Von Karman Avenue, 7th Floor, Irvine, California 92612 ("2TheMart").
1. DEFINITIONS.
(a) "CONTENT" means all content or information, in any medium,
provided by a party to the other party for use in conjunction
with the performance of its obligations hereunder, including
without limitation any text, music, sound, photographs, video,
graphics, data or software. Content provided by 2TheMart
is referred to herein as "2TheMart Content" and Content
provided by i-Escrow is referred to herein as "i-Escrow Content."
(b) "CO-BRANDED SITE" means the web-site accessible through
Domain Name, for the Services implemented by i-Escrow. The
homepage of this web-site will visibly display both
2TheMart Marks and i-Escrow Marks.
(c) "CUSTOMERS" means all users who access Co-Branded Site.
(d) "DOMAIN NAME" means www.iescrow.com/2TheMart.
(e) "ESCROW SERVICES" means services for auction
sellers and high bidders whereby an agent holds a
buyer's money in trust until the buyer approves the
applicable item that was physically delivered, at
which time the agent releases the buyer's money
to seller, after subtracting the escrow fees.
(f) "INFORMATION TRANSFER MECHANISM" means the
mechanism by which 2TheMart transfers to i-Escrow
information to populate the applicable i-Escrow
transaction and user registration forms.
(g) "LAUNCH DATE" means the first date on which the
Co-Branded Site is pointed to in all references to
i-Escrow from 2TheMart auction site, and the
Information Transfer Mechanism is publicly
deployed (post-beta).
(h) "MARKS" means all domain names, trademarks and
logos designated by a party for the other party's use in
conjunction with such other party's performance under
this Agreement. Marks designated by 2TheMart for
i-Escrow's use are referred to herein as "2TheMart
Marks" and Marks designated by i-Escrow for 2TheMart'
use are referred to herein as "i-Escrow Marks."
(i) "SERVICES" means i-Escrow's implementation
and performance of the Escrow Services as of the
Effective Date, as modified over time.
<PAGE>
(j) "SHADOW SITE" means the site where Co-Branded Site
is made available for 2TheMart's testing of the
Information Transfer Mechanism prior to being
made publicly available.
(k) "TRANSACTION" means a transaction utilizing the
Services that actually closes and that was
initiated by a Transaction Inquiry from a Customer.
(l) "TRANSACTION INQUIRY" means a Customer's
submission of i-Escrow's standard New Transaction
Inquiry form (or its successor) on or through the
Co-Branded Pages. Currently this means entry of a
description and price of merchandise by a user (buyer
or seller) who agrees to abide by the terms and
conditions of the Services, together with email address
of the other party, regardless of whether or not
any Transaction is completed.
2. DEVELOPMENT AND IMPLEMENTATION.
2.1 OVERVIEW. As set forth herein, 2TheMart will promote
Services to its auction users (buyers and sellers),
and i-Escrow shall develop Co-Branded Site,
and develop the Information Transfer
Mechanism working with 2TheMart to make
Services available seamlessly to Customers.
Unless otherwise specified, each party shall
be responsible for all development, hosting
and other costs associated with the pages
resident on their servers and all emails to
users they send.
2.2 INITIAL INFORMATION TRANSFER MECHANISM DEVELOPMENT.
The parties shall negotiate in good faith to determine
the initial operation of the Information
Transfer Mechanism and to describe such
operation and development fees, in a
statement of work ("SOW"). Each party shall
make available sufficient and qualified
engineers to negotiate the SOW. No SOW
shall be binding on the parties unless
mutually approved by both parties. In the
event that the parties are unable to agree
to an SOW within 2 months following the
Effective Date, either party may, in its
sole discretion, terminate this Agreement by
providing written notice.
Once approved, the parties shall use
commercially reasonable efforts to
diligently implement their respective
obligations under the SOW. Upon completion
of its duties under the SOW, a party shall
notify the other party and provide the other
party with the opportunity to test and
evaluate its work. i-Escrow shall make
available the Shadow Site for such testing
in a timely manner. Each party shall
reasonably cooperate with the other party in
effectuating their respective duties under
the SOW. The Information Transfer Mechanism
shall not go live until its operation has
been approved ("Approval Date") by both
parties, such approval not to be
unreasonably withheld.
2.3 LAUNCH TIMING. Each party shall use good faith
and reasonable efforts to expeditiously develop the
Co-Branded Pages and the Information
Transfer Mechanism. In the event that,
after using such efforts, the Launch Date
has not occurred within 4 months following
the Effective Date, either party may
terminate this Agreement by providing
written notice. If
<PAGE>
only one party has used good faith and reasonable development
efforts, only that party may exercise the
foregoing right to terminate.
2.4 RESTRICTIONS ON COMMUNICATIONS. i-Escrow may place
banner advertising on the Co-Branded Site
upon prior written approval of 2TheMart,
which shall be at the discretion of 2TheMart. All
advertising revenue arising from the banner ads shall be
solely i-Escrow's. i-Escrow shall not run
banner advertisements on the Co-Branded Site
for any of 2TheMart's competitors. 2TheMart
shall provide in writing, a list of companies they would
like to exclude, including every time
they wish to change this list.
2.5 SERVICE PERFORMANCE OF INFORMATION TRANSFER
MECHANISM. The parties each shall in good faith work to
provide reasonable service levels with respect to the
operation of the portions of the Information Transfer
Mechanism in their control.
2.6 PROGRAM REVIEW MEETINGS. The parties shall meet, at
least once per month either in person, or by telephone, to
coordinate the implementation of this agreement over time.
3. PROMOTION.
After Launch Date, 2TheMart will widely promote the Services:
(a) To every seller and high bidder through means
including, but not limited to, end of auction
emails containing links, such that, it shall be
possible for the buyer or seller to initiate a
Transaction Inquiry with i-Escrow, without
having to re-enter all their personal or
transaction related information.
(b) By adding links to Co-Branded Site in FAQ
section of 2TheMart auctions.
(c) By adding links to Co-Branded Site on the
seller listing pages of 2TheMart auctions.
(d) By displaying a text or graphic link to a
page containing information about Services on
all auction item pages and bidding pages to
educate bidders about i-Escrow. 2TheMart
may use the "Escrow Services Description" attached
in Exhibit A for creating such a page.
5. PAYMENT.
5.1 ADVERTISING FEES. After the Launch Date,
i-Escrow shall pay 2TheMart advertising fees based
on the number of Transaction Inquiries. This advertising
fees shall consist of a per Transaction Inquiry
amount calculated by multiplying 0.025% by
the amount of the average Transaction from
all Customers in the preceding quarter. The
formula for arriving at the per Transaction
Inquiry amount may be revised from time to
time during the term of this Agreement to
reflect present market conditions ("the
Adjusted Rate"), but only by mutual
<PAGE>
consent of the parties after good faith discussions.
The Adjusted Rate shall be added as an
addendum to this Agreement.
5.2 REPORTING. Within two (2) weeks following the
end of each calendar quarter, i-Escrow shall provide
to 2TheMart a report, describing for each quarter: the
number of new registrations through the
Co-Branded Pages; the number of Transaction
Inquiries from Customers; the total number
of Transactions from such inquiries; the
total dollar value of the Transactions.
5.3 AUDIT RIGHTS. i-Escrow shall keep for one (1) year proper
records and books of account relating to the
computation of advertising payments owed to
2TheMart (including, as appropriate, the
computation of the size of average
Transaction). Once every twelve (12)
months, 2TheMart through a CPA may inspect
and audit such records to verify reports.
Any such inspection will be conducted in a
manner that does not unreasonably interfere
with i-Escrow's business activities and with
no less than fifteen (15) days notice.
i-Escrow shall within two (2) weeks make any
overdue payments disclosed by the audit.
Such inspection shall be at 2TheMart's
expense; however, if the audit reveals
overdue payments in excess of ten percent
(10%) of the payments owed to date, i-Escrow
shall immediately pay all cost of such
audit.
6. RIGHTS AND STANDARDS.
6.1 CONTENT. 2TheMart hereby grants
to i-Escrow a worldwide,
non-exclusive right to use, reproduce,
distribute, publicly perform, publicly
display and digitally perform the 2TheMart
Content soley with respect to and in
conjunction with the Co-Branded Site all
with the prior written consent of 2TheMart,
for the term of this Agreement. i-Escrow
hereby grants to 2TheMart a worldwide,
non-exclusive right to use, reproduce,
distribute, publicly perform, publicly
display and digitally perform the i-Escrow
Content on or in conjunction with 2TheMart
auctions.
6.2 CONTENT OWNERSHIP. Except as otherwise provided in
this Agreement, as between 2TheMart and i-Escrow:
(a) 2TheMart and its suppliers retain all
rights, title and interest in and to all
intellectual property rights embodied in or
associated with the 2TheMart Content, and b)
i-Escrow and its suppliers retain all
rights, title and interest in and to all
intellectual property rights embodied in or
associated with the i-Escrow Content and
Co-Branded Site. There are no implied
licenses under this Agreement, and any
rights not expressly granted are reserved.
Neither party shall exceed the scope of the
rights granted hereunder.
6.3 TRADEMARKS. Subject to the terms and conditions
of this Agreement: (a) i-Escrow hereby grants to
2TheMart a non-exclusive, nontransferable
right to use the i-Escrow Marks (including
without limitation the Domain Name) in links
to and advertisements and promotions for the
Co-Branded Pages or the Services; and (b)
2TheMart hereby grants to i-Escrow a
non-exclusive, nontransferable right to use
2TheMart Marks (including without limitation
the Domain Name) on the Co-Branded Pages,
and for the performance of Services.
6.4 TRADEMARK RESTRICTIONS. The Mark owner may
terminate the foregoing rights if, in its reasonable
discretion, the other party's use of the
Marks tarnishes, blurs or dilutes the
quality associated with the Marks or the
associated goodwill and such problem is not
cured within ten (10) days of notice of
breach; alternatively, instead of
terminating the right in total, the
<PAGE>
owner may specify that certain pages of the other
party's web-site may not contain the Marks.
Title to and ownership of the owner's Marks
shall remain with the owner. The receiving
party shall use the Marks exactly in the
form provided and in conformance with any
trademark usage policies. The other party
shall not take any action inconsistent with
the owner's ownership of the Marks, and any
benefits accruing from use of such Marks
shall automatically vest in the owner. The
other party shall not form any combination
marks with the other party's Marks.
Notwithstanding the foregoing, to the extent
that the Domain Name is deemed a combination
mark, neither party shall use the Domain
Name for any purpose except as expressly
provided herein or attempt to register the
Domain Name, and the parties will jointly
cooperate on any enforcement action of
infringement of the Domain Name.
6.5 LIMITS ON SUBLICENSING. All rights (under any
applicable intellectual property right)
granted herein are not sublicenseable,
transferable or assignable. Notwithstanding
the foregoing, either party may use a third
party web host, but all actions or failures
to act of the web host that would be a
breach of this Agreement, were the actions
or failures to act taken by the applicable
party, shall be deemed a breach of this
Agreement. In addition, 2TheMart may grant
sublicenses to companies that 2TheMart has a
business relationship with to the extent
that 2TheMart Content is visible from such
company's web-site through a link or other
means.
6.6 CONTENT STANDARDS. 2TheMart shall not provide any
2TheMart Content, and i-Escrow shall not provide any
i-Escrow Content, that: (a) infringes any
third party's copyright, patent, trademark,
trade secret or other proprietary rights or
rights of publicity or privacy; (b) violates
any law, statute, ordinance or regulation
(including without limitation the laws and
regulations governing export control, unfair
competition, antidiscrimination or false
advertising); (c) is defamatory, trade
libelous, unlawfully threatening or
unlawfully harassing; (d) is obscene,
harmful to minors or child pornographic; (e)
contains any viruses, Trojan horses, worms,
time bombs, cancelbots or other computer
programming routines that are intended to
damage, detrimentally interfere with,
surreptitiously intercept or expropriate any
system, data or personal information; and
(f) is materially false, misleading or
inaccurate.
6.7 SERVICE STANDARDS. i-Escrow will comply with
all laws and regulations and act as an Independent Escrow
Agent as per the guidelines of California Escrow Law
(California Financial Code Section17000 et seq., or its
successor). Should any of the terms, conditions or
provisions of this Agreement conflict with the California
Escrow Law, its rules or regulations, which govern
i-Escrow's business practices, the California
Escrow Law shall prevail. Notwithstanding the
foregoing, at any time that i-Escrow reasonably believes
such a conflict exists, i-Escrow will give 2TheMart
written notice of such conflict and the parties
will use their best efforts to resolve such conflict.
7. DISCLAIMER OF WARRANTIES. EACH PARTY PROVIDES ALL
MATERIALS AND SERVICES TO THE OTHER PARTY "AS IS." EACH
PARTY DISCLAIMS ALL WARRANTIES AND CONDITIONS,
EXPRESS, IMPLIED OR STATUTORY, INCLUDING
WITHOUT LIMITATION THE IMPLIED WARRANTIES OF
TITLE, NON-
<PAGE>
INFRINGEMENT, MERCHANTABILITY ANDFITNESS FOR A
PARTICULAR PURPOSE. Each party acknowledges that it
has not entered into this Agreement in reliance upon any
warranty or representation except those
specifically set forth herein.
8. TERM AND TERMINATION.
8.1 TERM. The term of this Agreement shall continue for
one (1) year following the Launch Date, unless earlier
terminated as provided herein. This Agreement may be
renewed for any number of successive one (1)
year terms by mutual written agreement of
the parties prior to the conclusion of the
term of this Agreement. A party wishing to
renew this Agreement shall give the other
party notice thereof no less than thirty
(30) days before the expiration of the term
then in effect. In the event that either
party does not give such notice, the term of
this Agreement shall be automatically
renewed for another one (1) year.
8.2 TERMINATION FOR BREACH. In addition to other remedies that
may be available to it, by providing written notice, a party
may immediately terminate this Agreement: (a) if the other party
materially breaches this Agreement and fails to cure that
breach within sixty (60) days after receiving written
notice of the breach, or (b) as provided in Sections 2.2,
2.4, or 12.4.
8.3 TERMINATION FOR CHANGE IN COMPANY STRUCTURE. If a
majority of the equity securities of either 2TheMart or
i-Escrow, Inc. (except that i-Escrow may sell all or a
majority of its equity securities or voting interests
to i-Escrow.com, and i-Escrow.com may sell all or a
majority of its equity securities or voting interests
to i-Escrow's existing shareholders, without triggering
the foregoing) are acquired by another company during
the term of this Agreement either company may terminate
this Agreement, without liability, by giving a thirty
(30) days written notice to the other party.
8.4 TERMINATION FOR BANKRUPTCY. Either party may terminate
or suspend this Agreement effective immediately and without
liability upon written notice to the other party if
any one of the following events occurs:
(a) the other party files a voluntary petition in
bankruptcy or otherwise seeks protection under any
law for the protection of debtors;
(b) a proceeding is instituted against the
other party under any provision of any
bankruptcy laws which is not dismissed within
ninety (90) days;
(c) the other party is adjudged bankrupt;
(d) a court assumes jurisdiction of all or a
substantial portion of the assets of the other party
under a reorganization law;
(e) a trustee or receiver is appointed by a court
for all or a substantial portion of the assets
of the other party;
<PAGE>
(f) the other party becomes insolvent, ceases or
suspends all or substantially all of its business; or
(g) the other party makes an assignment of the
majority of its assets for the benefit of its creditors.
8.5 EFFECTS OF TERMINATION. Upon expiration or termination
of this Agreement for any reason: (a) all rights granted
herein shall terminate, (b) i-Escrow shall pay all amounts
owed to 2TheMart within six (6) weeks of termination,
and (c) each party shall remove the other party's content
and Marks from their servers. Notwithstanding the
foregoing, unless this Agreement was terminated for a
material breach, all provisions of this Agreement shall
survive to the extent necessary for i-Escrow to complete
any Customer transactions which are pending at the time
of expiration or termination. Sections 1, 7, 8.5, 9,
10, 11 and 12 shall survive expiration or
termination of this Agreement.
9. INDEMNITY. Each party (the "Indemnifying Party") shall
indemnify the other party (the "Indemnified Party")
against any and all claims, losses, costs and expenses,
including reasonable attorneys' fees, which the Indemnified
Party may incur as a result of claims in any form
by third parties arising from the Indemnifying Party's
acts, omissions or misrepresentations to the extent that the
Indemnified Party is deemed a principal of the Indemnifying
Party. In addition, 2TheMart shall indemnify i-Escrow against
any and all claims, losses, costs and expenses, including
reasonable attorneys' fees, which i-Escrow may incur as a result
of claims in any form by third parties arising from 2TheMart
Content. In addition, i-Escrow shall indemnify 2TheMart against
any and all claims, losses, costs and expenses, including
reasonable attorneys' fees, which 2TheMart may incur as a result
of claims in any form by third parties arising from i-Escrow
Content and or the Services provided to Customers. The
foregoing obligations are conditioned on the Indemnified Party:
(i) giving the Indemnifying Party notice of the relevant
claim, (ii) cooperating with the Indemnifying Party, at the
Indemnifying Party's expense, in the defense of such
claim, and (iii) giving the Indemnifying Party the right to
control the defense and settlement of any such claim, except
that the Indemnifying Party shall not enter into any
settlement that affects the Indemnified Party's rights or
interest without the Indemnified Party's prior written approval.
The Indemnified Party shall have the right to participate
in the defense at its expense.
10. LIMITATION ON LIABILITY. EXCEPT IN THE EVENT OF A
BREACH OF SECTION 11, NEITHER PARTY SHALL BE LIABLE FOR SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS
(HOWEVER ARISING, INCLUDING NEGLIGENCE) ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT, EVEN IF THE PARTIES ARE
AWARE OF THE POSSIBILITY OF SUCH DAMAGES.
11. CONFIDENTIAL INFORMATION. A party's "Confidential Information"
is defined as any confidential or proprietary
information of a party which is disclosed to
the other party in a writing marked
confidential or, if disclosed orally, is
identified as confidential at the time of
disclosure and is subsequently reduced to a
writing marked confidential and delivered to
the
<PAGE>
other party within ten (10) days of
disclosure. Each party shall hold the other
party's Confidential Information in
confidence and shall not disclose such
Confidential Information to third parties
nor use the other party's Confidential
Information for any purpose other than as
required to perform under this Agreement.
Such restrictions shall not apply to
Confidential Information which (a) is
already known by the recipient, (b) becomes,
through no act or fault of the recipient,
publicly known, (c) is received by recipient
from a third party without a restriction on
disclosure or use, or (d) is independently
developed by recipient without reference to
the Confidential Information. The
restriction on disclosure shall not apply to
Confidential Information which is required
to be disclosed by a court or government
agency. Upon expiration or termination of
this Agreement, within fourteen (14) days of
the other party's request, each party will
return all Confidential Information and
other deliverables to the requesting party.
12. GENERAL PROVISIONS.
12.1 GOVERNING LAW. This Agreement will be governed
and construed in accordance with the laws of the State of
California without giving effect to conflict of laws
principles. Both parties submit to personal jurisdiction
in California and further agree that any cause of action
arising under this Agreement shall be brought in a court
in Orange County, California.
12.2 SEVERABILITY; HEADINGS. If any provision herein is held
to be invalid or unenforceable for any reason, the
remaining provisions will continue in full force without being
impaired or invalidated in any way. The parties agree to replace
any invalid provision with a valid provision that most
closely approximates the intent and economic effect of the
invalid provision. Headings are for reference purposes only and
in no way define, limit, construe or describe the
scope or extent of such section.
12.3 PUBLICITY. Prior to the release of any press releases or other
similar promotional materials related to this Agreement, the
releasing party shall submit a written request for approval to the
other party with a copy of the materials to be released, which
request shall be made no less than three (3) business days prior to
the requested release date. A party shall not unreasonably withhold
or delay the granting of its approval of such materials,
and such approval shall be provided to the other party within one
(1) business day of receipt
12.4 FORCE MAJEURE. Except as otherwise provided, if performance
hereunder (other than payment) is prevented, restricted or
interfered with by any act or condition whatsoever beyond the
reasonable control of a party (a "force majeure event"), the
party so affected, upon giving prompt notice to the other party,
shall be excused from such performance to the extent
of such prevention, restriction or interference. However, if a
force majeure event interferes with the operation of this
Agreement for sixty (60) days or more, either party can terminate
this Agreement, without penalty. Notwithstanding the
foregoing, the occurrence of any force majeure event shall not
limit either party's obligations under Section 9 with respect to
any third party claim as to which the other party seeks
indemnification.
12.5 INDEPENDENT CONTRACTORS. The parties are independent
contractors, and no agency, partnership, joint venture, employee-
employer or franchisor-franchisee relationship is
<PAGE>
intended or created by this Agreement. Neither party shall
make any warranties or representations on behalf of the other
party.
12.6 NOTICE. Any notices hereunder shall be given to the
appropriate party at the address specified below or at such other
address as the party shall specify in writing. Notice shall
be deemed given: upon personal delivery; if sent by fax, upon
confirmation of receipt; or if sent by a reputable overnight
courier with tracking capabilities, one (1) day after the date of
mailing:
To i-Escrow: i-Escrow, Inc.
1730 South Amphlett Blvd., #215
San Mateo, CA 94402
Fax no. (650) 638-7890
Attention: President
With copy to: Fred M. Greguras, Esq.
Legal Counsel of i-Escrow
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
To 2TheMart: Dominic J. Magliarditi
President
18301 Von Karman Avenue,
7th Floor
Irvine, CA 92612
Fax no. (949) 477-1221
11.7 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and
all of which shall be taken together and deemed to be one
instrument.
12.8 GOOD FAITH. The parties agree to act in good faith with
respect to each provision of this Agreement and any dispute
that may arise related hereto.
12.9 ADDITIONAL DOCUMENTS/INFORMATION. The parties agree to
sign and/or provide such additional documents and/or information
as may reasonably be required to carry out the intent of
this Agreement and to effectuate its purposes.
12.10 RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies
provided herein will be cumulative and not exclusive of any other
rights or remedies provided by law or otherwise.
<PAGE>
12.11 NONWAIVER. No failure or forbearance by either party to
exercise any right or insist upon or enforce performance of
any obligation hereunder shall be deemed a waiver or
relinquishment to any extent of that or any other right or
obligation, in that or any other instance; rather, the
same shall be and shall remain in full force and effect.
Any waiver of any right of a party or any obligation of the
other party hereunder must be made in a writing signed by the
arty waiving such right or obligation.
12.12 ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties hereto with respect to the
transactions and matters contemplated hereby, supersedes
all previous Agreements between i-Escrow and 2TheMart
concerning the subject matter (except for the Confidential
Agreement Dated January 4 1999, which shall survive this
Agreement). No amendments or supplements to this Agreement
will be effective for any purpose except by a
written Agreement signed by the parties. No party hereto
has relied on any statement, representation or promise of any
party or with any other officer, agent, employee or
attorney for the other party in executing this Agreement
except as expressly stated herein.
2THEMART.COM, INC.: I-ESCROW, INC.:
By:/s/Dominic J. Magliarditi By:/s/Sanjay Bajaj
Name: Dominic J. Magliarditi Name: Sanjay Bajaj
Title: President Title: VP Business Development
Date: 6/21/99 Date: 6/11/99
<PAGE>
EXHIBIT A
ESCROW SERVICES DESCRIPTION
Successful completion of a transaction involves exchange of merchandise
with payment. The buyer has to be satisfied he/she received what they
thought they were getting and the seller has to be sure he/she
gets paid. i-Escrow holds payment from the buyer in trust until the
seller sends the merchandise to the buyer. Once the buyer
accepts the merchandise, i-Escrow forwards the payment to the
seller by writing a check. A typical escrow transaction:
When an auction ends, your end of auction email contains links to
i-Escrow. Once you have signed up with i-Escrow you go
through the following steps to complete your transaction.
1. Start a transaction by entering the description and price of the
merchandise along with email address of the other party.
2. The other party receives an email from i-Escrow requesting an
acknowledgement of the terms of the transaction.
3. Once the transaction is acknowledged by the other party, the
buyer pays i-Escrow the agreed upon price, by credit card or other means.
4. i-Escrow informs the seller that payment has been received, requesting
them to ship the merchandise directly to the buyer.
5. The seller provides i-Escrow with the tracking number of the shipment.
6. The buyer receives and accepts the merchandise.
7. i-Escrow sends the check to the seller.
For more information about I-Escrow, visit their web-site at www.iescrow.com
The Summit Group, Inc.
Agreement for Consulting Services
To: The Summit Group, Inc.
4215 Edison Lakes Parkway
P.O. Box 5106
Mishawaka, IN 46546-5106
Dominic Magliarditi
2 The Mart
18301 Von Karman Ave. Seventh Floor
Irvine, CA 92612
The Customer and The Summit Group, Inc. agree that the following terms and
conditions shall govern in all cases when The Summit Group furnishes
assistance to the customer in the installation, development, modification,
and use of data processing procedures.
Services
Agreement shall cover all assistance performed by The Summit Group
consulting personnel at the Customer's request, including, but not limited
to, special studies, education and training, systems/application analysis,
design and development, programming, conversion and implementation planning,
and installation evaluation. These services may be performed at either the
Customer's or The Summit Group's premises.
Term
This Agreement is effective from the date on which it is accepted by The
Summit Group and shall remain in force until terminated by the Customer upon
one month's prior written notice or by The Summit Group upon three months'
prior written notice. Completion of any specific services or Customer's
failure to order additional services hereunder shall not terminate this
Agreement, it being the intent of the parties to leave this Agreement in
effect in the event of future services.
Charges
The Customer agrees to pay charges for these services, including one-way
billable travel time and reasonable actual expenses, in accordance with The
Summit Group's established rates in effect when the services are rendered.
All billing rates are subject to change by The Summit Group upon two months'
notice.
Charges will be invoiced bi-weekly for services rendered and will be payable
on receipt of invoice.
There sha 11 be added to any charges under this Agreement
amounts equal to any applicable taxes however designated,
levied, or based on such charges or on this Agreement or the
services rendered hereunder, including state and local
privilege or excise taxes based on gross revenue, and any
taxes or amounts in lieu thereof paid or payable by The
Summit Group in respect of the foregoing, exclusive of taxes
based on net income.
The Customer will reimburse The Summit Group for special or unusual expenses
incurred at the Customer's specific request.
Control and Supervision
Customer tasks on which Summit personnel assist shall remain under the
supervision, management, and control of the Customer.
Confidentiality
With respect to financial, statistical, and personnel data relating to the
Customer's business which is confidential, is clearly so designated, and
which is submitted to The Summit Group by the Customer in order to carry out
this Agreement The Summit Group will instruct its personnel to keep such
information confidential by using the same care and discretion that they use
with similar data which The Summit Group designates as confidential.
However, The Summit Group shall not be required to keep confidential any
data which is or becomes publicly available, is already in The Summit
Group's possession, is independently developed by The Summit Group outside
the scope of this Agreement or is rightfully obtained from third parties. In
addition, The Summit Group shall not be required to keep confidential any
ideas, concepts, knowhow, or techniques relating to data processing
submitted to The Summit Group or developed during the course of this
Agreement by Summit personnel or jointly by Summit and Customer personnel.
Rights in Data
All original written material including programs, tapes, listings, and other
programming documentation originated and prepared for the Customer pursuant
to this Agreement shall belong exclusively to The Summit Group. The Summit
Group grants to die Customer a nonexclusive, irrevocable, and royalty-free
license to use this material throughout the world in any of its locations or
in any of its Parent Corporation's locations.
<PAGE>
The ideas, concepts, know-how, or techniques relating to data processing,
developed during the course of this Agreement by Summit personnel or jointly
by The Summit Group and Customer personnel shall be treated as follows: (a)
if made by Customer personnel, it shall be the property of the Customer; (b)
if made by Summit personnel, it shall be the property of The Summit Group
and The Summit Group grants to the Customer a non-exclusive, irrevocable,
and royalty-free license throughout the world; (C) if made jointly by
personnel of The Summit Group and the Customer, it shall be jointly owned
without accounting.
This Agreement shall not preclude The Summit Group from developing materials
which are competitive, irrespective of their similarity, to materials which
might be delivered to the Customer pursuant to this Agreement.
Personnel
In recognition of the fact that Summit personnel provided to the Customer
under this Agreement may perform similar services from time to time for
others, this Agreement shall not prevent The Summit Group from performing
such similar services or restrict The Summit Group from using the personnel
provided to the Customer under this Agreement The Summit Group will make
every effort consistent with sound business practices to honor the specific
requests of the Customer with regard to the assignment of its employees;
however, The Summit Group reserves the sole right to determine the
assignment of its employees. The Customer and The Summit Group agree that
they will not, during the term of this Agreement nor for a period of one
year after its termination, solicit for employment or employ, whether as
employee or independent contractor, each other's employees without written
consent.
Proposals for Service
Proposals for services to be rendered under this Agreement may be in
writing. No estimates are guaranteed in any way or to any extent by The
Summit Group and do not change this Agreement to a fixed price contract. The
Summit Group will, however, notify the Customer as soon as practicable if
the estimate win be exceeded, and the Customer may then terminate the
services, paying only for effort expended to that time. Charges will be paid
by the Customer at the established rates whether the charges are above or
below the estimate.
Proposals may include agreed to work schedules of Summit personnel. The
Summit Group will attempt to provide personnel in accordance with such
schedules subject to circumstances beyond The Summit Group's control.
Should a Summit employee be unable to perform scheduled services under this
Agreement because of illness, resignation, or other causes beyond The Summit
Group's reasonable control, The Summit Group will attempt to replace such
employee within a reasonable time, but The Summit Group shall not be liable
for failure to replace such employee within the schedule.
All schedules may be revised by mutual agreement.
Limitation of Liability
The Customer agrees that The Summit Group's liability hereunder for damages,
regardless of the form of action, shall not exceed the total amount paid for
those services associated with the specific task in question. This shall be
the Customer's exclusive remedy.
The Customer further agrees that The Summit Group will not be liable for any
lost profits, nor for any claim or demand against the Customer by any other
party.
No action, regardless of form, arising out of the services under this
Agreement may be brought by either party more than one year after the cause
of action has accrued, except that an action for nonpayment may be brought
within one year of the date of last payment.
The Summit Group does not make any express or implied warranties,
including, but not limited to, the implied warranties of merchantability and
fitness for a particular purpose, and no Year 2000 warranties.
In no event will The Summit Group be liable for consequential damages even
if The Summit Group has been advised of the possibility of such damages.
General
The terms of this Agreement may be modified by The Summit Group upon three
months' written notice to the Customer. The Customer may exercise his right
to terminate; otherwise, such modification shall become effective.
The term "this Agreement" as used herein includes any future written
amendments, modifications, or supplements made in accordance herewith.
The Customer acknowledges that he has read this agreement, understands it,
and agrees to be bound by its terms, and further agrees that it is the
complete and exclusive statement of the agreement between the parties, which
supersedes all proposals oral or written and all other communications
between the parties relating to the subject matter of this agreement.
The Agreement will be governed by the laws of the State of Indiana.
Accepted By:
The Summit Group, Inc.
/s/Bruce A. Danielson
Senior Vice President
Date 6/24/99
Client Name
2TheMart.com, Inc.
/s/Dominic J. Magliarditi
President
Date 6/22/99
<PAGE>
Addendum to Agreement for Consulting Services
This Addendum dated the 22nd day of June, 1999, to the Agreement for
Consulting Services of even date (the "Agreement") between The Summit Group,
Inc. ("The Summit Group') and 2TheMart.com, Inc. ("Customer") sets forth the
terms and conditions which are in addition to and/or modifies those terms
and conditions set forth in the Agreement.
1. In the section entitled "Charges", make the following changes:
a. At the end of the first paragraph, after the words "services- are
rendered". add the words "which rates shall have been provided in advance.".
b. In the second paragraph, after the words "two months' ", insert the words
"Prior written".
2. In the section entitled "Confidentiality", in the last sentence, after
the words "concepts, know-how", delete the words "or techniques relating to
data processing submitted to The Summit Group or".
3. At the end of the section entitled "Rights in Data", add the following
new sentence:
"If outside the commercially developed software packages, The Summit Group
creates some original concept specific to Customer, which provides the
Customer with a competitive advantage, The Summit Group will not share this
concept with Customer's competitors for a period of six (6) months from the
launch of Customer's website, without the prior written consent of Customer.
The list of Customer's competitors is provided as Exhibit A.".
4. In the section entitled "Proposals for Service", the first paragraph, the
first sentence, after the word "Agreement", replace the word "may" with the
word "will".
5. In the section entitled "General", make the following changes:
a. Delete the first paragraph in its entirety and replace it with the
following:
"The terms of this Agreement may only be modified in writing and signed by
both parties.".
<PAGE>
b. In the last paragraph replace the word "Indiana" with the word "California".
Except as expressly modified herein, the terms and conditions of the
Agreement are in full force and effect. In, the event of any conflict, the
terms and conditions of this Addendum shall prevail.
Accepted By:
The Summit Group, Inc.
/s/Bruce A. Danielson
Senior Vice President
Date 6/24/99
2TheMart.com, Inc.
/s/Dominic J. Magliarditi
President
Date 6/22/99
<PAGE>
Exhibit A
Ebay.com
Amazon.com
Lycos Auctions
Excite Auctions
Yahoo Auctions
Priceline.com
Onsale.com
Ubid.com
Auction Universe (Classified Ventures)
First Auction
Bid.com
City Auction
Bidnow.com
Edeal.com
Rbid.com
Microsoft Corporation
LAWSON SOFTWARE
PRODUCT LICENSE AGREEMENT
This Product License Agreement entered into between Lawson Associates, Inc.,
dba Lawson Software ("Lawson"), a Minnesota corporation with its principal
offices located at 1300 Godward Street, Minneapolis, Minnesota, USA 55413
and Client, whose name, principal business address, and jurisdiction of
incorporation are set forth below, (collectively "the Parties"), determines
the rights and obligations of Lawson and Client with respect to the subject
matter of this Agreement.
Client Name: 2 THE MART.COM, INC
Address: 18301 VON KARMAN AVE., SEVENTH FLOOR
City: IRVINE
State/Zip or Province/Postal Code: CA, 92612
Jurisdiction of Incorporation: LOS ANGELES
1.0 License and Payment.
1.1 Lawson grants to Client a perpetual, non-exclusive, and non-transferable
License to Use the Products only with the Platform Technology, Number of
Concurrent Users, Number of Seats, Number of Named Users, Number of Servers,
and Number of Sites, as designated in the Exhibits, subject to the terms and
conditions of this Agreement.
1.2 Client shall pay Lawson the License Fees, and any applicable Sales Tax on
License Fees, as set forth in the Exhibits attached hereto. In addition to the
Sales Tax on License Fees, Client shall pay or reimburse Lawson for any Taxes.
All License Fees are exclusive of Taxes. If applicable laws require the
withholding of Taxes under this Agreement, Client shall notify Lawson, make the
applicable withholding, and remit the required Tax to the proper governmental
authority.
2.0 Delivery and Installation.
2.1 Promptly after receipt of down payment, Lawson shall deliver the Products
to Client, including one copy of the Software and one copy of the Documentation
on appropriate media.
2.2 Client shall, at its expense, be responsible for installation of the
Software, User training, data conversion, and other services necessary to
installing and using the Products.
3.0 Definitions.
3.1 "Agreement" means this Agreement, Exhibits and any addenda signed by
the Parties.
3.2 "Documentation" means all documentation delivered by Lawson with the
Software, whether in machine-readable or printed form, including any updates,
revisions, new versions, and supplements to such documentation.
3.3 "Effective Date" means the date when authorized representatives of both
Lawson and Client have signed this Agreement as indicated at the end of this
Agreement in the space marked "Date" below Lawson's signature to this
Agreement.
3.4 "Initial Support Period" means six (6) months after initial delivery of
the Products.
3.5 "Intellectual Property Rights" means all copyrights, confidentiality
rights, trade secret rights, trademark rights, patent rights and other
intellectual property rights.
3.6 "License" means the license referred to in Section 1.1.
3.7 "License Fee" means the license fee payable for a Product as set forth
in the Exhibits.
3.8 "Media Warranty" means the warranty referred to in Section 4.6.
3.9 "Modifications or Enhancements" means any modifications, enhancements
or derivative works to the Products which contain or use any object code or
source code developed by Lawson or its Third Parties.
3.10 "Number of Concurrent Users" means the maximum number of Client's
employees or consultants that constitute the number of peak simultaneous
Users running any on-line program within an application license grouping
(if licensed as Standard Products) or within a process application suite
(if licensed as a Process Suite) as set forth in the Exhibits.
3.11 "Number of Named Users" means the maximum number of Client's employees
or consultants who are designated by Client as the only authorized Users of
Products licensed in such manner as set forth in the Exhibits.
3.12 "Number of Seats" means the maximum number of Client's workstations
upon which the licensed Products may be installed as set
<PAGE>
forth in the Exhibits.
3.13 "Number of Servers" means the maximum number of CPUs using the Platform
Technology on which Client is authorized to install the Software as specified
for each Product licensed as set forth in the Exhibits. A CPU shall be
considered a server when the server portion of the Product resides on that CPU.
Location, server description, server serial number, operating system and
release level , media required, and database and release level upon which
the Software is to be installed, are as set forth in the Exhibits or in an
addendum to this Agreement.
3.14 "Number of Sites" means the maximum number of street addresses,
regardless of number of buildings, at which the server portion of the Products
are installed. The site addresses must be set forth in the Exhibits or in an
addendum to this Agreement.
3.15 "Patent or Copyright" means a patent or copyright granted by the
government of the country in which the server portion of the Products is
first installed.
3.16 "Platform Technology" means the current and future release levels of the
combined hardware operating system and database system designated in the
Exhibits and certified by Lawson for Use with the Software. Unless otherwise
agreed upon in this Agreement, Lawson shall not be obligated to provide Support
for any portion of the Platform Technology.
3.17 "Products" means the products designated on the Exhibits to this
Agreement and owned either by Lawson or its Third Parties, which includes the
Software installed on the Platform Technology, Documentation, and media.
3.18 "Product Warranty" means the warranty referred to in Section 4.7.
3.19 "Software" means, depending on the applicable Support Category designated
in the Exhibits, the software portion of the Product installed on the Platform
Technology in object code or source code format, any updates, revisions,
new versions, supplements, and all permitted copies of the foregoing supplied
by Lawson to Client, whether in machine readable or printed form.
3.20 "Support" means the assistance provided by Lawson, directly or
indirectly, to Client as set forth in Section 4.0 of this Agreement.
3.21 "Taxes" means any sales, use, excise, value-added, withholding taxes
or other taxes based upon this Agreement, including taxes, interest and
penalties that are levied or assessed by a governmental authority, resulting
from this Agreement, excluding taxes based on Lawson's net income.
3.22 "Third Party" means a business entity that has authorized Lawson to
distribute that entity's Software and Documentation to Client by sublicense
between Lawson and Client.
3.23 "Use" means writing the Software into and reading the Software out of
memory of a computing device or the execution of the Software, in whole or in
part, by a computing device, and use of the Documentation, for the purpose of
performing the internal business of Client or its wholly-owned subsidiaries.
Use does not include using the Software for the business needs of a person or
entity other than Client, such as providing outsourcing, service bureau,
on-line services or training to third parties.
3.24 "User" means those employees and consultants of Client who are authorized
by the terms of this Agreement to Use the Products.
3.25 The singular and plural shall each include the other, and this Agreement
shall be read accordingly when required by the facts.
4.0 Support.
4.1 During the Initial Support Period and any extended period of Support under
Section 4.4, Lawson shall use its reasonable efforts to correct any error,
malfunction or defect in the operation of the Software to enable the Software
to materially or substantially perform in accordance with the Documentation in
effect at the time the Support is provided. Client shall be responsible for
the installation of Product defect repairs, and enhancements to, or subsequent
releases of, the Products. Client shall report to Lawson any errors,
malfunctions, or defects that cause the Product to fail to perform any material
function set forth in the then current Documentation. Lawson shall only be
obligated to provide Support if Client has paid the applicable Support fees and
provides Lawson with all information, documentation, technical assistance
and access to the computing device on which the Product is installed and any
other equipment and personnel necessary to assist Lawson. Lawson shall not
be obligated to provide Support if the Product is not used in accordance
with the then current Documentation or if any error, malfunction, or defect
reported by Client is found by Lawson to be due to a cause other than
the Product as delivered by Lawson. Client shall pay Lawson, at
Lawson's then current hourly rates, for Lawson's services in responding
to a Client report of an error, malfunction, or defect, if (a) such
error, malfunction, or defect does not exist, (b) Client
does not assist Lawson as required, (c) the Product is not used in accordance
with the Documentation, or (d) the error, malfunction, or defect is not caused
by the Product. If any such error, malfunction, or defect may reasonably be
corrected by Lawson, Lawson may correct it and Client shall reimburse Lawson
for such correction at Lawson's then current hourly rates.
4.2 Support further includes the items set forth in the following Support
Categories for each Product as designated in the Exhibits to this Agreement:
<PAGE>
(i) Support Category A entitles Client to receive for the Products the current
release of the source code and object code, Product defect repairs,
enhancements, and new releases, and any Documentation to enable Client to
install and use such Product defect repairs, enhancements and new releases,
as they become generally available from Lawson and the following Lawson
Helpline Services: (a) Lawson's standard telephone support, which includes
general technical information and assistance with problem determination,
isolation, verification, and resolution during the hours of 7 AM to 7 PM CST,
excluding weekends and holidays, and (b) Lawson's limited telephone support
which includes, in a production environment, mission critical and systems-down
application and technical support during the hours of 7 PM to 7 AM CST Monday
through Friday, 24 hours per day on Saturday and Sunday, and 8 AM to 5 PM CST
on United States Holidays excluding December 25.
(ii) Support Category B entitles Client to the same level of Support as
Support Category A, except that Client shall not receive source code.
(iii) Support Category C entitles Client to the same level of Support as
Support Category B, except that if Client terminates Support of a Support
Category C Product, Support for all other Products, regardless of the Support
Category is automatically terminated.
(iv) Support Category D, entitles Client to the same level of Support as
Support Category A, except that if Client terminates Support of a Support
Category D Product, Support for all other Products, regardless of the Support
Category is automatically terminated.
(v) Support Category E entitles Client to delivery of the object code for the
current release of the Product, but Client shall not receive any Support for
that Product during or after the Initial Support Period.
(vi) Support Category F entitles Client to delivery of the object code for
the current release of a Third Party Product, but no Support from Lawson for
that Product. Client may contract with the Third Party to receive Support
directly from the Third Party.
(vii) Support Category F-1 entitles Client to delivery of the source code for
the current release of the Product, but Client shall not receive any Support
from Lawson for that Product during or after the Initial Support Period.
Client may contract with a Third Party to receive Support directly from the
Third Party.
4.3 Only persons trained on the installation and operation of the Products
(as indicated on the Helpline access list provided from time to time by Client
to Lawson) may have access to the Lawson Helpline for problem resolution.
4.4 The License Fee paid for any Product, exclusive of Products licensed
under Support Category E, includes Support for the Initial Support Period.
Client may extend Support beyond the Initial Support Period by paying Lawson's
then current Support fee within sixty (60) days before the end of the Initial
Support Period and thereafter by paying Lawson's then current Support fee
within sixty (60) days before the end of any extended period of Support.
Support is extended for twelve (12) month periods and provided only as
specified by Lawson's then currently available Support offerings. Support
shall automatically terminate at the end of the applicable Support period if
payment is not timely made. Lawson may cease providing Support or change the
terms of Support at any time upon completion of the initial or any extended
period of Support. The Support fee base for the Products (excluding Third
Party Products), for any extended period of Support, is calculated at sixteen
16% of the list price of the Products at the Effective Date plus an increase
amount not to exceed twelve (12) percent of the previous Support period's
Support fee. Such increase restriction on Support fees shall be in effect for
a period of four (4) years from the initial delivery of the Products. The
increase restriction on Support fees in this Section 4.4 shall not apply to
(i) additions to the Number of Users, Seats, Servers, Sites or Products since
the beginning of the most recent Support period; or (ii) Third Party-owned
Products sublicensed through Lawson. The Support fee base for Third
Party-owned Products under the Agreement shall be calculated either at a flat
fee or at sixteen (16) percent of the then current list price, depending on the
respective Third Party-owned Product. Client shall reimburse Lawson for all
reasonable out-of-pocket and travel expenses incurred by Lawson at Client's
request.
4.5 If Client does not pay annual Support fees for the Products under Section
4.4 above, Support for such Products shall terminate. Reinstatement of annual
Support shall be at Lawson's discretion and shall require the following:
(i)If fewer than twelve (12) months have expired since annual Support has been
terminated, Client shall be required to pay a reinstatement fee equal to two (2)
percent of the then current list price for the Products for which annual
Support has been terminated for each month Client has not been covered under
annual Support, plus the annual Support fee for the next twelve (12) months.
The annual Support fee shall be based on the then current Support fee rate.
(ii)If twelve (12) months or more have expired since annual Support has
been terminated, then Client shall be required to pay a reinstatement fee for
the Products for which annual Support has been terminated equal to the then
current list price for the Products.
The Parties agree that the above reinstatement fees are liquidated damages and
fair and equitable compensation for the value of reinstated Support, and are
not penalties for termination of Support.
4.6 Lawson warrants that at the time of delivery of the Products, the media
containing the Products shall be free of material defects. The Client's sole
and exclusive remedy for breach of the Media Warranty is replacement of the
defective media if any such defect is found within six (6) months after
delivery of the defective media.
4.7 Lawson warrants that during the Initial Support Period and any extended
period of Support the Products shall materially or
<PAGE>
substantially perform in accordance with the Documentation in effect at
the time the Support is provided. No Product Warranty is provided for
Products licensed under Support Category E. The Client's exclusive
remedies for breach of the Product Warranty are (a) the Client may request
Support from Lawson to enable the Products to comply with the Product Warranty,
and (b) if the Support requested by the Client does not enable the Products
to comply with the Product Warranty within a reasonable period of time, Client
may seek direct damages for the affected Products subject to the limitations
in Section 14.0. Lawson shall not be liable to remedy any claimed breach of
the Product Warranty due to the acts or omissions of the Client or any third
party.
4.8 Lawson warrants that during the Initial Support Period and any extended
period of Support the Products shall be Year 2000 Compliant. "Year 2000
Compliant" means (to the extent that other information technology, used in
combination with the Products, properly exchanges date/time data with
the Products): (i) the Products, as delivered by Lawson, shall accurately
process date/time data (including, without limitation, calculating, comparing
and sequencing) from, into and between the twentieth and twenty-first
centuries, and the years 1999 and 2000 and leap year calculations, in
accordance with the Documentation relating to those Products and in effect at
the time the Support is provided; and (ii) the Products, as delivered by
Lawson, will accurately process date/time data (including, without limitation,
calculating, comparing and sequencing) on or after January 1, 2000 in the same
manner, and with the same functionality as the same release level of the
Products processes date/time data (including, without limitation, calculating,
comparing and sequencing) on or before December 31, 1999. During the Initial
Support Period or any extended period of Support, Lawson shall not modify the
Documentation or the Products in any manner which would cause the Products to
not be Year 2000 Compliant.
4.9 THE EXPRESS LIMITED WARRANTIES IN THIS SECTION 4.0 ARE IN LIEU OF ALL
OTHER WARRANTIES AND CONDITIONS EXPRESSED OR IMPLIED, CONTRACTUAL OR STATUTORY,
INCLUDING BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. NOTWITHSTANDING ANY OTHER PROVISION IN
THIS AGREEMENT, LAWSON DOES NOT WARRANT THAT THE USE OF THE PRODUCTS SHALL BE
UNINTERRUPTED OR ERROR FREE OR THAT ALL DEFICIENCIES OR ERRORS ARE CAPABLE OF
BEING CORRECTED.
5.0 Intellectual Property Rights.
5.1 Client acknowledges and agrees that the Products, the ideas, methods of
operation, processes, know-how, aesthetic aspects, sub-systems and modules
included in the Products, the graphical user interfaces for the Products, and
the look and feel of the Products are proprietary materials which contain
valuable trade secrets and that all Intellectual Property Rights to the
Products are owned exclusively by Lawson and its respective Third Parties,
subject to the License.
5.2 Client acknowledges and agrees that Lawson and its respective Third
Parties shall retain title to all Intellectual Property Rights related to the
Products, copies of the Products, and Modifications or Enhancements, subject to
the License. If Client makes any Modifications or Enhancements, Client shall
assign to Lawson and its respective Third Parties all Intellectual Property
Rights to the Modifications or Enhancements. Modifications or Enhancements may
be used in conjunction with the Products only in compliance with this
Agreement. Client may develop and own software which interfaces with the
Products but does not contain or use any object code or source code developed
by Lawson or its Third Parties.
5.3 Client shall take reasonable precautions (including the precautions used
for Client's own confidential information) to prevent the unauthorized use or
disclosure of the Products, any source code provided to Client under this
Agreement, or the results of any performance or benchmark tests of the
Software. Client shall not allow the Products or any such test results to be
made available to any third party who is not a User, unless Lawson approves
such in writing and the third party enters into a non-disclosure and non-use
agreement with Client on terms acceptable to Lawson and its Third Parties.
The Client shall not disassemble, decompile, decode or reverse engineer the
Software, except as expressly permitted by applicable law.
5.4 Client shall keep the Products free and clear of all liens and security
interests and may not sublicense the Products.
5.5 Lawson shall have the right to inspect, with reasonable notice, during
normal business hours, any location where the Products are being used and to
run the Software for the purpose of auditing its use.
6.0 Products Owned by Lawson Third Parties.
The portions of the Products that are owned by Lawson's Third Parties are
sublicensed by Lawson to the Client under this Agreement and are restricted to
Use in conjunction with the Products. If the applicable agreement between
Lawson and its respective Third Party is terminated for any reason, the Third
Party shall continue to be considered a third party beneficiary to this
Agreement and may enforce its rights under this Agreement as the licensor of
the Third Party-owned Products to Client.
7.0 Number of Concurrent Users, Number of Seats and Number of Named Users.
The number of Users authorized to Use any Product with the Platform Technology
shall not exceed the Number of Concurrent Users, Number of Seats or Number of
Named Users specified for the Products on the Exhibits. Client shall take
reasonable precautions to ensure that the Number of Concurrent Users, Number of
Seats or Number of Named Users are not exceeded, including periodic audits of
Use of the Products. Client may request, in writing to Lawson, that the Number
of Concurrent Users, Number of Seats and/or Number of Named Users be increased.
Upon payment of the then current Lawson pricing for the new level of Users
and/or seats, signing by Client and Lawson of an addendum to this Agreement
indicating the new Number of Users and/or Number of Seats and the new payment
level, and Lawson's receipt of such payment, the additional Users and/or Seats
shall be authorized. If the Exhibits designate the Number of
<PAGE>
Concurrent Users, Number of Seats, or Number of Named Users as "Unlimited,"
"UNL" or similar designation, such designation is restricted to the Platform
Technology designated in the Exhibits.
8.0 Number of Servers and Number of Sites.
The number of servers or sites upon or at which the Product is installed shall
not exceed the Number of Servers or Number of Sites specified for the Products
on the Exhibits. Client shall take reasonable precautions to ensure that the
Number of Servers or Number of Sites is not exceeded, including periodic audits
of Use of the Products. Client may request, in writing to Lawson, that the
Number of Servers or Number of Sites be increased. With respect to
Lawson-owned Products, upon signing by Client and Lawson of an addendum to this
Agreement indicating the new level of servers (and the number of Users per
server) or sites and the location and identification of such servers or sites,
the additional servers or sites shall be authorized. With respect to Third
Party-owned Products, upon payment of the then current Lawson pricing for the
additional servers or sites, signing by Client and Lawson of an addendum to
this Agreement indicating the new level of servers (and the number of Users per
server) or sites, and the new payment level, and Lawson's receipt of such
payment, the additional servers or sites shall be authorized. When requesting
an increase in the Number of Servers or Number of Sites, Client shall provide
Lawson the location address, Number of Concurrent Users, server description,
operating system and release level , server serial number, media required, and
database and release level upon which the Software is to be installed. If the
Exhibits designate the Number of Servers, or Number of Sites as "Unlimited,"
"UNL" or similar designation, such designation is restricted to the Platform
Technology designated in the Exhibits.
9.0 Platform Technology and Product Exchange.
9.1 Client may install and Use the Products on only the Platform Technology.
Client may install and Use products, as supplied by Lawson, with another
combination of hardware operating system and database system certified by
Lawson ("New Platform Technology") only by agreement with Lawson as described
in this Section 9.0.
9.2 Before signing this Agreement, Client may choose to purchase from Lawson
the optional right to exchange the Products in the future, during the Initial
Support Period and any extended period of Support, for then currently available
products supplied by Lawson with similar pricing, features and functionality
("Exchanged Products") for use with New Platform Technology under Lawson's
Platform Technology and Product Exchange Program ("Exchange Program"). If
Client desires to participate in the Exchange Program, Lawson and Client shall
proceed as follows:
(i) Concurrently with the signing of this Agreement, Lawson and Client will
enter into an addendum to this Agreement, which includes: a description of the
Exchanged Products and New Platform Technology, the additional license fees and
Support fees payable by Client upon execution of this Agreement and such
addendum, and other terms applicable to the Exchange Program.
(ii) When Client desires to take delivery of the Exchanged Products under the
Exchange Program, Client shall provide Lawson the location address, Number of
Concurrent Users, server description, operating system and release level,
server serial number, media required, and database and release level upon which
the Exchanged Products are to be installed.
(iii) Subject to the requirements listed in Section 9.2(ii), Lawson shall
deliver the Exchanged Products to Client, and Client may install and Use the
Exchanged Products on only the New Platform Technology pursuant to the License
under this Agreement.
(iv) Support for the Exchanged Products shall be made available by Lawson
under its then currently available Support offerings.
(v) Promptly after installation and implementation of the Exchanged Products
by Client, Client shall certify in writing to Lawson that Client has either
destroyed or returned to Lawson the Products replaced by the Exchanged Products.
If Client has not purchased the right to participate in the Exchange Program by
entering into an addendum concurrently with the signing of this Agreement,
Client may exchange the Products for Use with New Platform Technology in the
future only by entering into a separate Product License Agreement with Lawson
at Lawson's then current license fees and terms.
9.3 If Client desires to obtain other available products from Lawson that do
not have pricing, features and functionality similar to the Products, those
products shall be licensed for use by Client only by entering into a separate
Product License Agreement with Lawson at Lawson's then current license fees
and terms.
9.4 All future software products shall be developed and made available by
Lawson at its sole discretion.
10.0 Copies of Software and Documentation.
10.1 Client may copy the Software, in object and/or source code format, only
for backup and archival purposes. All copies of the Software must have all of
the restrictive and proprietary notices as they appear on copies of the
Software provided by Lawson or its Third Party. For those Products licensed on
an unlimited server basis, Client may request an additional copy of the
Software from Lawson, at a nominal charge to the Client, for each additional
server on which the server portion of the Products shall be installed. Such
request shall be subject to the terms set forth in Section 7.0, 8.0, and 9.0.
<PAGE>
10.2 Client may copy Documentation for Lawson-owned Products only on a limited
basis related to the number of Users of the Products. All copies of the
Documentation shall have all of the restrictive and proprietary notices as they
appear on copies of the Documentation provided by Lawson. Unless otherwise
provided for in writing, Client may not copy Documentation for Third
Party-owned Products.
11.0 Source Code.
The Software, in source code format, may be used only for diagnosing problems
and developing Modifications or Enhancements permitted by this Agreement.
Client may grant access to the source code only to its Users who have
personally signed an agreement protecting Lawson's and its Third Parties'
rights under this Agreement. Client shall ensure that only such authorized
Users have access to the source code.
12.0 Infringement.
12.1 Lawson shall, at its expense, defend any suit or claim brought against
Client and shall indemnify Client against an award of damages and costs against
Client by a final court judgment based on a claim that Client's Use of a
Product infringes a Patent or Copyright, if Client: (a) notifies Lawson in
writing of the suit or claim within ten (10) days after Client receives notice;
(b) gives Lawson sole authority to defend or settle the suit or claim; (c)
gives Lawson all information in Client's control concerning the suit or claim;
and (d) reasonably cooperates and assists Lawson with defense of the suit
or claim.
12.2 If any Product becomes or in Lawson's opinion is likely to become the
subject of a suit or claim of infringement of a Patent or Copyright, Lawson
shall at its option and expense (a) obtain the right for Client to Use the
Product; (b) replace or modify the Product so that it becomes non-infringing;
or (c) terminate the License for the infringing Product and this Agreement to
the extent it relates to the infringing Product. If Lawson terminates the
License for the infringing Product: under this Section 12.2 (a) Client shall
cease to Use the infringing Product and shall return it to Lawson; and (b)
Lawson shall pay Client, as Client's sole and exclusive remedy against Lawson
(other than indemnification by Lawson under Section 12.1) an amount equal to
the License Fee paid under this Agreement for the infringing Product less any
cumulative amortization or depreciation of that Product by Client on its
financial statements as of the date when Lawson terminates the License for the
infringing Product.
12.3 Lawson shall have no liability to Client under this Section 12.0 if
any suit or claim of infringement is based upon the use of the Product: (a)
in combination, operation or use with any product not furnished by Lawson or
its Third Party; (b) in a modified state not authorized by Lawson; or (c) in a
manner other than for which it was designed, if infringement would have been
avoided without such use of the Product. Lawson shall not be liable to Client
for any infringement outside the country in which the server portion of the
Products is first installed.
13.0 Term and Termination.
13.1 The term of this Agreement shall begin upon the Effective Date, and shall
continue until terminated by either Party pursuant to the terms and conditions
of this Agreement.
13.2 Lawson may terminate this Agreement and the License granted to Client if
Lawson is in compliance with this Agreement and either (a) Client fails to pay
Lawson any amounts when due Lawson or, (b) Client is in material default of any
other provision of this Agreement and such default has not been cured within
ninety 90 days after Lawson gives Client written notice describing the default.
Upon termination in accordance with this Section 13.2, Lawson may:
(i) declare all amounts owed to Lawson by Client to be immediately due and
payable;
(ii) require that Client cease any further use of the Products and
immediately return the Products and any copies to Lawson; and
(iii) cease performance of all of Lawson's obligations under this Agreement
without liability to Client.
13.3 Client may terminate this Agreement and the License granted to Client if
Client is in compliance with this Agreement and Lawson is in material default
of any provision of this Agreement and such default has not been cured within
ninety 90 days after Client gives Lawson written notice describing the default.
Upon such termination:
(i) Client shall pay Lawson's outstanding invoices that do not pertain to
Lawson's default, but Client shall have no further payment obligations to
Lawson under this Agreement; and
(ii) Lawson may require that Client cease any further use of the Products and
immediately return the Products and any copies to Lawson.
13.4 Upon termination of this Agreement by Lawson or Client, Sections 3.0,
4.6, 5.0, 6.0, and 12.0 through 26.0 of this Agreement shall survive.
14.0 Limitations of Liability.
14.1 AFTER THE PARTIES HAVE SIGNED THIS AGREEMENT, CLIENT'S EXCLUSIVE REMEDIES
FOR PRODUCT RELATED MATTERS SHALL BE AS DESCRIBED IN THIS AGREEMENT, SUBJECT TO
THE LIMITATIONS OF SECTION 14.0.
<PAGE>
14.2LAWSON SHALL NOT BE LIABLE FOR ANY EXPENSE OR DAMAGE ARISING OUT OF ANY
ERASURE, DAMAGE OR DESTRUCTION OF FILES, DATA OR PROGRAMS. CLIENT SHALL BE
RESPONSIBLE FOR MAKING BACKUP COPIES OF FILES, DATA, AND PROGRAMS.
14.3 IN NO EVENT SHALL LAWSON OR ITS THIRD PARTIES BE LIABLE FOR SPECIAL,
INDIRECT, THIRD PARTY, OR CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS.
NEITHER PARTY SHALL SEEK, OR OTHERWISE APPLY FOR, ANY PUNITIVE OR EXEMPLARY
DAMAGES.
14.4 EXCEPT ONLY FOR INDEMNIFICATION BY LAWSON UNDER SECTION 12.1 ABOVE,
LAWSON'S AND ITS THIRD PARTIES' MAXIMUM AGGREGATE LIABILITY FOR DAMAGES TO
CLIENT OR OTHERS SHALL BE LIMITED TO ACTUAL DIRECT MONEY DAMAGES IN AN AMOUNT
NOT TO EXCEED (A) THE INITIAL LICENSE FEE PAID BY CLIENT FOR THE PRODUCTS
SUBJECT TO THE DAMAGE CLAIM IF THE CLAIM AROSE WITHIN ONE (1) YEAR AFTER THE
EFFECTIVE DATE; OR (B) THE MOST RECENT ANNUAL SUPPORT FEE PAID BY CLIENT FOR
THE PRODUCTS SUBJECT TO THE DAMAGE CLAIM IF THE CLAIM AROSE MORE THAN ONE (1)
YEAR AFTER THE EFFECTIVE DATE.
14.5 CLIENT ACKNOWLEDGES THAT THE LIMITATIONS ON LIABILITY IN THIS SECTION
14 ARE REASONABLE. THE REMEDIES PROVIDED IN THIS AGREEMENT ARE EXCLUSIVE.
EXCEPT ONLY FOR ACTIONS BY LAWSON TO PROTECT INTELLECTUAL PROPERTY RIGHTS OR
FOR BREACH OF SECTION 17.0, NEITHER PARTY SHALL SEEK, OR OTHERWISE APPLY FOR,
ANY EQUITABLE REMEDIES.
15.0 Assignment.
Client shall not assign this Agreement or transfer, by operation of law or
otherwise, any of its respective rights or obligations under this Agreement
(including, without limitation, by a change in the majority ownership or
control of Client) without the prior written consent of Lawson, such consent
to not be unreasonably withheld. Any assignment or transfer in violation of
this Section 15.0 shall be void.
16.0 Waiver.
No term or provision of this Agreement shall be deemed waived and no breach
shall be deemed excused, unless such waiver is in writing and signed by the
Party claimed to have waived.
17.0 Export.
Client shall not export the Products from the country in which the server
portion of the Products is first installed, without the prior written
authorization of Lawson and compliance with applicable export laws.
18.0 Excusable Delay.
Neither Lawson nor Client shall be deemed to be in default of any provision
of this Agreement or for any failure in performance, resulting from acts or
events beyond the reasonable control of Lawson or Client, as the case may be.
For purposes of this Agreement, such acts shall include, but not be limited to,
acts of God, civil or military authority, civil disturbance, war, strikes,
fires, other catastrophes, or other such major events beyond Lawson's or
Client's reasonable control. This Section 18.0 shall not delay or excuse
Client's payment obligations.
19.0 Governing Law and Dispute Resolution.
This Agreement is governed by and construed in all respects in accordance
with the laws of the State of Minnesota, USA. (without regard to conflicts of
laws principles), excluding the United Nations Convention on Contracts for the
International Sale of Goods. Except only for disputes for which injunctive
relief is sought to prevent the unauthorized use or disclosure of the Products,
any disputes between Client and Lawson (which are not otherwise resolved by
the Parties) shall be submitted to binding arbitration in Minneapolis,
Minnesota, USA. in accordance with the then prevailing rules of the American
Arbitration Association. Any action, to confirm an arbitration award or any
other legal action related to this Agreement, the Products or other dispute
between Client and Lawson, shall be instituted only in a federal or state court
in the State of Minnesota, USA., and Client shall submit to personal
jurisdiction of these courts in any such legal action. Lawson and Client each
waive their right to a trial by jury for any disputes between the Parties.
20.0 Legal Fees and Costs.
The prevailing Party shall be entitled to collect from the other Party, the
prevailing Party's reasonable legal fees and costs in connection with the
enforcement of this Agreement.
21.0 Independent Contractor.
Lawson is providing the Products and Support under this Agreement as an
independent contractor, and its personnel shall not be considered employees
or agents of Client.
22.0 Severance and Interpretation.
<PAGE>
If any provision of this Agreement is found to be unenforceable, such
provision shall be deemed to be deleted or narrowly construed to such extent
as is necessary to make it enforceable and this Agreement shall otherwise
remain in full force and effect. If an ambiguity or question of intent arises,
this Agreement shall be construed as if drafted jointly by the Parties and no
presumption or burden of proof shall arise favoring or disfavoring either Party
by virtue of authorship of any of the provisions of this Agreement.
23.0 Time Limitation.
Except for actions for non-payment or for breach of Lawson's or its Third
Parties' Intellectual Property Rights, no action arising out of or relating to
this Agreement may be brought later than two (2) years after the cause of
action became known to the injured Party.
24.0 Notices.
All notices required or permitted under this Agreement and all requests for
approvals, consents, and waivers must be delivered by a method providing for
proof of delivery. A confirmed facsimile transmission shall be deemed to
provide proof of delivery. Any notice or request shall be deemed to have been
given on the date of delivery. Notices and requests must be delivered to the
Parties at the addresses on the first page of this Agreement until a different
address has been designated by notice to the other Party.
25.0 Non-Solicitation of Employees.
Neither Party shall directly solicit the services or employment of any employee
or agent of the other Party for a period beginning at the Effective Date and
ending twelve (12) months after the last date of initial delivery of any of the
Products as set forth in the Exhibits (as of the Effective Date). The
soliciting Party, who violates this Section 25.0, shall pay to the other Party
an amount equal to one (1) year's salary for any solicited employee of the other
Party, as liquidated damages and not as a penalty. The amount of annual salary
shall be the annual salary in effect at the date the employee was solicited.
For purposes of this Section 25.0, the term "employee" means current or former
employees of the other Party who were employed by the other Party at any time
during the period beginning at the Effective Date and ending twelve (12)
months after the last date of initial delivery of any Products.
26.0 Publicity.
Either Party may (in any press release, advertising or other publicly-
disseminated materials) refer to the other Party, to the existence and terms of
this Agreement, to the Products licensed by Client under this Agreement, and to
background information leading to this Agreement, including, for example:
Lawson competitors and competing products considered by Client, net value of
the Agreement, and Client business needs and reasons for selecting Lawson and
its Products. Before disseminating this information publicly, the disclosing
Party shall review the factual content of the disclosures with the other Party.
Notwithstanding the foregoing, Client shall not publicly disclose special
pricing, discounts, payment terms, or addenda contained in, or attached to,
this Agreement without the prior written consent of Lawson.
27.0 Entire Agreement.
This Agreement and the Exhibits listed below and referred to herein, together
with any addenda signed by the Parties (collectively, the "Agreement"),
constitute the entire agreement between Lawson and Client with respect to the
Products, Support, and other subject matter of this Agreement, and may only be
modified by a written amendment or addendum signed by both Lawson and Client.
No employee, agent, or other representative of either Lawson or Client has
authority to bind the other with regard to any statement, representation,
warranty, or other expression unless it is specifically included within the
express terms of this Agreement or a written addendum signed by both Lawson and
Client. All purchase orders, prior agreements, representations, statements,
proposals, negotiations, understandings, and undertakings with respect to the
subject matter of this Agreement are superseded by this Agreement.
For LAWSON ASSOCIATES, INC. For 2TheMart.com, Inc.
/s/Rhos B. Dyke /s/Dominic J. Magliarditi
Area Sales Director, West Field Operations President
(Title) (Title)
7/19/99 7/16/99
(Date) (Date)
EXHIBITS: Attached
ADDENDUM
TO
LAWSON SOFTWARE PRODUCT LICENSE AGREEMENT
This Addendum ("Addendum") modifies the Lawson Software Product License
Agreement ("Agreement") entered into between Lawson Associates, Inc. dba
Lawson Software ("Lawson") and the undersigned Client, and is effective as
of the date signed by Lawson. All of the capitalized terms not otherwise
defined in this Addendum have the same respective meanings as contained in
the Agreement. The following sections or paragraphs replace or are in
addition to the respective sections or paragraphs contained in the
Agreement. The sections or paragraphs of the Agreement that are not
expressly replaced by this Addendum shall remain in effect pursuant
to their terms.
SECTION 3.4 OF THE AGREEMENT IS DELETED IN ITS ENTIRETY AND REPLACED WITH
THE FOLLOWING:
3.4 "Initial Support Period" means twelve (12) months after
initial delivery of the Products.
SECTION 5.2 OF THE AGREEMENT IS DELETED IN ITS ENTIRETY AND REPLACED
WITH THE FOLLOWING:
5.2 Client acknowledges and agrees that Lawson and its respective
Third Parties shall retain title to all Intellectual Property Rights
related to the Products, copies of the Products, and Modifications
or Enhancements, subject to the License. If Client makes any
Modifications or Enhancements, Client shall assign to Lawson and its
respective Third Parties all Intellectual Property Rights to the
Modifications or Enhancements. Lawson shall not knowingly sell the
Modifications or Enhancement assigned to Lawson by Client to any
entity. Modifications or Enhancements may be used in conjunction
with the Products only in compliance with this Agreement. Client
may develop and own software which interfaces with the Products but
does not contain or use any object code or source code developed by
Lawson or its Third Parties.
SECTION 13.0 OF THE AGREEMENT IS DELETED IN ITS ENTIRETY AND
REPLACED WITH THE FOLLOWING:
13.1 The term of this Agreement shall begin upon the Effective
Date, and shall continue until terminated by either Party pursuant
to the terms and conditions of this Agreement.
13.2 Lawson may terminate this Agreement and the License granted to
Client if Lawson is in compliance with this Agreement and either (a)
Client fails to pay Lawson any amounts when due Lawson or, (b)
Client is in material default of any other provision of this
Agreement and such default has not been cured within sixty 60 days
after Lawson gives Client written notice describing the default.
Upon termination in accordance with this Section 13.2, Lawson may:
(i) declare all amounts owed to Lawson by Client to be
immediately due and payable;
(ii) require that Client cease any further use of the Products
and immediately return the Products and any copies to Lawson; and
(iii) cease performance of all of Lawson's obligations under
this Agreement without liability to Client.
13.3 Client may terminate this Agreement and the License granted to
Client if Client is in compliance with this Agreement and Lawson is
in material default of any provision of this Agreement and such
default has not been cured within sixty 60 days after Client gives
Lawson written notice describing the default. Upon such termination:
(i) Client shall pay Lawson's outstanding invoices that
do not pertain to Lawson's default, but Client shall have
no further payment obligations to Lawson under this
Agreement; and
(ii) Lawson may require that Client cease any further use
of the Products and immediately return the Products and
any copies to Lawson.
13.4 Upon termination of this Agreement by Lawson or Client,
Sections 3.0, 4.6, 5.0, 6.0, and 12.0 through 26.0 of this Agreement
shall survive.
SECTION 19.0 OF THE AGREEMENT IS DELETED IN ITS ENTIRETY AND
REPLACED WITH THE FOLLOWING:
19.0 This Agreement is governed by and construed in all respects in
accordance with the laws of the State of Minnesota, U.S.A. (without
regard to conflicts of laws principles), excluding the United
Nations Convention on Contracts for the International Sale of Goods.
Except only for disputes for which injunctive relief is sought to
prevent the unauthorized use or disclosure of the Products, any
disputes between the Parties (which are not otherwise resolved by
the Parties) shall be submitted to binding arbitration in accordance
with the then prevailing rules of the American Arbitration
Association (an "Arbitration Proceeding"). If Lawson initiates an
Arbitration Proceeding, the Arbitration Proceeding shall be held in
Irvine, California. If the Client initiates an Arbitration
Proceeding, the Arbitration Proceeding shall be held in Minneapolis,
Minnesota. Any action to confirm an arbitration award or any other
legal action related to this Agreement, the Products or other
dispute between the Client and Lawson, shall be instituted only in a
federal court in the State of California, if initiated by Lawson, or
in the State of Minnesota, if initiated by the Client; and the
Parties shall submit to personal jurisdiction of such respective
courts in any such legal action. Lawson and the Client each waive
their right to a trial by jury for any disputes between the Parties.
At least thirty (30) days before either Party initiates an
arbitration proceeding, authorized representatives of Lawson and the
Client shall review and become familiar with the subject matter of
the dispute, and meet in person or by telephone to review and
attempt to resolve the dispute in good faith.
ADDITIONAL USER PRICING: Financial Suite Users: List price is
$6,600/user. 2TheMart discounted price is $4,620/user sold in
groups of 5, valid for three years from contract execution date.
After three years, Lawson Software will extend to 2TheMart.com a 30%
discount on the then current list price.
FINAL PAYMENT TERMS
OPTION A:
On or before May 01, 2000, 2TheMart must exercise an option to
purchase unlimited Vendor Information Named users, unlimited
Net.Commerce Business Packs, and unlimited Business Components
Integrators by paying a one time fee of $573,070. This fee is due
prior to May 10, 2000. THIS DOES NOT INCLUDE ANY OF THE ADDITIONAL
USER PRICING FOR THE FINANCIAL SUITE USERS.
OPTION B:
The following payment terms will be applicable based on the GROSS
REVENUES of 2TheMart.com. Lawson Software will use 2TheMarts.com
Inc., quarterly earnings announcement as the criteria for billing.
An annual review of the 2TheMarts Financial Statements will also be
performed. These payments are cumulative in nature. EXAMPLE:
CLIENT HAS MADE FIRST PAYMENT OF $30,000 BASED ON REVENUES OF
$51,000,000. UPON THE RELEASE OF THE NEXT QUARTERLY EARNINGS,
CLIENT REPORTS REVENUES OF $501,000,000. CLIENT MUST PAY THE
CUMULATIVE TOTAL OF $235,000 ($50,000 + $85,000 + $100,000) PER THE
PAYMENT SCHEDULE BELOW.
When revenues exceed: 50 Million Paymentis: $30,000
150 Million $50,000
250 Million $85,000
500 Million $100,000
750 Million $125,000
1 Billion $150,000
2 Billion $500,000
3 Billion $500,000
4 Billion $500,000
5 Billion $500,000
6 Billion $500,000
7 Billion $500,000
8 Billion $500,000
9 Billion $500,000
10 Billion $1 million****
****With this option payment, 2TheMart.com will no longer have
any revenue based obligations for the unlimited Vendor
Information Named users, unlimited Net.Commerce Business
Packs, and unlimited Business Components Integrators as
initially provided as part of the initial software shipment.
2TheMart.com will have full and final unlimited corporate
licensing for Vendor Information Named users, Net.Commerce
Business Packs, and unlimited Business Components Integrators.
This does not include any of the additional user pricing for
the Financial Suite Users as noted above.
FOR LAWSON ASSOCIATES, INC.
/s/Rhos B. Dyke
Area Sales Director, West Field Operations
Date: 7/19/99
FOR 2THEMART.COM, INC.
/s/Dominic J. Magliarditi
President
Date: 7/19/99
LAWSON SOFTWARE
Beta Test Agreement
This Beta Test Agreement ("Beta Agreement") modifies the Lawson Software
product license agreement ("Agreement") entered into between Lawson Associates,
Inc. dba Lawson Software ("Lawson") and the undersigned Client, whose name,
principal business address, and jurisdiction of incorporation are set forth
below, (collectively "the parties"), and is effective as of the date signed
by Lawson. All of the capitalized terms not otherwise defined in this Beta
Agreement have the same respective meanings as contained in the Agreement.
The provisions of the Agreement that are not expressly nmodified by this Beta
Agreement shall remain in effect pursuant to their terms.
Client Name: 2THEMART.COM, INC.
Address: 18301 VON KARMAN AVE, SEVENTH FLOOR
City and State/Zip or Province/Postal Code: IRVINE, CA 92612
Country: USA
"Effective" Date means the date when authorized representatives of both Lawson
and Client have signed this Beta Agreement as indicated at the end of this Beta
Agreement in the space marked "Date" below Lawson's signature to this
Agreement.
1.0 Intent of the Beta Agreement.
The intent of this Beta Agreement is to set forth the obligations of the
Parties with respect to the Use of the designated Beta Test Products
("Beta Products"), as set forth in the Beta Worksheet, attached as Exhibit A.
2.0 Acknowledgment.
The Parties acknowledge and agree that the Beta Products are test versions
of the Products, are not generally available, may contain defects, are not
expected to perform fully, per the related specifications, upon installation,
and Lawson shall have no obligation under this Beta Agreement to repair such
defects. The Parties further acknowledge and agree that Lawson shall have the
right to use, in any matter and for any purpose, the information gained as the
result of Use of the Beta Products, exclusive of that which is mutually agreed
upon as proprietary in nature to the Client.
3.0 Obligations of Client.
Under the terms of this Beta Agreement Client shall:
1. assign a full-time employee as Client project leader to actively
participate, under the leadership of the Lawson designated project
facilitator, in the development and direction of the Beta Site Implementation
Plan ("Plan"), in the coordination of Client resources in support of the Plan,
and in serving as the primary Client communication contact in relation to the
Plan.
2. provide trained technical and application personnel who shall possess the
skills and training necessary to perform the Client-assigned tasks related to
the Plan.
3. implement, concurrently, the Beta Products and other products as specified
in the Plan.
4. provide data to Lawson, using appropriate media, for the purposes of
conversion testing.
5. test the identified features, functionality, and performance of the Beta
Products as set forth on Exhibit A.
6. refrain from developing modifications to the Beta Products and other
products, both directly and indirectly, unless agreed upon in writing by
Lawson, for the Term of this Beta Agreement.
7. permit modem support access and Internet patch download capability for
Lawson to the Beta Products and other products for the Term of this Beta
Agreement.
8. require Client's third parties, who have need of access to the Beta
Products and other products, to agree to and adhere to the terms and conditions
of this Beta Agreement.
9. serve as a beta site reference for Lawson's Clients and prospective clients
for a period of one (1) year from Client's receipt of the Beta Products, to the
extent of permitting Lawson pre-arranged site visits and telephone contact for
Lawson's Clients and prospective clients.
10. participate in Lawson public relations activities promoting the Beta
Product, including participation in press conferences, press and industry
analyst interviews, and providing quotes for press releases and promotional
materials.
11. participate in Lawson User Exchange sessions under the direction of Lawson
personnel.
12. pay any travel and per diem expenses incurred by Lawson or Client in the
performance of activities related to the Plan.
13. install any mandated program updates or repairs as required by Lawson.
14. return the Beta Products to Lawson if Lawson elects to recall the Beta
Products at its sole discretion.
15. upgrade from the Beta Product version to the generally available version
of the Beta Products no later than ninety (90) days after the generally
available version is made available by Lawson.
<PAGE>
4.0 Obligations of Lawson.
Under the terms of this Beta Agreement Lawson shall:
1. provide to Client the Beta Products set forth in Exhibit A; such Beta
Products to have been tested by Lawson and the documentation for which shall
be provided by Lawson in draft form.
2. provide a Lawson employee ("Client Service Manager"), utilizing Lawson's
project methodology, to direct the development and administration of the Plan,
to coordinate Lawson resources in support of the Plan, to provide Plan status
reports to Client and Lawson, and to serve as Lawson's communication contact
in relation to the Plan.
3. provide initial user upgrade training at a Client designated site, billed
in accordance with the Lawson Software Agreement for Services Fees, for the
Beta Products.
4. provide trained technical and application personnel who shall possess the
skills and training necessary to perform the Lawson-assigned tasks related to
the Plan.
5. provide modem connect support and Internet patch download capabilities for
the Beta Products.
6. provide Beta Product support during normal Lawson support hours.
After hours emergency support shall be provided for Beta Products only if
pre-arranged and mutually agreed upon between the Parties.
7. provide continued access to key Beta Product(s) personnel for the Term
of this Beta Agreement.
8. provide upgrade consulting services, either directly or indirectly, to
address Client's data conversion issues.
9. provide free registration for two (2) Client employees at one (1) Lawson
Software Conference and User Exchange subsequent to the Term of this Beta
Agreement.
10. provide on-site assistance resources from Lawson's Research & Development
Department to participate in the beta test process. Such resources shall be
provided free of charge to client for up to a mzximum of [ ] on-site visits.
Lawson Client Service Managers and Service Consultants shall be billed subject
to a Lawson Software Agreement for Services Fees entered into between Lawson
and Client.
5.0 Term & Termination.
5.1 This Beta Agreement shall be in effect for a period commencing with the
date signed by Lawson until ("Term").
5.2 Either Party may terminate this Beta Agreement prior to the expiration
of the Term, without cause, on sixty (60) days' notice.
5.3 Either Party may terminate this Beta Agreement prior to the expiration of
the Term for material breach by the other Party upon (30) days' written notice
specifying the breach, which termination shall be effective at the end of the
(30) day period unless one breach has earlier been cured.
Notwithstanding the foregoing, on any material breach of the intellectual
property rights of a Party, that Party may immediately terminate this
agreement without notice.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
Effective Date.
For LAWSON ASSOCIATES, INC. For 2TheMart.com, Inc.
/s/ Rhos B. Dyke /s/ Dominic J. Magliarditi
(Authorized Signature) (Authorized Signature)
Rhos B. Dyke Dominic J. Magliarditi
(Typed Name) (Typed Name)
Area Sales Director, West Field Operations President
(Title) (Title)
7/19/99 7/16/99
(Date) (Date)
EXHIBIT A Attached
<PAGE>
EXHIBIT A
BETA WORKSHEET
Location Address At Which the Beta Products Are Installed:
Site: 18301 Von Karman Ave, Irvine, CA 92612
Hardware Platform: RS6000
Serial Number:
Operating System & Release Level: Unix
Media: CD
Database: Oracle
Beta Product:
Business Component Integrators
Net. Commerce Business Pack
DB2 Database
Designated Features:
Expectations:
<PAGE>
ADDENDUM
TO
LAWSON SOFTWARE BETA TEST AGREEMENT
This Addendum ("Addendum") modifies the Lawson Software Beta Test Agreement
("Agreement") entered into between Lawson Associates, Inc. dba Lawson
Software ("Lawson") and the undersigned Client, and is effective as of the
date signed by Lawson. The following sections or paragraphs replace or are
in addition to the respective sections or paragraphs contained in the
Agreement. The sections or paragraphs of the Agreement that are not
expressly replaced by this Addendum shall remain in effect pursuant to their
terms.
SECTION 5.2 of the Agreement is deleted in its entirety and replaced with
the following
5.2 Either Party may terminate this Beta Agreement prior to the expiration
of the Term, without cause, on sixty (60) days' prior written notice.
ADDITIONAL OBLIGATIONS:
1. Designate Pramod Mathur, Vice-President, Collaborative
Commerce Suite, as the Lawson Executive Sponsor for this
initiative.
2. In the 1st week of August, deliver the beta code for the
Business Component Integrator (BCI) and Net-Commerce Pack
(NCP) solutions.
3. Commit to a series of meetings from July through October
99 directly between our Development personnel and 2TheMart
designees for the purposes of joint visioning and further
definition of 2TheMart specific interface requirements. It is
intended that one of these meetings will be at Lawson
Corporate headquarters. This meeting is tentatively scheduled
for July 20, 1999. The designated sites for the other
meetings will be at the discretion of 2TheMart.
4. Provide direct telephone access, for the appropriate
2TheMart designees, to the Lawson Software engineers and
managers responsible for development of our Collaborative
Commerce suite. There are 8 individuals currently dedicated
to this development task, and they will be directed with
respect to 2TheMart concerns by Al Chua (Chief Architect and
Developer) and Marieth Solie (Senior Analyst Collaborative
Commerce) whom have been designated as the direct interfaces
for 2TheMart.
5. Provide Lauren Hain, from IBM Global Services, as on-site
assistance for this initiative during the month of August.
Lauren is an Advisory IT Specialist, Internet Developer
currently working on this project at Lawson corporate
headquarters. An additional IBM Global Services member with
Lawson expertise will be on-site for the month of August as well.
6. Provide beta product support during normal Lawson support
hours. After hours emergency support will also be provided
for these products as requirements dictate.
7. Work aggressively with our partners to insure a functional
environment is available for 2TheMart in mid-September, 1999
to help facilitate your go-live date October 8th. Lawson will
provide knowledge and assistance in facilitating the following
API's and transaction sets:
Outbound
- OrderCreate
- Use OrderCreate to process orders that begin
with the Net.Commerce system
- The message contains order, shopper, billing,
merchant, and shipping information from the
ORDERS, SHOPPER, SHADDR, SHOPGRP, MERCHANT,
SHIPTO, PRODCUT and SHIPMODE tables
- The Lawson BCI will receive the message and
execute Lawson API OrderA to add the order to
Lawson Order Entry in an unreleased state.
View/modify the order via a Lawson OE Form (eg. OE10.3)
Inbound
- OrderStatusUpdate
- When OE129 is run (on request), Lawson
extracts the orderstatus for orders that have
been shipped and adds an entry to WOMA which
will alert the BCI Agent to begin Lawson API
OrdStatusU
- Net.Commerce updates the tables ORDSTAT and
ORDISTAT with the new order status information
- ProductQuantityUpdate
- When IC223 is run (on request), Lawson
extracts the product availability and adds an
entry to WOMA which will alert the BCI Agent
to begin Lawson API ItmQtyU
Net.Commerce updates the PRODUCT table with
the new inventory information
- ProductPriceUpdate
- When BL243 is run (on request), Lawson
extracts the product price and adds an entry
to WOMA which will alert the BCI Agent to
begin Lawson API ItmPriceU
- Net.Commerce updates the PRODPRCS table with
the new inventory information
-CustomerNew
<PAGE>
- When a new customer is added to Lawson using
AR09 & AR10, an entry to WOMA will alert the
BCI Agent to begin Lawson API CustomrA
- Net.Commerce updates information for a new
shopper by calling the AdminRegisterNew command
-CustomerUpdate
- When a customer is updated in Lawson using
AR09 & AR10, an entry to WOMA will alert the
BCI Agent to begin Lawson API CustomerU
- Net.Commerce updates information for a
registered shopper by calling the
AdminRegisterNew command
8. Continue to make our best efforts to insure the General
Availability (GA) date for the BCI and NCP is achieved by the
end of October, 1999.
9. In the 1st week of October, deliver the beta code for DB2
database support of the Lawson applications, running on an IBM
RS/6000 server.
10. Provide at no cost to 2TheMart Oracle RDBMS licenses.
These licenses will be returned to Lawson upon the conversion
to the DB2 database.
11. Provide 10 technical consulting days to administer the
Oracle database.
12. Provide a General Availability (GA) software date for
Lawson applications operating on an IBM RS/6000 server,
utilizing an AIX/ DB2 database that would allow 2TheMart to
convert from their initial Oracle database environment to the
DB2 database environment prior to March 1, 2000.
13. Waive all charges for the aforementioned consulting and
training services with the exception of the necessary travel
related expenditures.
For LAWSON ASSOCIATES, INC., For 2THEMART.com, Inc.
/s/ Rhos B. Dyke /s/ Dominic J. Magliarditi
(Authorized Signature) (Authorized Signature)
Rhos B. Dyke Dominic J. Magliarditi
(Printed Name) (Printed Name)
Area Sales Director, West Field Operations President
(Title) (Title)
7/19/99 7/16/99
(Date) (Date)
IBM Customer Agreement
Addendum for Customer Transaction
Enterprise Name and Address: Transaction Identification
2TheMart.com, Inc. No: T96BUV2
18301 Von Karman Revised Addendum: No
Irvine, CA 92612
IBM Address:
2929 N. CENTRAL AVENUE
PHOENIX, AZ 85012-2743
We are delighted you selected an IBM solution which consists of the elements
identified in the 'documents specified in this Addendum. Copies of these
documents are Included. Please make sure you have them and notify us If any
are missing.
The price for this solution is based on your-accepting it in Its entirety.
Any changes may result in a different solution price. The price for all
one-time charge Products is firm as long as the Productsare ordered within
one month and shipped within two months of the date we sign this Addendum.
Recurring charges and hourly rates may change in accordance With the terms
of our Agreement. The solution price does not include taxes or additional
charge items such as special handling or travel related charges.
Summary of Solution Price:
Total fixed price $ 7,906,749
IBM reserves a purchase money security interest (called a 'Security Interest)
in the Machines until all amounts due are received. You authorize us to
prepare, execute in your name, and file on your behalf, a perfected Security
Interest (UCC-1) for each Machine you order under this transaction (as listed
in the Supplement for Purchase of Machines or the Supplement for Purchase of
Machines II specified in this Addendum).
Name of Document Document Number
ICA SUPPLEMENT FOR PURCHASE OF IBM MACHINES Z125-3531-11
ICA SUPPLEMENT FOR PURCHASE OF MACHINES II Z125-3532-11
ICA SUPPLEMENT FOR LICENSE OF PROGRAMS Z125-33S9-06
ICA SIGNATURE PAGE FOR ATTACHMENTS Z1254571-50
ATTACH FOR IBM SUPPORT FAMILY SERVICES Z125-5160-16
ATTACH FOR RS/6000 SUPPORT FAMILY SERVICES Z125-5162-16
SUPPLEMENT FOR IBM SUPPORT FAMILY SERVICES Z125-5166-03
SOW FOR SERVICES - SERVICEELECT Z125-5510-09
The complete agreement between us about this transaction consists of 1) this
Addendum and the Attachments and Transaction Documents specified in it, and
2) the IBM Customer Agreement and its applicable Attachments (or any
equivalent agreement signed by both of us). By signing below for our
respective Enterprises, each of us agrees to the terms of this Addendum, and
the Attachments and Transact! on Documents specified in it.
Agreed to: (Enterprise name) Agreed to:
2TheMart.com, Inc. International Business Machines Corporation
By: /s/Dominic J. Magliarditi By: /s/Luis Gonzales
Name: DOMINIC J. MAGLIARDITI Name: LUIS GONZALES
Date: 8-5-99 Date: 8-5-99
<PAGE>
Addendum for Customer Transaction (Continued)
Name of Document Document Number
SCHEDULE FOR SERVICES Z125-5511-10
IBM STATEMENT OF WORK FOR PROJECT SUPPORT SVC Z125-4195-06
PASSPORT ADVANTAGE SOFTWARE LIST
All hardware product delivery must be completed within 6 months and
delivery of all other products and services of a nonrecurring nature must
be completed within 12 months of Initial product Installation.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted form the
accompanying financial statements of 2TheMart.com, Inc. for the Period
January 8, 1999 to June 30, 1999 and is qualified in its entirety by
reference to such financial statments.
</LEGEND>
<CIK> 0001081192
<NAME> 2THEMART.COM, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-08-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,110,252
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,182,278
<PP&E> 1,116,095
<DEPRECIATION> (10,938)
<TOTAL-ASSETS> 5,287,435
<CURRENT-LIABILITIES> 595,303
<BONDS> 0
0
0
<COMMON> 2,504
<OTHER-SE> 4,689,628
<TOTAL-LIABILITY-AND-EQUITY> 5,287,435
<SALES> 0
<TOTAL-REVENUES> 86,726
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,000,029
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,913,303)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,913,303)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,913,303)
<EPS-BASIC> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
