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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-25575
@plan.inc
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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TENNESSEE 62-1643381
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3 LANDMARK SQUARE, SUITE 400, STAMFORD, CT 06901
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(203) 961-0340
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, NO PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by checkmark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the Common Stock issued and outstanding and
held by non-affiliates of the Registrant, based upon the closing sales price for
the Common Stock on the Nasdaq National Market on March 28, 2000 was
$27,351,325. All executive officers and directors of the registrant have been
deemed, solely for the purpose of the foregoing calculation, to be "affiliates"
of the registrant.
As of March 28, 2000, there were 11,231,300 shares of the Registrant's
common stock outstanding.
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@PLAN. INC.
TABLE OF CONTENTS
ANNUAL REPORT ON FORM 10-K
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PART I
Item 1. Business.................................................... 2
Item 2. Properties.................................................. 14
Item 3. Legal Proceedings........................................... 14
Item 4. Submission of Matters to a Vote of Security Holders......... 14
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 14
Item 6. Selected Financial Data..................................... 15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 16
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 22
Item 8. Financial Statements and Supplementary Data................. 23
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 37
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 37
Item 11. Executive Compensation...................................... 37
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 37
Item 13. Certain Relationships and Related Transactions.............. 37
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K......................................................... 37
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ITEM 1. BUSINESS
We are a leading online business to business exchange for optimizing
Internet advertising and merchandising strategies through our target market
research planning systems. Our systems are specifically designed for Internet
advertisers, advertising agencies, Web publishers, online retailers and consumer
brand marketers. These systems help enable our clients to effectively harness
the power of the Internet as an advertising, marketing and retailing medium. Our
internally developed systems, which our clients access through our Web site,
combine our databases of consumer lifestyle, product preference and demographic
data with powerful technology that enables our clients to perform queries and
searches to plan campaigns and strategies. Our syndicated Internet consumer
research data is collected by The Gallup Organization on an exclusive basis. We
believe that our systems facilitate the purchase and sale of advertising on the
Internet and are becoming an important information tool in enabling the increase
in consumer electronic commerce.
We introduced the @plan Gutenberg Advertising System in June 1997 and @plan
Kepler E-Business System in December 1998. As of December 31, 1999, we had
contracts representing a total of over 425 Internet advertisers, advertising
agency offices, Web sites, online retailers and consumer brand marketers. We
currently have subscription contracts for our systems with all of the top 20 Web
publishers as measured by advertising revenues, 70% of the top 20 U.S.
advertising agencies primarily focused on the Web as measured by billings and
80% of the top 20 "traditional" U.S. advertising agencies as measured by
billings.
MARKET OVERVIEW
The Internet is rapidly emerging as a mass communications and commerce
medium enabling millions of people worldwide to share information, be
entertained, communicate and research or make consumer purchases electronically.
It is evolving into an important medium for advertisers due to its interactive
nature, its potential for highly targeted advertising and its ability to reach a
workplace audience. Additionally, the Internet is increasingly affecting the
methods by which businesses are selling goods and services and developing
relationships with their current and potential customers. The Internet provides
the ability to reach a global audience, achieve greater economies of scale, and
operate with minimal infrastructure while providing consumers with a broad
selection of goods and services, increased pricing power and unparalleled
convenience. Furthermore, businesses that are not actively selling goods and
services online are integrating the Internet into their marketing strategy to
acquire and retain customers and enhance their marketing capabilities.
As the Internet advertising, marketing and retailing environment continues
to rapidly evolve, online market participants are continually challenged to
define and reach their target audiences, develop cost-efficient customer
acquisition and retention strategies and develop their business strategies and
tactics. Market research tools enable advertisers, marketers, and retailers in
many industries to optimize their competitive strategies by providing them with
highly detailed consumer behavior information. Furthermore, the characteristics
of the Internet as both a unique medium for advertising and a distinct marketing
and sales channel plus the substantial potential size of the Internet market
have heightened the need among online market participants for these tools. As a
result, online market participants are seeking trusted, third-party neutral
Internet market research and planning tools that will enable them to navigate
the volatile and dynamic online marketplace.
OUR STRATEGY
Our objective is to be the leading provider of target market research
planning systems for online market participants including Internet advertisers,
advertising agencies, Web publishers, online retailers and consumer brand
marketers. The following are the key elements of our strategy:
Develop New Products. We believe that our future success depends on our
ability to develop new systems and products. We are currently developing our
first highly targeted vertical market research system which focuses on the
automotive, travel and merchandising e-commerce sector. We are expecting to
launch this system at the end of the first quarter of 2000. Our strategy
includes the continued development and introduction of additional vertical
market research systems and new products.
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Increase Market Penetration of the @plan Kepler E-Business System. We
intend to increase the market penetration of the @plan Kepler E-Business System
by continuing to target our sales and marketing efforts toward online retailers
and consumer brand marketers. We introduced the @plan Kepler E-Business System
in December 1998 and as of December 31, 1999 we had entered into contracts with
30 online retailers and consumer brand marketers. We intend to establish the
@plan Kepler E-Business System as the recognized leader in its market to
capitalize on the projected growth of electronic commerce.
Enhance and Expand the @plan Gutenberg Advertising System. We intend to
expand our sales and marketing efforts of the @plan Gutenberg Advertising
System. Further, we intend to leverage our proprietary information and
technology to further enhance the @plan Gutenberg Advertising System and
facilitate the development of additional features. We believe that our
proprietary information and software interface and the experience and knowledge
gained through the delivery of our systems provide us with a significant
competitive advantage.
Develop Additional Revenue Sources. We intend to leverage our database of
information, our technology, our expertise and our existing client base to
develop new sources of revenue. As the Internet continues to grow and evolve, we
believe the demand for more detailed Internet market research tools will
increase. We intend to meet this demand by continually developing new
information products that are of interest to our clients. In addition, we intend
to leverage our relationships with existing clients by expanding existing
contracts to include additional client offices and Web properties.
Expand Sales Efforts. We believe that a strong sales organization is
essential to effectively sell our systems. Our current sales team consists of
highly qualified, experienced individuals who sell our sophisticated systems. To
increase our market penetration, particularly in the growing electronic commerce
segment, we intend to continue to expand our sales efforts by continuing to
expand our sales team.
Continue to Focus on Client Service. We emphasize high quality service for
our clients and take a proactive approach to ensure that our clients are
satisfied. We believe client satisfaction is the key to ensuring high rates of
contract renewal, and, accordingly, we maintain a dedicated client service team
that provides service, training and client support. We compensate our client
service managers in part based on targeted levels of renewal rates. In addition,
as our client base increases we intend to continue to build our client service
team to offer a high level of service, training and support.
Leverage Our Market Research to Identify Key Trends. We believe that a
significant source of value to our clients is our ability to track trends in the
online marketplace. We continually update our data collection process to capture
relevant information to define these trends. We intend to continue to use and
refine these tracking techniques to provide the information that our clients
need and to identify appropriate areas of expansion for our products.
OUR SYSTEMS
We provide two target market research planning systems: the @plan Gutenberg
Advertising System for advertisers, advertising agencies and Web publishers and
the @plan Kepler E-Business System for online retailers and consumer brand
marketers. These systems are accessed through our Web site by entering a
password combination that allows our clients access to our sophisticated
software interfaces through which
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they can query various datasets in our exclusively owned and controlled
databases. The datasets and databases that new clients can access generally
depend on the system to which they subscribe as set forth below:
@PLAN GUTENBERG ADVERTISING SYSTEM
- Advertiser-supported Web site specific profiling data
- Web site advertising rate card, site description and contact information
data, which we call our B.R.E.W. database
- Web adult consumer lifestyle and product preference data
@PLAN KEPLER E-BUSINESS SYSTEM
- Electronic commerce/retailing Web site specific profiling data
- Adult U.S. population lifestyle and product preference database
- Web adult consumer lifestyle and product preference data
- Advertiser-supported Web site-specific profiling data
@PLAN GUTENBERG ADVERTISING SYSTEM
The @plan Gutenberg Advertising System is a comprehensive advertising
decision support and planning system providing lifestyle, product preference and
demographic profile information across a large number of advertiser-supported
Web sites.
Internet advertisers and advertising agencies can query the system on an
interactive basis to better understand the role the Internet should play in
attaining specific advertising objectives. Clients can conduct queries on
various client defined targets, such as Web audiences, advertiser-supported Web
sites, or particular products or services. By combining the results of those
queries with current rate card information from our B.R.E.W. database, clients
can develop comprehensive and sophisticated media plans and marketing campaigns
for reaching a specific target audience in the most efficient and cost-effective
manner.
Web publishers utilize the system to develop specific strategies for
optimizing their sales efforts toward those advertisers who would be most
interested in reaching the audience that the publisher's Web site can deliver.
The system provides the support for these optimization strategies and sales
efforts in the form of highly detailed, third-party neutral and comparable
lifestyle, product preference, shopping behavior and demographic profiling data
across a large number of advertiser supported Web sites. Web publishers can also
use the system to assess the strengths and weaknesses of their competitors as
well as to help differentiate the competitive position of their sites.
@PLAN KEPLER E-BUSINESS SYSTEM
The @plan Kepler E-Business System is a comprehensive consumer Internet
market research and planning system providing lifestyle, product preference,
shopping behavior and demographic profiling data across a large number of
advertiser-supported Web sites and consumer electronic commerce retail sites and
categories. Online retailers and consumer brand marketers utilize the system to
understand and track their competitive strengths and weaknesses in order to
assess their strategy in both traditional and online markets. The system
provides support for these assessments in the form of highly detailed and
comparable information across a large number of consumer electronic commerce
retail Web sites. Online retailers can also use this information to develop more
effective and cost-efficient customer acquisition and retention strategies. The
system also provides access to a database reflecting select lifestyle, product
preference and demographic profiling data for the total U.S. adult population.
Online retailers and consumer brand marketers utilize the system to access this
data to track differences in retailing trends between traditional and online
markets to better understand how the online market differs from the traditional
market in their particular retail category. Online retailers and consumer brand
marketers can also utilize the system to combine this profile information with
content site information to arrive at statistical estimates of the market
penetration for various products and services sold on the Internet.
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OUR CLIENTS
Following is a representative list within each category of the over 425
clients that we currently have under contract:
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ONLINE RETAILERS AND
ADVERTISING AGENCIES WEB PUBLISHERS CONSUMER BRAND MARKETERS
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INTERACTIVE
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AvenueA About.com Buy.com
Digitas CBS MarketWatch CDNOW
iXL Discovery Channel eBay.com
i-traffic Online Eddie Bauer
Magnet Interactive Excite@Home Ford.com
Modem Media E*TRADE PaineWebber Incorporated
THINK New Ideas Time Inc. New Media Wine.com
Women.Com
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TRADITIONAL
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BBDO
Euro RSCG DSW Partners
Grey Interactive
Saatchi & Saatchi
Starcom IP (Leo Burnett)
TBWA/Chiat Day
Western International Media
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DATA COLLECTION AND RESULTING DATABASES
The methodology for collecting our data, the generation of a sample
population to be surveyed and the collection of data from that sample population
for all of our databases is controlled and conducted by Gallup, which uses a
random scientific sample telephone dialing process to generate an initial pool
of potential survey participants. Data is collected from the participants first
on the phone and, for the Web user database, by means of an extensive
interactive online survey software program. The survey software employs a
"decision tree" methodology that automatically poses specific questions based on
a respondent's prior pattern of replies. The online survey software can collect
a wide variety of data while maintaining the interest of the respondent because
it automatically adjusts to the specific behavior and interests of the
respondent. For a subset of non-Web users, consumer lifestyle, product
preference and demographic data is collected by means of an extensive phone
interview. This data is used to create our U.S. population database. The data
collected is then incorporated into a number of distinct datasets. These
datasets include a U.S. consumer lifestyle and product preference dataset, an
electronic commerce/retailing Web site profile dataset, an advertiser-supported
Web site profiling dataset and a Web consumer lifestyle and product preference
dataset.
We employ stringent controls to ensure the integrity of our consumer market
research data. Before any data point can be considered for reporting, it must
first pass rigorous statistical tests.
SALES AND MARKETING OF OUR SYSTEMS
We sell our systems through a sales team located in Stamford, Connecticut
and San Francisco, California. Our current sales team consists of highly
qualified, experienced individuals who are able to effectively sell our
sophisticated systems. We intend to expand our sales team by adding additional
experienced individuals. Our sales team has a number of selling protocols and
systems in place to maximize prospecting and closing of subscription contracts.
Our systems are generally sold on an annual subscription basis. As of December
31, 1999, approximately 95% of our contracts provide for automatic one year
renewals unless the client provides written notice of termination prior to the
anniversary date of the contract.
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We take a highly selective approach to our marketing. To help build brand
awareness with our prospective customers, we largely rely on one-to-one live
product demonstrations of our systems. In addition, we seek speaking engagements
at very select events where current and prospective clients are concentrated. We
also produce marketing materials, including media kits and presentations, in
support of sales to prospective customers.
OUR CLIENT SERVICE TEAM
We believe that our ability to establish and maintain long-term client
relationships and high contract renewal rates in part depends upon the strength
of our client service operations and team. Our client service team consists of
client service managers located in Stamford, Connecticut and San Francisco,
California. We motivate our client service managers to provide the highest
quality service by basing a portion of their compensation on both the renewal
rates of the clients they support and the overall client renewal rate. In
addition to providing training and client support, this group works proactively
with our clients to help them maximize the value they derive from our systems.
Each client service manager supports and is responsible for approximately 25-30
contracts. The assignments vary in relation to specific client needs but are
generally defined geographically to enhance opportunities for personal contact.
The client service managers are responsible for training their clients in how to
use the system and the research information that our systems provide, resolving
any problems their clients have with our systems, and providing strategic
insight and technical support. The client service managers also obtain feedback
from their clients to assist us in anticipating client needs and developing new
systems. We monitor our clients' use of the systems on a continual basis to
gauge client satisfaction. We intend to continue to build our client service
team as our client base increases to offer a high level of client service,
training and support.
COMPETITION FOR OUR INTERNET CLIENTS
The market for market research tools for Internet advertisers, advertising
agencies, Web publishers, online retailers and consumer brand marketers is
highly competitive and rapidly evolving, and we expect competition in this
market to intensify in the future. While we do not believe any of our
competitors currently offer Internet target market research systems that provide
the same search, query and planning capabilities as our systems, we face
competition from a number of companies who provide services to a similar base of
clients and who could develop systems that more directly compete with our
systems. In some cases our services are complementary to services provided by
other companies and in some cases, particularly with respect to Web "ratings"
companies, our services are considered to be a substitute. Please see "Risk
Factors -- We face competition from more established providers of Internet
market research tools that could cause a loss of clients or cause us to reduce
the prices we can charge to our clients."
Our competitors include:
- Web "ratings" companies, including Media Metrix and Nielsen Media
Research/NetRatings, that rely on using a sample group of respondents
where software is installed on a respondent's computer and passively
monitors Web behavior;
- "auditing" companies, including I/PRO, that audit viewers in terms of
page views, site impressions and navigation on a subject Web site;
- advertisement targeting providers, including DoubleClick, 24/7 Media and
NetGravity, that place advertisements on networks of Web sites and
collect data on viewer response;
- advertisement performance measurement companies, including MatchLogic;
- Web advertising management services, including AdKnowledge;
- online research and consulting providers, including Jupiter
Communications; and
- syndicated market research providers in traditional publishing, including
MRI and Simmons.
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Most of these companies have greater financial, technical, product
development, marketing and other resources than we have. These companies may be
better known and have longer operating histories than we have. We believe that
our ability to compete depends on many factors both within and beyond our
control, including the following:
- the timing and market acceptance of new solutions and enhancements to
existing solutions developed by us or our competitors;
- customer service and support efforts;
- sales and marketing efforts; and
- the ease of use, performance, price and reliability of solutions
developed by us or our competitors.
PROTECTION OF OUR PROPRIETARY RIGHTS
Proprietary rights are important to our success and our competitive
position. To protect our proprietary rights, we rely on copyright, trademark,
and trade secret laws, confidentiality agreements with third parties, and
license agreements with consultants, vendors and customers. Despite such
protection, a third party could, without authorization, copy or otherwise
appropriate information from our database. Our agreements with employees,
consultants and others who participate in development activities could be
breached. We may not have adequate remedies for any breach, and our trade
secrets may otherwise become known or independently developed by competitors. In
addition, the laws of some foreign countries do not protect our proprietary
rights to the same extent as do the laws of the United States, and effective
copyright, trademark and trade secret protection may not be available in those
jurisdictions.
We have applied for registration of several trademarks in the United
States. None of these applications have been approved to date, and there can be
no assurance that the applications will be approved in the future. Even if these
applications are approved, the trademarks may be successfully challenged by
others or invalidated. If the applications are not approved because third
parties own the trademarks, the use of the trademarks will be restricted unless
we enter into arrangements with the third parties which may be unavailable on
commercially reasonable terms.
There have been substantial amounts of litigation in the computer and
online industries regarding intellectual property assets. Third parties may
claim infringement by us with respect to current and future products,
trademarks, or other proprietary rights, or we may counterclaim against these
parties. Any such claims or counterclaims could be time-consuming, result in
costly litigation, divert management's attention, cause product release delays,
require us to redesign our products or require us to enter into royalty or
licensing agreements, any of which could harm our business, financial condition
and operating results. Such royalty and licensing agreements, if required, may
not be available on terms acceptable to us, if at all.
RISK FACTORS
There are statements in this report that are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements include, but are not limited to, statements
about our plans, objectives, expectations and intentions and other statements
contained in this report that are not historical facts. When used in this
report, the words "expect," "anticipate," "intend," "plan," "believe,"
"estimate" and similar expressions are generally intended to identify forward-
looking statements. Because these forward-looking statements involve risks and
uncertainties, there are
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important factors that could cause actual results to differ materially from
those expressed or implied by these forward-looking statements, including the
following:
RISKS RELATED TO OUR BUSINESS AND OUR COMPANY
Because We Have A Limited Operating History, It Is Difficult To Evaluate Our
Business and Prospects
We were incorporated in May 1996 and have a limited operating history. As a
result, we face many risks and difficulties frequently encountered by early
stage companies in new and rapidly evolving markets, including the Internet
advertising and electronic commerce markets. These risks include our ability to:
- sustain revenue growth rates;
- manage our expanding operations;
- compete with companies that have longer operating histories, greater name
recognition and greater financial resources; and
- expand our current client base.
We also depend on the growing use of the Internet for advertising, commerce
and communication, and on general economic conditions. We cannot assure you that
our business strategy will be successful or that we will successfully address
these risks.
We Have A History Of Losses, and We Anticipate Continued Losses
To date, we have not made a profit. We incurred net losses of approximately
$661,000 during our inception period from May 29, 1996 through December 31,
1996, $2.8 million in 1997, $1.9 million in 1998, and $2.1 million in 1999. As
of December 31, 1999, our accumulated deficit was $8.8 million. We expect to
continue incurring significant operating and net losses through at least 2000
and, as a result, we will need to generate significant revenues to achieve and
maintain profitability. Although our revenues have grown in recent quarters, we
cannot assure you that we will achieve sufficient revenues for profitability.
Even if we do achieve profitability, we cannot assure you that we can sustain or
increase profitability on a quarterly or annual basis in the future. Our results
of operations and financial condition will be harmed if revenues grow more
slowly than we anticipate, or if operating expenses exceed our expectations and
cannot be adjusted accordingly.
We Depend On Subscription Renewals By Our Clients and A Decrease In Our
Current Rate Of Renewal
Could Cause A Decline In Our Revenue
We derive all of our revenues from subscriptions to our systems. Because we
have a limited operating history, our subscription renewal rate is based on a
limited number of contracts and we are not sure that we will continue to
experience our current rate of subscription renewal. If our renewal rate
percentage declines, our results of operations and financial condition could be
harmed. Our subscription renewal rates may decline as a result of a
consolidation in our client base, the emergence of direct competition or if a
significant number of our clients cease operations.
Our Business Will Be Harmed If Our Relationship With Gallup Is Terminated
Causing Updates To Our
Database Or The Introduction Of New Products To Be Delayed.
The methodology for the collection of data, the generation of a sample
population to be surveyed and the collection of data from that sample population
for our Web user database, our U.S. population database and our merchandising
vertical system are controlled and conducted by Gallup. We cannot be sure that
Gallup will continue to provide us services in a manner that allows us to
execute our business strategy. If our agreements with Gallup terminates for any
reason, we will need to find another firm to perform our research data
collection services and this could harm our business by delaying our ability to
update our database and introduce new products.
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If Gallup Experiences Problems With The Timely Collection, Processing, Storing
Or Delivery Of Accurate
Data, We May Lose Credibility With Our Clients
The data that comprises our exclusively owned databases is collected and
statistically processed by Gallup and delivered to us on a quarterly basis.
Gallup could experience problems with, or make errors in, collecting,
processing, storing or delivering the data. In addition, Gallup could experience
problems with the computer systems that process and store the data. These
problems could result in inaccuracies or in delays in delivery or loss of, the
data from Gallup. These inaccuracies, delays or losses could cause us to lose
credibility with our clients or breach some client contracts which could cause
us to lose clients and could harm our business.
We Have Experienced Significant Growth In Our Business In Recent Periods and
Any Inability To Manage
This Growth and Any Future Growth Could Harm Our Business
Our business has grown and we expect continued growth as we add new
products and hire new employees. This growth has placed, and our anticipated
future growth in our operations will continue to place a strain on our
management systems and resources. We cannot assure you that our management team
will be able to efficiently or successfully manage our growth. In addition, we
will need to hire additional financial and operations personnel. We expect that
we will need to continue to improve our financial and managerial controls and
reporting systems and procedures, and we will need to continue to expand, train
and manage our workforce.
If We Are Unable To Attract and Retain Sales And Client Service Personnel Or
We Are Unable To
Adequately Train Our Sales Personnel In A Timely Manner, Our Business and
Future Revenue Growth Would Be Harmed
Our business would be harmed if we were unable to attract, retain and
motivate highly qualified, experienced sales and client service personnel. We
need to hire additional sales and client service personnel to achieve our growth
objectives. Competition for these individuals is intense. Even if we are able to
hire additional sales personnel it typically takes months of training before
they are fully productive. We may be unable to attract, train and retain an
adequate number of individuals to meet our sales and client service objectives.
Our Business and Future Revenue Growth May Suffer If We Are Not Successful At
Developing and
Introducing New Products
Our future growth depends in part on our ability to offer new products and
services on a timely and cost-effective basis. Our business may suffer if we
fail to develop and introduce new products or if our new products are not
accepted by the market or are accepted at a slower rate than we anticipate. In
December 1998, we introduced the @plan Kepler E-Business System for online
retailers and consumer brand marketers. We are currently launching our first
highly targeted vertical system focusing on the automotive, travel and
merchandising e-commerce sector which is expected to launch late in the first
quarter 2000. In addition, we plan on launching additional vertical systems
covering additional vertical e-commerce sectors. There are many costs and risks
associated with developing and introducing these and other new products,
including:
- significant market research data collection and software development
costs;
- need for additional sales, client service and other personnel;
- diversion of management attention and resources; and
- the lack of acceptance of new products in the marketplace.
We cannot assure you that we will be successful in developing and
introducing new products.
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Our Future Revenues May Be Unpredictable and Our Quarterly Results Are
Expected To Fluctuate
Our operating results have varied on a quarterly basis and may fluctuate
significantly in the future as a result of a variety of factors, many of which
are outside our control. Due to these fluctuations, it is likely that in some
future quarters our operating results will fall below the expectations of
securities analysts and investors, which could cause the price of our common
stock to drop. Factors that may affect our quarterly operating results include:
- market acceptance of the Web as an advertising medium;
- the development of the electronic commerce market;
- market acceptance of our products;
- the amount and timing of operating costs and capital expenditures
relating to the expansion of our business, including those related to our
development of highly targeted vertical market research and planning
systems;
- variations in product or client mix, as pricing may vary based on the
volume and type of subscriptions being sold to a client;
- our ability to expand our client base and retain current clients;
- new competitors entering our market;
- general economic conditions as well as economic conditions specific to
the Internet;
- our ability to attract, train and retain qualified sales and other
personnel;
- technical difficulties or service interruptions; and
- the magnitude and timing of strategic pricing changes, marketing
decisions or acquisitions.
Our limited operating history and the emerging nature of our markets make
prediction of future revenues difficult. Our expense levels are based, in part,
on our expectations with regard to future revenues, and to a large extent our
expenses are fixed, particularly in the short term. We cannot assure you that we
will be able to predict our future revenues accurately and we may be unable to
adjust spending in a timely manner to compensate for any unexpected revenue
shortfall. Accordingly, any significant shortfall in our expectations could
cause significant declines in our quarterly operating results.
Due to all the foregoing factors, our quarterly revenues and operating
results are difficult to forecast. We believe that our quarterly revenues,
expenses and operating results could vary significantly in the future, and that
period-to-period comparisons should not be relied upon as indicators of future
performance.
We May Experience Client Dissatisfaction Or Be Exposed To Liability For
Supplying Inaccurate Information To Our Clients
Our data may contain inaccuracies as a result of data collection or
software errors, among other reasons. Our clients may become dissatisfied with
our systems, or we may face liability if we supply inaccurate information. Any
client dissatisfaction with our data would hinder our ability to attract new
clients and retain existing clients. If we face liability for supplying
inaccurate data, our business may suffer.
Our Reputation and The Attractiveness Of Our Systems Could Be Impaired By A
Failure Of Our Computing
Systems and Our Internet Service Provider's Computing Systems
The performance of our server and networking hardware and software
infrastructure is critical to our business, reputation and ability to attract
and retain clients. Any system failure that causes an interruption in service or
a decrease in responsiveness of our processing or data storage capabilities
could impair our reputation and the attractiveness of our products. We entered
into an agreement with UUNet for our Internet connectivity. Any interruption in
the service that UUNet provides, or any failure of UUNet to handle higher
volumes of Internet users, would harm our business.
10
<PAGE> 12
Despite precautions taken by us and our Internet service provider, the
occurrence of natural disasters or other unanticipated problems at our or their
facilities could result in interruption in the availability of our systems or
significant damage to our equipment. Even though we have implemented network
security measures, our servers are vulnerable to computer viruses, break-ins and
similar disruptions from unauthorized tampering. The occurrence of any of these
events could result in interruptions, delays, the loss or corruption of our data
or cessations in the availability of our systems, which could harm our business
and our reputation.
We Have Experienced and May Again Experience System Capacity Constraints That
Could Result In
Client Dissatisfaction Or A Loss Of Clients
An increase in the number of our clients, the addition of new products or
spikes in client demand, either unexpected or in connection with new data
releases, could strain the capacity of our computer systems, which could lead to
slower response time or system failures. Our business could be harmed by system
failures or slowdowns that reduce the speed and responsiveness of our data
processing and diminish the experience for our clients. We face risks related to
our ability to scale up to our expected client levels while maintaining superior
performance. We may need to purchase additional servers to maintain adequate
data processing speeds.
The Loss Of Services Of Our Key Executives Would Likely Hurt Our Business
Our future success depends to a significant extent on the continued service
of Mark K. Wright, our Chief Executive Officer and Chairman of our Board of
Directors, and Karl A. Spangenberg, our President and Chief Operating Officer.
We have no employment agreements with either of these executives. The loss of
the services of either of Messrs. Wright or Spangenberg would likely hurt our
business.
We Face Competition From More Established Providers Of Internet Market
Research Tools That Could
Cause A Loss Of Clients Or Cause Us To Reduce The Prices We Can Charge To Our
Clients
Our market, namely providing market research tools for Internet
advertisers, advertising agencies, Web publishers, online retailers and consumer
brand marketers, is new and rapidly evolving. Competition for clients is intense
and is expected to increase in the future as existing competitors develop new
solutions, potential competitors become active in the market and our industry
consolidates. We cannot assure you that we will be able to compete successfully
or that competitive pressures will not harm our business. We believe that our
ability to compete depends upon many factors both within and beyond our control,
including the following:
- the timing and market acceptance of new products and enhancements to
existing products developed either by us or our competitors;
- our client service and support efforts;
- our sales and marketing efforts; and
- the ease of use, performance, price and reliability of products developed
either by us or our competitors.
Most of our competitors have longer operating histories, greater name
recognition, larger client bases and significantly greater financial, technical
and marketing resources than we do. This may allow them to respond more quickly
than we can to new or emerging technologies and changes in client requirements.
It may also allow them to devote greater resources than we can to the
development, promotion and sale of their products and services. These
competitors may also engage in more extensive research and development,
undertake more far-reaching marketing campaigns, adopt more aggressive pricing
policies and make more attractive offers to existing and potential employees,
strategic partners, advertisers and Web publishers. We cannot assure you that
our current and potential competitors will not develop products or services that
are of equal or superior quality to ours or that achieve greater market
acceptance or that may be offered at lower prices. In addition, current and
potential competitors have established or may establish cooperative
relationships among themselves or with third parties to increase the ability of
their products or services to address the needs of our prospective customers. It
is possible that new competitors may emerge and rapidly acquire significant
market
11
<PAGE> 13
share. Increased competition is likely to result in price reductions, reduced
gross margins and loss of market share, all of which will harm our business.
Please see "Business -- Competition for Our Internet Clients" for detailed
information about our competition.
Any Failure By Us To Protect Our Intellectual Property Could Harm Our Business
and Competitive Position
Our success and our competitive position are dependent on our internally
developed methods, technologies and trademarks which we generally protect
through a combination of copyright, trademark and trade secrecy laws,
confidentiality agreements with third parties, and license agreements with
consultants, vendors and customers. Despite these protections, a third party
could, without authorization, copy or otherwise take information from our
database. Our agreements with employees, consultants and others who participate
in development activities could be breached. We may not have adequate remedies
for any breach, and our trade secrets may otherwise become known or
independently developed by competitors. We have filed applications for several
trademarks in the United States. We cannot assure you that any of our trademark
applications will be approved. Even if these applications are approved, the
trademarks may be successfully challenged by others or invalidated.
We Will Lose Clients Or Fail To Attract New Clients If The Internet Does Not
Continue To Develop As An
Advertising Medium
Our future success depends on an increase in the use of the Internet as an
advertising medium. We would lose clients or fail to attract new clients if the
market for Internet advertising fails to develop or develops more slowly than we
expect. The Internet advertising market is new and rapidly evolving, and it
cannot yet be compared with traditional advertising media to gauge its
effectiveness and value to advertisers. As a result, demand and market
acceptance for our systems is uncertain. Many of our current or potential
clients have little or no experience using the Internet for advertising
purposes, and they have allocated only a limited portion of their advertising
budgets to Internet advertising. The adoption of Internet advertising,
particularly by those entities that have historically relied upon traditional
media for advertising, requires accepting a new way of conducting business,
exchanging information and advertising products and services. Clients may find
that Internet advertising is less effective for promoting their products and
services relative to traditional advertising media. In addition, most of our
current and potential Web publisher clients have little or no experience in
generating revenues from the sale of advertising space on their Web sites.
The Internet Market Research Industry Is New and Changing Quickly and Our
Systems May Not Be
Accepted By Our Existing and Future Clients
To date, no industry consensus has emerged as to what information tools
will be essential to buying and selling Internet advertising as well as to the
development of electronic commerce. Our existing and future clients may
challenge or refuse to accept the market research information that our systems
provide. Our clients may not be satisfied with our methodology for data
collection or may feel that our databases do not represent Internet users. Our
clients might turn to other current or future providers of market research
systems.
The Failure Of Industry Initiatives To Support Our Methodologies Or Their
Endorsement Of Other
Methodologies May Result In A Decline In Sales Of Subscriptions For Our
Systems
Key industry organizations, including the Internet Advertising Bureau, the
Media Ratings Council, the Advertising Research Foundation and FAST Forward,
have begun initiatives focusing on standards for Internet market research and
audience measurement. To the extent that some or all of these trade groups do
not support our methodologies or endorse other methodologies, our business and
financial condition could be harmed.
12
<PAGE> 14
Technological Change May Render Our Systems Obsolete
The Internet, the Internet advertising and electronic commerce markets are
characterized by rapidly changing technologies, evolving industry standards,
frequent new product and service introductions, and changing client demands. Our
systems may be rendered obsolete by those developments. Our future success
depends on our ability to adapt to rapidly changing technologies, to enhance our
existing products and to develop and introduce a variety of new products to
address our clients' changing needs. We may experience difficulties that could
delay or prevent the successful design, development, introduction or marketing
of our products. In addition, our new products or enhancements must meet the
requirements of our current and prospective clients and must achieve significant
market acceptance. Delays in introducing new products and enhancements may cause
clients to forego purchases of our products and purchase those of our
competitors.
EXECUTIVE OFFICERS
The following is a brief summary of the business experience of each of the
executive officers of the Company. Officers of the Company are elected by the
Board of Directors and serve at the pleasure of the Board of Directors. There
are no family relationships among any officers. The following table sets forth
certain information regarding the executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Mark K. Wright............ 44 Chairman and Chief Executive Officer
Karl A. Spangenberg....... 53 President and Chief Operating Officer
Susan C. Russo............ 47 Executive Vice President
Nancy A. Lazaros.......... 35 Senior Vice President, Chief Financial Officer and Secretary
</TABLE>
Mark K. Wright has served as our Chief Executive Officer and Chairman of
our Board of Directors since May 1996. Prior to becoming our Chief Executive
Officer, Mr. Wright served as the Executive Vice President of Ericson Marketing
Communications, Inc., an advertising and marketing communications agency. Prior
to that, he served as Senior Vice President of Ericson in charge of marketing
and media services. Mr. Wright has a BA from Northwestern University and a MBA
from Vanderbilt University.
Karl A. Spangenberg has served as our President and Chief Operating Officer
since April 1997. Before joining us, Mr. Spangenberg served as Vice President
Worldwide Advertising Sales for Infoseek, an Internet navigation company, from
December 1995 to February 1997. From March 1994 to November 1995, he served as
Publisher, Datamation Magazine for Cahner's Publishing, a publishing company.
Susan C. Russo has served as our Executive Vice President since January
1997. From June 1996 to January 1997, Ms. Russo served as General Manager,
Rodale Interactive for Rodale Press, a publishing company. From May 1994 to June
1996, Ms. Russo served as Vice President, Ad Sales and Strategy, for Hearst New
Media, a Web publishing company.
Nancy A. Lazaros has served as our Senior Vice President and Chief
Financial Officer since May 1997, and has served as our Secretary since July
1998. Prior to joining us, Ms. Lazaros served as Senior Vice President, Finance
of Popcorn Channel, LP, a cable channel, from January 1995 to February 1997; and
as a consultant to various publishing companies from January 1994 to January
1995.
OUR EMPLOYEES
As of December 31, 1999, we employed 34 persons. We also contract with
independent contractors to develop our internally developed software systems and
to support our information services personnel. We are not subject to any
collective bargaining agreements, and we believe that our relationship with our
employees is good.
13
<PAGE> 15
ITEM 2. PROPERTIES
Our principal executive offices are located in Stamford, Connecticut. Our
leases for approximately 8,600 square feet at this location expires in February
2001. We also lease approximately 2,400 square feet space for our sales and
client service efforts in San Francisco, California. This lease expires in June
2002.
ITEM 3. NO LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET PRICE FOR COMMON STOCK
Our common stock has been quoted on the Nasdaq National Market under the
symbol APLN since our initial public offering on May 21, 1999. The following
table sets forth, for the periods indicated, the high and low sales prices per
share of the common stock as reported on the Nasdaq National Market:
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Second Quarter (from May 21, 1999)........................ $18.5000 $10.5000
Third Quarter............................................. $22.2500 $ 9.1250
Fourth Quarter............................................ $17.5000 $ 8.5000
YEAR ENDED DECEMBER 31, 2000
First Quarter (through March 28, 2000).................... $14.6875 $ 8.6875
</TABLE>
On March 28, 2000, the last reported sales price of the common stock on the
Nasdaq National Market was $9.25 per share. As of March 28, 2000, there were 34
registered holders of record of our common stock.
DIVIDEND POLICY
We have not declared or paid any cash dividends on our capital stock since
inception. We intend to retain any future earnings to finance the operation and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future.
None of our securities were sold during the year ended December 31, 1999
without registration under the Securities Act of 1933, as amended.
14
<PAGE> 16
ITEM 6. SELECTED FINANCIAL DATA
The selected statement of operations data presented below for the period
from our inception on May 29, 1996 to December 31, 1996 and for each of the
years in the three-year period ended December 31, 1999, and the selected balance
sheet data as of December 31, 1996, 1997, 1998 and 1999, are derived from our
financial statements that have been audited by Arthur Andersen, LLP, our
independent public accountants, and are included elsewhere in this report. You
should read the following selected financial information in conjunction with our
financial statements and the notes to those statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
located elsewhere in this report.
<TABLE>
<CAPTION>
PERIOD FROM
MAY 29, 1996
(INCEPTION) TO YEAR ENDED DECEMBER 31,
DECEMBER 31, -----------------------------------------
1996 1997 1998 1999
-------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.............................. $ -- $ 422,401 $ 3,108,356 $ 7,355,773
Costs and expenses:
Product costs...................... 487,239 1,744,366 2,360,042 4,657,281
Selling and marketing.............. -- 819,043 1,713,080 3,219,439
General and administrative......... 190,766 753,299 1,084,698 2,110,922
Compensation and expenses.......... -- -- -- 505,098
--------- ----------- ----------- -----------
Total costs and expenses...... 678,005 3,316,708 5,157,820 10,492,740
--------- ----------- ----------- -----------
Loss from operations.................. (678,005) (2,894,307) (2,049,464) (3,136,967)
Interest income....................... 17,367 80,368 191,804 1,116,453
--------- ----------- ----------- -----------
Net loss before income taxes.......... (660,638) (2,813,939) (1,857,660) (2,020,514)
Income tax provision.................. -- -- 13,219 64,300
--------- ----------- ----------- -----------
Net loss.............................. $(660,638) $(2,813,939) $(1,870,879) $(2,084,814)
========= =========== =========== ===========
Basic and diluted loss per share...... $ (0.73) $ (3.13) $ (2.07) $ (0.48)
========= =========== =========== ===========
Weighted average shares outstanding... 900,000 900,000 901,993 7,146,699
========= =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------
1996 1997 1998 1999
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............ $1,608,370 $ 832,338 $ 3,682,576 $34,817,991
Working capital...................... 1,511,997 726,217 3,716,071 33,559,911
Total assets......................... 1,625,616 1,559,175 6,026,481 39,122,353
Mandatory redeemable convertible
preferred stock................... 2,189,097 4,443,811 9,582,802 --
Shareholders' equity (deficit)....... (660,637) (3,474,576) (5,310,037) 34,832,651
</TABLE>
15
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
You should read the following discussion in conjunction with our financial
statements and the notes to those statements appearing elsewhere in this report.
OVERVIEW
We were founded in May 1996. During the period from May 1996 to December
31, 1996, our inception period, we had no revenues and were primarily engaged in
the development and planning of our software and survey research
infrastructures. In June 1997, we introduced our first product system, the @plan
Gutenberg Advertising System. Since 1997, subscribers to this system have
included Internet advertisers, advertising agencies and Web publishers and, to a
lesser extent, online retailers and consumer brand marketers. During 1997, we
generated revenues of approximately $422,000, and continued to build our sales
and operations staff. During 1998, our first full year of sales, we continued to
grow our client subscriber base and generated revenues of $3.1 million. Despite
our growth in revenues, we incurred operating losses for the year, as our focus
continued to be on expanding our client and user bases, product development and
the hiring of additional sales, client service and operations personnel. During
1998, we opened a satellite office in San Francisco, California to service our
existing West Coast clients and to expand our client base in this market. In
December 1998, we introduced the @plan Kepler E-Business System specifically
designed for online retailers and consumer brand marketers. During 1999, we
began development on our first highly targeted vertical market research system
which focuses on the automotive, travel and merchandising e-commerce sector. We
are expecting this system to launch at the end of the first quarter of 2000.
We derive all of our revenues from the sale of subscriptions to our
systems. The subscription contracts are generally non-cancelable for a period of
one year and most automatically renew unless we receive notice of termination
from the client prior to the anniversary date. Clients typically pay contract
fees on an annual, quarterly or monthly basis which are recorded as deferred
revenue until the revenue is recognized. Revenue is recognized on a straight
line basis over the non-cancelable contract period, generally 12 months. Upon
renewal, many of the subscription rates increase automatically in accordance
with contract provisions. These automatic increases are generally higher in the
first two renewal years than in subsequent renewal years where the rate
adjustment is based on increases in the Consumer Price Index, or CPI. We have
experienced a contract renewal rate in excess of 90% from inception through
December 31, 1999. The renewal rate is not necessarily indicative of the rate of
future retention of our revenue base. See "Risk Factors -- We depend on
subscription renewals by our clients and a decrease in our current rate of
renewal could cause a decline in our revenue."
One measure of the volume of our business is "contract value" which
represents the annualized value of all contracts in effect at a given point in
time, without regard to the duration of contracts then outstanding and without
deducting revenue already recognized under these contracts. Our contract value
was $1.6 million at December 31, 1997, $4.6 million at December 31, 1998 and
$10.4 million at December 31, 1999. As of December 31, 1999, we have recognized
$4.8 million of revenues of the $10.4 million in contract value.
Our revenues, and as a result our operating margins, will fluctuate
depending on our product and customer mix. Annual subscriptions to the @plan
Kepler E-Business System are typically priced higher than annual subscriptions
to the @plan Gutenberg Advertising System. Moreover, annual subscription pricing
and renewal pricing are often negotiated and may vary based on the volume of
subscriptions being sold to the client. Variations in product or client mix
could cause our revenues and operating results to fluctuate on a quarterly or
annual basis.
Product costs consist primarily of amounts paid to Gallup for quarterly
collection of data used in our market research systems. From time to time we
will engage Gallup on a case-by-case basis to collect additional data. In the
past, these additional engagements have caused our data collection costs to
fluctuate from quarter to quarter, and we expect quarterly data collection costs
to continue to fluctuate as we plan to continue to use Gallup for additional
data collection. Product costs will also increase as we collect data and incur
additional software development costs in conjunction with the development of our
vertical market research systems and new products.
16
<PAGE> 18
Also included in product costs are software development costs which consist
primarily of the amortization of capitalized software development costs and, to
a lesser extent, other non-capitalized technology expenses such as Web site
maintenance. Software development costs represent direct expenses incurred to
improve or enhance our systems, including increasing access speeds, designing
new user interfaces and developing new system modules. As of December 31, 1999,
we had approximately $552,000 in capitalized software development costs which
will be amortized and expensed as product costs over the next one to three
years. See note 2 of the notes to our financial statements for an explanation of
the accounting for our software development costs.
We have incurred significant losses since inception and as of December 31,
1999, we had an accumulated deficit of $8.8 million. Our net losses and
accumulated deficit resulted from our lack of substantial revenues and the
significant costs incurred in the development of our systems and in the
establishment of our operations infrastructure. We intend to invest in the
development of new products, the enhancement of our current systems and in the
expansion of our sales force. As a result, we expect to incur additional losses
at least through December 31, 2000.
RESULTS OF OPERATIONS
Year Ended December 31, 1998 and December 31, 1999
Revenues. Total revenues increased 137% from $3.1 million in 1998 to $7.4
million in 1999. The increase in revenues resulted principally from an increase
of $2.8 million in recurring revenues from the retention of existing clients.
Additionally, we experienced increased growth of $1.5 million in our
subscription sales to new clients, including revenues from our @plan Kepler
E-Business System launched in December 1998.
Product Costs. Product costs consist primarily of amounts paid to Gallup
for quarterly collection of data used in our market research systems and
software development costs. Product costs increased 97% from $2.4 million in
1998 to $4.7 million in 1999. This increase was due primarily to an increase of
$1.7 million in additional data collection costs and an increase of
approximately $604,000 in software development costs associated primarily with
the introduction of the @plan Kepler E-Business system and the development of
our first highly targeted vertical market research system focusing on the
automotive, travel and merchandising e-commerce sector system. Our strategy
includes the continued development and introduction of new products. As a
result, we anticipate incurring increased data collection and software costs
during 2000 and in future periods as we continue to develop additional products.
Selling and Marketing. Selling and marketing costs consist primarily of
personnel expenses associated with the sale and service of our systems,
including commissions, public relations costs and, to a lesser extent, marketing
expenses. Selling and marketing costs increased 88% from $1.7 million in 1998 to
$3.2 million in 1999. This increase was due largely to the expansion of our
sales force and client service team and commissions associated with increased
sales. Selling and marketing costs will increase as we continue to expand our
sales force and introduce new products.
General and Administrative. General and administrative expenses consist
primarily of salaries and related costs for our administrative, financial and
information technology personnel, professional fees, occupancy costs and general
office expenses. General and administrative expenses increased 95% from $1.1
million in 1998 to $2.1 million in 1999. This increase was primarily due to the
increase in personnel needed to support our expanding operations and related
costs and the additional costs related to being a public company, including
directors' and officers' liability insurance, investor relations programs and
professional services fees. Accordingly, general and administrative expenses
will increase in future periods.
Non-cash compensation expense. During the first quarter of 1999, we issued
47,340 options to our employees. These options had an exercise price that was
$10.67 less per share than the fair market value of our common stock on the date
of grant. The options fully vested on the date of the initial public offering.
In accordance with the Accounting Principles Board no. 25, "Accounting for Stock
Issued to Employees," we
17
<PAGE> 19
recognized compensation expense of approximately $505,000 during 1999. See note
6 of Notes to Financial Statements.
Interest income. Interest income consists of interest earned on cash and
cash equivalents. Interest income was approximately $192,000 in 1998 as compared
to $1.1 million in 1999. The increase in interest income was primarily
attributable to the higher cash balances during 1999 as a result of net proceeds
from the sale of our common stock in our initial public offering in May 1999.
Years Ended December 31, 1997 and December 31, 1998
Revenues. Total revenues increased to $3.1 million in 1998 from
approximately $422,000 in 1997. The growth in revenues during 1998 resulted
principally from a $2.2 million increase in subscription sales for the @plan
Gutenberg Advertising System during our first full year of sales efforts, as
well as an approximate $455,000 increase in recurring revenues from the
retention of existing clients. We had nominal revenues from subscription sales
of the @plan Kepler E-Business System in 1998 as it was not introduced until
December 1998.
Product Costs. Product costs increased to $2.4 million in 1998 from $1.7
million in 1997 due primarily to ongoing data collection costs associated with
the @plan Gutenberg Advertising System and additional data collection costs
associated with the December 1998 launch of the @plan Kepler E-business System.
Selling and Marketing. Selling and marketing costs increased to $1.7
million in 1998 from approximately $819,000 in 1997. The increase was due
largely to the expansion of our sales force and client service team and
commissions associated with increased sales.
General and Administrative Expenses. General and administrative expenses
were approximately $753,000 in 1997 and $1.1 million in 1998. The increase was
primarily attributable to the increase in staffing levels to manage and support
our expanding operations.
Interest Income. Interest income was approximately $80,000 in 1997 and
approximately $192,000 in 1998. The increase in 1998 was primarily due to a
higher investment balance as a result of net proceeds of $5.1 million from our
sale of preferred stock in 1998.
SELECTED QUARTERLY OPERATING RESULTS
The following tables set forth selected statement of operations data for
the five quarters ended December 31, 1999 both in absolute dollars and as a
percentage of total revenues. The information for each quarter has been prepared
on substantially the same basis as the audited statements included in other
parts of this filing and, in our opinion, includes all adjustments, consisting
of only normal recurring adjustments, necessary for a fair presentation of the
results of operations for these periods. You should read this information in
conjunction with our financial statements and the notes to those statements
included elsewhere herein. The operating results for any quarter are not
necessarily indicative of the results to be expected in the future.
18
<PAGE> 20
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 31, DECEMBER 31,
1998 1999 1999 1999 1998
------------ ---------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues........................... $1,106,881 $1,337,122 $1,623,996 $2,009,841 $ 2,384,814
Costs and expenses:
Product costs.................... 709,230 740,480 805,286 1,264,809 1,846,706
Selling and marketing............ 514,508 539,160 699,416 898,849 1,082,014
General and administrative....... 367,763 402,750 418,029 558,312 731,831
Compensation expenses............ -- 30,060 475,038 -- --
---------- ---------- ---------- ---------- -----------
Total costs and
expenses............... 1,591,501 1,712,450 2,397,769 2,721,970 3,660,551
---------- ---------- ---------- ---------- -----------
Loss from operations............... (484,620) (375,328) (773,773) (712,129) (1,275,737)
---------- ---------- ---------- ---------- -----------
Interest Income.................... 46,187 36,730 185,978 435,340 458,405
---------- ---------- ---------- ---------- -----------
Net loss before taxes.............. 438,433) (338,598) (587,795) (276,789) (817,332)
Income tax provision............... 8,298 3,300 41,000 10,000 10,000
---------- ---------- ---------- ---------- -----------
Net loss........................... $ (446,731) $ (341,898) $ (628,795) $ (286,789) $ (827,332)
========== ========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues........................... 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Product costs.................... 64.1 55.4 49.6 63.0 77.4
Selling and marketing............ 46.5 40.3 43.1 44.7 45.4
General and administrative....... 33.2 30.2 25.7 27.8 30.7
Compensation expense............. -- 2.2 29.3 -- --
----- ----- ----- ----- -----
Total costs and
expenses............... 143.8 128.1 147.7 135.5 153.5
----- ----- ----- ----- -----
Loss from operations............... (43.8) (28.1) (47.7) (35.5) (53.5)
----- ----- ----- ----- -----
Interest income.................... 4.2 2.7 11.5 21.7 19.2
----- ----- ----- ----- -----
Net loss before taxes.............. (39.6) (25.3) (36.2) (13.8) (34.3)
Income tax provision............... 0.8 0.3 2.5 .5 .4
----- ----- ----- ----- -----
Net loss........................... (40.4)% (25.6)% (38.7)% (14.3)% (34.7)%
===== ===== ===== ===== =====
</TABLE>
FACTORS AFFECTING QUARTERLY OPERATING RESULTS
Our revenues increased during each quarter of 1999 and the last quarter of
1998. Quarterly revenue increased 21% from the fourth quarter of 1998 to the
first quarter of 1999, 21% from the first to the second quarter, 24% from the
second to the third quarter and 19% from the third quarter to the fourth quarter
of 1999. These increases were due to the growth in sales of subscriptions to the
@plan Gutenberg Advertising System, the effects of subscription renewals, which
began in the third quarter of 1998, and sales of the @plan Kepler E-Business
System, which was introduced in December 1998. These renewals reflect higher
subscription rates than those in place during the initial term of these
contracts, in accordance with contract provisions.
Operating costs and expenses increased 8% from the fourth quarter 1998 to
the first quarter 1999, 40% from the first to the second quarter, 14% from the
second to the third quarter and increased 34% from the third quarter to the
fourth quarter of 1999. These increases were due primarily to additions of sales
and administrative personnel to sustain our growth and new product development
costs. Operating costs and expenses in the second quarter were impacted by
product development costs associated with our U.S. population data collection,
which was included with the @plan Kepler E-Business System beginning in the
fourth quarter. Loss from operations increased during the year due to the
increased costs associated with the development of additional products.
19
<PAGE> 21
Interest income increased as a result of our higher cash balance associated
with the sale of our common stock during the second quarter 1999.
Our operating results have varied on a quarterly basis and are expected to
fluctuate significantly in the future as a result of a variety of factors, many
of which are outside our control. Factors that may affect our quarterly
operating results include:
- market acceptance of the Web as an advertising medium;
- the development of the electronic commerce market;
- market acceptance of our products and services;
- the amount and timing of operating costs and capital expenditures
relating to expansion of our business, including our planned development
of more detailed market research systems;
- variations in product or client mix, as pricing may vary based on the
volume and type of subscription being sold to a client;
- our ability to expand our customer base and retain current clients;
- new competitors entering our market;
- general economic conditions as well as economic conditions specific to
the Internet;
- our ability to attract and retain qualified sales and other personnel;
- technical difficulties or service interruptions; and
- strategic pricing changes, marketing decisions or acquisitions.
Our limited operating history and the emerging nature of our markets make
prediction of future revenues difficult. Our expense levels are based, in part,
on our expectations with regard to future revenues, and to a large extent such
expenses are fixed, particularly in the short term. We cannot assure you that we
will be able to predict our future revenue accurately and we may be unable to
adjust spending in a timely manner to compensate for any unexpected revenue
shortfall. Accordingly, any significant shortfall in our expectations could
cause significant declines in our quarterly operating results.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999 we had $34.8 million in cash and cash equivalents
as compared to $3.7 million as of December 31, 1998. In May 1999, we consummated
our initial public offering by selling 2,500,000 shares of Common Stock at a
price of $14.00 per share. Net proceeds from the initial public offering, net of
underwriting discounts and offering costs, were $31.7 million. Prior to our
initial public offering, we had financed our operations primarily through the
private placement of preferred stock. Net proceeds from the sales of convertible
preferred stock from inception to December 31, 1999 totaled $9.6 million.
Net cash used in operating activities was $2.8 million in 1997, $1.8
million in 1998 and approximately $100,000 in 1999. Cash used in operating
activities in each period was primarily attributable to net operating losses and
increases in accounts receivable which were partially offset by increases in
deferred revenue and accrued expenses.
Deferred revenue increased from approximately $367,000 at December 31, 1997
to $1.1 million at December 31, 1998 and to $2.5 million at December 31, 1999.
Deferred revenue represents amounts invoiced under contract prior to our
rendering of services to the client. Unbilled accounts receivable increased from
approximately $91,000 at December 31, 1997 to approximately $245,000 at December
31, 1998, and decreased to approximately $181,000 at December 31, 1999. Unbilled
accounts receivable represents the value of services provided prior to
invoicing.
20
<PAGE> 22
Net cash used in investing activities was approximately $214,000 in 1997,
$533,000 in 1998 and $904,000 in 1999. Cash used in investing activities in each
period was primarily attributable to software development costs and purchases of
property and equipment.
Net cash provided by financing activities was $2.3 million in 1997, $5.1
million in 1998 and $32.1 million in 1999. Cash provided by financing activities
in each period was primarily attributable to the proceeds from the sale of
preferred stock, net of issuance costs and the sale of common stock through the
initial public offering, net of issuance costs.
We believe that our current cash and cash equivalents, which includes the
proceeds from our initial public offering, will be sufficient to meet our
working capital and capital expenditure requirements throughout 2000.
Thereafter, we may be required to raise additional funds. If additional funds
are raised through the issuance of equity securities, our shareholders may
experience significant dilution. There can be no assurance that additional
funding, if needed, will be available on attractive terms, or at all. If
financing is not available when required or is not available on acceptable
terms, we may be unable to develop or enhance our products or services. The
failure to raise capital when needed could harm our business, operating results
and financial condition.
COMMITMENTS AND CONTINGENCIES
We have no material commitments other than our leases for our corporate
headquarters and our office in San Francisco and obligations under our agreement
with Gallup. Our agreement with Gallup provides us with initial baseline data
and quarterly tracking data collection. The agreement has a one-year term with
nine successive one-year renewals and is cancelable by us upon 90-days' written
notice prior to an anniversary date. The annual renewal provides for CPI
increases to the associated fees. During the third quarter, we entered into an
additional agreement with Gallup to provide us with initial baseline data and
quarterly tracking data collection for our first targeted vertical market
research system focusing on the automotive, travel and merchandising e-commerce
sector. This agreement extends through August 2009 and is cancelable by us upon
90-days' written notice prior to an anniversary date. Our strategy includes the
development and introduction of additional vertical system and new products. As
we continue to develop additional products, we anticipate incurring increased
data collection through 2000 and in future periods.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded
to accept or recognize only two digit entries in the date code field. These
systems and software products will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and software may need to be upgraded to comply with Year 2000
requirements or risk system failure or miscalculations causing disruptions of
normal business activities.
In order to minimize or eliminate the effect of the Year 2000 risk on our
business systems and applications, we identified, evaluated, implemented and
tested changes to our computer systems, applications and software necessary to
achieve Year 2000 compliance. Our computer systems and equipment successfully
transitioned to the Year 2000 with no significant issues. We continue to monitor
problems that could surface at key dates or events in the future. We do not
anticipate any significant problems related to these events. We are also not
aware of any material Year 2000 problems with our suppliers or vendors.
We have not incurred any incremental costs in connection with identifying,
evaluating or addressing Year 2000 compliance issues. Most of our expenses have
related to, and are expected to continue to relate to, the operating costs
associated with time spent by employees in the evaluation process and Year 2000
compliance matters generally. At this time, we do not anticipate that such
expenses will be material.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Cost of Computer Software
Developed or Obtained for Internal Use."
21
<PAGE> 23
Statement of Position 98-1 is effective for financial statements for years
beginning after December 15, 1998. Statement of Position 98-1 provides guidance
over accounting for computer software developed or obtained for internal use
including the requirement to capitalize specific costs and amortization of such
costs. We do not expect this standard to have a material effect on our
capitalization policy.
We do not believe that any other recent pronouncements will have a
significant impact on our results of operations, financial position or cash
flows.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE'S ABOUT MARKET RISK
The carrying values of financial instruments including cash and cash
equivalents, accounts receivable, accounts payable and notes payable,
approximate fair value because of the short maturity of these instruments.
Our results of operations, financial position, and cash flows are not
materially affected by changes in the relative values of non-U.S. currencies to
the U.S. dollar. We do not use derivative financial instruments to limit our
foreign currency risk exposure.
22
<PAGE> 24
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
@PLAN.INC
Report of Independent Public Accountants.................. 24
Balance Sheets as of December 31, 1998 and December 31,
1999................................................... 25
Statements of Operations for the years ended December 31,
1997, 1998 and 1999.................................... 26
Statements of Shareholders' Equity (Deficit) for the years
ended December 31, 1997, 1998 and 1999................. 27
Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999.................................... 28
Notes to Financial Statements............................. 29
</TABLE>
23
<PAGE> 25
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of @plan.inc:
We have audited the accompanying balance sheets of @plan.inc (a Tennessee
corporation) as of December 31, 1999 and 1998, and the related statements of
operations, shareholders' equity (deficit) and cash flows for each of the three
years in the period ended December 31, 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of @plan.inc as of December 31,
1999 and 1998, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
--------------------------------------
New York, New York
February 3, 2000
24
<PAGE> 26
@PLAN.INC
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 3,682,576 $34,817,991
Accounts receivable, net of allowance of $80,000, and
$164,000, respectively:
Billed................................................. 1,440,693 2,214,834
Unbilled............................................... 245,310 181,432
Other.................................................. -- 159,837
Prepaid expenses.......................................... 101,208 475,519
----------- -----------
Total current assets.............................. 5,469,787 37,849,613
Property and equipment, net................................. 117,641 260,372
Software development costs, net............................. 375,278 551,545
Other assets................................................ 63,775 460,823
----------- -----------
Total assets...................................... $ 6,026,481 $39,122,353
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable.......................................... $ 254,223 $ 881,041
Accrued liabilities....................................... 375,411 956,447
Deferred revenue.......................................... 1,124,082 2,452,214
----------- -----------
Total current liabilities......................... 1,753,716 4,289,702
Mandatory redeemable convertible preferred stock:
Series A, no par value, 500,000 shares authorized: 448,000
and no shares issued and outstanding, respectively..... 431,876 --
Series B, no par value, 2,250,000 shares authorized:
2,016,000 and no shares issued and outstanding,
respectively........................................... 4,011,935 --
Series C, no par value, 1,725,667 shares authorized:
1,725,667 and no shares issued and outstanding,
respectively........................................... 5,138,991 --
----------- -----------
Total mandatory redeemable convertible preferred
stock.......................................... 9,582,802 --
Shareholders' equity (deficit):
Preferred Stock, no par value, 5,524,333 and 10,000,000
shares authorized; no shares issued and outstanding.... -- --
Common stock, no par value, 50,000,000 shares authorized;
907,200 and 11,205,700 shares issued and outstanding,
respectively........................................... 8,001 41,730,405
Additional paid-in capital................................ 27,418 1,855,511
Accumulated deficit....................................... (5,345,456) (8,753,265)
----------- -----------
Total shareholders' equity (deficit).............. (5,310,037) 34,832,651
----------- -----------
Total liabilities and shareholders' equity
(deficit)...................................... $ 6,026,481 $39,122,353
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE> 27
@PLAN.INC
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Revenues............................................ $ 422,401 $ 3,108,356 $ 7,355,773
Costs and expenses:
Product costs..................................... 1,744,366 2,360,042 4,657,281
Selling and marketing............................. 819,043 1,713,080 3,219,439
General and administrative........................ 753,299 1,084,698 2,110,922
Compensation expense.............................. -- -- 505,098
----------- ----------- -----------
Total costs and expenses.......................... 3,316,708 5,157,820 10,492,740
----------- ----------- -----------
Loss from operations................................ (2,894,307) (2,049,464) (3,136,967)
Interest income..................................... 80,368 191,804 1,116,453
----------- ----------- -----------
Net loss before income taxes...................... (2,813,939) (1,857,660) (2,020,514)
Income tax provision................................ -- 13,219 64,300
----------- ----------- -----------
Net loss.......................................... $(2,813,939) $(1,870,879) $(2,084,814)
=========== =========== ===========
Basic and diluted loss per share.................... $ (3.13) $ (2.07) $ (0.48)
=========== =========== ===========
Weighted average shares outstanding................. 900,000 901,993 7,146,699
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE> 28
@PLAN.INC
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------------ PAID-IN ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY (DEFICIT)
---------- ----------- ---------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1996..... 900,000 $ 1 $ -- $ (660,638) $ (660,637)
Net loss........................ -- -- -- (2,813,939) (2,813,939)
---------- ----------- ---------- ----------- -----------
Balances, December 31, 1997..... 900,000 1 -- (3,474,577) (3,474,576)
Exercise of stock options....... 7,200 8,000 -- -- 8,000
Options granted to
non-employees................. -- -- 27,418 -- 27,418
Net loss........................ -- -- -- (1,870,879) (1,870,879)
---------- ----------- ---------- ----------- -----------
Balances, December 31, 1998..... 907,200 8,001 27,418 (5,345,456) (5,310,037)
Issuance of Common Stock from
initial public offering,
net........................... 2,500,000 31,667,805 -- -- 31,667,805
Exercise of options............. 257,100 471,797 -- -- 471,797
Conversion of preferred stock... 7,541,400 9,582,802 -- -- 9,582,802
Warrants........................ -- -- 1,322,995 (1,322,995) --
Compensation related to stock
options granted to
employees..................... -- -- 505,098 -- 505,098
Net loss........................ -- -- -- (2,084,814) (2,084,814)
---------- ----------- ---------- ----------- -----------
Balances, December 31, 1999..... 11,205,700 $41,730,405 $1,855,511 $(8,753,265) $34,832,651
========== =========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE> 29
@PLAN.INC
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.......................................... $(2,813,939) $(1,870,879) $(2,084,814)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization..................... 48,648 218,878 585,005
Provision for doubtful accounts................... -- 80,000 145,000
Non cash charges.................................. -- 27,418 505,098
Changes in operating assets and liabilities:
Increase in accounts receivable................ (445,981) (1,320,023) (1,015,100)
Increase in prepaid expenses................... (37,055) (63,370) (374,311)
(Increase) decrease in other assets............ (61,289) 360 (397,048)
(Decrease) increase in accounts payable........ (14,182) 171,248 626,818
Increase in accrued liabilities................ 140,013 235,398 581,036
Increase in deferred revenue................... 366,953 757,130 1,328,132
----------- ----------- -----------
Net cash used in operating activities........ (2,816,832) (1,763,840) (100,184)
Cash flows from investing activities:
Purchases of equipment............................ (143,419) (74,327) (241,382)
Software development costs........................ (70,495) (458,586) (662,621)
----------- ----------- -----------
Net cash used in investing activities........ (213,914) (532,913) (904,003)
Cash flows from financing activities:
Proceeds from issuance of common stock, net....... -- 8,000 32,139,602
Proceeds from issuance of preferred stock, net.... 2,254,714 5,138,991 --
----------- ----------- -----------
Net cash provided by financing activities.... 2,254,714 5,146,991 32,139,602
----------- ----------- -----------
Net change in cash and cash equivalents............. (776,032) 2,850,238 31,135,415
Cash and cash equivalents at beginning of period.... 1,608,370 832,338 3,682,576
----------- ----------- -----------
Cash and cash equivalents at end of period.......... $ 832,338 $ 3,682,576 $34,817,991
=========== =========== ===========
Supplemental information:
Cash paid for income taxes........................ $ -- $ 4,921 $ 64,300
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE> 30
@PLAN.INC
NOTES TO FINANCIAL STATEMENTS
1. GENERAL:
@plan.inc was incorporated in the State of Tennessee in May 1996. We are
based in Stamford, Connecticut, and are a provider of target market research
planning systems for Internet advertisers, advertising agencies, Web publishers,
online retailers and consumer brand marketers.
2. SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
We provide target market research planning systems to our clients on a
renewable subscription basis. We recognize revenue ratably over the contract
period, which is generally twelve months. We bill our clients for our services
based on terms of the contracts, which may not coincide with criteria required
for revenue recognition.
On the accompanying balance sheets, deferred revenue represents amounts
invoiced prior to rendering our services while unbilled receivables represents
the value of services rendered prior to being invoiced. Substantially all of the
deferred and unbilled revenue will be earned and billed, respectively, within
twelve months of the respective period ends.
Upon signing a contract, our sales representatives become eligible for a
commission. These commissions are paid at the time of the contract signing. For
financial reporting purposes, we capitalize these commissions as a component of
prepaid expenses and amortize these amounts over the lives of the related
contracts.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and all investments in
highly liquid instruments purchased with original maturities of three months or
less. Funds in excess of operating cash needs are maintained in a money market
fund, which may exceed the amount insured by the Federal Deposit Insurance
Corporation.
Property and Equipment
Property and equipment is stated at cost less accumulated depreciation and
amortization. Property and equipment consists of computer equipment, software,
furniture and fixtures and leasehold improvements. Computer equipment, software,
furniture and fixtures are depreciated using the straight-line method over their
useful lives that range from 3 to 5 years. Leasehold improvements are amortized
over the term of the lease.
Software Development Costs
We capitalize direct costs relating to our computer software development
upon the establishment of technological feasibility. Until our products reach
technological feasibility, all costs related to development efforts are expensed
as a component of product costs. Software development costs, subsequent to
technological feasibility and prior to general release, have been capitalized
and are reported at the lower of unamortized cost or net realizable value. We
amortize capitalized software development costs on a straight-line basis for
periods ranging from one to three years. As of December 31, 1998 and 1999,
software development costs are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1998 1999
--------- ----------
<S> <C> <C>
Software development costs.................................. $ 529,081 $1,191,702
Less: Accumulated amortization.............................. (153,803) (640,157)
--------- ----------
$ 375,278 $ 551,545
========= ==========
</TABLE>
29
<PAGE> 31
@PLAN.INC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
We periodically review our software development costs and property and
equipment for any potential impairments. We consider undiscounted cash flows,
future operating results, trends or other relevant information in assessing
whether the carrying value of our assets is recoverable. At December 31, 1999,
we do not believe that any of our assets are impaired.
Income Taxes
We recognize deferred tax assets and liabilities for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized.
Stock-Based Compensation
We account for our stock-based compensation to our employees by recognizing
compensation expense for the difference between the estimated fair value of our
stock at the date of grant and the exercise price of the granted stock.
Stock-based grants issued to non-employees are recorded at either the fair value
of the services provided or the fair value of the stock issued, as determined
using the Black-Scholes model.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires us to make estimates and assumptions.
These estimates and assumptions affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements. These assumptions also affect the reported amounts of
revenue and expenses during the reporting periods. Actual results could differ
from those estimates and assumptions.
Concentrations of Risk
We invest the majority of our cash balances in short-term, high quality
marketable securities. Our accounts receivable balances are domestic. No single
client represents a significant credit risk to us.
The methodology for the collection of data, the generation of a sample
population to be surveyed and the collection of data from that sample population
for our Web user database, our U.S. population database and our merchandising
vertical system are controlled and conducted by Gallup. If our agreements with
Gallup terminates for any reason, we will need to find another firm to perform
our research data collection services and this could harm our business by
delaying our ability to update our database and introduce new products.
Fair Value of Financial Instruments
The carrying amount of all of our cash and cash equivalents, accounts
receivable and accounts payable approximate fair value due to the short-term
nature of these accounts.
Stock-Splits
The accompanying financial statements give retroactive effect to a 1.8 for
1 stock-split that was approved by our Board of Directors on March 10, 1999.
30
<PAGE> 32
@PLAN.INC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1999
--------- ---------
<S> <C> <C>
Computer equipment and software............................. $ 211,999 $ 436,315
Furniture and fixtures...................................... 8,613 16,261
Leasehold improvements...................................... 8,073 17,491
--------- ---------
228,685 470,067
Less: Accumulated depreciation.............................. (111,044) (209,695)
--------- ---------
$ 117,641 $ 260,372
========= =========
</TABLE>
4. BASIC AND DILUTED NET LOSS PER SHARE:
Basic loss per share amounts are computed by dividing the net loss by the
weighted average number of shares of common stock outstanding during the period.
Diluted loss per share is computed by dividing the net loss by the weighted
average number of shares of common stock outstanding during the period plus the
effects of any potentially dilutive securities. In the accompanying statements
of operations, diluted loss per share does not include the effects of
potentially dilutive securities for all periods presented as they would have
been anti-dilutive in years in which a loss is reported.
The following summarizes the securities outstanding which are excluded from
the loss per share calculation as amounts would have an anti-dilutive effect.
Preferred Stock is reflected on an "if-converted" basis.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Series A preferred stock.......................... 806,400 806,400 --
Series B preferred stock.......................... 3,628,800 3,628,800 --
Series C preferred stock.......................... -- 3,106,200 --
Stock options..................................... 1,506,600 1,805,400 2,213,540
Warrants.......................................... -- -- 200,000
--------- --------- ---------
Total................................... 5,941,800 9,346,800 2,413,540
========= ========= =========
</TABLE>
The following tables summarize the calculation of basic and dilutive
earnings per share for the years ended December 31, 1997, 1998 and 1999:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Net loss.................................... $(2,813,939) $(1,870,879) $(2,084,814)
Less: preferred stock dividends............. -- -- (1,322,995)
----------- ----------- -----------
Loss available to common shareholders....... $(2,813,939) $(1,870,879) $(3,407,809)
=========== =========== ===========
Weighted average shares outstanding......... 900,000 901,993 7,146,699
Basic and dilutive loss per common share
available to common shareholders.......... $ (3.13) $ (2.07) $ (0.48)
</TABLE>
31
<PAGE> 33
@PLAN.INC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. EQUITY TRANSACTIONS:
In May 1999, we completed an initial public offering of our common stock.
We sold 2,500,000 shares of our common stock at an initial offering price of
$14.00 per share resulting in proceeds of $31.7 million, net of underwriting
discounts and offering expenses.
In 1996 and 1997, we issued a total of 448,000 shares of Series A preferred
stock and 2,016,000 shares of Series B preferred stock at a purchase price of
$1.00 and $2.00 per share, respectively. In 1998, we issued 1,725,667 shares of
Series C preferred stock at a purchase price of $3.00 per share. Upon the
closing of the initial public offering, all outstanding shares of Series A, B
and C preferred stock were converted into 806,400 shares, 3,628,800 shares and
3,106,200 shares of common stock, respectively.
Simultaneous with the closing of our initial public offering, a director
and an officer and all of the preferred shareholders received warrants to
purchase an aggregate of 200,000 shares of common stock. Of these warrants,
warrants to purchase 25,000 shares of common stock were granted to each of the
director and officer. The preferred shareholders, including the director and
officer, received a pro rata portion of the remaining 150,000 warrants. These
warrants are exercisable for seven years.
We accounted for these warrants at the time of issuance as follows:
- For warrants issued to the officer and director, we applied the
provisions of Accounting Principles Boards Opinion No. 25, "Accounting
for Stock Issued to Employees," and recorded compensation expense for the
difference between the fair value of our common stock at the time of
grant, based on our initial public offering price, and the exercise price
of the warrant. As these amounts were equivalent on the date of grant, we
do not expect to record any compensation expense for these warrants.
- For warrants issued to the holders of our preferred stock, we recorded
the value of these warrants, as determined by using the Black-Scholes
model, as a dividend to these shareholders on the date of grant. This
dividend increased our accumulated deficit but had no effect on reported
net income (loss). The value of this dividend was $1.3 million which was
determined by using the Black-Scholes model with the following
assumptions:
- risk free interest rate of 5.3%,
- expected dividend yield of 0%,
- expected life of 5.0 years and
- expected volatility of 0%
6. STOCK OPTION PLANS:
In 1996, we created the 1996 Stock Option Plan. This plan, as amended,
provides for stock option grants to employees, members of our board of
directors, our consultants and other persons having a business relationship with
us. Under this plan, the option price as determined by the board of directors
cannot be less than 100% of the fair market value of our common stock, at grant,
in the case of incentive stock options, and not less than 50% of the fair market
value of our common stock, at grant, in the case of non-qualified stock options.
Exceptions exist under certain conditions. No options will be exercisable more
than ten years after the date the option is granted. Options that we have
granted under our plan generally vest ratably over a four year period, beginning
at the date of grant. All unvested options immediately vested upon the initial
public offering of our common stock. Our board of directors and shareholders
authorized a total of 1,980,000 shares of common stock for issuance under this
plan. No further awards of stock will be granted under the 1996 plan.
Our board of directors adopted the 1999 Stock Incentive Plan in March 1999
and it was approved by our shareholders in March 1999. The purpose of the plan
is to attract, retain and reward key employees,
32
<PAGE> 34
@PLAN.INC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
consultants and non-employee directors. This plan allows flexibility in the
award of stock based incentive compensation to these people. The plan authorized
up to 800,000 shares of common stock for issuance under the plan plus an annual
increase to be added on each anniversary date of the adoption of this plan equal
to the lesser of 400,000 shares, two percent of the outstanding shares of our
common stock on that anniversary date or a number determined by our board of
directors.
In October 1999, our board of directors adopted the 1999 Stock Option Plan
for New Employees. The purpose of the plan is attract persons not previously
employed by @plan. and to offer equity interest in the company as an inducement
essential to the person's accepting employment. The plan authorized up to
400,000 shares of common stock for issuance under the plan as non-qualified
stock options.
At December 31, 1997, 1998 and 1999, the following options had been granted
under our plans and were outstanding:
<TABLE>
<CAPTION>
1997 1998 1999
----------------- ------------------ ------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- ----- --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
period........................ 343,800 $0.94 1,506,600 $ 1.14 1,805,400 $ 1.43
Granted......................... 1,162,800 1.20 349,200 2.91 755,240 11.72
Exercised....................... -- -- (7,200) 1.11 (257,100) 1.84
Forfeited....................... -- -- (43,200) 1.39 (90,000) 2.00
--------- ----- --------- ------ --------- ------
Outstanding at end of period.... 1,506,600 $1.14 1,805,400 $ 1.43 2,213,540 $ 4.84
========= ========= =========
Options exercisable at end of
period........................ 505,399 $0.99 874,420 $ 1.20 1,548,248 $ 1.76
========= ========= =========
Weighted average fair value of
options granted during
period........................ $0.38 $0.66 $7.54
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
WEIGHTED-
OPTIONS AVERAGE OPTIONS
OUTSTANDING AT REMAINING WEIGHTED- EXERCISABLE AT WEIGHTED-
RANGE OF DECEMBER 31, CONTRACTUAL AVERAGE DECEMBER 31, AVERAGE
EXERCISE PRICES 1999 LIFE EXERCISE PRICE 1999 EXERCISE PRICE
- ----------------- -------------- ----------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$ .89 - $1.11 1,126,800 7.05 years $ 1.06 1,126,800 $ 1.06
$1.67 256,700 8.13 years 1.67 256,700 1.67
$3.33 113,140 8.81 years 3.33 113,140 3.33
$9.50 140,000 9.82 years 9.50 -- --
$12.00 - $12.4375 364,000 9.79 years 12.03 -- --
$14.00 - $14.94 212,900 9.42 years 14.18 51,608 14.06
--------- ---------
2,213,540 1,548,248
========= =========
</TABLE>
During the first quarter 1999, we issued 47,340 options to our employees.
These options had an exercise price that was approximately $10.67 less per share
than the fair market value of our common stock on the date of grant. Since these
options fully vested on the date of the initial public offering, we recognized
compensation expense of approximately $505,000 during 1999.
33
<PAGE> 35
@PLAN.INC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In 1998, we granted 36,000 stock options at an exercise price of $3.33 to
non-employees. We recognized expense in the amount of $27,418 in connection with
these grants, which was estimated using the Black-Scholes model and the
following assumptions:
- risk free interest rate of 5.3%,
- expected dividend yield of 0%,
- expected life of 5.0 years and
- expected volatility of 0%
The fair value of all of our other option grants is estimated on the date
of grant using the Black-Scholes model with the following weighted-average
assumptions used for grants in 1997, 1998 and 1999:
- weighted-average risk free interest rates of 6.5, 5.3% and 6.1%,
respectively,
- expected dividend yields of 0%,
- expected lives of 6.0 years and
- expected volatility of 0%, 0% and 66%, respectively.
We applied Accounting Principles Board No. 25, "Accounting our Stock Issued
to Employees," in accounting for our Stock Option grants to employees and
directors. Accordingly, except for the two series of option grants discussed
above, no compensation cost has been recognized for any option grants in the
accompanying statements of operations. Had compensation costs been recorded, our
net loss and basic and diluted loss per share would have been reduced from the
following as reported amounts to the following pro forma amounts:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Net loss:
As reported............................... $(2,813,939) $(1,870,879) $(2,084,814)
Pro forma................................. $(2,938,567) $(2,037,361) $(2,865,641)
Basic and diluted loss per share:
As reported............................... $ (3.13) $ (2.07) $ (0.48)
Pro forma................................. $ (3.27) $ (2.26) $ (0.59)
</TABLE>
7. INCOME TAXES:
The accompanying statements of operations for the years ended December 31,
1998 and 1999 include a provision for current state capital taxes of
approximately $13,200 and $64,300, respectively. No taxes were provided for the
year ended December 31, 1997, as tax was not due during the year.
34
<PAGE> 36
@PLAN.INC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the tax provision at the United States statutory rate
to the actual income tax expense reported is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Tax benefit at the United States statutory
rate.......................................... $(956,739) $(631,635) $(686,975)
State taxes, net of federal tax benefit......... -- 8,725 42,438
Options issued to employees..................... 171,733
Losses not benefited............................ 954,695 632,034 532,936
Other........................................... 2,044 4,095 4,168
--------- --------- ---------
Total income tax provision............ $ -- $ 13,219 $ 64,300
========= ========= =========
</TABLE>
Since inception, we have generated losses for both book and tax purposes.
We have not recorded potential income tax benefits that we may receive from our
ability to apply current losses to future years in which we have taxable income.
Under accounting rules, these benefits can only be recorded when it is more
likely than not that these benefits will be realized. Due to our limited
operating history, we currently cannot make this assessment.
At December 31, 1999, we had net operating loss carryforwards for federal
and state income tax purposes totaling approximately $7.1 million, which will
expire from 2016 through 2019.
Our net deferred tax asset consisted of the following amounts of deferred
tax assets and liabilities as of December 31, 1998 and 1999:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
Deferred tax asset:
Net operating loss carryforwards........................ $ 1,949,007 $ 2,840,599
Start-up costs.......................................... 184,731 130,664
Reserves and other...................................... 50,668 91,341
----------- -----------
Deferred tax asset........................................ 2,184,406 3,062,604
Less valuation allowance for deferred tax assets.......... (2,129,943) (2,756,927)
----------- -----------
54,463 305,677
Deferred tax liability:
Prepaid commissions..................................... (37,263) (85,277)
Excess of depreciation for tax purposes over book....... (17,200) (220,400)
----------- -----------
Deferred tax liability.................................... (54,463) (305,677)
----------- -----------
Net deferred tax asset.................................... $ -- $ --
=========== ===========
</TABLE>
35
<PAGE> 37
@PLAN.INC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES:
LEASE COMMITMENTS
We lease office facilities under operating leases. Future minimum lease
payments related to these agreements are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
2000........................................................ 271,611
2001........................................................ 136,270
2002........................................................ 58,157
Thereafter.................................................. --
</TABLE>
Rent expense was approximately $110,000, $156,000 and $192,000 for the
years ended December 31, 1997, 1998 and 1999 respectively.
CONTRACTUAL COMMITMENTS
We have a Letter of Agreement with The Gallup Organization, Inc. which was
entered into on September 6, 1996. This agreement was amended on January 5,
1998, August 20, 1998 and February 19, 1999. Under this agreement Gallup
provides us with initial baseline data and quarterly tracking survey research.
The agreement has a one-year term with nine successive one-year renewals, and is
cancelable only by us upon 90-days' written notice prior to an anniversary date.
The annual renewal provides for CPI increases to the associated fees. During the
third quarter of 1999, we entered into an additional agreement with Gallup to
provide us with initial baseline data and quarterly tracking data collection for
our highly targeted vertical system focusing on the automotive, travel and
merchandising e-commerce sector. This agreement extends through August 2009 and
is cancelable by us upon 90-days' written notice prior to an anniversary.
36
<PAGE> 38
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Our board of directors has selected Arthur Andersen LLP to serve as
independent auditors for the current fiscal year. Arthur Andersen LLP has served
as our independent auditors since November 11, 1998. On November 11, 1998, we
dismissed Kraft Bros, Esstman Patton & Harrell, PLLC as our independent
accountants. Kraft Bros' reports on the financial statements for the years ended
December 31, 1996 and 1997 did not contain any adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principle. The decision to change independent accountants was
approved by the board of directors. During the years ended December 31, 1996 and
1997 and through November 11,1998 there were no reportable events, as defined in
regulations of the Securities and Exchange Commission, or disagreements with
Kraft Bros on any matters of accounting principles or practices, financial
statement disclosure or auditing scope or procedure. Prior to retaining Arthur
Andersen LLP, we had not consulted with Arthur Andersen LLP regarding accounting
principles.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information as to directors of the Company is incorporated by reference
from the information contained in our proxy statement for the 2000 Annual
Meeting of Stockholders which we will file with the Securities and Exchange
Commission within 120 days of the end of the fiscal year to which this report
relates. Pursuant to General Instruction G(3), certain information concerning
executive officers of the Company is included in Part I of this Form 10-K, under
the caption "Executive Officers."
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the information contained in our proxy
statement for the 2000 Annual Meeting of Stockholders which we will file with
the Securities and Exchange Commission within 120 days of the end of the fiscal
year to which this report relates.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from the information contained in our proxy
statement for the 2000 Annual Meeting of Stockholders which we will file with
the Securities and Exchange Commission within 120 days of the end of the fiscal
year to which this report relates.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the information contained in our proxy
statement for the 2000 Annual Meeting of Stockholders which we will file with
the Securities and Exchange Commission within 120 days of the end of the fiscal
year to which this report relates.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
Reference is made to the financial statements included in Item 8 to this
Report on Form 10-K.
(a) (2) Financial Statement Schedules
37
<PAGE> 39
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To @plan.inc:
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule of Valuation and Qualifying Accounts
is presented for purposes of complying with the Securities and Exchange
Commissions rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
New York, New York
February 3, 2000
38
<PAGE> 40
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS(A) OF PERIOD
- ----------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year Ended December 31, 1997............. $ -- $ -- $ -- $ --
Year Ended December 31, 1998............. -- 80,000 -- 80,000
Year Ended December 31, 1999............. 80,000 145,000 61,000 164,000
VALUATION ALLOWANCE FOR DEFERRED TAX
ASSETS
Year Ended December 31, 1997............. 251,098 1,068,317 -- 1,319,415
Year Ended December 31, 1998............. 1,319,415 810,528 -- 2,129,943
Year Ended December 31, 1999............. 2,129,943 652,704 -- 2,782,647
</TABLE>
- ---------------
(a) Represents accounts written off as uncollectible.
(a) (3) Exhibits
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <S>
3.1 Form of Third Amended and Restated Charter of @plan.inc
(incorporated by reference to Exhibit 3.1 to the Company's
Registration statement on Form S-1, No 333-74507)
3.2 Form of Second Amended and Restated Bylaws of @plan.inc
(incorporated by reference to Exhibit 3.2 to the Company's
Registration statement on Form S-1, No 333-74507)
4.1 Form of certificate representing the common stock, no par
value per share of @plan.inc (incorporated by reference to
Exhibit 4.1 to the Company's Registration statement on Form
S-1, No 333-74507)
4.2 @plan.inc Amended and Restated Shareholders' Agreement dated
January 6, 1998, as amended (incorporated by reference to
Exhibit 4.2 to the Company's Registration statement on Form
S-1, No 333-74507)
4.3 Form of Stock Purchase Warrant (incorporated by reference to
Exhibit 4.3 to the Company's Registration statement on Form
S-1, No 333-74507)
4.4 Article 7 of the Third Amended and Restated Charter
(included in Charter filed as Exhibit 3.1) (incorporated by
reference to Exhibit 4.4 to the Company's Registration
statement on Form S-1, No 333-74507)
4.5 Article II of the Second Amended and Restated Bylaws
(included in Bylaws filed as Exhibit 3.2) (incorporated by
reference to Exhibit 4.5 to the Company's Registration
statement on Form S-1, No 333-74507)
10.1 Gallup Agreement dated September 6, 1996, as amended.
(incorporated by reference to Exhibit 10.1 to the Company's
Registration statement on Form S-1, No 333-74507)
10.2 Lease between @plan.inc, as tenant, and Reckson Operating
Partnership, L.P. (incorporated by reference to Exhibit 10.2
to the Company's Registration statement on Form S-1, No
333-74507)
10.3 Series A and Series B Convertible Preferred Stock Securities
Purchase Agreement dated July 24, 1996 (incorporated by
reference to Exhibit 10.3 to the Company's Registration
statement on Form S-1, No 333-74507)
10.4 Series C Convertible Preferred Stock Securities Purchase
Agreement dated December 31, 1997 (incorporated by reference
to Exhibit 10.4 to the Company's Registration statement on
Form S-1, No 333-74507)
10.5 Second Amended and Restated 1996 Stock Option Plan,
effective as of July 22, 1996 (incorporated by reference to
Exhibit 10.5 to the Company's Registration statement on Form
S-1, No 333-74507)
</TABLE>
39
<PAGE> 41
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <S>
10.6 1999 Stock Incentive Plan (incorporated by reference to
Exhibit 10.6 to the Company's Registration statement on Form
S-1, No 333-74507)
10.7 Form of Indemnification Agreement (incorporated by reference
to Exhibit 10.7 to the Company's Registration statement on
Form S-1, No 333-74507)
10.8 Form of Severance Agreement (incorporated by reference to
Exhibit 10.8 to the Company's Registration statement on Form
S-1, No 333-74507)
10.10 1999 Stock Option Plan for New Employees
10.11 Amendment to lease between @plan.inc, as tenant, and Reckson
Operating Partnership, L.P.
10.12 Lease between @plan.inc, as tenant, and Fidelity National
Title Insurance Company
10.13 Gallup Agreement dated August 1999
11 Computation of Loss per Share (incorporated by reference to
Exhibit 11 to the Company's Registration statement on Form
S-1, No 333-74507)
16 Letter re: Change in Certifying Accountant (incorporated by
reference to Exhibit 16 to the Company's Registration
statement on Form S-1, No 333-74507)
23.1 Consent of Arthur Andersen LLP
27 Financial Data Schedule (for SEC use only).
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
40
<PAGE> 42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934 , the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on this 29th day of
March, 2000.
@plan.inc
By: /s/ MARK K. WRIGHT
------------------------------------
Mark K. Wright
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<C> <S> <C>
/s/ MARK K. WRIGHT Chairman and Chief Executive Officer March 29, 2000
- ------------------------------------------------ (principal executive officer)
Mark K. Wright
/s/ NANCY A. LAZAROS Senior Vice President and Chief March 29, 2000
- ------------------------------------------------ Financial Officer (principal
Nancy A. Lazaros financial and accounting officer)
/s/ GARY R. HAYNES Director March 29, 2000
- ------------------------------------------------
Gary R. Haynes
/s/ DONALD M. JOHNSTON Director March 29, 2000
- ------------------------------------------------
Donald M. Johnston
/s/ W. PATRICK ORTALE, III Director March 29, 2000
- ------------------------------------------------
W. Patrick Ortale, III
/s/ ROGER J. THOMSON Director March 29, 2000
- ------------------------------------------------
Roger J. Thomson
/s/ JOHN H. WYANT Director March 29, 2000
- ------------------------------------------------
John H. Wyant
</TABLE>
41
<PAGE> 1
EXHIBIT 10.10
@PLAN.INC
1999 STOCK OPTION PLAN FOR NEW EMPLOYEES
SECTION 1. PURPOSE; DEFINITIONS.
The purpose of the @plan.inc 1999 Stock Option Plan for New Employees
(the "Plan") is to enable @plan.inc (the "Corporation") to attract persons not
previously employed by the Corporation and to offer equity interests in the
Corporation as an inducement essential to the person's entering an employment
contract with the Corporation. The creation of the Plan shall not diminish or
prejudice other compensation programs approved from time to time by the Board.
For purposes of the Plan, the following terms shall be defined as set
forth below:
A. "Affiliate" means any entity other than the Corporation and its
Subsidiaries that is designated by the Board as a participating employer under
the Plan, provided that the Corporation directly or indirectly owns at least 20%
of the combined voting power of all classes of stock of such entity or at least
20% of the ownership interests in such entity.
B. "Board" means the Board of Directors of the Corporation.
C. "Cause" has the meaning provided in Section 5(j) of the Plan.
D. "Change in Control" has the meaning provided in Section 6(b) of the
Plan.
E. "Change in Control Price" has the meaning provided in Section 6(d) of
the Plan.
F. "Common Stock" means the Corporation's Common Stock, no par value per
share.
G. "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
H. "Committee" means the Committee referred to in Section 2 of the Plan.
I. "Corporation" means @plan.inc, a corporation organized under the laws
of the State of Tennessee, or any successor corporation.
J. "Disability" means disability as determined under the Corporation's
insurance plans.
K. "Early Retirement" means retirement, for purposes of this Plan with
the express consent of the Corporation at or before the time of such retirement,
from active employment with the Corporation and any Subsidiary or Affiliate
prior to age 65, in accordance with any applicable early retirement policy of
the Corporation then in effect or as may be approved by the Committee.
L. "Effective Date" has the meaning provided in Section 10 of the Plan.
<PAGE> 2
M. "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.
N. "Fair Market Value" means with respect to the Common Stock, as of any
given date or dates, unless otherwise determined by the Committee in good faith,
the reported closing price of a share of Common Stock on Nasdaq or such other
market or exchange as is the principal trading market for the Common Stock, or,
if no such sale of a share of Common Stock is reported on Nasdaq or other
exchange or principal trading market on such date, the fair market value of a
share of Common Stock as determined by the Committee in good faith.
O. "Immediate Family" means any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include
adoptive relationships.
P. "Nasdaq" means The Nasdaq National Stock Market.
Q. "Non-Qualified Stock Option" means any stock option granted pursuant
to Section 5 hereof that is not an incentive stock option within the meaning of
Section 422 of the Code
R. "Normal Retirement" means retirement from active employment with the
Corporation and any Subsidiary or Affiliate on or after age 65.
S. "Plan" means this @plan.inc 1999 Stock Option Plan for New Employees,
as amended from time to time.
T. "Retirement" means Normal or Early Retirement.
U. "Subsidiary" means any corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by a Committee of not less than two
Non-Employee Directors, who shall be appointed by the Board and who shall serve
at the pleasure of the Board. The functions of the Committee specified in the
Plan may be exercised by an existing Committee of the Board composed exclusively
of Non-Employee Directors. The initial Committee shall be the Compensation
Committee of the Board. In the event there are not at least two Non-Employee
Directors on the Board, the Plan shall be administered by the Board and all
references herein to the Committee shall refer to the Board.
2
<PAGE> 3
The Committee shall have authority to grant, pursuant to the terms of
the Plan, Non-Qualified Stock Options to new employees of the Corporation.
In particular, the Committee, or the Board, as the case may be, shall
have the authority, consistent with the terms of the Plan:
(a) to select the new employees of the Corporation and its
Subsidiaries and Affiliates to whom Non-Qualified Stock Options, may
from time to time be granted hereunder;
(b) to determine whether and to what extent Non-Qualified Stock
Options are to be granted hereunder to one or more eligible persons;
(c) to determine the number of shares to be covered by each such
award granted hereunder;
(d) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder (including, but
not limited to, the share price and any restriction or limitation, or
any vesting acceleration or waiver of forfeiture restrictions regarding
any Non-Qualified Stock Option and/or the shares of Common Stock
relating thereto, based in each case on such factors as the Committee
shall determine, in its sole discretion); and to amend or waive any such
terms and conditions to the extent permitted by Section 7 hereof;
(e) to determine whether and under what circumstances a
Non-Qualified Stock Option may be settled in cash instead of Common
Stock;
(f) to determine whether, to what extent, and under what
circumstances NonQualified Stock Option grants under the Plan are to be
made, and operate, on a tandem basis vis-a-vis cash awards made outside
of the Plan;
(g) to determine whether, to what extent, and under what
circumstances shares of Common Stock and other amounts payable with
respect to an award under this Plan shall be deferred either
automatically or at the election of the participant (including providing
for and determining the amount (if any) of any deemed earnings on any
deferred amount during any deferral period);
(h) to determine whether to require payment of tax withholding
requirements in shares of Common Stock subject to the award; and
(i) to impose any holding period required to satisfy Section 16
under the Exchange Act.
3
<PAGE> 4
The Committee shall have the authority to adopt, alter, and repeal such
rules, guidelines, and practices governing the Plan as it shall, from time to
time, deem advisable; to interpret and construe the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan; provided, however,
that, to the extent that this Plan otherwise requires the approval of the Board
or the shareholders of the Corporation, all decisions of the Committee shall be
subject to such Board or shareholder approval. Subject to the foregoing, all
decisions made by the Committee pursuant to the provisions of the Plan shall be
made in the Committee's sole discretion and shall be final and binding on all
persons, including the Corporation and Plan participants.
SECTION 3. SHARES OF COMMON STOCK SUBJECT TO PLAN.
(a) As of the Effective Date, the aggregate number of shares of Common
Stock that may be issued under the Plan shall be 400,000 shares. The shares of
Common Stock issuable under the Plan may consist, in whole or in part, of
authorized and unissued shares or treasury shares.
(b) If any shares of Common Stock that have been optioned cease to be
subject to a NonQualified Stock Option or any such award otherwise terminates
without a payment being made to the participant in the form of Common Stock,
such shares shall again be available for distribution in connection with future
awards under the Plan.
(c) In the event of any merger, reorganization, consolidation,
recapitalization, extraordinary cash dividend, stock dividend, stock split or
other change in corporate structure affecting the Common Stock, an appropriate
substitution or adjustment shall be made in the maximum number of shares that
may be awarded under the Plan and in the number and option price of shares
subject to outstanding Non-Qualified Options granted under the Plan provided
that the number of shares subject to any award shall always be a whole number.
SECTION 4. ELIGIBILITY.
New employees are eligible to be granted awards under the Plan as an
inducement essential to their entering into an employment contract with the
Corporation.
SECTION 5. NON-QUALIFIED STOCK OPTIONS.
Non-Qualified Stock Options may be granted alone, in addition to, or in
tandem with cash awards made outside of the Plan. Any Non-Qualified Stock Option
granted under the Plan shall be in such form as the Committee may from time to
time approve.
4
<PAGE> 5
Non-Qualified Stock Options granted to new employees under the Plan
shall be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of the Plan, as
the Committee shall deem desirable.
(a) Option Price. The option price per share of Common Stock
purchasable under a Non-Qualified Stock Option shall be determined by
the Committee at the time of grant.
(b) Option Term. The term of each Non-Qualified Stock Option
shall be fixed by the Committee.
(c) Exercisability. Non-Qualified Stock Options shall be
exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee at or after grant.
The Committee may provide that a Non-Qualified Stock Option shall vest
over a period of future service at a rate specified at the time of
grant, or that the Non-Qualified Stock Option shall be exercisable only
in installments. If the Committee provides, in its sole discretion, that
any Non-Qualified Stock Option is exercisable only in installments, the
Committee may waive such installment exercise provisions at any time at
or after grant, in whole or in part, based on such factors as the
Committee shall determine in its sole discretion.
(d) Method of Exercise. Subject to whatever installment exercise
restrictions apply under Section 5(c), Non-Qualified Stock Options may
be exercised in whole or in part at any time during the option period,
by giving written notice of exercise to the Corporation specifying the
number of shares to be purchased. Such notice shall be accompanied by
payment in full of the purchase price, either by check or such other
instrument as the Committee may accept. As determined by the Committee,
in its sole discretion, at or after grant, payment in full or in part
may also be made in the form of shares of Common Stock already owned by
the optionee valued at the Fair Market Value of the Common Stock on the
date the Non-Qualified Stock Option is exercised. If payment of the
exercise price is made in part or in full with Common Stock, the
Committee may award to the employee a new Non-Qualified Stock Option to
replace the Common Stock which was surrendered. No shares of Common
Stock shall be issued until full payment therefor has been made. An
optionee shall generally have the rights to dividends or other rights of
a shareholder with respect to shares subject to the Non-Qualified Stock
Option when the optionee has given written notice of exercise and has
paid in full for such shares.
(e) Transferability of Options. No Non-Qualified Stock Option
shall be transferable by the optionee without the prior written consent
of the Committee other than (i) transfers by the Optionee to a member of
his or her Immediate Family or a trust for the benefit of the optionee
or a member of his or her Immediate Family, or (ii) transfers by will or
by the laws of descent and distribution.
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<PAGE> 6
(f) Bonus for Taxes. In the case of a Non-Qualified Stock Option,
the Committee in its discretion may award at the time of grant or
thereafter the right to receive upon exercise of such Non-Qualified
Stock Option a cash bonus calculated to pay part or all of the federal
and, if any, state income tax incurred by the optionee upon such
exercise.
(g) Termination by Death. If an optionee's employment by the
Corporation and any Subsidiary or Affiliate terminates by reason of
death, any Non-Qualified Stock Option held by such optionee may
thereafter be exercised, to the extent such option was exercisable at
the time of death or on such accelerated basis as the Committee may
determine at or after grant (or as may be determined in accordance with
procedures established by the Committee) by the legal representative of
the estate or by the legatee of the optionee under the will of the
optionee, for a period of one year (or such other period as the
Committee may specify at or after grant) from the date of such death or
until the expiration of the stated term of such Non-Qualified Stock
Option, whichever period is the shorter.
(h) Termination by Reason of Disability. If an optionee's
employment by the Corporation and any Subsidiary or Affiliate terminates
by reason of Disability, any NonQualified Stock Option held by such
optionee may thereafter be exercised by the optionee, to the extent it
was exercisable at the time of termination or on such accelerated basis
as the Committee may determine at or after grant (or as may be
determined in accordance with procedures established by the Committee),
for a period of three years (or such other period as the Committee may
specify at or after grant) from the date of such termination of
employment or until the expiration of the stated term of such
Non-Qualified Stock Option, whichever period is the shorter, provided
however, that, if the optionee dies within the period specified above
(or other such period as the committee shall specify at or after grant),
any unexercised Non-Qualified Stock Option held by such optionee shall
thereafter be exercisable to the extent to which it was exercisable at
the time of death for a period of twelve months (or other such period as
the Committee shall specify at or after grant) from the date of such
death or until the expiration of the stated term of such Non-Qualified
Stock Option, whichever period is shorter.
(i) Termination by Reason of Retirement. If an optionee's
employment by the Corporation and any Subsidiary or Affiliate terminates
by reason of Normal or Early Retirement, any Non-Qualified Stock Option
held by such optionee may thereafter be exercised by the optionee, to
the extent it was exercisable at the time of such Retirement or on such
accelerated basis as the Committee may determine at or after grant or,
as may be determined in accordance with procedures established by the
Committee, for a period of three years (or such other period as the
Committee may specify at or after grant) from the date of such
termination of employment or the expiration of the stated term of such
NonQualified Stock Option, whichever period is the shorter; provided
however, that, if the optionee dies within the period specified above
(or other such period as the Committee shall specify at or after grant),
any unexercised Non-Qualified Stock Option held by such optionee shall
thereafter be exercisable to the extent to which it was exercisable at
the time of death
6
<PAGE> 7
for a period of twelve months (or other such period as the Committee
shall specify at or after grant) from the date of such death or until
the expiration of the stated term of such Non-Qualified Stock Option,
whichever period is shorter.
(j) Other Termination. Unless otherwise determined by the
Committee (or pursuant to procedures established by the Committee) at or
after grant, if an optionee's employment by the Corporation and any
Subsidiary or Affiliate is involuntarily terminated for any reason other
than death, Disability or Normal or Early Retirement, or if optionee
voluntarily terminates employment, the Non-Qualified Stock Option shall
thereupon terminate, except that such Non-Qualified Stock Option may be
exercised, to the extent otherwise then exercisable, for the lesser of
three months (or other such period as the Committee shall specify at or
after grant) or the balance of such Non-Qualified Stock Option's term if
the involuntary termination is without Cause. For purposes of this Plan,
"Cause" means (i) a felony conviction of a participant or the failure of
a participant to contest prosecution for a felony, or (ii) a
participant's willful misconduct or dishonesty, which is directly and
materially harmful to the business or reputation of the Corporation or
any Subsidiary or Affiliate. If an optionee voluntarily terminates
employment with the Corporation and any Subsidiary or Affiliate (except
for Disability, Normal or Early Retirement), the Non-Qualified Stock
Option shall thereupon terminate; provided, however, that the Committee
at grant or thereafter may extend the exercise period in this situation
for the lesser of three months or the balance of such Non-Qualified
Stock Option's term.
SECTION 6. CHANGE IN CONTROL PROVISIONS.
(a) Impact of Event. In the event of:
(1) a "Change in Control" as defined in Section 6(b); or
(2) a "Potential Change in Control" as defined in Section
6(c), but only if and to the extent so determined by the
Committee or the Board at or after grant (subject to any right of
approval expressly reserved by the Committee or the Board at the
time of such determination),
(i) Subject to the limitations set forth below in this
Section 6(a), any Non-Qualified Stock Option awarded under the Plan
not previously exercisable and vested shall become fully exercisable
and vested.
(ii) Subject to the limitations set forth below in this
Section 6(a), the value of all outstanding Non-Qualified Stock
Options to the extent vested, shall, unless otherwise determined by
the Board or by the Committee in its sole discretion prior to any
Change in Control, be cashed out on the basis of the "Change in
Control Price" as defined in Section 6(d) as of the date such Change
in Control or such
7
<PAGE> 8
Potential Change in Control is determined to have occurred or such
other date as the Board or Committee may determine prior to the
Change in Control.
(iii) The Board or the Committee may impose additional
conditions on the acceleration or valuation of any option in the
option agreement.
(b) Definition of Change in Control. For purposes of Section 6(a), a
"Change in Control" means the happening of any of the following:
(i) any person or entity, including a "group" as defined in
Section 13(d)(3) of the Exchange Act, other than the Corporation or
a wholly-owned subsidiary thereof or any employee benefit plan of
the Corporation or any of its Subsidiaries, becomes the beneficial
owner of the Corporation's securities having 50% or more of the
combined voting power of the then outstanding securities of the
Corporation that may be cast for the election of directors of the
Corporation (other than as a result of an issuance of securities
initiated by the Corporation in the ordinary course of business); or
(ii) as the result of, or in connection with, any cash tender
or exchange offer, merger or other business combination, sales of
assets or contested election, or any combination of the foregoing
transactions, less than a majority of the combined voting power of
the then outstanding securities of the Corporation or any successor
corporation or entity entitled to vote generally in the election of
the directors of the Corporation or such other corporation or entity
after such transaction are held in the aggregate by the holders of
the Corporation's securities entitled to vote generally in the
election of directors of the Corporation immediately prior to such
transaction; or
(iii) during any period of two consecutive years, individuals
who at the beginning of any such period constitute the Board cease
for any reason to constitute at least a majority thereof, unless the
election, or the nomination for election by the Corporation's
shareholders, of each director of the Corporation first elected
during such period was approved by a vote of at least two-thirds of
the directors of the Corporation then still in office who were
directors of the Corporation at the beginning of any such period.
(c) Definition of Potential Change in Control. For purposes of
Section 6(a), a "Potential Change in Control" means the happening of any
one of the following:
(i) The approval by shareholders of an agreement by the
Corporation, the consummation of which would result in a Change in
Control of the Corporation as defined in Section 6(b); or
8
<PAGE> 9
(ii) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than the
Corporation or a Subsidiary or any Corporation employee benefit plan
(including any trustee of such plan acting as such trustee)) of
securities of the Corporation representing 5% or more of the
combined voting power of the Corporation's outstanding securities
and the adoption by the Committee of a resolution to the effect that
a Potential Change in Control of the Corporation has occurred for
purposes of this Plan.
(d) Change in Control Price. For purposes of this Section 6, "Change
in Control Price" means the highest price per share paid in any
transaction reported on Nasdaq or such other exchange or market as is the
principal trading market for the Common Stock, or paid or offered in any
bona fide transaction related to a Potential or actual Change in Control
of the Corporation at any time during the 60 day period immediately
preceding the occurrence of the Change in Control (or, where applicable,
the occurrence of the Potential Change in Control event), in each case as
determined by the Committee.
SECTION 7. AMENDMENTS AND TERMINATION.
The Board may at any time amend, alter or discontinue the Plan;
provided, however, that, without the approval of the Corporation's shareholders,
no amendment or alteration may be made which would make any change for which
applicable law or regulatory authority (including the regulatory authority of
Nasdaq or any other market or exchange on which the Common Stock is traded)
would require shareholder approval. No amendment, alteration, or discontinuation
shall be made which would impair the rights of an optionee or participant under
a Non-Qualified Stock Option theretofore granted, without the participant's
consent.
The Committee may amend the terms of any Non-Qualified Stock Option or
other award theretofore granted, prospectively or retroactively, but, subject to
Section 2 above, no such amendment shall impair the rights of any holder without
the holder's consent. The Committee may also substitute new Non-Qualified Stock
Options for previously granted Non-Qualified Stock Options (on a one for one or
other basis), including previously granted Non-Qualified Stock Options having
higher option exercise prices.
SECTION 8. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Corporation, nothing contained herein shall give
any such participant or optionee any rights that are greater than those of a
general creditor of the Corporation. In its sole discretion, however, the
Committee may authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver Common Stock or payments in lieu
thereof as provided hereunder; provided, however, that no such trust or other
funding arrangement shall be implemented unless the
9
<PAGE> 10
Committee determines with the consent of the affected participant that the
existence of such trusts or other arrangements would be consistent with the
"unfunded" status of the Plan.
SECTION 9. GENERAL PROVISIONS.
(a) All certificates for shares of Common Stock or other
securities delivered under the Plan shall be subject to such
stock-transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations, and other requirements of the
Commission, any stock exchange upon which the Common Stock is then
listed, and any applicable Federal or state securities law, and the
Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(b) Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such arrangements
may be either generally applicable or applicable only in specific cases.
(c) The adoption of the Plan shall not confer upon any employee
of the Corporation or any Subsidiary or Affiliate any right to continued
employment with the Corporation or a Subsidiary or Affiliate, as the
case may be, nor shall it interfere in any way with the right of the
Corporation or a Subsidiary or Affiliate to terminate the employment of
any of its employees at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for Federal income tax
purposes with respect to any award under the Plan, the participant shall
pay to the Corporation, or make arrangements satisfactory to the
Committee regarding the payment of, any Federal, state, or local taxes
of any kind required by law to be withheld with respect to such amount.
The Committee may require withholding obligations to be settled with
Common Stock, including Common Stock that is part of the award that
gives rise to the withholding requirement. The obligations of the
Corporation under the Plan shall be conditional on such payment or
arrangements and the Corporation and its Subsidiaries or Affiliates
shall, to the extent permitted by law, have the right to deduct any such
taxes from any payment of any kind otherwise due to the participant.
(e) The Plan and all awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the
State of Tennessee.
(f) The members of the Committee and the Board shall not be
liable to any employee or other person with respect to any determination
made hereunder in a manner that is not inconsistent with their legal
obligations as members of the Board. In addition to such other rights of
indemnification as they may have as directors or as members of the
10
<PAGE> 11
Committee, the members of the Committee shall be indemnified by the
Corporation against the reasonable expenses, including attorneys' fees
actually and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to
which they or any of them may be a party by reason of any action taken
or failure to act under or in connection with the Plan or any option
granted thereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal
counsel selected by the Corporation) or paid by them in satisfaction of
a judgment in any such action, suit or proceeding, except in relation to
matters as to which it shall be adjudged in such action, suit or
proceeding that such Committee member is liable for negligence or
misconduct in the performance of his duties; provided that within 60
days after institution of any such action, suit or proceeding, the
Committee member shall in writing offer the Corporation the opportunity,
at its own expense, to handle and defend the same.
(g) The Committee may, at or after grant, condition the receipt
of any payment in respect of any award or the transfer of any shares
subject to an award on the satisfaction of a six-month holding period,
if such holding period is required for compliance with Section 16 under
the Exchange Act.
SECTION 10. EFFECTIVE DATE OF PLAN.
The Plan shall be effective October, 1999, (the "Effective Date"),
provided that it has been approved by the Board of the Corporation.
SECTION 11. TERM OF PLAN.
No Non-Qualified Stock Option shall be granted pursuant to the Plan on
or after the tenth anniversary of the Effective Date of the Plan, but awards
granted prior to such tenth anniversary may be extended beyond that date.
11
<PAGE> 1
EXHIBIT 10.11
SECOND AMENDMENT OF LEASE
This SECOND AMENDMENT OF LEASE, made as of the 9th day of Dec., 1999,
by and between RECKSON OPERATING PARTNERSHIP, L.P., (hereinafter referred to as
"Landlord") having an office at One Landmark Square, Stamford, Connecticut 06901
and @PLAN, INC., a Pennsylvania corporation, having an office at Three Landmark
Square, (Suite 400), Stamford, Connecticut 06901 ("Tenant").
W I T N E S S E T H
WHEREAS, Landlord and Tenant have entered into a Lease dated January
28, 1997, amended by the First Amendment of Lease dated November 15, 1999 (the
"Lease"), with respect to approximately 6,460 rentable square feet on the fourth
(4th) floor of Three Landmark Square, Suite 400, (the "Original Premises"), and
2,212 rentable square feet on the second (2nd) floor of Two Landmark Square,
Suite 208 (the "Additional Premises"), Stamford, Connecticut, for a combined
total square footage leased of 8,672 rentable square feet. The following
provisions shall therefore amend other terms and conditions of the Lease.
NOW THEREFORE, Landlord and Tenant desire to amend the Lease to
establish the commencement date for the total Additional Premises, consisting of
Space A (1,100 rsf) and Space B (1,112 rsf), upon the earlier of substantial
completion or Tenant's occupancy of the Additional Premises. Accordingly, the
following provisions shall therefore amend other terms and conditions of the
Lease.
PROVISIONS
Landlord and Tenant agree to amend the Lease Agreement as follows:
1. Article 1.03 of the Lease is amended to read as follows:
"(c). The term of the Lease for the Additional Premises shall commence the
earlier of substantial completion of the work outlined in Article
3.01 A, or Tenant's occupancy of the Additional Space; (the
"Additional Premises Commencement Date"). The Expiration Date for
the Additional Premises shall be coterminous with the existing
Expiration Date of the Lease for the Original Premises, February 29,
2001 (the "Additional Premises Expiration Date").
(d). Landlord will allow Tenant access prior to the Additional Premises
Commencement Date for purposes of telephone and data wiring."
2. Article 1.04(a) of the Lease is hereby amended to include the following:
Effective as follows, the fixed base rent for the Additional Premises
shall be as follows:
<TABLE>
<CAPTION>
RATE MONTHLY ANNUAL
LEASE PERIOD PER RSF FIXED BASE RENT FIXED BASE RENT
------------------------- ------------- ------------------- -----------------
<S> <C> <C> <C>
Additional Premises $23.00 $4,239.66 $50,876.00
Commencement Date - 2/28/01
</TABLE>
3. Article 6.01(a) of the Lease shall be amended to include the following:
"(i) Effective upon the Additional Premises Commencement Date, the term
"Tax Base Year" shall mean the tax fiscal year of July 1, 1999 to
June 30, 2000 for Additional Premises only."
4. Article 6.01(c) of the Lease shall be amended to include the following:
"Landlord and Tenant agree that the 20.33% of Real Estate Taxes and
assessments levied against the Common Areas shall remain in effect with
respect to Three Landmark Square only; and that 6.07% of Real Estate Taxes
and assessments levied against the Common Areas with respect to Two
Landmark Square, shall become effective upon the Additional Premises
Commencement Date."
page 1 of 2
<PAGE> 2
@Plan, Inc.
Second Amendment of Lease
Page 2
5. Article 6.01(d) of the Lease shall be amended to include the following:
"(i) Effective upon the Additional Premises Commencement Date, the term
"Tenant's Proportionate Share" for the 2.212 rentable square feet only
shall be 5.88%."
6. Article 7.02(a) of the Lease shall be amended to include the following:
"(i) Effective upon the Additional Premises Commencement Date, the term
"Base Year" shall mean the operating base year of January 1, 2000 through
December 31, 2000 for the Additional Premises only."
7. Article 7.02(f) of the Lease shall be amended to include the following:
"Landlord and Tenant agree that the 20.33% of Operating Costs for the
operation of the Building shall remain in effect with respect to Three
Landmark Square only; and that 6.07% of Operating Costs for the operation
of the Building with respect to Two Landmark Square shall become effective
upon the Additional Premises Commencement Date."
8. Article 7.02(e) of the Lease shall be amended to include the following:
"(i) Effective upon the Additional Premises Commencement Date, the term
"Tenant's Proportionate Share" for the 2,212 rentable square feet only
shall be 5.88%."
9. Tenant represents and warrants that the sole broker with whom it has dealt
with in this transaction is SOUND COMMERCIAL REAL ESTATE GROUP, LC, 104
Field Point Road, Greenwich, CT 06830, and that no other broker interested
Tenant in the Additional Premises. Landlord shall be responsible for the
payment of any real estate commission to said broker but Tenant shall hold
Landlord harmless from the claim of any other real estate broker or
salesman claiming to have interested or have been responsible for Tenant's
execution of this Lease.
10. Except as modified herein, the Lease shall remain in full force and
effect, and, as, modified by this Agreement, the Lease is ratified and
affirmed in all respects.
11. This Agreement may not be amended or terminated nor any of its provisions
waived except by an agreement in writing signed by the party to be
charged.
12. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment of
Lease to be executed as of the day and year first above written.
RECKSON OPERATING PARTNERSHIP, L.P.
SIGNED AND DELIVERED
IN THE PRESENCE OF: By: RECKSON ASSOCIATES REALTY CORP.
General Partner
- ---------------------------
- --------------------------- By: /s/ F.D. Rich, III
-----------------------------------
Name: F.D. Rich, III
Its: Sr. Vice President - Managing
Director
- --------------------------- @ PLAN, INC.
- --------------------------- By: /s/ Nancy Lazaros
-----------------------------------
Name: Nancy Lazaros
Its: CFO
page 2 of 2
<PAGE> 1
EXHIBIT 10.12
CONSENT TO SUBLEASE
THIS AGREEMENT is made by and among PINE STREET INVESTORS I, L.L.C. a
Delaware limited liability company ("Landlord"), FIDELITY NATIONAL TITLE
INSURANCE COMPANY, a California corporation ("Tenant"), and @PLAN.INC., a
Tennessee corporation doing business in California as "ATPLAN.INC."
("Subtenant").
Tenant is the tenant under an Office Lease dated August 31, 1998 (which
Office Lease as hereafter amended is hereinafter called the "Master Lease"),
under which Landlord leased to Tenant the premises commonly known as Suite 1850
on the 18th floor of the office building located at 100 Pine Street, San
Francisco, California (the "Premises"). Landlord hereby consents to the
subletting by Tenant to Subtenant, pursuant to a sublease (the "Sublease") dated
as of November 29, 1999, a full and complete copy of which is attached hereto,
of the Premises comprising 2,447 square feet of rentable areas as shown and
marked on the floor plan attached to the Master Lease (the "Sublet Space"), such
consent being subject to and upon the following terms and conditions, to each of
which Tenant and Subtenant expressly agree:
1. Nothing contained in this Consent to Sublease (the "Consent") shall
either:
(a) Operate as a consent to or approval or ratification by Landlord
of any of the provisions of the Sublease or as a representation or
warranty by Landlord, and Landlord shall not be bound or estopped in
any way by the provisions of the Sublease; or
(b) Be construed to modify, waive or affect (i) any of the
provisions, covenants or conditions in the Master Lease, (ii) any of
Tenant's obligations under the Master Lease, or (iii) any rights or
remedies of Landlord under the Master Lease or otherwise, whether
exercised by Landlord as of the date hereof or not, or to enlarge or
increase Landlord's obligations or Tenant's rights under the Master
Lease or otherwise; or
(c) Be construed to waive any present or future breach or default on
the part of Tenant under the Master Lease. In case of any conflict
between the provisions of this Consent and the provisions of the
Sublease, the provisions of this Consent shall prevail unaffected by
the Sublease.
2. The Sublease shall be subject and subordinate at all times to the
Master Lease and all of its provisions, covenants and conditions. In case of any
conflict between the provisions of the Master Lease and the provisions of the
Sublease, the provisions of the Master Lease shall prevail unaffected by the
Sublease. The parties acknowledge and agree that although the Sublease
contemplates Landlord's signature and the agreement by Landlord of certain
provisions therein, Landlord is executing this Consent only and not the Sublease
and is not bound by any such provisions in the Sublease unless otherwise
expressly agreed by Landlord in writing.
<PAGE> 2
3. Neither the Sublease nor this Consent shall release or discharge
Tenant from any liability under the Master Lease and Tenant shall remain liable
and responsible for the full performance and observance of all of the
provisions, covenants and conditions set forth in the Master Lease on the part
of Tenant to be performed and observed. Any breach or violation of any provision
of the Master Lease by Subtenant shall be deemed to be and shall constitute a
default by Tenant in fulfilling such provision.
4. This Consent by Landlord is not assignable by Tenant or Subtenant and
shall not be construed as a consent by Landlord to any further subletting either
by Tenant or Subtenant. The Sublease may not be assigned, renewed or extended
nor shall the Premises or Sublet Space, or any part thereof be further sublet
without the prior written consent of Landlord thereto in each instance
consistent with the terms and conditions of the Master Lease.
5. Upon the expiration or any earlier termination of the term of the
Master Lease, or in case of surrender of the Master Lease by Tenant to Landlord,
except as provided in the next succeeding sentence, the Sublease and its term
shall expire and come to an end as of the effective dated of such expiration,
termination or surrender and Subtenant shall vacate the Sublet Space on or
before such date. If the Master Lease shall expire or terminate during the term
of the Sublease for any reason other than condemnation or destruction by fire or
other cause, or if Tenant shall surrender the Master Lease to Landlord during
the term of the Sublease, Landlord, in its sole discretion, upon written notice
given to Tenant and Subtenant not more than thirty (30) days after the effective
date of such expiration, termination or surrender, without any additional or
further agreement of any kind on the part of Subtenant, may elect to continue
the Sublease with the same force and effect as if Landlord, as lessor, and
Subtenant, as lessee, had entered into a lease as of such effective date for a
term equal to the then unexpired term of the Sublease and containing the same
terms and conditions as those contained in the Sublease, Subtenant shall attorn
to Landlord and Landlord and Subtenant shall have the same rights, obligations
and remedies thereunder as were had by Tenant and Subtenant thereunder prior to
such effective date, respectively, except that in no event shall Landlord be (i)
liable for any act or omission by Tenant or (ii) subject to any offsets or
defenses which Subtenant had or might have against Tenant, (iii) bound by any
rent or additional rent or other payment paid by Subtenant to Tenant in advance
or (iv) bound by any amendment to the Sublease not consented to by Landlord.
Upon expiration of the Sublease pursuant to the provisions of the first sentence
of this Paragraph 5, in the event of the failure of Subtenant to vacate the
Sublet Space as therein provided, Landlord shall be entitled to all of the
rights and remedies available to Landlord against Tenant holding over after the
expiration of the term.
6. Subtenant shall deal directly with Tenant for the provision of all
services and materials (including, by way of example only, after-hours
air-conditioning) to the Premises or Sublet space. Notwithstanding said
requirement, both Tenant and Subtenant shall be and continue to be liable for
all bills rendered by Landlord for charges incurred by or imposed upon Subtenant
for services rendered and materials supplied to the Sublet Space at the request
of Subtenant, whether actually requested of Landlord by Tenant or Subtenant.
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<PAGE> 3
7. Landlord agrees to provide Subtenant with copies of written notices
it delivers to the Tenant under the Master Lease to Subtenant at the Sublet
Space only, with a copy to Subtenant at 3 Landmark Square, Suite 400, Stamford,
Connecticut 06901 Attention: Nancy Lazaros; provided, however, such delivery
shall not affect or delay the time Landlord's notice to Tenant is deemed to be
received under the Master Lease or otherwise. All communication, notices and
demands of any kind which a party may be required or desire to give or to serve
upon another party pursuant to this Consent to Sublease shall be made in writing
and shall be deemed to have been fully given upon delivery if personally
delivered, or three (3) business days after deposit in the United States mail,
certified, postage prepaid, return receipt requested, or otherwise when actually
received, to the following addresses, or such other address as the parties may
from time to time designate in writing:
To Landlord: Pine Street Investors I, L.L.C.
c/o Danielson Whitehead Inc.
100 Pine Street, Suite 620
San Francisco, CA 94111
Attn: Robert D. Whitehead
To Tenant: FIDELITY NATIONAL TITLE INSURANCE COMPANY
Orion Realty
3938 State Street
Suite 210
Santa Barbara, CA 93105
To Subtenant: @plan. Inc.
100 Pine Street, Suite 1850
San Francisco, CA 94111
8. As a material condition to Landlord entering into this Consent,
Landlord, Tenant and Subtenant hereby agree that Landlord shall have the right
to terminate the Master Lease prior to the expiration thereof (which shall
effectively terminate the Sublease as of such early termination date) by
delivering to Tenant at least six (6) months prior written notice thereof; upon
any such notice of termination, Tenant shall immediately notify Subtenant of the
termination of the Master Lease and the applicable termination date. Said right
of Landlord to terminate the Master Lease shall survive any termination of the
Sublease prior to the expiration date set forth in the Sublease.
9. Subtenant shall indemnify and hold harmless Landlord and Tenant on
the same terms and conditions as Tenant provides indemnification to the Landlord
Pursuant to Article 12 of the Master Lease. In addition, Subtenant shall
maintain such insurance as is required by Article 11 of the Master Lease, naming
Landlord and Tenant, and their respective successors and assigns, as additional
insureds on such policies, and shall otherwise comply with the procedures of the
Master Lease.
3
<PAGE> 4
10. This Consent shall be construed in accordance with the laws of the
State of California and contains the entire agreement of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Consent to
Sublease effective January 7, 2000.
LANDLORD:
PINE STREET INVESTORS I, L.L.C.
a Delaware limited liability company
By: DANIELSON WHITEHEAD, INC.,
a California corporation, as agent
for Pine Street Investors I, L.L.C.
By: /s/ Carl Danielson
-------------------------------------
Carl Danielson
Its: Chief Executive Officer
------------------------------------
TENANT:
FIDELITY NATIONAL TITLE INSURANCE COMPANY,
a California corporation
By: /s/ William A. Imparato
-------------------------------------------
Name: William A. Imparato
--------------------------------------
Its: Vice President
---------------------------------------
SUBTENANT:
@PLAN.INC.
a Tennessee corporation doing business in
California as "ATPLAN.INC."
By: /s/ Nancy A. Lazaros
-------------------------------------------
Nancy A. Lazaros
Its: Chief Financial Officer
--------------------------------------------
4
<PAGE> 5
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD SUBLEASE
(SHORT-FORM TO BE USED WITH POST 1995 AIR LEASES)
1. PARTIES. This Sublease, dated, for reference purposes only, November
-----------
29, 1999, is made by and between Fidelity National Title Insurance Company, a
- -------- -----------------------------------------------
California corporation ("Sublessor") and @plan, a Tennessee corporation
- ---------------------- ------------------------------
("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 100 Pine
--------------
Street, Suite 1850 located in the County of San Francisco, State of California
- ------------------ ------------- ------------
and generally described as (describe briefly the nature of the
property) that office suite of 2,447 rsf
----------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. TERM.
3.1. TERM. The term of this Sublease shall be for Thirty (30) months
------------------------
and six (6) days commencing on December 10, 1999 and ending on June 6, 2002
- ---------------- ----------------- -----------------
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 Premises by the
commencement date. If, despite said efforts, Sublessor is unable to deliver
possession as agreed, the rights and obligations of Sublessor and Sublessee
shall be as set forth in Paragraph 3.3 of the Master Lease (as modified by
Paragraph 7.3 of this Sublease).
4. RENT
4.1 BASE RENT. Sublessee shall pay to Sublessor as Base Rent for the
Premises equal monthly payments of $9,380.17 in advance, on the first day of
--------- ------
each month of the term hereof. Sublessee shall pay Sublessor upon the execution
hereof $6,354.31 as Base Rent for December 10 -31, 1999
--------- ----------------------------------------------
- --------------------------------------------------------------------------------
Base Rent for any period during the term hereof which is for less than one month
shalt be a pro rata portion of the monthly installment.
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 $9,380.17 as security for Sublessee's faithful performance of Sublessee's
----------
obligations hereunder. The rights and obligations of Sublessor and
Sublessee as to said Security Deposit shall be as set forth in Paragraph 5 of
the Master Lease (as modified by Paragraph 7.3 of this Sublease).
6. USE.
6.1 AGREED USE. The Premises shall be used and occupied only for
office use 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.
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 their
suitability for Sublessee's intended use,
(b) Sublessee 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 Premises, 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 Premises, 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 Pine Street Investors I, LLC, as Landlord and Fidelity
-------------------------------------------------------------
National Title Insurance Company, as Tenant
- --------------------------------------------------------------------------------
is the lessor, hereinafter the "MASTER LESSOR"
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
Sublessee 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 he 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: 2, 3, 4a, 6, 34
-------------------------------------------------------------
- --------------------------------------------------------------------------------
7.5 The obligations that Sublessee 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, unless such failure is caused by the negligence
or the intentional act of Sublessor.
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 Subtessee 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. Sublessor shall not take any action to amend, modify or otherwise
alter the terms of the Master Lease without the prior written consent of the
Sublessee.
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 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 Sublessee.
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 ten days of 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.
<PAGE> 6
(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 any one 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
Cushman & Wakefield of California, Inc. ("C&W")
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 $ 9,225.19 for brokerage services rendered by
----------
Broker to Sublessor in this transaction. C&W shall pay the cooperating broker,
CB Richard Ellis, from the commission paid by Sublessor.
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 Lesser 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
line from this point to the next printed word after the space left here. If
there are additional provisions place the same here.]
13. Sublessee shall pay for its own directory signage and standard signage
at the entrance to the Premises. Sublessor shall assist Sublessee with the sign
request to Lessor.
14. Notices sent between Sublessor and Sublessee shall be sent as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
To Sublessor: To Sublessee:
------------- -------------
----------------------------------------------------------------------------
<S> <C>
Fidelity National Title Insurance Company @plan.inc
c/o Park West Development Three Landmark Square
1515 E. Missouri Avenue Stamford, CT 06901
Phoenix, AZ 85014 Attention: Nancy Lazaros
Attention: William A. Imparato (203) 961-0340 ext. 114
(602) 264-1300
----------------------------------------------------------------------------
</TABLE>
15. 5ublessor shall promptly deliver to Sublessee any and all notices that
it may receive from Master Lessor under the terms of the Master Lease.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Executed at: FIDELITY NATIONAL TITLE INSURANCE CO., INC.
-------------------------------- ------------------------------------------------------------
on: 12/15/99
-----------------------------------------
Address: 3938 State Street, Suite 110 By: /s/ William A. Imparato
----------------------------------- -------------------------------------------------------
Santa Barbara, California 93105 William A. Imparato
-----------------------------------
"Sublessor" (Corporate Seal ) Its: VP Real Estate
--------------------------
Executed at: Stamford, Connecticut @plan, Inc.
-------------------------------- ------------------------------------------------------------
on: December 10, 1999
-----------------------------------------
Address: Three Landmark Square By: /s/ Nancy Lazaros
----------------------------------- --------------------------------------------------------
----------------------------------- Nancy Lazaros
"Sublessee" (Corporate Seal ) Its: Chief Financial Officer
-------------------------
Executed at:
-------------------------------- ------------------------------------------------------------
on:
-----------------------------------------
Address: By:
----------------------------------- ---------------------------------------------------------
----------------------------------- "Master Lessor" (Corporate Seal)
</TABLE>
NOTE: These forms are often modified to meet changing requirements of law and
needs of the industry. Always write or call to make sure you are utilizing the
most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 South Flower
Street, Suite 600, Los Angeles, CA 90017 (213) 687-8777
<PAGE> 7
100 PINE STREET CENTER
OFFICE LEASE
BETWEEN
PINE STREET INVESTORS I, L.L.C.
a Delaware limited liability company,
LANDLORD
AND
FIDELITY NATIONAL TITLE INSURANCE COMPANY, a California corporation,
TENANT
DATED August 31, 1998
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1.
Premises.................................................................1
ARTICLE 2.
Term ..................................................................1
ARTICLE 3.
Base Rent................................................................2
ARTICLE 4.
Additional Rent..........................................................3
ARTICLE 5.
Personal Property Taxes, Rent Taxes and Other Taxes......................5
ARTICLE 6.
Condition of Premises....................................................6
ARTICLE 7.
Use and Rules............................................................6
ARTICLE 8.
Services and Utilities...................................................6
ARTICLE 9.
Maintenance and Repairs..................................................8
ARTICLE 10.
Alterations and Liens....................................................9
ARTICLE 11.
Insurance, Subrogation and Waiver of Claims..............................10
ARTICLE 12.
Indemnity................................................................12
ARTICLE 13.
Destruction or Damage....................................................12
</TABLE>
i
<PAGE> 9
<TABLE>
<S> <C>
ARTICLE 14.
Condemnation.............................................................14
ARTICLE 15.
Subordination, Attornment and Mortgagee Protection.......................14
ARTICLE 16.
Estoppel Certificate.....................................................15
ARTICLE 17.
Assignment and Subletting................................................15
ARTICLE 18.
Compliance with Legal Requirements.......................................19
ARTICLE 19.
Rights Reserved by Landlord..............................................19
ARTICLE 20.
Landlord's Remedies......................................................21
ARTICLE 21.
Landlord's Right to Cure.................................................24
ARTICLE 22.
Return of Possession.....................................................24
ARTICLE 23.
Holding Over.............................................................25
ARTICLE 24.
No Waiver................................................................25
ARTICLE 25.
Attorneys' Fees and Jury Trial...........................................26
ARTICLE 26.
Captions, Definitions and Severability...................................26
ARTICLE 27.
Conveyance by Landlord and Liability.....................................31
</TABLE>
ii
<PAGE> 10
<TABLE>
<S> <C>
ARTICLE 28.
Safety and Security Devices, Services and Programs......................32
ARTICLE 29.
Communications and Computer Lines.......................................32
ARTICLE 30.
Hazardous Materials.....................................................34
ARTICLE 31.
Miscellaneous...........................................................36
ARTICLE 32.
Offer .................................................................37
ARTICLE 33.
Notices.................................................................37
ARTICLE 34.
Real Estate Brokers.....................................................38
ARTICLE 35.
Security Deposit........................................................38
ARTICLE 36.
Entire Agreement........................................................38
</TABLE>
iii
<PAGE> 11
OFFICE LEASE
THIS LEASE made as of the 31st day of August, 1998, between PINE STREET
INVESTORS I, L.L.C., a Delaware limited liability company ("Landlord") and
FIDELITY NATIONAL TITLE INSURANCE COMPANY, a California corporation ("Tenant"),
whose address is c/o Park West Development, 1515 East Missouri Avenue, Building
A, Phoenix, Arizona 85014.
WITNESSETH:
Landlord hereby leases to Tenant and Tenant hires from Landlord the
premises described herein for the term and subject to the terms, covenants,
agreements and conditions hereinafter set forth, to each and all of which Tenant
and Landlord hereby mutually agree.
ARTICLE 1.
PREMISES
Landlord hereby leases to Tenant and Tenant hereby hires from Landlord
those certain premises, as shown on the floor plan attached hereto as Exhibit
"A" and made a part hereof ("Premises"), on the 18th floor of the building known
as Pine Street Center ("Building") located at 100 Pine Street, San Francisco,
California ("Property" as further described in Article 26). Tenant acknowledges
and agrees that it has had an opportunity to review Landlord's calculation of
rentable area, and Landlord and Tenant hereby agree that for purposes of this
Lease the rentable area of the Premises is 2,447 square feet and the rentable
area of the Property is 402,534 square feet.
ARTICLE 2.
TERM
(A) TERM. The term of this Lease ("Term") shall commence on December 1,
1998 ("Commencement Date") and, unless sooner terminated as hereinafter
provided, shall expire on June 6, 2002 ("Expiration Date"). The Commencement
Date and Expiration Date shall be subject to adjustment as provided in Paragraph
(B) of this Article.
(B) DELAY IN COMMENCEMENT DATE. The Commencement Date set forth in
Paragraph (A) of this Article shall be delayed and Base Rent shall be abated to
the extent that Landlord fails: (i) to substantially complete any initial
improvements to the Premises required to be performed by Landlord under any
separate agreement signed by both parties, or (ii) to deliver possession of the
Premises for any other reason, including but not limited to, holding over by
prior occupants, except to the extent that Tenant, its contractors, agents or
employees in any way contribute to either such failures. If Landlord so fails
for a ninety (90) day initial grace period, or such additional time as may be
necessary due to fire or other casualty, strikes, lock-outs, or other labor
troubles, shortages of equipment or materials, governmental requirements, power
shortages or outages, acts or omissions
<PAGE> 12
of Tenant or other Persons, or other causes beyond Landlord's reasonable
control, Tenant shall have the right to terminate this Lease by written notice
to Landlord any time thereafter up until Landlord substantially completes any
such improvements and delivers the Premises to Tenant. Any such delay in the
Commencement Date shall not subject Landlord to liability for loss or damage
resulting therefrom and Tenant's sole recourse with respect thereto shall be the
abatement of Rent and right to terminate this Lease described above. Upon any
such termination, Landlord and Tenant shall be entirely relieved of their
obligations hereunder, and any Security Deposit and Rent payments shall be
returned to Tenant. If The Commencement Date is delayed, the Expiration Date
shall be similarly extended for the period of such delay. During any period that
Tenant shall be permitted to enter the Premises prior to the Commencement Date
other than to occupy the same (e.g., to perform alterations or improvements),
Tenant shall comply with all terms and provisions of this Lease, except those
provisions requiring the payment of Rent. If Tenant shall be permitted to enter
the Premises prior to the Commencement Date for the purpose of occupying the
same, Rent shall commence on such date, and if Tenant shall commence occupying
only a portion of the Premises prior to the Commencement Date, Rent shall be
prorated based on the number of rentable square feet occupied by Tenant.
Landlord may permit early entry, provided the Premises are legally available and
Landlord has completed any work required under this Lease or any separate
agreement entered in connection herewith.
(C) EARLY OCCUPANCY. Landlord acknowledges and agrees that Tenant shall
be permitted to occupy the Premises commencing upon the full execution and
delivery of this Lease and the painting and installation of carpeting within the
Premises (in accordance with Article 6), which is prior to the Commencement
Date. During such period until the Commencement Date, Tenant shall comply with
all terms and provisions of this Lease, except those provisions requiring the
payment of Base Rent.
ARTICLE 3.
BASE RENT
Tenant shall pay Landlord as Base Rent the sum of $45.00 per rentable
square foot of the Premises per year, which shall be equal to an annual Base
Rent of $110,115.00 and a monthly Base Rent of $9,176.25. Monthly Base Rent
shall be paid to Landlord in advance on or before the first day of each calendar
month during the Term, commencing as of the Commencement Date, except that Base
Rent for the first full calendar month for which Base Rent shall be due, shall
be paid when Tenant executes this Lease. Rent shall be paid without any prior
demand or notice therefor and without any deduction, set-off or counterclaim
unless otherwise explicitly set forth herein, or relief from any valuation or
appraisement laws. If the Term commences on a day other than the first day of a
calendar month, or ends on a day other than the last day of a calendar month,
then the Base Rent for such month shall be prorated on the basis of 1/30th of
the monthly Base Rent for each day of such month.
2
<PAGE> 13
ARTICLE 4.
ADDITIONAL RENT
(A) TAXES. Tenant shall pay Landlord as additional rent an amount equal
to Tenant's Prorata Share of Taxes in excess of the amount of Taxes paid by
Landlord during the calendar year 1998 ("Base Tax Year"). The terms "Taxes" and
"Tenant's Prorata Share" shall have the meanings specified therefor in Article
26.
(B) OPERATING EXPENSES. Tenant shall pay Landlord as additional rent an
amount equal to Tenant's Prorata Share of Operating Expenses in excess of the
amount of Operating Expenses paid by Landlord during the calendar year 1998
("Base Expense Year"). The term "Operating Expenses" shall have the meaning
specified therefor in Article 26.
(C) MANNER OF PAYMENT. Taxes and Operating Expenses shall be paid in the
following manner:
a) Landlord may reasonably estimate in advance the amounts Tenant
shall owe for Taxes and Operating Expenses for any full or partial
calendar year of the Term. In such event, Tenant shall pay such
estimated amounts, on a monthly basis, on or before the first day of
each calendar month, together with Tenant's payment of Base Rent. Such
estimate may be reasonably adjusted from time to time by Landlord.
b) Within 120 days after the end of each calendar year, or as
soon thereafter as practicable, Landlord shall provide a statement
("Statement") to Tenant showing: (a) the amount of actual Taxes and
Operating Expenses for such calendar year, with a listing of amounts for
major categories of Operating Expenses, and such amounts for the Base
Years, (b) any amount paid by Tenant towards Taxes and Operating
Expenses during such calendar year on an estimated basis, and (c) any
revised estimate of Tenant's obligations for Taxes and Operating
Expenses for the current calendar year.
c) If the Statement shows that Tenant's estimated payments were
less than Tenant's actual obligations for Taxes and Operating Expenses
for such year, Tenant shall pay the difference. If Landlord increases
Tenant's estimated payments for the current calendar year, Tenant shall
pay the difference between the new and former estimates, for the period
from January 1 of the current calendar year through the month in which a
statement is sent. Tenant shall make such payments within thirty (30)
days after Landlord sends the applicable statement.
d) If the Statement shows that Tenant's estimated payments
exceeded Tenant's actual obligations for Taxes and Operating Expenses,
Tenant shall receive a credit for the difference against payments of
Base Rent next due. If the Term shall have expired and no further Base
Rent shall be due, Tenant shall receive a refund of such difference,
within thirty (30) days after Landlord sends the Statement.
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e) So long as Tenant's obligations hereunder are not materially
adversely affected thereby, Landlord reserves the right to reasonably
change, from time to time, the manner or timing of the foregoing
payments. In lieu of providing one Statement covering Taxes and
Operating Expenses, Landlord may provide separate statements, at the
same or different times. No delay by Landlord in providing the Statement
(or separate statements) shall be deemed a default by Landlord or a
waiver of Landlord's right to require payment of Tenant's obligations
for actual or estimated Taxes or Operating Expenses. In no event shall a
decrease in Taxes or Operating Expenses below the Base Year amounts,
ever decrease the monthly Base Rent, or give rise to a credit or refund
in favor of Tenant.
(D) PRORATION. If the Term commences other than on January 1, or ends
other than on December 31, Tenant's obligations to pay estimated and actual
amounts towards Taxes and Operating Expenses for such first or final calendar
years shall be prorated to reflect the portion of such years included in the
Term. Such proration shall be made by multiplying the total estimated or actual
(as the case may be) Taxes and Operating Expenses, for such calendar years, as
well as the Base Year amounts, by a fraction, the numerator of which shall be
the number of days of the Term during such calendar year, and the denominator of
which shall be 365.
(E) ADJUSTMENTS. For purposes of making its calculation of Operating
Expenses and Taxes payable by Tenant hereunder, Landlord will make adjustments
to reflect a 95% occupancy rate in the Building. Landlord may exclude from the
Base Expense Year, any non-recurring items, including capital expenditures
otherwise permitted as Operating Expenses under Article 26 of the Lease (and
shall only include the amortization of such expenditures in subsequent year
Operating Expenses to the extent permitted under Article 26, including any
remaining amortization of permitted expenditures made prior to or after the
Commencement Date). If Landlord eliminates from any subsequent year's Operating
Expenses a recurring category of expenses previously included in the Base
Expense Year, Landlord may subtract such category from the Base Expense Year
commencing with such subsequent year.
(F) LANDLORD'S RECORDS. Landlord shall maintain records respecting Taxes
and Expenses and determine the same in accordance with sound accounting and
management practices, consistently applied. Although this Lease contemplates the
computation of Taxes and Operating Expenses on a cash basis, Landlord shall make
reasonable and appropriate accrual adjustments to ensure that each calendar
year, including the Base Years, includes substantially the same recurring items.
Landlord reserves the right to change to a full accrual system of accounting so
long as the same is consistently applied and Tenant's obligations are not
materially adversely affected.
(G) TENANT'S REVIEW. If Taxes or Operating Expenses for any calendar
year increase more than five percent (5%) over Taxes and Operating Expenses for
the immediately preceding calendar year, Tenant, within thirty (30) days after
receiving Landlord's Statement, shall have the right to provide Landlord with
written notice ("Review Notice") of its intent to review Landlord's books and
records relating to Taxes and Operating Expenses for such calendar year. Within
a reasonable time after receipt of a timely Review Notice, Landlord shall make
such books and records
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available to Tenant or Tenant's agent for its review at the Building office;
provided, that if Tenant retains an agent to review Landlord's books and records
for any calendar year, such agent must be a CPA firm licensed to do business in
California. Tenant shall be solely responsible for any and all costs, expenses
and fees incurred by Tenant or its agent in connection with such review. Upon
such review of Landlord's books and records, Tenant shall have the right, within
thirty (30) days after such books and records are made available, to give
Landlord written notice stating in reasonable detail any objection to Landlord's
Statement for the applicable calendar year. If Tenant fails to give Landlord
written notice of objection within such thirty (30) day period or fails to
provide Landlord with a timely Review Notice, Tenant shall be deemed to have
approved Landlord's Statement in all respects and shall thereafter be barred
from raising any claims with respect thereto. Upon Landlord's receipt of a
timely objection notice from Tenant, Landlord and Tenant shall work together in
good faith to resolve the discrepancy between Landlord's Statement and Tenant's
review. If Landlord and Tenant determine that Taxes and Operating Expenses for
the applicable calendar year are less than reported, Landlord shall provide
Tenant with a credit against future additional rent in the amount of any
overpayment by Tenant. Likewise, if Landlord and Tenant determine that Taxes and
Operating Expenses for the applicable calendar year are greater than reported,
Tenant shall forthwith pay to Landlord the amount of underpayment by Tenant. Any
information obtained by Tenant pursuant to the provisions of this section shall
be treated as confidential. Notwithstanding anything to the contrary herein,
Tenant shall not be permitted to examine Landlord's books and records or to
dispute any Statement unless Tenant has paid to Landlord the amount due as shown
on such Statement.
(H) RENT AND OTHER CHARGES. Base Rent, Taxes, Operating Expenses, and
any other amounts which Tenant is or becomes obligated to pay Landlord under
this Lease or other agreement entered into in connection herewith, are sometimes
herein referred to collectively as "Rent," and all remedies applicable to the
non-payment of Rent shall be applicable thereto. Rent shall be paid at any
office maintained by Landlord or its agent at the Property, or at such other
place as Landlord may designate.
ARTICLE 5.
PERSONAL PROPERTY TAXES, RENT TAXES AND OTHER TAXES
Tenant shall pay prior to delinquency all taxes, charges or other
governmental impositions assessed against or levied upon Tenant's fixtures,
furnishings, equipment and personal property located in the Premises, and any
Work to the Premises performed under Article 10. Whenever possible, Tenant shall
cause all such items to be assessed and billed separately from the property of
Landlord. In the event any such items shall be assessed and billed with the
property of Landlord, Tenant shall pay Landlord its share of such taxes, charges
or other governmental impositions within thirty (30) days after Landlord
delivers a statement and a copy of the assessment or other documentation showing
the amount of such impositions applicable to Tenant's property. Further, Tenant
shall pay any rent tax or sales tax, service tax, transfer tax or value added
tax, or any other applicable tax on the Rent or services herein or otherwise
respecting this Lease.
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ARTICLE 6.
CONDITION OF PREMISES
Tenant has inspected the Premises, Building, Property, Systems and
Equipment (as defined in Article 26), or has had an opportunity to do so, and
agrees to accept the same "as is" without any agreements, representations,
understandings or obligations on the part of Landlord to perform any
alterations, repairs or improvements except that: (A) Landlord agrees to: (i)
install new Building standard carpeting within the Premises, and (ii) repaint
the Premises; such carpeting and painting shall be completed by Landlord at
Tenant's cost and expense except that Landlord agrees to pay up to $12,235.00
toward the cost of such work, and (B) Landlord agrees to be responsible for
repairing Systems and Equipment defects within the Premises identified by Tenant
in writing within seven (7) days following Tenant's occupancy of the Premises.
ARTICLE 7.
USE AND RULES
Tenant shall use the Premises exclusively for business offices and no
other purpose whatsoever, in compliance with all applicable Laws, and without
disturbing or interfering with any other tenant or occupant of the Property.
Tenant shall not use the Premises in any manner so as to cause a cancellation of
Landlord's insurance policies, or an increase in the premiums thereunder and
Tenant shall not commit, or suffer to be committed, any waste upon the Premises,
or any nuisance or other act or thing that may disturb the quiet enjoyment of
any other Tenant in the Building in which the Premises may be located. Tenant
shall comply with all rules set forth in Rider One attached hereto (the
"Rules"). Landlord shall have the right to reasonably amend such Rules and
supplement the same with other reasonable Rules (not expressly and materially
inconsistent with this Lease) relating to the Property, or the promotion of
safety, care, cleanliness or good order therein, and all such amendments or new
Rules shall be binding upon Tenant after five (5) days' notice thereof to
Tenant. All Rules shall be applied on a non-discriminatory basis, but nothing
herein shall be construed to give Tenant or any other Person (as defined in
Article 26) any claim, demand or cause of action against Landlord arising out of
the violation of such Rules by any other tenant, occupant, or visitor of the
Property, or out of the enforcement, failure to enforce or waiver of the Rules
by Landlord in any particular instance or instances.
ARTICLE 8.
SERVICES AND UTILITIES
(A) Provided Tenant shall not be in default under this Lease and subject
to the other provisions of this Lease and the Rules, Landlord shall provide the
following services and utilities (the cost of which shall be included in
Operating Expenses unless otherwise expressly stated herein):
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1. Electricity for standard office lighting fixtures, and equipment and
accessories customary for offices (up to 280 hours per month) where: (1)
the connected electrical load of all of the same does not exceed an
average of 4 watts per square foot of the Premises (or such lesser
amount as may be available, based on the safe and lawful capacity of the
existing electrical circuit(s) and facilities serving the Premises), (2)
the electricity will be at nominal 120 volts, single phase (or 110
volts, depending on available service in the Building), and (3) the safe
and lawful capacity of the existing electrical circuit(s) serving the
Premises is not exceeded.
2. Heat and air-conditioning to provide a temperature required, in
Landlord's reasonable opinion and in accordance with applicable Law, for
occupancy of the Premises under normal business operations, from 8:00
a.m. until 6:00 p.m. Monday through Friday, except on Holidays (as
defined in Article 26). Landlord shall not be responsible for inadequate
air-conditioning or ventilation to the extent that same occurs because
Tenant uses any item or items of equipment consuming more than 500 watts
at rated capacity without providing adequate air-conditioning and
ventilation there for.
3. Water for drinking, lavatory and toilet purposes at those points of
supply provided for nonexclusjve general use of other tenants at the
Property.
4. Customary office cleaning and trash removal service Monday through
Friday or Sunday through Thursday in and about the Premises.
5. Operatorless passenger elevator service (if the Property has such
equipment serving the Premises) and freight elevator service (if the
Property has such equipment serving the Premises, and subject to
scheduling by Landlord) in common with Landlord and other tenants and
their contractors, agents and visitors.
(B) Tenant shall cooperate fully with Landlord to conserve energy use in
the Building and Tenant shall use its best efforts to reasonably minimize its
use of gas, electricity, water and other utilities and public services
throughout the term hereof. Tenant agrees to cooperate with Landlord and to
abide by all regulations and requirements which Landlord may prescribe for the
proper functioning and protection of heating, ventilating, air-conditioning and
other systems within the Building.
(C) So long as Tenant is not in default under this Lease, Landlord shall
seek to provide such extra utilities or services as Tenant may from time to time
request, if the same are reasonable and feasible for Landlord to provide and do
not involve modifications or additions to the Property or existing Systems and
Equipment (as defined in Article 26), and if Landlord shall receive Tenant's
request within a reasonable period (but in any event no less than forty-eight
hours) prior to the time such extra utilities or services are required. Landlord
may comply with written or oral requests by any officer or employee of Tenant,
unless Tenant shall notify Landlord of, or Landlord shall request,
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the names of authorized individuals (up to 3 for each floor on which the
Premises are located) and procedures for written requests. Tenant shall, for
such extra utilities or services, pay such charges as Landlord shall from time
to time reasonably establish. All charges for such extra utilities or services
shall be due at the same time as the installment of Base Rent with which the
same are billed, or if billed separately, shall be due within twenty (20) days
after such billing.
(D) Landlord may install and operate meters or any other reasonable
system for monitoring or estimating any services or utilities used by Tenant in
excess of those required to be provided by Landlord under this Article
(including a system for Landlord's engineer to reasonably estimate any such
excess usage). If such system indicates such excess services or utilities,
Tenant shall pay Landlord's reasonable charges for installing and operating such
system and any supplementary air-conditioning, ventilation, heat, electrical or
other systems or equipment (or adjustments or modifications to the existing
Systems and Equipment), and Landlord's reasonable charges for such amount of
excess services or utilities used by Tenant.
(E) Landlord does not warrant that any services or utilities will be
free from shortages, failures, variations, interruptions caused by repairs,
maintenance, replacements, improvements, alterations, changes of service,
strikes, lockouts, labor controversies, accidents, inability to obtain services,
utilities, fuel, steam, water or supplies, governmental requirements or
requests, or other causes beyond Landlord's reasonable control. Landlord shall
not be in default hereunder or be liable for any damages (including loss of
profits, business interruption or other consequential damages) directly or
indirectly resulting from, nor shall it constitute a constructive eviction of
Tenant, nor shall the Rent reserved herein be abated or Tenant relieved from the
performance of its other obligations under this Lease by reason of: (i) the
installation, use, or interruption of use of any equipment in connection with
furnishing the services to be provided by Landlord hereunder, (ii) failure to
furnish or delay in furnishing any such services when such failure is caused by
accident or any condition beyond the reasonable control of Landlord or by the
making of necessary improvements or repairs to the Premises, Systems and
Equipment, Building or the Property, (iii) the limitation, curtailment,
rationing or restriction on use of water, electricity, gas or any other form of
energy, utility or other public service serving the Premises or the Building,
(iv) any prevention, delay or stoppage due to strikes, labor or materials or
reasonable substitutes therefor, governmental restrictions, governmental
regulations, governmental controls, enemy or hostile governmental action, civil
commotion, fire or other casualty.
ARTICLE 9.
MAINTENANCE AND REPAIRS
Except for customary cleaning and trash removal provided by Landlord
under Article 8, and damage covered under Article 13, Tenant shall keep the
interior of the Premises in good and sanitary condition, working order and
repair (including without limitation, carpet, wall-covering, doors, plumbing and
other fixtures, equipment, alterations and improvements whether installed by
Landlord or Tenant). In the event that any repairs, maintenance or replacements
are required, Tenant shall
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promptly arrange for the same, in a first class, workmanlike manner approved by
Landlord in advance in writing, either through Landlord for such reasonable
charges as Landlord may from time to time establish, or such contractors as
Landlord generally uses at the Property, or such other contractors as Landlord
shall first approve in writing. If Tenant does not promptly make such
arrangements, Landlord may, but need not, make such repairs, maintenance and/or
replacements, and the costs paid or incurred by Landlord therefor shall be
reimbursed by Tenant promptly after request by Landlord. Tenant shall indemnify
Landlord and pay for any repairs, maintenance and replacements to areas of the
Property outside the Premises, caused in whole or in part, as a result of moving
any furniture, fixtures, or other property to or from the Premises, or by Tenant
or its employees, agents, contractors, or visitors (notwithstanding anything to
the contrary contained in this Lease). Except as provided in this Article, or
for damage covered under Article 13, Landlord shall keep the common areas of the
Property in good and sanitary condition, working order and repair (the cost of
which shall be included in Operating Expenses).
ARTICLE 10.
ALTERATIONS AND LIENS
(A) Tenant shall make no additions, changes, alterations or improvements
("Work") to the Premises or the Systems and Equipment (as defined in Article 26)
pertaining to the Premises without the prior written consent of Landlord.
Landlord may impose reasonable requirements as a condition of such consent
including without limitation the submission of plans and specifications for
Landlord's prior written approval, obtaining necessary permits, posting bonds,
obtaining insurance, prior approval of contractors, subcontractors and
suppliers, prior receipt of copies of all contracts and subcontracts, contractor
and subcontractor lien waivers, affidavits listing all contractors,
subcontractors and supplies, use of union labor (if Landlord uses union labor),
affidavits from engineers acceptable to Landlord stating that the Work will not
adversely affect the Systems and Equipment or the structure or operation of the
Property, and requirements as to the manner and times in which such Work shall
be done. All Work shall be performed in a good and workmanlike manner and all
materials used shall be of a quality comparable to or better than those in the
Premises and Property and shall be in accordance with plans and specifications
approved by Landlord, and Landlord may require that all such Work be pefformed
under Landlord's supervision. If Landlord consents or supervises, the same shall
not be deemed a warranty as to the adequacy of the design, workmanship or
quality of materials, and Landlord hereby expressly disclaims any responsibility
or liability for the same. Landlord shall under no circumstances have any
obligation to repair, maintain or replace any portion of the Work. Landlord and
Tenant acknowledge and agree that Landlord may withhold its consent to the Work
if such Work necessitates compliance with any Laws for which Landlord might be
responsible.
(B) Tenant shall keep the Property, the Building and Premises free from
any mechanic's, materialmen's or similar liens or other such encumbrances in
connection with any Work on or respecting the Premises not performed by or at
the request of Landlord, and shall indemnify and hold Landlord harmless from and
against any claims, liabilities, judgments, or costs (including attorneys'
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fees) arising out of the same or in connection therewith. Tenant shall give
Landlord notice at least twenty (20) days prior to the commencement of any Work
on the Premises, or such additional times as may be necessary under applicable
Laws (defined in Article 26), to afford Landlord the opportunity of posting and
recording appropriate notices of non-responsibility. Tenant shall remove any
such liens or encumbrance by bond or otherwise within ten (10) days after
written notice by Landlord, and if Tenant shall fail to do so, Landlord may pay
the amount necessary to remove such lien or encumbrances, without being
responsible for investigating the validity thereof. The amount so paid shall be
deemed additional Rent under this Lease payable upon demand, without limitation
as to other remedies available to Landlord under this Lease. Nothing contained
in this Lease shall authorize Tenant to do any act which shall subject
Landlord's title to the Property, Building or Premises to any liens or
encumbrances whether claimed by operation of law or express or implied contract.
Any claim to a lien or encumbrance upon the Property, Building or Premises
arising in connection with any Work on or respecting the Premises not performed
by or at the request of Landlord shall be null and void, or at Landlord's option
shall attach only against Tenant's interest in the Premises and shall in all
respects be subordinate to Landlord's title to the Property and Premises.
ARTICLE 11.
INSURANCE, SUBROGATION AND WAIVER OF CLAIMS
(A) At all times during the Lease Term and during any pre-commencement
occupancy and holdover period, Tenant, at its sole expense, shall procure and
maintain the following types of insurance:
1. A policy of commercial general Liability insurance with Broad Form
Liability, and cross-liability endorsements, insuring Landlord and
Tenant against any claims for bodily injury, property damage or other
liability arising out of the use, occupancy, maintenance or ownership of
the Premises and all areas appurtenant thereto, including parking areas,
with an "Additional Insured-Managers or Lessors of Premises" Endorsement
and contain the "Amendment of the Pollution Exclusion" for damage caused
by heat, smoke or fumes from a hostile fire. Such insurance shall be in
an amount satisfactory to Landlord but in no event less than $3,000,000
per occurrence, $3,000,000 annually in the aggregate for all claims.
2. Insurance for Tenant's personal property, inventory, alterations,
fixtures and equipment located on the Premises, in an amount not less
than one hundred percent (100%) of their actual replacement value,
providing All Risk coverage including, without limitation, water damage
of any type, including sprinkler leakage, bursting or stoppage of pipes,
explosion, theft, vandalism and malicious mischief. The proceeds of such
insurance, so long as this Lease remains in effect, shall be used to
repair or replace the personal property, inventory, alterations,
fixtures and equipment so insured. In addition, Tenant shall obtain and
keep in force, at all times during the Term of this lease, a policy of
business interruption insurance coverage, insuring that one hundred
percent (100%) of the monthly Base Rent, and
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all additional Rent due hereunder, will be paid to Landlord for a period
of not less than one (1) year if the Premises are damaged or destroyed
or rendered unfit for occupancy by a risk insured under the foregoing
All Risk coverage.
3. A policy of worker's compensation insurance as required by applicable
law.
(B) The insurance to be acquired and maintained by Tenant shall be with
companies admitted to do business in the State of California with Best's Rating
Guide of A+ 10 or better. The insurance policies required hereunder shall (to
the extent applicable): (i) name Landlord, and such other parties as Landlord
shall designate from time to time, as additional insureds, (ii) not be canceled
or altered without thirty (30) days' prior written notice to Landlord, (iii)
insure performance of the indemnity set forth in Article 12, and (iv) provide
that such coverage s primary to and not contributory with any similar insurance
carried by Landlord, whose insurance shall be considered excess insurance only.
(C) The limits of said insurance required by this Lease or as carried by
Tenant shall not, however, limit the liability of Tenant nor relieve Tenant of
any obligation hereunder. Landlord may periodically, but not more often than
every five years, require that Tenant reasonably increase the aforementioned
coverage.
(D) An original certificate for each policy of insurance required to be
carried by Tenant under this Article evidencing the existence of such coverage,
together with copies of all endorsements to such policies, shall be delivered to
Landlord for retention by it prior to Tenant's taking possession of the
Premises, and Tenant shall provide renewal certificates to Landlord at least
twenty (20) days prior to expiration of such policies. In the event that Tenant
shall fail to insure or shall fail to furnish Landlord the evidence of such
insurance as herein required, Landlord may, but shall not be obligated to, from
time to time acquire such insurance for the benefit of Tenant or Landlord, or
both of them, for a period not exceeding one (1) year and any premium paid by
Landlord shall be recoverable from Tenant as additional Rent on demand.
(E) Tenant shall obtain from its insurers under all policies of
insurance maintained by Tenant pursuant to this Article a waiver of all rights
of subrogation which the insurer might have against Landlord, and Tenant agrees
to indemnify Landlord against any loss or expense, including reasonable
attorneys' fees, resulting from the failure to obtain or effect such waiver. In
addition Tenant hereby waives, on behalf of itself and its insurers, to the
extent it would not have the effect of invalidating any insurance coverage of
Tenant, all rights of subrogation as to Landlord. Further, Tenant hereby
releases and relieves Landlord and waives its right to recover damages (whether
in contract or in tort) against Landlord for loss of or damage to Tenant's
property arising our of or incident to perils required to be insured pursuant to
this Lease. The effect of such release and waiver of the right to recover
damages shall not be limited by the amount of insurance carried or required, or
by any deductibles applicable thereto.
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ARTICLE 12.
INDEMNITY
(A) Tenant agrees to defend and indemnify Landlord against and save
Landlord harmless from any and all loss, cost, liability, damage and expense,
including without limitation penalties, fines and reasonable attorneys' fees and
costs, incurred in connection with or arising from any cause whatsoever in, on
or about the Premises, including without limiting the generality of the
foregoing: (i) any failure by Tenant to observe or perform of any of the terms,
covenants or conditions of this Lease on Tenant's part to be observed or
performed, or (ii) the use or occupancy or manner of use or occupancy of the
Premises by Tenant or any person or entity claiming through or under Tenant, or
(iii) the condition of the Premises or any occurrence or happening on the
Premises from any cause whatsoever other than the active negligence or willful
misconduct of Landlord, its agents or employees, or (iv) any acts, omissions or
negligence of Tenant or any person or entity claiming through or under Tenant,
or of the agents, contractors, employees, subtenants, licensees, invitees or
visitors of Tenant or any such person or entity, in, on or about the Premises or
the Building, either prior to the commencement of, during, or after the
expiration of the term, including without limitation any acts, omissions or
negligence in the making or performing of any alterations. Tenant further agrees
to defend, indemnify and save harmless Landlord, Landlord's agents and the
lessors under any ground or underlying leases, from and against any and all
loss, cost, liability, damage and expense, including without limitation
reasonable attorneys' fees and costs, incurred in connection with or arising
from any claims by any persons by reason of injury to persons or damage to
property occasioned by any use, occupancy, condition, occurrence, happening,
act, omission or negligence referred to in the preceding sentence. In the event
any action or proceeding is brought against Landlord for any claim with respect
to which Tenant is obligated to indemnify Landlord hereunder, Tenant upon notice
from Landlord shall defend such action or proceeding at Tenant's sole expense by
counsel approved by Landlord, which approval shall not be unreasonably withheld.
The provisions of this Paragraph shall survive the expiration or earlier
termination of this Lease.
(B) Landlord shall not be responsible for or liable to Tenant for any
loss or damage that may be occasioned by or through the acts or omissions of
persons occupying adjoining premises or any part of the premises adjacent to or
connected with the Premises or any part of the Building or Property or for any
loss or damage resulting to Tenant or its property from burst, stopped or
leaking water, gas, sewer or steam pipes or falling plaster, or electrical
wiring or for any damage or loss of property within the Premises from any causes
whatsoever, including theft, excepting only losses or damages resulting from the
active negligence or willful misconduct of Landlord, and in no event shall
Landlord be liable to Tenant for any consequential damages.
ARTICLE 13.
DESTRUCTION OR DAMAGE
If the Premises or any common areas of the Property providing access
thereto shall be damaged by fire or other casualty, Landlord shall use available
insurance proceeds to restore the
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same. Such restoration shall be to substantially the condition prior to the
casualty, except for modifications required by zoning and building codes and
other Laws or by any Holder (as defined in Article 26), any other modifications
to the common areas deemed desirable by Landlord (provided access to the
Premises is not materially impaired), and except that Landlord shall not be
required to repair or replace any of Tenant's furniture, furnishings, fixtures
or equipment, or any alterations or improvements in excess of any work performed
or paid for by Landlord under any separate agreement signed by the parties in
connection herewith. Landlord shall not be liable for any inconvenience or
annoyance to Tenant or its visitors, or injury to Tenant's business resulting in
any way from any such damage or the repair thereof. However, Landlord shall
allow Tenant aproportionate abatement of Rent during the time and to the extent
the Premises are unfit for occupancy for the purposes permitted under this Lease
and not occupied by Tenant as a result thereof (unless Tenant or its employees
or agents caused the damage). Notwithstanding the foregoing to the contrary,
Landlord may elect to terminate this Lease by notifying Tenant in writing of
such termination within sixty (60) days after the date of damage (such
termination notice to include a termination date providing at least ninety (90)
days for Tenant to vacate the Premises), if the Property shall be materially
damaged by Tenant or its employees or agents, or if the Property shall be
damaged by fire or other casualty or cause such that: (a) repairs to the
Premises and access thereto cannot reasonably be completed within 120 days after
the casualty without the payment of overtime or other premiums, (b) more than
25% of the Premises is affected by the damage, and fewer than 24 months remain
in the Term, or any material damage occurs to the Premises during the last 12
months of the Term, (c) any Holder shall require that the insurance proceeds or
any portion thereof be used to retire the Mortgage debt (or shall terminate the
ground lease, as the case may be), or the damage is not fully covered by
Landlord's insurance policies, or (d) the cost of the repairs, alterations,
restoration or improvement work would exceed 25% of the replacement value of the
Building, or the nature of such work would make termination of this Lease
necessary or convenient. Tenant agrees that Landlord's obligation to restore,
and the abatement of Rent provided herein, shall be Tenant's sole recourse in
the event of such damage, and waives any other rights Tenant may have under any
applicable Law to terminate the Lease by reason of damage to the Premises or
Property; provided, however, if in Landlord's reasonable opinion the Premises
cannot be restored within six (6) months from issuance of a building permit
therefor and if such damage materially and adversely affects Tenant's use of the
Premises, Tenant may elect to terminate this Lease by delivering written notice
thereof to Landlord within sixty (60) days after Landlord's notice of its
inability to restore the Premises within such time period in which event this
Lease shall terminate as of the termination date specified in Tenant's notice of
termination (which date shall not be less than five (5) days nor more than sixty
(60) days following the date of such notice) whereupon any obligation of
Landlord to restore the Premises shall cease. Tenant acknowledges that this
Article represents the entire agreement between the parties respecting damage to
the Premises or Property, and Tenant waives the provisions of California Civil
Code Section 1932(2) and 1933(4) and any similar statute now or hereafter in
force.
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ARTICLE 14.
CONDEMNATION
If the whole or any material part of the Premises or Property shall be
taken by power of eminent domain or condemned by any competent authority for any
public or quasi-public use or purpose, or if any adjacent property or street
shall be so taken or condemned, or reconfigured or vacated by such authority in
such manner as to require the use, reconstruction or remodeling of any part of
the Premises, Building or Property, or if Landlord shall grant a deed or other
instrument in lieu of such taking by eminent domain or condemnation, Landlord
shall have the option to terminate this Lease upon ninety (90) days' notice,
provided such notice is given no later than one hundred eighty (180) days after
the date of such taking, condemnation, reconfiguration, vacation, deed or other
instrument. Tenant shall have reciprocal termination rights if the whole or any
material part of the Premises is permanently taken, or if access to the Premises
is permanently materially impaired. Landlord shall be entitled to receive the
entire award or payment in connection therewith, except that Tenant shall have
the right to file any separate claim available to Tenant for any taking of
Tenant's personal property and fixtures belonging to Tenant and removable by
Tenant upon expiration of the Term, and for moving expenses (so long as such
claim does not diminish the award available to Landlord or any Holder, and such
claim is payable separately to Tenant). All Rent shall be apportioned as of the
date of such termination, or the date of such taking, whichever shall first
occur. If any part of the Premises shall be taken, and this Lease shall not be
so terminated, the Rent shall be proportionately abated. The parties waive the
provisions of California Code of Civil Procedure Section 1265.130 or any
similar law allowing either party to petition the Superior Court to terminate
this Lease in the event of a partial taking of the Premises.
ARTICLE 15.
SUBORDINATION, ATTORNMENT AND MORTGAGEE PROTECTION
This Lease is subject and subordinate to all Mortgages (as defined in
Article 26) now or hereafter placed upon the Property, and all other
encumbrances and matters of public record applicable to the Property. If any
foreclosure proceedings are initiated by any Holder (as defined in Article 26)
or a deed in lieu is granted (or if any ground lease is terminated), Tenant
agrees, upon written request of any such Holder or any purchaser at foreclosure
sale, to attorn and pay Rent to such party and to execute and deliver any
instruments necessary or appropriate to evidence or effectuate such attainment.
However, in the event of attornment, no Holder shall be: (i) liable for any
action or omission of Landlord, or subject to any offsets or defenses which
Tenant might have against Landlord (prior to such Holder becoming Landlord under
such attainment), (ii) liable for any security deposit or bound by any prepaid
Rent not actually received by such Holder or (iii) bound by any future
modification of this Lease not consented to by such Holder. Any Holder may elect
to make this Lease prior to the lien of its Mortgage, by written notice to
Tenant, and if the Holder of any prior Mortgage shall require, this Lease shall
be prior to any subordinate Mortgage. Tenant agrees to give any Holder by
certified mail, return receipt requested, a copy of any notice of default served
by Tenant upon Landlord, provided that prior to such notice Tenant has been
notified in
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writing (by way of service on Tenant of a copy of an assignment of leases, or
otherwise) of the address of such Holder. Tenant further agrees that if Landlord
shall have failed to cure such default within the times permitted by Landlord
for cure under this Lease, any such Holder whose address has been provided to
Tenant shall have an additional period of thirty (30) days in which to cure (or
such additional time as may be required due to causes beyond such Holder's
control, including time to obtain possession of the Property by power of sale or
judicial action). Tenant shall execute such documentation as Landlord may
reasonably request from time to time in recordable form, in order to confirm the
matters set forth in this Article.
ARTICLE 16.
ESTOPPEL CERTIFICATE
Tenant shall from time to time, within twenty (20) days after written
request from Landlord, execute, acknowledge and deliver a statement (i)
certifying that this Lease is unmodified and in full force and effect, or, if
modified, stating the nature of such modification and certifying that this Lease
as so modified, is in full force and effect (or if this Lease is claimed not to
be in full force and effect, specifying the grounds therefor) and any dates to
which the Rent has been paid in advance, and the amount of any Security Deposit,
(ii) acknowledging that there are not, to Tenant's knowledge, any uncured
defaults on the part of Landlord hereunder, or specifying such defaults if any
are claimed, and (iii) certifying such other matters as Landlord may reasonably
request, or as may be requested by Landlord's current or prospective Holders,
insurance carriers, auditors, and prospective purchasers. Any such statement may
be relied upon by any such parties. If Tenant shall fail to execute and return
any such statement within the time required herein, Tenant shall be deemed to
have agreed with the matters set forth therein.
ARTICLE 17.
ASSIGNMENT AND SUBLETTING
(A) TRANSFERS. Tenant shall not, without the prior written consent of
Landlord, which, subject to the provisions of this Article, shall not be
unreasonably withheld or delayed: (i) assign, mortgage, pledge, hypothecate,
encumber, or permit any lien to attach to, or otherwise transfer, this Lease or
any interest hereunder, by operation of law or otherwise, (ii) sublet the
Premises or any part thereof, or (iii) permit the use of the Premises by any
Persons (as defined in Article 26) other than Tenant and its employees (all of
the foregoing are hereinafter sometimes referred to collectively as "Transfers"
and any Person to whom any Transfer is made or sought to be made is hereinafter
sometimes referred to as a "Transferee"). Prior to making any Transfer, Tenant
shall notify Landlord in writing, which notice shall provide a detailed
description of the proposed Transfer, including, without limitation: (a) the
proposed effective date (which shall not be less than 30 nor more than 180 days
after Tenant's notice), (b) the portion of the Premises to be Transferred
(herein called the "Subject Space"), (c) the terms of the proposed Transfer and
the consideration therefor, the name and address of the proposed Transferee, and
a copy of all documentation pertaining to the proposed
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Transferee, and (d) current financial statements of the proposed Transferee,
certified by an officer, partner or owner thereof, and any other information to
enable Landlord to determine the financial responsibility, character, and
reputation of the proposed Transferee, nature of such Transferee's business and
proposed use of the Subject Space, and such other information as Landlord may
reasonably require. If Landlord requests additional information, Tenant's notice
shall not be deemed to have been received until Landlord receives such
additional information. Any Transfer made without complying with this Article
shall, at Landlord's option, be null, void and of no effect, or shall constitute
a Default under this Lease. Whether or not Landlord shall grant consent, Tenant
shall pay $300.00 towards Landlord's review and processing expenses, as well as
any reasonable legal fees incurred by Landlord, within thirty (30) days after
written request therefor by Landlord.
(B) APPROVAL. Subject to the terms set forth in this Article, Landlord
will not unreasonably withhold its consent to any proposed Transfer of the
Subject Space to the Transferee on the terms specified in Tenant's notice. The
parties hereby agree that it shall be reasonable under this Lease and under any
applicable Law for Landlord to withhold consent to any proposed Transfer where
one or more of the following applies (without limitation as to other reasonable
grounds for withholding consent): (i) the Transferee is of a character or
reputation or engaged in a business which is not consistent with the quality of
the Property, or would be a significantly less prestigious occupant of the
Property than Tenant, (ii) the Transferee intends to use the Subject Space for
purposes which are not permitted under this Lease, (iii) the Subject Space is
not regular in shape with appropriate means of ingress and egress suitable for
normal renting purposes, (iv) the Transferee is either a government (or agency
or instrumentality thereof) or an occupant of the Property, (v) the proposed
Transferee does not have a reasonable financial condition in relation to the
obligations to be assumed in connection with the Transfer, (vi) the proposed
Transfer would result in more than two (2) subleases of portions of the Premises
being in effect at any one time during the Term, or (vii) Tenant has committed
and failed to cure a default at the time Tenant requests consent to the proposed
Transfer.
(C) RECAPTURE. Notwithstanding anything to the contrary in this Article,
Landlord shall have the option, by giving notice to Tenant within thirty (30)
days after receipt of Tenant's notice of any proposed Transfer (and any
additional information required or requested by Landlord in connection
therewith) to: (a) in the case of any Transfer, terminate this Lease as to the
Subject Space as of the effective date of the proposed Transfer, in which event
Tenant shall be relieved of all further obligations hereunder as to the Subject
Space as ot such date; or (b) in the case of a sublease, to sublease the Subject
Space from Tenant upon the terms and conditions set forth in Tenant's notice,
except that the rent shall be the lower of the per square foot monthly Base Rent
and additional Rent described in Articles 3 and 4 payable under this Lease for
the Subject Space, or that part of the rent and other consideration set forth in
Tenant's notice which is applicable to the Space. If Landlord exercises its
option to sublet the Subject Space, Tenant shall sublet the Subject Space to
Landlord upon the terms and conditions contained in Tenant's notice; provided,
however, that: (i) Landlord shall at all times under such sublease have the
right and option further to sublet the Subject Space without obtaining Tenant's
consent or sharing any of the economic consideration received by Landlord; (ii)
the provisions of Article 6 shall not be applicable thereto; (iii) Landlord and
its
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subtenants shall have the right to use in common with Tenant all lavatories,
corridors and lobbies which are within the Premises and the use of which is
reasonably required for the use of the Subject Space; (iv) Tenant shall have no
right of set-off or abatement or any other right to assert a default hereunder
by reason of any default by Landlord under such sublease; and (v) Landlord's
liability under such sublease shall not be deemed assumed or taken subject to by
any successor to Landlord's interest under this Lease. No failure of Landlord to
exercise either option with respect to the Subject Lease shall be deemed to be
Landlord's consent to the Transfer. If this Lease shall be terminated with
respect to less than the entire Premises, the Rent reserved herein shall be
prorated on the basis of the number of square feet of rentable area retained by
Tenant in proportion to the number of rentable square feet contained in the
Premises, this Lease as so amended shall continue thereafter in full force and
effect, and upon request of either party, the parties shall execute written
confirmation of the same.
(D) TERMS OF CONSENT. If Landlord consents to a Transfer, as some of the
conditions to the effectiveness thereof: (a) the terms and conditions of this
Lease, including among other things, Tenant's liability for the Subject Space,
shall in no way be deemed to have been waived or modified, (b) such consent
shall not be deemed consent to any further Transfer by either Tenant or a
Transferee, (c) no Transferee shall succeed to any rights provided in this Lease
or any amendment hereto to extend the Term of this Lease, expand the Premises,
or lease additional space, any such rights being deemed personal to Tenant, and
(d) Tenant shall deliver to Landlord promptly after execution, an original
executed copy of all documentation pertaining to the Transfer in form reasonably
acceptable to Landlord. Any sublease hereunder shall be subordinate and subject
to the provisions of this Lease, and if this Lease shall be terminated during
the term of any sublease for any reason, Landlord shall have the right, in its
sole discretion, to: (i) treat such sublease as canceled and repossess the
Subject Space by any lawful means, or (ii) require that such subtenant attorn to
and recognize Landlord as its landlord under any such sublease. If Tenant shall
be in Default hereunder, as described in Paragraph (A) of Article 20, Landlord
is hereby irrevocably authorized, as Tenant's agent and attorney-in-fact, to,
and may (but shall not be obligated to), direct any Transferee to make all
payments under or in connection with the Transfer directly to Landlord (which
Landlord shall apply towards Tenant's obligations under this Lease) until such
Default is cured. Regardless of Landlord's consent, no Transfer shall release
Tenant of Tenant's obligation or alter the primary liability of Tenant to pay
the Rent and to perform all other obligations to be performed by Tenant
hereunder. The acceptance of Rent by Landlord from any other person shall not be
deemed to be a waiver by Landlord of any provision hereof. Consent to one
Transfer shall not be deemed consent to any subsequent Transfer. In the event of
default by any assignee or successor of Tenant in the performance of any of the
terms hereof, Landlord may proceed directly against Tenant without the necessity
of exhausting remedies against said assignee or successor. Landlord may consent
to subsequent Transfers of the Lease or amendments or modifications to this
Lease with assignees of Tenant, without notifying Tenant, or any successor of
Tenant, and without obtaining its or their consent thereto and such action shall
not relieve Tenant or any successor of Tenant of liability under this Lease.
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(E) TRANSFER PREMIUM. If Landlord consents to a Transfer, and as a
condition thereto which the parties hereby agree is reasonable, Tenant shall pay
Landlord seventy-five percent (75%) of any Transfer Premium derived by Tenant
from such Transfer. "Transfer Premium" shall mean all rent, additional rent or
other consideration paid by such Transferee in excess of the Rent payable by
Tenant under this Lease (on a monthly basis during the Term, and on a per
rentable square foot basis, if less than all of the Premises is transferred),
after deducting the reasonable expenses incurred by Tenant for any changes,
alterations and improvements to the Premises, any other economic concessions or
services provided to the Transferee, and any customary brokerage commissions
paid in connection with the Transfer. If part of the consideration for such
Transfer shall be payable other than in cash, Landlord's share of such non-cash
consideration shall be in such form as is reasonably satisfactory to Landlord.
The percentage of the Transfer Premium due Landlord hereunder shall be paid
within ten (10) days after Tenant receives any Transfer Premium from the
Transferee.
(F) CERTIFICATE; ANNUAL STATEMENT. Tenant shall furnish upon Landlord's
request a complete statement, certified by an independent certified public
accountant, or Tenant's chief financial officer, setting forth in detail the
computation of any Transfer Premium Tenant has derived and shall derive from
such Transfer. In addition, Tenant shall deliver to Landlord a statement within
thirty (30) days after the end of each calendar year in which any part of the
Term occurs, and the end of the Term, specifying as to such calendar year each
sublease or assignment in effect during the period covered by such statement and
(i) the date of its execution and delivery, (ii) the number of square feet of
rentable area covered thereby, (iii) the term thereof, (iv) the rent charged
thereunder, and (v) the amount (if any) Transfer Premium paid and payable by
Tenant to Landlord. Landlord or its authorized representatives shall have the
right at all reasonable times to audit the books, records and papers of Tenant
relating to any Transfer, and shall have the right to make copies thereof. If
the Transfer Premium respecting any Transfer shall be found understated, Tenant
shall within thirty (30) days after demand pay the deficiency, and if
understated by more than 2%, Tenant shall pay Landlord's costs of such audit.
(G) CERTAIN TRANSFERS. For purposes of this Lease, the term "Transfer"
shall also include (a) if Tenant is a partnership, or limited liability company,
the withdrawal or change (whether voluntary, involuntary or by operation of taw)
of a majority of the partners or members, or any transfer of a majority of
partnership or membership interests or assets (as a consequence of a single
transaction or any number of separate transactions), or the dissolution of the
partnership or limited liability company, (b) if Tenant is a corporation whose
stock is not publicly held and not traded through an exchange or over the
counter, the dissolution, merger, consolidation or other reorganization of
Tenant, or (as a consequence of a single transaction or any number of separate
transactions): (i) the sale or other transfer of more than an aggregate of 50%
of the voting shares of Tenant, or (ii) the sale, mortgage, hypothecation or
pledge of more than an aggregate of 50% of Tenant's net assets, (c) If Tenant is
more than one Person, any Transfer by any one of the Persons comprising Tenant,
and (d) any Transfer by a Transferee.
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ARTICLE 18.
COMPLIANCE WITH LEGAL REQUIREMENTS
(A) At Tenant's sole cost, Tenant shall promptly comply with all Laws
(defined in Article 26) now in force or that may later be in force, including,
but not limited to, all provisions of the American With Disabilities Act, the
requirements of any board of fire underwriters or other similar body now or in
the future constituted, and any direction or occupancy certificate issued by
public officers (collectively "Legal Requirements"), insofar as they relate to
the condition, use, or occupancy of the Premises; except for (i) structural
changes or changes to the electrical, mechanical, or plumbing systems of the
Building, to the extent such changes are not necessitated by Tenant's acts or by
improvements made for Tenant and (ii) alterations or improvements to the
Building as a whole or the common areas of the Building.
(B) In the event that Landlord shall be required to comply with any
Legal Requirement as a result of any structural changes, changes to the
electrical, mechanical or plumbing systems of the Building or the Premises or
any alterations or improvements to the Building as a whole or the common areas
of the Building done solely for, the benefit of Tenant, any and all costs of
such changes, alterations and improvements together with any and all costs
associated with Landlord's compliance with Legal Requirements in connection
therewith shall be for the account of Tenant and Tenant shall within ten (10)
days of receipt pay all invoices therefor as additional rent.
(C) Landlord shall, at its own expense consistent with Article 26(H), be
responsible for complying with the Americans with Disabilities Act affecting the
Building common areas unless such compliance is necessitated by the particular
use of the Premises by Tenant for other than general business office purposes,
but may contest, appeal or defer such compliance provided that the use or
occupancy of the Premises by Tenant shall not be materially interfered with and
Tenant is not subject to prosecution for criminal offense by reason of such
noncompliance by Landlord.
ARTICLE 19.
RIGHTS RESERVED BY LANDLORD
Landlord reserves full rights to control the Property (which rights may
be exercised without subjecting Landlord to claims for constructive eviction,
abatement of Rent, damages or other claims of any kind), including more
particularly, but without limitation, the following rights:
(A) To change the name or street address of the Property; install and
maintain signs on the exterior and interior of the Property; retain at all
times, and use in appropriate instances, keys to all doors within and into the
Premises; grant to any Person the right to conduct any business or render any
service at the Property, whether or not it is the same or similar to the use
permitted Tenant by this Lease; and have access for Landlord and other tenants
of the Property to any mail chutes located on the Premises according to the
rules of the United States Postal Service.
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(B) To enter the Premises at reasonable hours for reasonable purposes,
including inspection and supplying cleaning service or other services to be
provided Tenant hereunder, to show the Premises to current and prospective
mortgage lenders, ground lessors, insurers and prospective purchasers, tenants
and brokers, and if Tenant shall abandon the Premises at any time, or shall
vacate the same during the last three months of the Term, to decorate, remodel,
repair or alter the Premises.
(C) To use any and all means which Landlord deems proper to enter the
Premises at any time in an emergency.
(D) To limit or prevent access to the Property, shut down elevator
service, activate elevator emergency controls, or otherwise take such action or
preventative measures deemed necessary by Landlord for the safety of tenants or
other occupants of the Property or the protection of the Property and other
property located thereon or therein, in case of fire, invasion, insurrection,
riot, civil disorder, public excitement or other dangerous condition, or threat
thereof.
(E) To decorate and to make alterations, additions and improvements,
structural or otherwise, in or to the Property or any part thereof, and any
adjacent building, structure, parking facility, land, street or alley (including
without limitation changes and reductions in corridors, lobbies, parking
facilities and other public areas and the installation of kiosks, planters,
sculptures, displays, escalators, mezzanines, and other structures, facilities,
amenities and features therein, and changes for the purpose of connection with
or entrance into or use of the Property in conjunction with any adjoining or
adjacent building or buildings, now existing or hereafter constructed). In
connection with such matters, or with any other repairs, maintenance,
improvements or alterations, in or about the Property, Landlord may erect
scaffolding and other structures reasonably required, and during such operations
may enter upon the Premises and take into and upon or through the Premises, all
materials required to make such repairs, maintenance, alterations or
improvements, and may close public entry ways, other public areas, restrooms,
stairways or corridors.
(F) To substitute for the Premises other premises (herein referred to as
the "new premises") at the Property, or another comparable building, provided:
(i) the new premises shall be similar to the Premises in area, (ii) Landlord
shall give Tenant at least thirty (30) days' written notice before making such
change; and (iii) if Tenant shall already have taken possession of the Premises:
(a) Landlord shall pay the direct, out-of-pocket, reasonable expenses of Tenant
in moving from the Premises to the new premises and improving the new premises
so that they are substantially similar to the Premises, and (b) such move shall
be made during evenings, weekends, or otherwise so as to incur the least
convenience to Tenant. In such case, the parties shall execute an amendment to
the Lease confirming the change within thirty (30) days after Landlord shall
request the same.
(G) To periodically remeasure the Property and/or the Premises, which
may result in an increase or decrease in the number of feet contained therein,
provided that such a remeasurement shall not (i) during the term in which such
remeasurement takes place, by itself result in an increase or decrease in the
Base Rent, or Tenant's Prorata Share of Taxes or Operating Expenses or any other
fee, charge or expense based on the area leased by Tenant; or (ii) under any
circumstances entitle
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Tenant to a refund or credit for any sums paid under this Lease. The parties
shall execute an amendment to the Lease confirming the measurement change within
thirty (30) days after Landlord shall request the same.
(H) To adjust the Expiration Date by either extending or truncating the
Expiration Date by up to a maximum of three (3) months (such adjusted Expiration
Date being referred to thereinafter as the "New Expiration Date"), provided that
Landlord shall give Tenant at least twenty-four (24) months' written notice of
such adjustment prior to the earlier of the Expiration Date or the New
Expiration Date. The parties shall execute an amendment to the Lease confirming
the change within thirty (30) days after Landlord shall request the same.
In connection with entering the Premises to exercise any of the
foregoing rights, Landlord shall: (a) provide reasonable advance written or oral
notice to Tenant's on-site manager or other appropriate person (except in
emergencies, or for routine cleaning or other routine matters), and (b) take
reasonable steps to minimize any interference with Tenant's business.
ARTICLE 20.
LANDLORD'S REMEDIES
(A) DEFAULT. The occurrence of any one or more of the following events
shall constitute a "Default" by Tenant, which shall give rise to Landlord's
remedies set forth in Paragraph (B) of this Article: (i) failure by Tenant to
make when due any payment of Rent; provided that on the first two occasions
during the Term (or any extension thereof) of Tenant's failure to pay Rent when
due, no Default shall be deemed to have occurred unless Tenant falls to pay Rent
within five (5) days following Landlord's written notice that said Rent is due
and payable; (ii) failure by Tenant to observe or perform any of the terms or
conditions of this Lease to be observed or performed by Tenant other than the
payment of Rent, or as provided below, unless such failure is cured within sixty
(60) days after notice, or such shorter period expressly provided elsewhere in
this Lease; (iii) failure by Tenant to comply with the Rules, unless such
failure is cured within five (5) days after notice; (iv) vacation of all or a
substantial portion of the Premises for more than thirty (30) consecutive days,
or the failure to take possession of the Premises within sixty (60) days after
the Commencement Date; (v) (a) making by Tenant or any guarantor of this Lease
("Guarantor") of any general assignment for the benefit of creditors, (b) filing
by or against Tenant or any Guarantor of a petition to have Tenant or such
Guarantor adjudged a bankrupt or a petition for reorganization or arrangement
under any Law (defined in Article 26) relating to bankruptcy (unless, in the
case of a petition filed against Tenant or such Guarantor, the same is dismissed
within sixty (60) days), (c) appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets or of Tenant's interest in
this Lease, where possession is not restored to Tenant within thirty (30) days,
(d) attachment, execution or other judicial seizure of substantially all of
Tenant's assets or of Tenant's interest in this Lease, (e) Tenant's or any
Guarantor's convening of a meeting of its creditors or any class thereof for the
purpose of effecting a moratorium upon or composition of its debts, or (f)
Tenant's or any Guarantor's insolvency or admission of an inability to pay its
debts as
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they mature; (vi) any material misrepresentation herein, or material
misrepresentation or omission in any financial statements or other materials
provided by Tenant or any Guarantor in connection with negotiating or entering
this Lease or in connection with any Transfer under Article 17; (vii) making of
any Transfer in violation of Article 17; or (viii) cancellation or revocation of
any guaranty of this Lease by any Guarantor. Without limiting the foregoing,
failure by Tenant to comply with the same term or condition of this Lease on
three occasions during any twelve (12) month period shall cause any failure to
comply with such term or condition during the succeeding twelve month period, at
Landlord's option, to constitute an incurable Default if Landlord has given
Tenant notice of each such failure after each such failure occurs. The parties
acknowledge and agree that time is of the essence of this Lease and, to the
extent allowable by Law, the notice and cure periods provided herein are in lieu
of, and not in addition to, any notice and cure periods provided by Law.
(B) REMEDIES. If Tenant commits a Default, in addition to any other
right or remedy allowed under any Law or other provision of this Lease (all of
which remedies shall be distinct, separate and cumulative), Landlord may
terminate this Lease, repossess the Premises by unlawful detainer suit, summary
proceedings, or any other lawful means, and recover as damages a sum of money
equal to: (a) the worth at the time of award of the unpaid Rent which had been
earned at the time of termination; (b) the worth at the time of award of the
amount by which the unpaid Rent which would have been earned after termination
until the time of the award exceeds the amount of such Rent loss that Tenant
proves could have been reasonably avoided; (c) the worth at the time of award of
the amount by which the unpaid Rent for the balance of the Term after the time
of award exceeds the amount of such Rent loss that Tenant proves can reasonably
be avoided; and (d) any other amounts necessary to compensate Landlord for all
detriment or damages proximately caused by Tenant's failure to perform its
obligations under this Lease or that in the ordinary course would be likely to
result therefrom, including without limitation, all Costs of Reletting (as
defined in Paragraph (F) of this Article. For purposes of computing the amount
of Rent herein that would have accrued after the time of award, Tenant's Prorata
Share of Taxes and Operating Expenses shall be projected, based upon the average
rate of increase, if any, in such items from the Commencement Date through the
time of award. The "worth at the time of award" of the amounts referred to in
clauses (a) and (b) shall be computed by allowing interest at the Default Rate
(as defined in Article 26). The "worth at the time of award" of the amount
referred to in clause (c) shall be computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of award
plus one percent (1%).
(C) MITIGATION OF DAMAGES. If Landlord terminates this Lease or Tenant's
right to possession, Landlord shall use reasonable efforts to mitigate
Landlord's damages, and Tenant shall be entitled to submit proof of such failure
to mitigate as a defense to Landlord's claims hereunder, if mitigation of
damages by Landlord is required by applicable Law. If Landlord has not
terminated this Lease or Tenant's right to possession, Landlord shall have no
obligation to mitigate, and may permit the Premises to remain vacant or
abandoned, and shall have the remedies under California Civil Code, Section
1951.4, as the same may be modified or replaced hereafter; in such case, Tenant
may seek to mitigate damages by attempting to sublease the Premises or assign
this Lease subject to the provisions of Article 17.
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(D) SPECIFIC PERFORMANCE AND COLLECTION OF RENT. Landlord shall at all
times have the rights and remedies (which shall be cumulative with each other
and cumulative and in addition to those rights and remedies available under
Paragraph (B) of this Article above or any law or other provision of this
Lease), without prior demand or notice except as required by applicable Law: (i)
to seek any declaratory, injunctive or other equitable relief and specifically
enforce this Lease, or restrain or enjoin a violation or breach of any provision
hereof, and (ii) to sue for and collect any unpaid Rent which has accrued.
(E) LATE CHARGES AND INTEREST. Tenant shall pay, as additional Rent, a
service charge of Two Hundred Dollars ($200.00) for bookkeeping and
administrative expenses, if Rent is not received within five (5) days after its
due date. In addition, any Rent paid more than five (5) days after due shall
accrue interest from the due date at the Default Rate (as defined in Article
26), until payment is received by Landlord. Such service charge and interest
payments shall not be deemed consent by Landlord to late payments, nor a waiver
of Landlord's right to insist upon timely payments at any time, nor a waiver of
any remedies to which Landlord is entitled as a result of the late payment of
Rent.
(F) CERTAIN DEFINITIONS. "Net Re-Letting Proceeds" shall mean the total
amount of rent and other consideration actually paid by any Replacement Tenants,
less all Costs of Re-Letting, during a given period of time. "Costs of
Re-Letting" shall include, without limitation, all reasonable costs and expenses
incurred by Landlord for any repairs, maintenance, changes, alterations and
improvements to the Premises, brokerage commissions, advertising costs,
attorneys' fees, any customary free rent periods or credits, tenant improvement
allowances, take-over lease obligations and other customary, necessary or
appropriate economic incentives reasonably required to enter into leases with
Replacement Tenants, and costs of collecting rent from Replacement Tenants.
"Replacement" shall mean any Person (as defined in Article 26) to whom Landlord
relets the Premises or any portion thereof pursuant to this Article.
(G) OTHER MATTERS. No re-entry or repossession, repairs, changes,
alterations and additions, reletting, acceptance of keys from Tenants, or any
other action or omission by Landlord shall be construed as an election by
Landlord to terminate this Lease or Tenant's right to possession, or accept a
surrender of the Premises, nor shall the same operate to release the Tenant in
whole or in part from any of Tenant's obligations hereunder, unless express
written notice of such intention is sent by Landlord to Tenant. To the fullest
extent permitted by Law, all rent and other consideration paid by any
Replacement Tenants shall be applied: first, to the Costs of Re-Letting, second,
to the payment of any Rent theretofore accrued, and the residue, if any, shall
be held by Landlord and applied to the payment of other obligations of Tenant to
Landlord as the same become due (with any remaining residue to be retained by
Landlord). Landlord may apply payments received from Tenant to any obligations
of Tenant then accrued, without regard to such obligations as may be designated
by Tenant. Landlord shall be under no obligation to observe or perform any
provision of this Lease on its part to be observed or performed which accrues
after the date of any Default by Tenant. Tenant hereby irrevocably waives any
right otherwise available under any Law to redeem or reinstate this Lease.
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ARTICLE 21.
LANDLORD'S RIGHT TO CURE
(A) If Landlord shall fail to perform any term or provision under this
Lease required to be performed by Landlord, Landlord shall not be deemed to be
in default hereunder nor subject to any claims for damages of any kind, unless
such failure shall have continued for a period of thirty (30) days after written
notice thereof by Tenant; provided, if the nature of Landlord's failure is such
that more than thirty (30) days are reasonably required in order to cure,
Landlord shall not be in default if Landlord commences to cure such failure
within such thirty (30) day period, and thereafter reasonably seeks to cure such
failure to completion. The aforementioned periods of time permitted for Landlord
to cure shall be extended for any period of time during which Landlord is
delayed in, or prevented from, curing due to fire or other casualty, strikes,
lock-outs or other labor troubles or shortages, shortages of equipment or
materials, governmental requirements, power shortages or outages, acts or
omissions by Tenant or other Persons, and other causes beyond Landlord's
reasonable control. If Landlord shall fail to cure within the times permitted
for cure herein, Landlord shall be subject to such remedies as may be available
to Tenant (subject to the other provisions of this Lease); provided, in
recognition that Landlord must receive timely payments of Rent and operate the
Property, Tenant shall have no right of self-help to perform repairs or any
other obligation of Landlord, and shall have no right to withhold, set-off or
abate Rent.
(B) All agreements and provisions to be performed by Tenant under any of
the terms of this Lease shall be at its sole cost and expense and without any
abatement of Rent. If Tenant shall fail to pay any sum of money, other than
Rent, required to be paid by it hereunder, or shall fail to perform any other
act on its part to be performed hereunder and such failure shall continue for
ten (10) days after notice thereof by Landlord, or a shorter period if
additional damage may result, Landlord may, to protect its interests, but shall
not be obligated to do so, and without waiving or releasing Tenant from any of
its obligations, make any such payment or perform any such other act on Tenant's
part to be made or performed as provided herein. All sums so paid by Landlord
and all necessary incidental costs shall be deemed additional Rent hereunder and
shall be payable with interest from the date Landlord makes such payments until
paid by Tenant, at the Default Rate, and Landlord shall have (in addition to any
other right or remedy of Landlord) the same rights and remedies in the event of
the nonpayment thereof by Tenant as in the case of default by Tenant in the
payment of Rent.
ARTICLE 22.
RETURN OF POSSESSION
At the expiration of earlier termination of this Lease or Tenant's right
of possession, Tenant shall surrender possession of the Premises in the
condition required under Article 9, ordinary wear and tear and damage by
casualty or act of God under Article 13 excepted, and shall surrender all keys,
key cards, and any parking stickers, to Landlord, and advise Landlord as to the
combination of any locks or vaults then remaining in the Premises, and shall
remove all trade fixtures and
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personal property. All improvements, fixtures and other items in or upon the
Premises (except trade fixtures and personal property belonging to Tenant),
whether installed by Tenant or Landlord, shall be Landlord's property and shall
remain upon the Premises, all without compensation, allowance or credit to
Tenant. However, if prior to such termination or within ten (10) days thereafter
Landlord so directs by notice, Tenant shall promptly remove such of the
foregoing items as are designated in such notice and restore the Premises to the
condition prior to the installation of such items and as of the execution
hereof. If Tenant shall fail to perform any repairs or restoration, or fail to
remove any items from the Premises required hereunder, Landlord may do so, and
Tenant shall pay Landlord the cost thereof upon demand. All property removed
from the Premises by Landlord pursuant to any provisions of this Lease or any
Law may be handled or stored by Landlord at Tenant's expense, and Landlord shall
in no event be responsible for the value, preservation or safekeeping thereof.
All property not removed from the Premises or retaken from storage by Tenant
within thirty (30) days after expiration or earlier termination of this Lease or
Tenant's right to possession, shall at Landlord's option be conclusively deemed
to have been conveyed by Tenant to Landlord as if by bill of sale without
payment by Landlord. Unless prohibited by applicable Law, Landlord shall have a
lien against such property for the costs incurred in removing and storing the
same.
ARTICLE 23.
HOLDING OVER
Unless Landlord expressly agrees otherwise in writing, Tenant shall pay
Landlord 175% of the amount of Rent then applicable (or the highest amount
permitted by law, whichever shall be less) prorated on per diem basis for each
day Tenant shall retain possession of the Premises or any part thereof after
expiration or earlier termination of this Lease, together with all damages
sustained by Landlord on account thereof. The foregoing provisions shall not
serve as permission for Tenant to hold-over, nor serve to extend the Term
(although Tenant shall remain bound to comply with all provisions of this Lease
until Tenant vacates the Premises, and shall be subject to the provisions of
Article 22). Notwithstanding the foregoing to the contrary, at any time before
or after expiration or earlier termination of the Lease, Landlord may serve
notice advising Tenant of the amount of Rent and other terms required, should
Tenant desire to enter a month-to-month tenancy (and if Tenant shall hold over
more than one full calendar month after such notice, Tenant shall thereafter be
deemed a month-to-month tenant, on the terms and provisions of this Lease then
in effect, as modified by Landlord's notice, and except that Tenant shall not be
entitled to any renewal or expansion rights contained in this Lease or any
amendments hereto).
ARTICLE 24.
NO WAIVER
No provision of this Lease will be deemed waived by either party unless
expressly waived in writing signed by the waiving party. No waiver shall be
implied by delay, forbearance, failure to act or any other act or omission of
either party. No waiver by either party of any provision of this
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Lease shall be deemed a waiver of such provision with respect to any subsequent
matter relating to such provision, and Landlord's consent or approval respecting
any action by Tenant shall not constitute a waiver of the requirement for
obtaining Landlord's consent or approval respecting any subsequent action.
Acceptance of Rent by Landlord shall not constitute a waiver of any breach by
Tenant of any term or provision of this Lease. No acceptance of a lesser amount
than the Rent herein stipulated shall be deemed a waiver of Landlord's right to
receive the full amount due, nor shall any endorsement or statement on any check
or payment or any letter accompanying such check or payment be deemed an accord
and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the full amount due. The acceptance of
Rent or of the performance of any other term or provision from any Person other
than Tenant, including any Transferee, shall not constitute a waiver of
Landlord's right to approve or disapprove any Transfer.
ARTICLE 25.
ATTORNEYS' FEES AND JURY TRIAL
In the event of any litigation between the parties, the prevailing party
shall be entitled to obtain, as part of the judgment, all reasonable attorneys'
fees, costs and expenses incurred in connection with such litigation, except as
may be limited by applicable Law. In the interest of obtaining a speedier and
less costly hearing of any dispute, the parties hereby each irrevocably waive
the right to trial by jury.
ARTICLE 26.
CAPTIONS, DEFINITIONS AND SEVERABILITY
The captions of the Articles and Paragraphs of this Lease are for
convenience of reference only and shall not be considered or referred to in
resolving questions of interpretation. If any term or provision of this Lease
shall be found invalid, void, illegal, or unenforceable with respect to any
particular Person by a court of competent jurisdiction, it shall not affect,
impair or invalidate any other terms or provisions hereof, or its enforceability
with respect to any other Person, the parties hereto agreeing that they would
have entered into the remaining portion of this Lease notwithstanding the
omission of the portion or portions adjudged invalid, void, illegal, or
unenforceable with respect to such Person.
(A) "Building" shall mean the structure identified in Article 1 of this
Lease.
(B) "Default Rate" shall mean eighteen percent (18%) per annum, or the
highest rate permitted by applicable Law, whichever shall be less.
(C) "Holder" shall mean the holder of any Mortgage at the time in
question, and where such Mortgage is a ground lease, such term shall refer to
the ground lessor.
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(D) "Holidays" shall mean all federally observed holidays, including New
Year's Day, President's Day, Memorial Day, Independence Day, Labor Day,
Veterans' Day, Thanksgiving Day, Christmas Day, and to the extent of utilities
or services provided by union members engaged at the Property, such other
holidays observed by such unions.
(E) "Landlord" and "Tenant" shall be applicable to one or more Persons
as the case may be, and the singular shall include the plural, and the neuter
shall include the masculine and feminine; and if there be more than one, the
obligations thereof shall be joint and several. For purposes of any provisions
indemnifying or limiting the liability of Landlord, the term "Landlord" shall
include Landlord's present and future partners, members, beneficiaries,
trustees, officers, directors, employees, shareholders, principals, agents,
affiliates, successors and assigns.
(F) "Law" shall mean all federal, state, county and local governmental
and municipal laws, statutes, ordinances, rules, regulations, codes, decrees,
orders, and other such requirements, applicable equitable remedies and decisions
by courts in cases where such decisions are considered binding precedents in the
state in which the Property is located, and decisions of federal courts applying
the Laws of such State.
(G) "Mortgage" shall mean all mortgages, deeds of trust, ground leases
and other such encumbrances now or hereafter placed upon the Property or
Building, or any part thereof, and all renewals, modifications, consolidations,
replacements or extensions thereof, and all indebtedness now or hereafter
secured thereby and all interest thereon.
(H) "Operating Expenses" shall mean all expenses, costs and amounts
(other than Taxes) of every kind and nature which Landlord shall incur or pay
during any calendar year any portion of which occurs during the Term, because of
or in connection with the ownership, management, repair, maintenance,
restoration and operation of the Property, including, without limitation, any
amounts paid for: (a) utilities for the Property, including but not limited to,
electricity, power, gas, steam, oil or other fuel, water, sewer, lighting,
heating, air conditioning and ventilating, (b) permits, licenses and
certificates necessary to operate, manage and lease the Property, (c) insurance
applicable to the Property, not Limited to the amount of coverage Landlord is
required to provide under this Lease, (d) supplies, tools, equipment and
materials used in the operation, repair and maintenance of the Property, (e)
accounting, legal, inspection, consulting, concierge and other services, (f) any
equipment rental (or installment equipment purchase or equipment financing
agreements), or management agreements (including the cost of any management fee
actually paid thereunder and the fair rental value of any office space provided
thereunder, up to customary and reasonable amounts), (g) wages, salaries and
other compensation and benefits (including the fair value of any parking
privileges provided) for all persons engaged in the operation, maintenance or
security of the Property, and employer's Social Security taxes, unemployment
taxes or insurance, and any other taxes which may be levied on such wages,
salaries, compensation and benefits, (h) payments under any easement, operating
agreement, declaration, restrictive covenant or instrument pertaining to the
sharing of costs in any planned development, and (i) operation, repair and
maintenance of all Systems and Equipment and components thereof (including
replacement of components), janitorial
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service, alarm and security service, window cleaning, trash removal, elevator
maintenance, cleaning of walks, parking facilities and building walls, removal
of ice and snow, replacement of wall and floor coverings, ceiling tiles and
fixtures in lobbies, corridors, restrooms and other common or public areas or
facilities, maintenance and replacement of shrubs, trees, grass, sod and other
landscaped items, irrigation systems, drainage facilities fences, curbs and
walkways, re-paving and re-striping parking facilities, and roof repairs. If the
Property is not fully occupied during all or a portion of any calendar year,
Landlord may, in accordance with sound accounting and management practices,
determine the amount of variable Operating Expenses (i.e., those items which
vary according to occupancy levels) that would have been paid had the Property
been fully occupied, and the amount so determined shall be deemed to have been
the amount of variable Operating Expenses for such year. If Landlord makes such
an adjustment, Landlord shall make a comparable adjustment for the Base Expense
year. Notwithstanding the foregoing, Operating Expenses shall not, however,
include:
(i) depreciation, interest (except as set forth below with respect to
amortization of capital improvements) and amortization on Mortgages, and
other debt costs or ground lease payments, if any; legal fees in
connection with leasing, tenant disputes or enforcement of leases; real
estate brokers' leasing commissions; improvements or alterations to
tenant spaces; the cost of providing any service directly to and paid
directly by, any tenant; any costs expressly excluded from Operating
Expenses elsewhere in this Lease; costs of any items to the extent
Landlord receives reimbursement from insurance proceeds or from a third
party (such proceeds to be deducted from Operating Expenses in the year
in which received);
(ii) capital expenditures, except for: (a) the costs of any capital
improvements, equipment or devices installed or paid for by Landlord (1)
required or desired for the health and safety of tenants and occupants,
(2) to conform with any change in Laws, rules, regulations or
requirements of any governmental or quasi governmental authority having
jurisdiction not applicable to the Building as of the date of original
construction or of the board of fire underwriters or similar insurance
body, or (3) to effect a labor saving, energy saving or other economy,
amortized over the lesser of (A) three (3) years, (B) the "pay back
period," or (C) the useful Life of such capital improvement, equipment
or device (as determined by Landlord), as well as interest on the
unamortized balance at the Prime Rate, as defined in Paragraph (J)
below, on the date the costs are incurred or such higher rate as may
have been paid by Landlord on borrowed funds. The "pay back period"
shall be the period within which the anticipated savings from the use of
such capital improvement, equipment or device, as determined by
Landlord, will equal the cost of the subject capital improvement,
equipment or device; (b) the costs of (1) exterior window draperies and
coverings provided by Landlord, (2) carpeting and wall coverings in the
common areas, and (3) other furnishings in common areas which, as a
result of normal use, require periodic replacement, amortized over the
useful life of such improvements (as determined by Landlord), or such
longer period as may be determined by Landlord in its reasonable
discretion, as well as interest on the unamortized balance at the Prime
Rate on the date the costs are incurred or such higher rate as may have
been paid by Landlord on borrowed funds, if more than thirty-five
percent (35%) of the draperies, window coverings, carpeting or
furnishings are replaced during any
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calendar year. If thirty-five percent (35%) or less of the draperies,
window coverings, carpeting or furnishings are replaced during any
calendar year, then the entire cost of replacing such draperies, window
coverings, carpeting or furnishings shall be included in Operating
Expenses in the calendar year the cost is incurred; (c) depreciation or
amortization of the costs of materials, tools, supplies and equipment
purchased by Landlord to enable Landlord to supply services which
Landlord might otherwise contract for with a third party where such
depreciation and amortization would otherwise have been included in the
charge for such third party's services; and (d) costs of minor capital
improvements or expenditures where such improvement or expenditure costs
less than Ten Thousand Dollars ($10,000.00); and
(iii) any item not generally charged to other tenants in the Building
under office leases signed after the execution of this Lease.
(I) "Person" shall mean an individual, trust, partnership, joint
venture, association, limited liability company, corporation and any other
entity.
(J) "Prime Rate" shall mean the prime rate (or base rate) reported in
the Money Rates column or section of The Wall Street Journal as being the base
rate on corporate loans at large U.S. money center commercial banks (whether or
not such rate has actually been charged by any such bank) on the first day on
which The Wall Street Journal is published in the month preceding the month in
which the subject costs are incurred.
(K) "Property" shall mean the Building, and any common or public areas
or facilities, easements, corridors, lobbies, sidewalks, loading areas,
driveways, landscaped areas, skywalks, parking garages and lots, and any and all
other structures or facilities operated or maintained in connection with or for
the benefit of the Building, and all parcels or tracts of land on which all or
any portion of the Building or any of the other foregoing items are located, and
any fixtures, machinery, equipment, apparatus, Systems and Equipment, furniture
and other personal property located thereon or therein and used in connection
therewith, whether title is held by Landlord or its affiliates. Possession of
areas necessary for utilities, services, safety and operation of the Property,
including the Systems and Equipment (as defined in this Article), fire
stairways, perimeter walls, space between the finished ceiling of the Premised
and the slab of the floor or roof of the Property there above, and the use
thereof together with the right to install, maintain, operate, repair and
replace the Systems and Equipment including any of the same in, through, under
or above the Premises in locations that will not materially interfere with
Tenant's use of the Premises, are hereby excepted and reserved by Landlord, and
not demised to Tenant.
(L) "Rent" shall have the meaning specified therefor in Paragraph (H) of
Article 4.
(M) "Systems and Equipment" shall mean any plant, machinery,
transformers, duct work, cable, wires and other equipment, facilities, and
systems designed to supply heat, ventilation, air conditioning and humidity or
any other services or utilities, or comprising or serving as any
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component or portion of the electrical, gas, steam, plumbing, sprinkler,
communications, alarm, security, or fire/life/safety systems or equipment, or
any other mechanical, electrical, electronic, computer or other systems or
equipment for the Property.
(N) "Taxes" shall mean all federal, state, county or local governmental
or municipal taxes, fees, charge or other impositions of every kind and nature,
whether general, special, ordinary or extraordinary (including, without
limitation, real, estate taxes, general and special assessments, transit taxes,
water and sewer rents, taxes based upon the receipt of rent including gross
receipts or sales taxes applicable to the receipt of rent or service or value
added taxes (except to the extent paid by Tenant under Article 5), personal
property taxes imposed upon the fixtures, machinery, equipment, apparatus,
Systems and Equipment, appurtenances, furniture and other personal property used
in connection with the Property which Landlord shall pay during any calendar
year, any portion of which occurs during the Term (without regard to any
different fiscal year used by such government or municipal authority) because of
or in connection with the ownership, leasing and operation of the Property.
Notwithstanding the foregoing, there shall be excluded from Taxes all excess
profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and
succession taxes, estate taxes, federal and state income taxes, and other taxes
to the extent applicable to Landlord's general or net income (as opposed to
rents, receipts or income attributable to operations at the Property). If the
method of taxation of real estate prevailing at the time of execution hereof
shall be, or has been altered, so as to cause the whole or any part of the taxes
now, hereafter or heretofore levied, assessed or imposed on real estate to be
levied, assessed or imposed on Landlord, wholly or partially, as a capital levy
or otherwise, or on or measured by the rents received therefrom, then such new
or altered taxes attributable to the Property shall be included within the term
"Taxes," except that the same shall not include any enhancement of said tax
attributable to other income of Landlord. Any expenses incurred by Landlord in
attempting to protest, reduce or minimize Taxes shall be included in Taxes in
the calendar year such expenses are paid. Tax refunds shall be deducted from
Taxes in the year they are received by Landlord, but if such refund shall relate
to taxes paid in a prior year of the Term, and the Lease shall have expired,
Landlord shall mail Tenant's Prorata Share of such net refund (after deducting
expenses and attorneys' fees), up to the amount Tenant paid towards Taxes during
such year, to Tenant's last known address. If Taxes for the Base Tax year are
reduced as the result of protest, or by means of agreement, or as the result of
legal proceedings or otherwise, Landlord may adjust Tenant's obligations for
Taxes in all years following the Tax Base Year, and Tenant shall pay Landlord
within 30 days after notice any additional amount required by such adjustment
for any such years or portions thereof that have therefore occurred. If Taxes
for any period during the Term or any extension thereof, shall be increased
after payment thereof by Landlord, for any reason, including without limitation,
error or reassessment by applicable governmental or municipal authorities,
Tenant shall pay Landlord upon demand Tenant's Prorata Share of such increased
Taxes. Tenant shall pay increased Taxes whether Taxes are increased as a result
of increases in the assessments or valuation of the Property (whether based on a
sale, change in ownership or refinancing of the Property or otherwise),
increases in the tax rates, reduction or elimination of any rollbacks or other
deductions available under current law, scheduled reductions of any tax
abatement, as a result of the elimination, invalidity or withdrawal of any tax
abatement, or for any other cause whatsoever. Notwithstanding the foregoing, if
any Taxes shall be paid based
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on assessments or bills by a governmental or municipal authority using a fiscal
year other than a calendar year, Landlord may elect to average the assessments
or bills for the subject calendar year, based on the number of months of such
calendar year included in each such assessment or bill.
(O) "Tenant's Prorata Share" of Taxes and Operating Expenses shall be
0.608%. Tenant acknowledges that the "rentable area of the Premises" under this
Lease includes the usable area, without deduction for columns or projections,
multiplied by a load or conversion factor, to reflect a share of certain areas,
which may include lobbies, corridors, mechanical, utility, janitorial, boiler
and service rooms and closets, restrooms and other public, common and service
areas. Except as provided expressly to the contrary herein, the "rentable area
of the Property" shall include all rentable area of all space leased or
available for lease at the Property, which Landlord may reasonably re-determine
from time to time, to reflect re-configurations, additions or modifications to
the Property. If the Property or any development of which it is a part, shall
contain non-office uses, Landlord shall have the right to determine in
accordance with sound accounting and management principles, Tenant's Prorata
Share of Taxes and Operating Expenses for only the office portion of the
Property or of such development, in which event, Tenant's Prorata Share shall be
based on the ratio of the rentable area of the Premises to the rentable area of
such office portion. Similarly, if the Property shall contain tenants who do not
participate in all or certain categories of Taxes or Operating Expenses on a
prorata basis, Landlord may exclude the amount of Taxes or Operating Expenses,
or such categories of the same, as the case may be, attributable to such
tenants, and exclude the rentable area of their premises, in computing Tenant's
Prorata Share. If the Property shall be part of or shall include a complex,
development or group of buildings or structures collectively owned or managed by
Landlord or its affiliates or collectively managed by Landlord's managing agent,
Landlord may allocate Taxes and Operating Expenses within such complex,
development or group, and between such buildings and structures and the parcels
on which they are located, in accordance with sound accounting and management
principles. In the alternative, Landlord shall have the right to determine, in
accordance with sound accounting and management principles, Tenant's Prorata
Share of Taxes and Operating Expenses based upon the totals of each of the same
for all such buildings and structures, the land constituting parcels on which
the same are located, and all related facilities, including common areas and
easements, corridors, lobbies, sidewalks, elevators, loading areas, parking
facilities and driveways and other appurtenances and public areas, in which
event Tenant's Prorata Share shall be based on the ratio of the rentable area of
the Premises to the rentable area of all such buildings.
ARTICLE 27.
CONVEYANCE BY LANDLORD AND LIABILITY
In case Landlord or any successor owner of the Property or the Building
shall convey or otherwise dispose of any portion thereof in which the Premises
are located, to another Person (and nothing herein shall be construed to
restrict or prevent such conveyance or disposition), such other Person shall
thereupon be and become landlord hereunder and shall be deemed to have fully
assumed and be liable for all obligations of this Lease to be performed by
Landlord which first arise after the
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date of conveyance, and Tenant shall attorn to such other Person, and Landlord
or such successor owner shall, from and after the date of conveyance, be free of
all liabilities and obligations hereunder not then incurred. The liability of
Landlord to Tenant for any default by Landlord under this Lease or arising in
connection herewith or with Landlord's operation, management, leasing, repair,
renovation, alteration or any other matter relating to the Property or the
Premises, shall be limited to the interest of Landlord in the Property (and the
rental proceeds thereof), and Tenant agrees to look solely to Landlord's
interest in the Property (and the rental proceeds thereof). Tenant agrees to
look solely to Landlord's interest in the Property (and the rental proceeds
thereof) for the recovery of any judgment against Landlord, and Landlord shall
not be personally liable for any such judgment or deficiency after execution
thereon. The limitations of liability contained in this Article shall apply
equally and inure to the benefit of Landlord's present and future partners,
beneficiaries, officers, directors, trustees, members, shareholders, agents and
employees, and their respective partners, heirs, successors and assigns. Under
no circumstances shall any present or future partner, member, shareholder, or
trustee or beneficiary (if Landlord or any partner, member or shareholder of
Landlord is a trust) have any liability for the performance of Landlord's
obligations under this Lease. Notwithstanding the foregoing to the contrary,
Landlord shall have personal liability for insured claims, beyond Landlord's
interest in the Property (and rental proceeds thereof), to the extent of
Landlord's liability insurance coverage available for such claims.
ARTICLE 28.
SAFETY AND SECURITY DEVICES, SERVICES AND PROGRAMS
The parties acknowledge that safety and security devices, services and
programs provided by Landlord, if any, while intended to deter crime and ensure
safety, may not in given instances prevent theft or other criminal acts, or
ensure safety of persons or property. The risk that any safety or security
device, service or program may not be effective, or may malfunction, or be
circumvented by a criminal, is assumed by Tenant with respect to Tenant's
property and interests, and Tenant shall obtain insurance coverage to the extent
Tenant desires protection against such criminal acts and other losses in
addition to insurance required to be carried by Tenant hereunder. Tenant agrees
to cooperate in any reasonable safety or security program developed by Landlord
or any program required by law.
ARTICLE 29.
COMMUNICATIONS AND COMPUTER LINES
(A) Tenant may install, maintain, replace, remove or use any
communications or computer wires, cables and relatediievices (collectively the
"Lines") at the Property in or serving the Premises, provided: (a) Tenant shall
obtain Landlord's prior written consent, use an experienced and qualified
contractor approved in writing by Landlord, and comply with all of the other
provisions of Article 10, (b) any such installation, maintenance, replacement,
removal or use shall comply with all Laws applicable thereto and good work
practices, and shall not interfere with the use of any then
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existing Lines at the Property, (c) an acceptable number of spare Lines and
space for additional Lines shall be maintained for existing and future occupants
of the Property, as determined in Landlord's reasonable opinion, (d) if Tenant
at any time uses any equipment that may create an electromagnetic field
exceeding the normal insulation ratings of ordinary twisted pair riser cable or
cause radiation higher than normal background radiation, the Lines therefor
(including riser cables) shall be appropriately insulated to prevent such
excessive electromagnetic fields or radiation, (e) as a condition to permitting
the installation of new Lines, Landlord may require that Tenant remove existing
Lines located in or serving the Premises, (f) Tenant's rights shall be subject
to the rights of any regulated telephone company, and (g) Tenant shall pay all
costs in connection therewith. Landlord reserves the right to require that
Tenant remove any Lines located in or serving the Premises which are installed
in violation of these provisions, or which are or become at any time in
violation of any Laws or represent a dangerous or potentially dangerous
condition (whether such Lines were installed by Tenant or any other party),
within three (3) days after written notice.
(B) Landlord may (but shall not have the obligation to): (i) install new
Lines at the Property, (ii) create additional space for Lines at the Property,
and (iii) reasonably direct, monitor and/or supervise the installation,
maintenance, replacement and removal of, the allocation and periodic
re-allocation of available space (if any) for, and the allocation of excess
capacity (if any) on, any Lines now or hereafter installed at the Property by
Landlord, Tenant or any other party (but Landlord shall have no right to monitor
or control the information transmitted through such Lines). Such rights shall
not be in limitation of other rights that may be available to Landlord by Law or
otherwise. If Landlord exercises any such rights, Landlord may charge Tenant for
the costs attributable to Tenant, or may include those costs and all other costs
in Operating Expenses under Article 26 (including, without limitation, costs for
acquiring and installing Lines and risers to accommodate new Lines and spare
Lines, any associated computerized system and software for maintaining records
of Line connections, and the fees of any consulting engineers and other
experts); provided, any capital expenditures included in Operating Expenses
hereunder shall be amortized (together with reasonable finance charges) over the
period of time prescribed by Paragraph (H)(ii) of Article 26.
(C) Notwithstanding anything to the contrary contained in Article 22,
Landlord reserves the right to require that Tenant remove any or all Lines
installed by or for Tenant within or serving the Premises upon termination of
this Lease, provided Landlord notifies Tenant prior to or within thirty (30)
days following such termination. Any Lines not required to be removed pursuant
to this Article shall, at Landlord's option, become the property of Landlord
without payment by Landlord. If Tenant fails to remove such lines as required by
Landlord, or violates any other provision of this Article, Landlord may, after
twenty (20) days' written notice to Tenant, remove such Lines or remedy such
other violation, at Tenant's expense (without limiting Landlord's other remedies
available under this Lease or applicable Law). Tenant shall not, without the
prior written consent of Landlord in each instance , grant to any third party, a
security interest or lien in or on the Lines, and any such security interest or
lien granted without Landlord's written consent shall be null and void. Except
to the extent arising from the intentional or grossly negligent acts of Landlord
or Landlord's agents or employees, Landlord shall have no liability for damages
arising from, and
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Landlord does not warrant that the Tenant's use of any Lines will be free from
the following (collectively called "Line Problems"), (x) any eavesdropping or
wiretapping by unauthorized parties, (y) any failure of any Lines to satisfy
Tenant's requirements, or (z) any shortages, failures, variations,
interruptions, disconnections, loss or damage caused by the installation,
maintenance, replacement, use or removal of Lines by or for other tenants or
occupants of the Property, by any failure of the environmental conditions or the
power supply for the Property to conform to any requirements for the Lines or
any associated equipment, or any other problems associated with any Lines by any
other cause. Under no circumstances shall any Line Problems be deemed an actual
or constructive eviction of Tenant, render Landlord liable to Tenant for
abatement of Rent, or relieve Tenant from performance of Tenant's obligations
under this Lease. Landlord in no event shall be liable for damages by reason of
loss of profits, business interruption or other consequential damage arising
from any Line Problems.
ARTICLE 30.
HAZARDOUS MATERIALS
(A) Tenant shall not transport, use, store, maintain, generate,
manufacture, handle, dispose, release or discharge any "Hazardous Material" (as
defined below) upon or about the Property, or permit Tenant's employees, agents,
contractors and other occupants of the Premises to engage in such activities
upon or about the Property. However, the foregoing provisions shall not prohibit
the transportation to and from, and use, storage, maintenance and handling
within, the Premises of substances customarily used in offices (or such other
business or activity expressly permitted to be undertaken in the Premises under
Article 7), provided: (a) such substances shall be used and maintained only in
such quantities as are reasonably necessary for such permitted use of the
Premises, strictly in accordance with applicable Law and the manufacturers'
instructions therefor, (b) such substances shall not be disposed of, released or
discharge on the Property, and shall be transported to and from the Premises in
compliance with all applicable laws, and as Landlord shall reasonably require,
(c) if any applicable Law or Landlord's trash removal contractor requires that
any such substances be disposed of separately from ordinary trash, Tenant shall
make arrangements at Tenant's expense for such disposal directly with a
qualified and licensed disposal company at a lawful disposal site (subject to
scheduling and approval by Landlord), and shall ensure that disposal occurs
frequently enough to prevent unnecessary storage of such substances in the
Premises, and (d) any remaining such substances shall be completely, properly
and lawfully removed from the Property upon expiration or earlier termination of
this Lease.
Tenant shall promptly notify Landlord of: (i) any enforcement, cleanup
or other regulatory action taken or threatened by any governmental or regulatory
authority with respect to the presence of any Hazardous Material on the Premises
or the migration thereof from or to other property, (ii) any demands or claims
made or threatened by any party against Tenant or the Premises relating to any
loss or injury resulting from any Hazardous Materials, (iii) any release,
discharge or nonroutine, improper or unlawful disposal or transportation of any
Hazardous Material on or from the Premises, and (iv) any matters where Tenant is
required by Law to give a notice to any governmental or
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regulatory authority respecting any Hazardous Material on the Premises. Landlord
shall have the right (but not the obligation) to join and participate as a party
in any legal proceedings or actions affecting the Premises initiated in
connection with any environmental, health or safety Law. At such times as
Landlord may reasonably request, Tenant shall provide Landlord with a written
list identifying any Hazardous Material then used, stored, or maintained upon
the Premises, the use and approximate quantity of each such material, a copy of
any material safety data sheet ("MSDS") issued by the manufacturer therefor,
written information concerning the removal, transportation and disposal of the
same, and such other information as Landlord may reasonably require or as may be
required by Law. The term "Hazardous Material" for purposes hereof shall mean
any chemical substance, material or waste or component thereof which is now or
hereafter listed, defined or regulated as a hazardous or toxic chemical,
substance, material or waste or component thereof by any federal, state or local
governing or regulatory body having jurisdiction, or which would trigger any
employee or community "right-to-know" requirements adopted by any such body, or
for which any such body has adopted any requirements for the preparation or
distribution of an MSDS.
If any Hazardous Material is released, discharged or disposed of by
Tenant or any other occupant of the Premises, or their employees, agents or
contractors, on or about the Property in violation of the foregoing provisions,
Tenant shall immediately, properly and in compliance with applicable Laws clean
up and remove the Hazardous Material from the Property and any other affected
property and clean or replace any affected personal property (whether or not
owned by Landlord), at Tenant's expense. Such cleanup and removal work shall be
subject to Landlord's prior written approval (except in emergencies), and shall
include, without limitation, any testing, investigation, and the preparation and
implementation of any remedial action plan required by any governmental body
having jurisdiction or reasonably required by Landlord. If Tenant shall fall to
comply with the provisions of this Article within five (5) days after written
notice by Landlord, or such shorter time as may be required by Law or in order
to minimize any hazard to Persons or property, Landlord may (but shall not be
obligated to) arrange for such compliance directly or as Tenant's agent through
contractors or other parties selected by Landlord, at Tenant's expense (without
limiting Landlord's other remedies under this Lease or applicable Law). If any
Hazardous Material is released, discharged or disposed of on or about the
Property and such release, discharge or disposal is not caused by Tenant or
other occupants of the Premises, or their employees, agents or contractors, such
release, discharge or disposal shall be deemed casualty damage under Article 13
to the extent that the Premises or common areas serving the Premises are
affected thereby; in such case, Landlord and Tenant shall have the obligations
and rights respecting such casualty damage provided under Article 13.
(B) The parties acknowledge that the material used in certain of the
fire-proofing materials applied to certain structural members in the Building
and Property (which structural members are primarily located above the ceiling
in the Premises) contains asbestos. In order to preserve the air quality of the
Building and Property, Landlord has established, and from time to time may
modify, rules and regulations governing the manner in which alterations and
improvements are to be undertaken in the areas where the subject fire-proofing
is located. Tenant shall comply with all such rules and regulations established
by Landlord. If any governmental entity promulgates or
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revises a statute, ordinance, code or regulation, or imposes mandatory or
voluntary controls or guidelines with respect to the subject asbestos
fire-proofing, or if Landlord is required or elects to make alterations or to
remove the subject asbestos fire-proofing, Landlord may, in its sole discretion,
comply with such mandatory or voluntary controls or guidelines, or make such
alterations or remove such asbestos fire-proofing. Neither such compliance nor
the making of alterations, nor the removal of all or a portion of such asbestos
fire-proofing shall in any event entitle Tenant to any damages, relieve Tenant
of the obligation to pay any sums due hereunder, or constitute or be construed
as a constructive or other eviction of Tenant. In accordance with Proposition 65
and the regulations promulgated thereunder which require that person subject to
"environmental exposure" to certain designated chemicals, such as asbestos,
receive warnings, you are advised that:
WARNING: THE BUILDING CONTAINS ASBESTOS, A
CHEMICAL KNOWN TO THE STATE OF CALIFORNIA TO
CAUSE CANCER.
ARTICLE 31.
MISCELLANEOUS
(A) Each of the terms and provisions of this Lease shall be binding upon
and inure to the benefit of the parties hereto, their respective heirs,
executors, administrators, guardians, custodians, permitted successors and
assigns, subject to the provisions of Article 17 respecting Transfers.
(B) Neither this Lease nor any memorandum of lease or short form lease
shall be recorded by Tenant.
(C) This Lease shall be construed in accordance with the Laws of the
state of California.
(D) All obligations or rights of either party arising during or
attributable to the period ending upon expiration or earlier termination of this
Lease shall survive such expiration or earlier termination.
(E) Landlord agrees that, if Tenant timely pays the Rent and performs
the terms and provisions hereunder, and subject to all other terms and
provisions of this Lease, Tenant shall hold and enjoy the Premises during the
Term, free of lawful claims by any Person acting by or through Landlord.
(F) This Lease does not grant any legal rights to "light and air"
outside the Premises nor any particular view or cityscape visible from the
Premises.
(G) If the Commencement Date is delayed in accordance with Article 2 for
more than one year, Landlord or Tenant may declare this Lease null and void, and
if the Commencement Date is
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so delayed for more than seven years, this Lease shall thereupon become null and
void without further action by either party.
(H) All remedies hereinbefore and hereafter conferred upon Landlord
shall be deemed cumulative and no one shall be exclusive of the other, or shall
in any way limit the availability to Landlord of any other remedy conferred by
law, whether or not specifically conferred by the provisions of this Lease.
ARTICLE 32.
OFFER
The submission and negotiation of this Lease shall not be deemed an
offer to enter the same by Landlord, but the solicitation of such an offer by
Tenant. Tenant agrees that its execution of this Lease constitutes a firm offer
to enter the same which may not be withdrawn for a period of 30 days after
delivery to Landlord (or such other period as may be expressly provided in any
other agreement signed by the parties). During such period and in reliance on
the foregoing, Landlord may, at Landlord's option (and shall, if required by
applicable Law), deposit any security deposit and Rent, and proceed with any
plans, specifications, alterations or improvements, and permit Tenant to enter
the Premises, but such acts shall not be deemed an acceptance of Tenant's offer
to enter this Lease, and such acceptance shall be evidenced only by Landlord
signing and delivering this Lease to Tenant.
ARTICLE 33.
NOTICES
Except as expressly provided to the contrary in this Lease, every notice
or other communication to be given by either party to the other with respect
hereto or to the Premises or Property, shall be in writing and shall not be
effective for any purpose unless the same shall be served personally or by
national air courier service, or United States certified mail, return receipt
requested, postage prepaid, addressed, if to Tenant, at the address first set
forth in the Lease, until the Commencement Date, and thereafter to the Tenant at
the Premises, and if to Landlord, at the address at which the last payment of
Rent was required to be made and to Pine Street Investors I, L.L.C., c/o
Danielson Whitehead, Inc., at 100 Pine Street, San Francisco, California 94111,
Attn: Robert Whitehead, or such other address or addresses as Tenant or Landlord
may from time to time designate by notice given as above provided. Every notice
or other communication hereunder shall be deemed to have been given as of the
third business day following the date of such mailing (or as of any earlier date
evidenced by a receipt from such national air courier service or the United
States Postage Service) or immediately if personally delivered. Notices not sent
in accordance with the foregoing shall be of no force or effect until received
by the foregoing parties at such addressed required herein.
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ARTICLE 34.
REAL ESTATE BROKERS
Tenant represents that it has dealt only with J.M. COMMERCIAL (whose
commission, if any, shall be paid by Landlord pursuant to separate agreement) as
broker, agent or finder in connection with this Lease and agrees to indemnify
and hold Landlord harmless from all damages, judgments, liabilities and expenses
(including reasonable attorneys' fees) arising from any claims or demands of any
other broker, agent or finder with whom Tenant has dealt or is claimed to have
dealt for any commission or fee alleged to be due in connection with its
participation in the procurement of Tenant or the negotiation with Tenant or
execution of this Lease.
ARTICLE 35.
SECURITY DEPOSIT
Tenant shall deposit with Landlord the sum of $9,176.25 ("Security
Deposit"), upon Tenant's execution and submission of this Lease. The Security
Deposit shall serve as security for the prompt, full and faithful performance by
Tenant of the terms and provisions of this lease. In the event that Tenant is in
Default hereunder, or in the event that Tenant owes any amounts to Landlord upon
the expiration of this Lease, Landlord may use or apply the whole or any part of
the Security Deposit for the payment of Tenant's obligations hereunder. The use
or application of the Security Deposit or any portion thereof shall not prevent
Landlord from exercising any other right or remedy provider hereunder or under
any Law and shall not be construed as liquidated damages. In the event the
Security Deposit is reduced by such use or application, Tenant shall deposit
with Landlord within ten (10) days after written notice, an amount sufficient to
restore the full amount of the Security Deposit. Landlord shall not be required
to keep the Security Deposit separate from Landlord's general funds or pay
interest on the Security Deposit. Any remaining portion of the Security Deposit
shall be returned to Tenant within sixty (60) days after Tenant has vacated the
Premises in accordance with Article 22. If the Premises shall be expanded at any
time, or if the Term shall be extended at an increased rate of Rent, the
Security Deposit shall thereupon be proportionately increased.
ARTICLE 36.
ENTIRE AGREEMENT
This Lease, together with Rider One and Exhibit A (WHICH COLLECTIVELY
ARE HEREBY INCORPORATED WHERE REFERRED TO HEREIN AND MADE A PART HEREOF AS
THOUGH FULLY SET FORTH), contains all the terms and provisions between Landlord
and Tenant relating to the matters set forth herein, and no prior or
contemporaneous agreement or understanding pertaining to the same shall be of
any force or effect, except any such contemporaneous agreement specifically
referring to and modifying this Lease, signed by both parties. Without
limitation as to the generality of the foregoing, Tenant hereby acknowledges and
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agrees that Landlord's leasing agents and field personnel are only authorized to
show the Premises and negotiate terms and conditions for leases subject to
Landlord's final approval, and are not authorized to make any agreements,
representations, understandings or obligations, binding upon Landlord,
respecting the condition of the Premises or Property, suitability of the same
for Tenant's business, or any other matter, and no such agreements,
representations, understandings or obligations not expressly contained herein or
in such contemporaneous written agreement shall be of any force or effect.
Neither this Lease, nor any Riders or Exhibits referred to above, may be
modified, except in writing signed by both parties.
LANDLORD:
PINE STREET INVESTORS I, L.L.C.
a Delaware limited liability company
By: DANIELSON WHITEHEAD, INC.,
a California corporation, as agent
for Pine Street Investors I, L.L.C.
By: /s/ Carl Danielson
-----------------------------------
Carl Danielson
Its:
----------------------------------
TENANT:
FIDELITY NATIONAL TITLE INSURANCE COMPANY,
a California corporation
By: /s/ William A. Imparato
--------------------------------------
Name: William A. Imparato
---------------------------------
Its: Vice President
----------------------------------
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RIDER ONE
RULES
(1) On Saturdays, Sundays and Holidays, and on other days between the
hours of 6:00 p.m. and 8:00 a.m. the following day, or such other hours as
Landlord shall determine from time to time, access to the Property and/or the
passageways, entrances, exits, shipping areas, halls, corridors, elevators or
stairways and other areas in the Property may be restricted and access gained by
use of a key to the outside doors of the Property, or pursuant to such security
procedures Landlord may from time to time impose. All such areas, and all roofs,
are not for use of the general public and Landlord shall in all cases retain the
right to control and prevent access thereto by all persons whose presence in the
judgment of Landlord shall be prejudicial to the safety, character, reputation
and interests of the Property and its tenants provided, however, that nothing
herein contained shall be construed to prevent such access to persons with whom
Tenant deals in the normal course of Tenant's business unless such persons are
engaged in activities which are illegal or violate these Rules. No Tenant and no
employee or invitee of Tenant shall enter into areas reserved for the exclusive
use of Landlord, its employees or invitees. Tenant shall keep doors to corridors
and lobbies closed except when persons are entering or leaving.
(2) Tenant shall not paint, display, inscribe, maintain or affix any
sign, placard, picture, advertisement, name, notice, lettering or direction on
any part of the outside or inside of the Property, or on any part of the inside
of the Premises which can be seen from the outside of the Premises, without the
prior consent of Landlord, and then only such name or names or matter and in
such color, size, style, character and material as may be first approved by
Landlord in writing. Landlord shall prescribe the suite number and
identification sign for the Premises (which shall be prepared and installed by
Landlord at Tenant's expense). Landlord reserves the right to remove at Tenant's
expense all matter not so installed or approved without notice to Tenant.
(3) Tenant shall not in any manner use the name of the Property for any
purpose other than that of the business address of the Tenant, or use any
picture or likeness of the Property, in any letterheads, envelopes, circulars,
notices, advertisements, containers or wrapping material without Landlord's
express consent in writing.
(4) Tenant shall not place anything or allow anything to be placed in
the Premises near the glass of any door, partition, wall or window which may be
unsightly from outside the Premises, and Tenant shall not place or permit to be
placed any article of any kind on any window ledge or on the exterior walls.
Blinds, shades, awnings or other forms of inside or outside window ventilators
or similar devices, shall not be placed in or about the outside windows in the
Premises except to the extent, if any, that the character, shape, color,
material and make thereof is first approved by the Landlord.
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(5) Furniture, freight and other large or heavy articles, and all other
deliveries may be brought into the Property only at times and in the manner
designated by Landlord, and always at the Tenant's sole responsibility and risk.
Landlord may impose reasonable charges for use in freight elevators after or
before normal business hours. All damage done to the Property by moving or
maintaining such furniture, freight or articles shall be repaired by Landlord at
Tenant's expense. Landlord may inspect items brought into the Property or
Premises with respect to weight or dangerous nature. Landlord may require that
all furniture, equipment, cartons and similar articles removed from the Premises
or the Property be listed and a removal permit therefor first be obtained from
Landlord. Tenant shall not take or permit to be taken in or out of other
entrances or elevators of the Property, any item normally taken, or which
Landlord otherwise reasonably requires to be taken, in or out through service
doors or on freight elevators. Tenant shall not allow anything to remain in or
obstruct in any way, any lobby, corridor, sidewalk, passageway, entrance, exit,
hall, stairway, shipping area, or other such area. Tenant shall move all
supplies, furniture and equipment as soon as received directly to the Premises,
and shall move all such items and waste (other than waste customarily removed by
Property employees) that are at any time being taken from the Premises directly
to the areas designated for disposal. Any hand-carts used at the Property shall
have rubber wheels.
(6) Tenant shall not overload any floor or part thereof in the Premises,
or Property, including any public corridors or elevators therein bringing in or
removing any large or heavy articles, and Landlord may direct and control the
location of safes, and all other heavy articles and require supplementary
supports at Tenant's expense of such material and dimensions as Landlord may
deem necessary to properly distribute the weight.
(7) Tenant shall not attach or permit to be attached additional locks or
similar devices to any door or window, change existing locks or the mechanism
thereof, or make or permit to be made any keys for any door other than those
provided by Landlord. If more than two keys for one lock are desired, Landlord
will provide them upon payment therefor by Tenant. Tenant, upon termination of
its tenancy, shall deliver to the Landlord all keys of offices, rooms and toilet
rooms which have been furnished Tenant or which the Tenant shall have had made,
and in the event of loss of any keys so furnished shall pay Landlord therefor.
(8) If Tenant desires signal, communication, alarm or other utility or
similar service connections installed or changed, Tenant shall not install or
change the same without the prior approval of Landlord, and then only under
Landlord's direction at Tenant's expense. Tenant shall not install in the
Premises any equipment which requires more electric current than Landlord is
required to provide under this Lease, without Landlord's prior approval, and
Tenant shall ascertain from Landlord the maximum amount of load or demand for or
use of electrical current which can safely be permitted in the Premises, taking
into account the capacity of electric wiring in the Property and the Premises
and the needs of tenants of the Property, and shall not in any event connect a
greater load than such safety capacity.
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(9) Tenant shall not obtain for use upon the Premises ice, drinking
water, towel, janitor and other similar services, except from Persons approved
by the Landlord. Any Person engaged by Tenant to provide janitor or other
services shall be subject to direction by the manager or security personnel of
the Property.
(10) The toilet rooms, urinals, wash bowls and other such apparatus
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be thrown
therein and the expense of any breakage, stoppage or damage resulting from the
violation of this Rule shall be borne by the Tenant who, or whose employees or
invitees shall have caused it.
(11) The janitorial closets, utility closets, telephone closets, broom
closets, electrical closets, storage closets, and other such closets, rooms and
areas shall be used only for the purposes and in the manner designated by
Landlord, and may not be used by tenants, or their contractors, agents,
employees, or other parties without Landlord's prior written consent.
(12) Landlord reserves the right to exclude or expel from the Property
any person who, in the judgment of Landlord, is intoxicated or under the
influence of liquor or drugs, or who shall in any manner do any act in violation
of any of these Rules. Tenant shall not at any time manufacture, sell use or
give away, any spirituous, fermented, intoxicating or alcoholic liquors on the
Premises, nor permit any of the same to occur (except in connection with
occasional social or business events conducted in the Premises which do not
violate any Laws nor bother or annoy any other tenants). Tenant shall not at any
time sell, purchase or give away, foods in any form by or to any of Tenant's
agents or employees or any other parties on the Premises, nor permit any of the
same to occur (other than in lunch rooms or kitchens for employees as may be
permitted or installed by Landlord, which does not violate any Laws or bother or
annoy any other tenant).
(13) Tenant shall not make any room-to-room canvass to solicit business
or information or to distribute any article or material to or from other tenants
or occupants of the Property and shall not exhibit, sell or offer to sell, use,
rent or exchange any products or services in or from the Premises unless
ordinarily embraced within the Tenant's use of the Premises specified in the
Lease.
(14) Tenant shall not waste electricity, water, heat or air conditioning
or other utilities or services, and agrees to cooperate fully with Landlord to
assure the most effective and energy efficient operation of the Property and
shall not allow the adjustment (except by Landlord's authorized Property
personnel) of any controls. Tenant shall keep corridor doors closed and shall
not open any windows, except that if the air circulation shall not be in
operation, windows which are openable may be opened with Landlord's consent. As
a condition to claiming any deficiency in the air conditioning or ventilation
services provided by Landlord, Tenant shall close any blinds or drapes in the
Premises to prevent or minimize direct sunlight.
(15) Tenant shall conduct no auction, fire or going out of business sale
or bankruptcy sale in or from the Premises, and such prohibition shall apply to
Tenant's creditors.
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(16) Tenant shall cooperate and comply with any reasonable safety or
security programs, including fire drills and air raid drills, and the
appointment of "fire wardens" developed by Landlord for the Property, or
required by Law. Before leaving the Premises unattended, Tenant shall close and
securely lock all doors or other means of entry to the Premiss and shut off all
lights and water faucets in the Premises (except heat to the extent necessary to
prevent the freezing or bursting of pipes).
(17) Tenant will comply with all municipal, county, state, federal or
other government laws, statutes, codes, regulations and other requirements,
including without limitation, environmental, health, safety and police
requirements and regulations respecting the Premises, now or hereinafter in
force, at its sole cost, and will not use the Premises for any immoral purposes.
(18) Tenant shall not (i) carry on any business, activity or service
except those ordinarily embraced within the permitted use of the Premises
specified in the Lease and more particularly, but without limiting the
generality of the foregoing, shall not (ii) install or operate any internal
combustion engine, boiler, machinery, refrigerating, heating or air conditioning
equipment in or about the Premises, (iii) use the Premises for housing, lodging
or sleeping purposes or for the washing of clothes, (iv) place any radio or
television antennae other than inside of the Premises, (v) operate or permit to
be operated any musical or sound producing instrument or device which may be
heard outside the Premises, (vi) use any source of power other than electricity,
(vii) operate any electrical or other device from which may emanate electrical
or other waves which may interfere with or impair radio, television, microwave,
or other broadcasting or reception from or in the Property or elsewhere, (viii)
bring or permit any bicycle or other vehicle, or dog (except in the company of a
blind person or except when specifically permitted) or other animal or bird in
the Property, (ix) make or permit objectionable noise or odor to emanate from
the Premises (x) do anything in or about the Premises tending to create or
maintain a nuisance or do any act tending to injure the reputation of the
Property, (xi) throw or permit to be thrown or dropped any article from any
window or other opening in the Property, (xii) use or permit upon the Premises
anything that will invalidate or increase the rate of insurance on any policies
of insurance now or hereafter carried on the Property or violate the
certificates of occupancy issued for the premises or the Property, (xiii) use
the Premises for any purpose, or permit upon the Premises anything, that may be
dangerous to person or property (including but not limited to flammable oils,
fluids, paints, chemicals, firearms or any explosive articles or materials) nor
(xiv) do or permit anything to be done upon the Premises in any way tending to
disturb any other tenant at the Property or the occupants of neighboring
property.
(19) If the Property shall now or hereafter contain a building garage,
parking structure or other parking area or facility, the following Rules shall
apply in such areas or facilities:
(i) Parking shall be available in areas designated generally
for tenant parking, for such daily or monthly charges as Landlord
may establish from time to time, or as may be provided in any
parking Agreement attached hereto (which, when signed by both
parties as provided therein, shall thereupon become effective). In
all cases, parking for Tenant and its employees and visitors shall
be on a "first come, first served," unassigned basis, with Landlord
and other tenants at the Property, and their
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employees and visitors, and other Persons (as defned in Article
26 of the Lease) to whom Landlord shall grant the right or who
shall otherwise have the right to use the same, all subject to
these Rules, as the same may be amended or supplemented, and
applied on a non-discriminatory basis, as is further described
in Article 6 of the lease. Notwithstanding the foregoing to the
contrary, Landlord reserves the right to assign specific spaces,
and to reserve spaces for visitors, small cars, handicapped
individuals, and other tenants, visitors of tenants or other
Persons, and Tenant and its employees and visitors shall not
park in any such assigned or reserved spaces. Landlord may
restrict or prohibit full size vans and other large vehicles.
(ii) In case of any violation of these provisions, Landlord may
refuse to permit the violator to park, and may remove the
vehicle owned or driven by the violator from the Property
without liability whatsoever, at such violator's risk and
expense. Landlord reserves the right to close all or a portion
of the parking areas or facilities in order to make repairs or
performance maintenance services, or to alter, modify, re-stripe
or renovate the same, or if required by casualty, strike,
condemnation, act of God, Law or governmental requirement, or
any other reason beyond Landlord's reasonable control. In the
event access is denied for any reason, any monthly parking
charges shall be abated to the extent access is denied, as
Tenant's sole recourse. Tenant acknowledges that such parking
areas or facilities may be operated by an independent contractor
not affiliated with Landlord, and Tenant acknowledges that in
such event, Landlord shall have no liability for claims arising
through acts or omissions of such independent contractor, if
such contractor is reputable.
(iii) Hours shall be 6 a.m. to 8 p.m., Monday through Friday,
and 10:00 a.m. to 1:00 p.m. on Saturdays, or such other hours as
may be reasonably established by Landlord or its parking
operator from time to time; cars must be parked entirely within
the stall lines, and only small cars may be parked in areas
reserved for small cars; all directional signs and arrows must
be observed; the speed limit shall be 5 miles per hour; spaces
reserved for handicapped parking must be used only by vehicles
property designated; every parker is required to park and lock
his own car; washing, waxing, cleaning or servicing of any
vehicle is prohibited; parking areas may be used only for
parking automobiles; parking is prohibited in areas: (a) not
striped or designated for parking, (b) aisles, (c) where "no
parking" signs are posted, (d) ramps, and (e) loading areas and
other specially designated areas. Delivery trucks and vehicles
shall use only those areas designated therefor.
44
<PAGE> 1
EXHIBIT 10.13
RESEARCH SERVICES AGREEMENT
This AGREEMENT is made and entered as of August ___, 1999, by and
between The Gallup Organization, Inc. ("Gallup") and @plan.inc ("@plan").
WHEREAS, Gallup has historically provided @plan with certain research
services for profiling the United States population of adults who use the World
Wide Web (the "Web"); and
WHEREAS, @plan desires to engage Gallup and Gallup desires to be engaged
to provide similar research services to @plan for profiling the U.S. population
of adults who use the Web or the Internet (as defined below) for retail
transactions.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, and other good and valuable consideration the receipt and
sufficiency of which is acknowledged by this Agreement, Gallup and @plan agree
as follows:
1. Research Services. In cooperation with @plan, Gallup shall prepare a
system of survey research designed to provide @plan with statistically reliable
data for profiling the United States population of adults who use the Web or any
other global telecommunications network facilities or applications now known or
developed in the future as the parties may jointly agree to study (collectively
the "Internet"), for retail transactions (the "Retail Transaction Vertical").
Gallup shall provide all necessary data collection and survey research services
that the parties shall jointly deem necessary for the Retail Transaction
Vertical from time to time during the term hereof (the "Research Services"). The
scope of the Research Services to be performed under this Agreement and the
descriptions and schedule of deliverables are set forth in the attached Exhibit
A. Modifications to the scope of the Research Services or deliverables shall
require a signed Letter of Authorization. A form Letter of Authorization is
attached as Exhibit B.
2. Fees. @plan shall pay to Gallup for the services rendered under this
Agreement, fees in the amounts as set forth on Exhibit C attached hereto,
subject to adjustment during the term hereof as mutually agreed to by the
parties; provided, however, that the fees (not including incentive payments) for
providing quarterly surveys during the term of this Agreement shall not increase
by more than the annual percentage increase during the immediately preceding
year in the Consumer Price Index-All Consumers (All Items)-United States City
Average, as compiled by the United States Department of Labor. For each
quarterly survey, 50% of the fees shall be due and payable by @plan prior to the
commencement of that quarter's survey and the balance shall be due and payable
within 30 days of completion of 50% of the total number of interviews to be
completed during that quarterly survey. @plan shall also pay to Gallup all
amounts that Gallup commits to provide, as estimated on Exhibit C, to survey
respondents it recruits as incentives for completing the surveys. The moneys
paid for any incentives shall be paid by @plan before the letters to the
recruited respondents are sent. Any increase in the amount committed by Gallup
as incentives which in the aggregate exceeds 10% of either the estimate set
forth on Exhibit C or the amount paid in incentives in the course of the
immediately preceding quarterly survey, as applicable, shall only be made with
the prior written consent of @plan.
<PAGE> 2
3. Term and Termination. Gallup shall provide the Research Services for
a term ending August __, 2009, provided @plan shall have the right to terminate
this Agreement on any anniversary date of the date hereof (an "Anniversary
Date") prior to August __, 2009 by delivering written notice of termination to
Gallup 90 days prior to such Anniversary Date. Either party may terminate this
Agreement if the other makes an assignment for the benefit of creditors, files a
voluntary petition in bankruptcy or seeks or consents to any reorganization or
similar relief under any present or future bankruptcy act or similar law, or is
adjudicated bankrupt or insolvent, or if a third party commences any bankruptcy,
insolvency, reorganization or similar proceeding involving the other.
4. Exclusivity. During the term of this Agreement, Gallup shall conduct
Exclusive Research Services (as hereinafter defined) exclusively on behalf of
and for the benefit of @plan. For purposes of this section, "Exclusive Research
Services" shall be defined as any and all services including and related to the
telephone recruitment of a survey population of Internet users and the
collection of data from such population in any form, including by means of an
online survey, for use in syndicated marketing research or database products
related to retail transactions on the Internet. Exclusive Research Services
shall not include online or Internet research for clients who do not incorporate
the research in a syndicated database product.
In the event that the payments received by Gallup from @plan for
Research Services pursuant to this Agreement in any calendar year is less than
90% of the payments received in the prior calendar year pursuant to this
Agreement (excluding any start up costs, including, without limitation, any
pre-test, base wave or initial survey costs), the exclusivity provisions of this
paragraph 4 shall terminate with respect to the Retail Transaction Vertical.
5. Ownership. Gallup agrees that all research and any other work Gallup
has performed or may perform, and any and all resulting work product and data,
in connection with the Research Services provided pursuant to this Agreement
shall be the exclusive property of @plan.
6. Confidential Information.
a. Each party acknowledges that it may be exposed to confidential
and proprietary information belonging to the other party or relating to its
affairs, including, without limitation, customer lists, business plans,
marketing plans and strategies, financial information, product or service
information and other materials expressly designated or marked as confidential
("Confidential Information"). Confidential Information does not include (i)
information already known or independently developed by the recipient; (ii)
information in the public domain through no wrongful act of the party, or (iii)
information received by a party from a third party who was free to disclose it.
b. Each party agrees that during the term of this Agreement and
at all times thereafter it shall not use, commercialize or disclose the other
party's Confidential Information to any person or entity, except to its own
employees having a "need to know". Each party shall use at least
2
<PAGE> 3
the same degree of care in safeguarding the other party's Confidential
Information as it uses in safeguarding its own Confidential Information, but in
no event shall a party use less than due diligence and care.
7. Injunctive Relief. The parties acknowledge that violation by one
party of the provisions of Section 4, Section 5 or Section 6 would cause
irreparable harm to the other party not adequately compensable by monetary
damages. In addition to other relief, it is agreed that preliminary and
permanent injunctive relief shall be available without necessity of posting bond
to prevent any actual or threatened violation of such provisions.
8. Approval of Use of Gallup Name. The parties agree that the Gallup
name may not be used in any advertising or promotional materials in support of a
particular product, service, or point of view other than for the purpose of
informing the recipient that Gallup conducted the survey research portion of the
Retail Transaction Vertical database. Public references to Gallup research
findings that support a particular product, service, or point of view are
similarly prohibited. Both parties agree that @plan may put the following
statement in advertising and promotional materials: "The survey research
component of this database was conducted by The Gallup Organization."
9. Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Connecticut applicable to agreements entered into
and wholly performed in Connecticut.
10. Assignment. This Agreement may not be assigned by either party
without the prior written consent of the other party.
11. Entire Agreement; Severability. This Agreement sets forth the entire
understanding between the parties with respect to the Research Services. In the
event of any conflict between the terms and conditions which appear in this
Agreement and any purchase order or other document under this Agreement, the
terms and conditions of this Agreement shall control. The invalidity, illegality
or unenforceability of any one or more provisions of this Agreement shall in no
way affect or impair the validity, legality or enforceability of the remaining
provisions, which shall remain in full force and effect. No waiver by either
party of any breach, default or violation of any term, warranty, representation,
agreement, covenant, condition or provision of this Agreement shall constitute a
waiver of any subsequent breach, default or violation of the same or other term,
warranty, representation, agreement, covenant, condition or provision.
12. Amendments. No amendment, modification, termination or waiver of any
provision of the Agreement shall be effective unless that same shall be in
writing and signed on behalf of the nonrequesting party , and then such consent
shall be effective only in the specific instance and for the specific purpose
for which it is given.
13. Notices. All notices and other communications from either party to
the other under this Agreement shall be in writing and shall be deemed given
when delivered personally, by courier
3
<PAGE> 4
service or when deposited in the U.S. Mail, certified or registered mail, return
receipt requested, postage prepaid and properly addressed to:
Gallup: The Gallup Organization
300 South 68th Street Place
Lincoln, NE 68510
Attention: Steven D. O'Brien
@plan: @plan.inc
Three Landmark Square
Suite 400
Stanford, CT 06901
Attn: Mark K. Wright
14. No Third Party Beneficiaries. This Agreement shall not be deemed to
give any right or remedy to any third party whatsoever unless that right or
remedy is specifically granted to the third party by the express terms of this
Agreement.
IN WITNESS WHEREOF, Gallup and @plan have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
THE GALLUP ORGANIZATION, INC:
By: /s/ Steven D. O'Brien
------------------------------------------
Title: General Counsel and Corporation Secretary
------------------------------------------
@PLAN.INC
By: /s/ Mark K. Wright
---------------------------------------------
Title: CEO
------------------------------------------
4
<PAGE> 5
EXHIBIT A
PROJECT DETAIL
The Gallup Organization will supply @plan with approximately 15,000
cases of data each quarter based on an internet survey running approximately 45
minutes. The data will be based on a random digit dial telephone survey that
screens for qualified internet users. Data import will include various data
checking procedures to ensure that accurate data is provided to @plan. All
respondent- identifying information will be removed from the data provided to
@plan in the normal course of providing the Research Services under this
Agreement. Notwithstanding the foregoing, @plan shall have access to
respondent-identifying information of those respondents who agree to be
recontacted at all times and upon request shall take delivery of all such
respondent-identifying information; provided, however, @plan agrees to use this
information only in furtherance of its operations and, therefore, will not sell
or otherwise transfer ownership of the respondent data to any third party.
<PAGE> 6
EXHIBIT B
LETTER OF AUTHORIZATION
This Letter of Authorization adds to, modifies, or otherwise amends that
certain Research Services Agreement between @plan and Gallup, dated , with
regard to the following Research Services set forth below to be provided for the
Retail Transaction Vertical.
1. The following constitutes the Research Services or deliverables under
this Research Services Agreement ("Additional Services"):
2. The pricing for the Additional Services, exclusive of expenses and
costs otherwise payable under the Research Services Agreement, shall be as
follows:
3. Gallup will bill for Additional Services as follows:
4. Except as specifically amended by this Letter of Authorization, all
the terms and conditions of the Research Services Agreement shall remain in full
force and effect. This Letter of Authorization shall be effective upon complete
execution and receipt by Gallup's Contracting Officer. Gallup shall have no
obligations to initiate work on the Additional Services, nor shall it be
responsible for any project timeliness for the Additional Services, until this
Letter of Authorization becomes effective.
If the foregoing terms and conditions meet with your understanding and
approval, please indicate Client's acceptance and agreement by signing this
Letter in duplicate and returning one original to the undersigned.
THE GALLUP ORGANIZATION @PLAN.INC
By: By:
--------------------------------- --------------------------------
PRINT NAME: PRINT NAME:
------------------------- ------------------------
TITLE: TITLE:
------------------------------ -----------------------------
DATE: DATE:
------------------------------ ------------------------------
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 10-K, into the Company's previously filed
Registration Statement File No. 333-81541.
/s/ ARTHUR ANDERSEN LLP
New York, New York
March 27, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF @PLAN FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 34,817,991
<SECURITIES> 0
<RECEIVABLES> 2,560,266
<ALLOWANCES> (164,000)
<INVENTORY> 0
<CURRENT-ASSETS> 37,849,613
<PP&E> 470,068
<DEPRECIATION> 209,696
<TOTAL-ASSETS> 39,122,353
<CURRENT-LIABILITIES> 4,289,702
<BONDS> 0
0
0
<COMMON> 41,730,405
<OTHER-SE> (6,897,754)
<TOTAL-LIABILITY-AND-EQUITY> 39,122,353
<SALES> 7,355,773
<TOTAL-REVENUES> 7,355,773
<CGS> 4,657,281
<TOTAL-COSTS> 10,492,740
<OTHER-EXPENSES> 5,835,459
<LOSS-PROVISION> 164,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,020,514)
<INCOME-TAX> 64,300
<INCOME-CONTINUING> (2,084,814)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,084,814)
<EPS-BASIC> (.48)
<EPS-DILUTED> (.48)
</TABLE>
