-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NurMfBEyTDUnDN23B+wWz5XrSvRRKVTV7AGmg4yrVT7dReLACIvaUv4CfRTxlZ02 kD6vyDf9nCQhOdmLQ5qYZg== 0000898430-01-501920.txt : 20010816 0000898430-01-501920.hdr.sgml : 20010816 ACCESSION NUMBER: 0000898430-01-501920 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHEAP TICKETS INC CENTRAL INDEX KEY: 0001076411 STANDARD INDUSTRIAL CLASSIFICATION: TRANSPORTATION SERVICES [4700] IRS NUMBER: 990338363 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-25279 FILM NUMBER: 1714338 BUSINESS ADDRESS: STREET 1: 1440 KAPIOLANI BLVD STREET 2: STE 800 CITY: HONOLULU STATE: HI ZIP: 96814 BUSINESS PHONE: 8089457439 MAIL ADDRESS: STREET 1: 1440 KAPIOLANI BLVD STREET 2: STE 800 CITY: HONOLULU STATE: HI ZIP: 96814 10-Q 1 d10q.txt FORM 10-Q DATED 6/30/2001 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 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: 000-25279 CHEAP TICKETS, INC. (Exact name of registrant as specified in its charter) Delaware 99-0338363 (State or other jurisdiction (I.R.S. Employer of incorporation) Identification No.) 1440 Kapiolani Blvd., Honolulu, Hawaii 96814 (Address of principal executive offices) (Zip Code) (808) 945-7439 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) 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. [X] Yes [_] No As of August 13, 2001, the Registrant had 24,336,701 shares of Common Stock, $.001 par value per share, outstanding. INDEX Page ---- PART I FINANCIAL INFORMATION Item 1. Consolidated Financial Statements (unaudited)..................... 3 - Consolidated balance sheets at December 31, 2000 and June 30, 2001............................................................ 3 - Consolidated statements of operations for the three and six months ended June 30, 2000 and 2001............................. 4 - Consolidated statement of stockholders' equity for the six months ended June 30, 2001.................................. 5 - Consolidated statements of cash flows for the six months ended June 30, 2000 and 2001............................. 6 - Notes to consolidated financial statements...................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................... 9 Item 3. Quantitative and Qualitative Disclosure about Market Risk...................................... 15 PART II OTHER INFORMATION................................................. 15 Item 1. Legal Proceedings................................................. 15 Item 2. Changes in Securities and Use of Proceeds......................... 15 Item 3. Defaults Upon Senior Securities................................... 15 Item 4. Submission of Matters to a Vote of Security Holders............... 15 Item 5. Other Information................................................. 15 Item 6. Exhibits and Reports on Form 8-K.................................. 16 SIGNATURES........................................................ 16 2 All historical financial information contained in this Quarterly Report on Form 10-Q has been restated to comply with recently issued accounting standards as discussed on page 7 (see Note 1 to the Notes to Consolidated Financial Statements). PART I FINANCIAL INFORMATION Item 1. CONSOLIDATED FINANCIAL STATEMENTS CHEAP TICKETS, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per share data)
December 31, June 30, 2000 2001 ----------- ------------- (unaudited) ASSETS Current Assets: Cash and cash equivalents $ 40,325 $ 47,253 Marketable securities 100,485 101,662 Trade accounts and other receivables 6,995 9,581 Refundable income taxes 659 884 Contract acquisition costs - 886 Ticket inventories 464 238 Other current assets 2,119 3,059 -------- -------- Total current assets 151,047 163,563 Property and equipment, net 13,571 18,450 Contract acquisition costs - 2,458 Other assets 1,867 1,594 -------- -------- $166,485 $186,065 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 7,358 $ 21,052 Accrued salaries 1,596 1,750 Accrued vacation 680 870 Accrued expenses and other liabilities 837 1,328 Current installments of long-term debt 26 31 Current installments of capital lease obligations 1,415 1,206 Deferred revenue, current 400 400 -------- -------- Total current liabilities 12,312 26,637 Long-term debt, excluding current installments 491 474 Capital lease obligations, excluding current installments 1,961 1,468 Deferred revenue, noncurrent 800 600 Other noncurrent liabilities 126 211 -------- -------- Total liabilities 15,690 29,390 Stockholders' Equity: Preferred stock, $0.01 par value as of December 31, 2000 and June 30, 2001. Authorized 10,000 shares; Issued and Outstanding none at December 31, 2000 and June 30, 2001. - - Common stock, $.001 par value. Authorized 70,000 shares; 24 24 Issued and outstanding 24,250 shares at December 31, 2000 and 24,322 shares at June 30, 2001. Additional paid-in capital 145,874 149,277 Unearned compensation (83) (7) Retained earnings 19,720 22,121 Treasury stock, at cost-1,037 common shares at December 31, 2000 and June 30, 2001 (14,740) (14,740) -------- -------- Total stockholders' equity 150,795 156,675 -------- -------- $166,485 $186,065 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 3 CHEAP TICKETS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except for per share data) (unaudited)
Three months ended Six months ended June 30, June 30, ------------------ ------------------ 2000 2001 2000 2001 -------- -------- -------- ------- Revenue: Non-published fares $ 17,233 $ 13,727 $ 30,145 $26,257 Commissions and bonuses 8,763 11,936 15,025 21,953 Service fees and other 3,583 2,838 5,640 5,165 -------- -------- -------- ------- Total revenue 29,579 28,501 50,810 53,375 Cost of sales 2,247 2,087 4,054 4,045 -------- -------- -------- ------- Gross profit 27,332 26,414 46,756 49,330 Selling, general and administrative expenses 21,405 26,411 38,889 49,588 -------- -------- -------- ------- Net operating income (loss) 5,927 3 7,867 (258) Other income (deductions): Interest and dividend income 2,270 1,841 4,333 3,987 Interest expense (97) (68) (202) (144) Other, net (132) 53 (175) 38 -------- -------- -------- ------- Earnings before income taxes 7,968 1,829 11,823 3,623 Income taxes 3,069 608 4,611 1,222 -------- -------- -------- ------- Net earnings $ 4,899 $ 1,221 $ 7,212 $ 2,401 ======== ======== ======== ======= Income available to common shares $ 4,899 $ 1,221 $ 7,212 $ 2,401 ======== ======== ======== ======= Basic earnings per common share $ 0.21 $ 0.05 $ 0.31 $ 0.10 ======== ======== ======== ======= Average common shares outstanding 23,171 23,254 23,137 23,243 ======== ======== ======== ======= Diluted earnings per common share $ 0.21 $ 0.05 $ 0.31 $ 0.10 ======== ======== ======== ======= Average diluted common shares outstanding 23,542 23,796 23,561 23,646 ======== ======== ======== =======
The accompanying notes are an integral part of the consolidated financial statements. 4 CHEAP TICKETS, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (In thousands) (Unaudited)
Additional Total Common Paid-In Unearned Retained Treasury Stockholders' Stock Capital Compensation Earnings Stock Equity ---------------- --------- ----------- --------- -------- ----------- Shares Amount ------- ------ Balance, December 31, 2000 24,250 $ 24 $ 145,874 $ (83) $ 19,720 $(14,740) $ 150,795 Net earnings - - - - 2,401 - 2,401 Exercise of stock options 68 - 22 - - - 22 Income tax benefit of stock option - - 76 - - - 76 compensation Amortization and forfeiture of stock option - - - 76 - - 76 compensation Write-off of stock options - - (78) - - - (78) Issuance of stock for BOD compensation 4 - 37 - - - 37 Issuance of stock warrants to Delta - - 3,346 - - - 3,346 ------ ------ --------- ----------- --------- -------- ----------- Balance, June 30, 2001 24,322 $ 24 $ 149,277 $ (7) $ 22,121 $(14,740) $ 156,675 ====== ====== ========= =========== ========= ======== ===========
The accompanying notes are an integral part of the consolidated financial statements. 5 CHEAP TICKETS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Six months ended June 30, ------------------ 2000 2001 ------- ------- Cash flows from operating activities: Net earnings $ 7,212 $ 2,401 Adjustments to reconcile net earnings to net cash provided by operating activities: Deferred income taxes - (207) Depreciation and amortization 1,226 1,480 Stock option compensation 21 (2) Amortization of discount on marketable securities (151) (171) Amortization of contract acquisition costs - 117 Loss on sale or disposal of property and equipment 134 63 Loss/(gain) on sale of marketable securities 68 (80) Changes in: Trade accounts and other receivables (2,006) (2,586) Refundable income taxes 356 (149) Ticket inventories (82) 227 Other current assets 1 (646) Other noncurrent assets (138) 272 Accounts payable 11,418 13,528 Accrued salaries (623) 154 Accrued vacation 80 190 Income taxes payable 1,162 - Accrued expenses and other liabilities 205 490 Deferred revenue (200) (200) Other noncurrent liabilities (16) (3) ------- ------- Net cash provided by operating activities 18,667 14,878 Cash flows from investing activities: Capital expenditures (779) (6,257) Proceeds from sale of property and equipment 105 - Purchase of marketable securities (75,449) (82,192) Proceeds from sale of marketable securities 80,254 81,267 ------- ------- Net cash provided by (used in) investing activities 4,131 (7,182) Cash flows from financing activities: Proceeds from issuance of common stock, net of expenses paid 79 60 Principal payments on long-term debt (121) (13) Stock warrant issuance costs - (114) Principal payments on capital lease obligations (712) (701) ------- ------- Net cash used in financing activities (754) (768) Net increase in cash 22,044 6,928 Cash and cash equivalents at beginning of period 40,718 40,325 ------- ------- Cash and cash equivalents at end of period $62,762 $47,253 ======= ======= Supplemental cash flow information: Cash paid for: Interest 202 144 Income taxes 3,093 1,225 Noncash investing and financing activities: Issuance of common stock warrant in connection with Delta contract acquisition - 3,460 Stock option disqualifying disposition - 76
The accompanying notes are an integral part of the consolidated financial statements. 6 CHEAP TICKETS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The accompanying unaudited consolidated financial statements of Cheap Tickets, Inc. ("Cheap Tickets") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation for the periods reported. Certain information and note disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules or regulations, although management believes that the disclosures made are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2000 and the notes thereto included in Cheap Tickets' Annual Report on Form 10-K for the year ended December 31, 2000 filed with the Securities and Exchange Commission. The results of operations for the three and six months ended June 30, 2001 are not necessarily indicative of results expected for the full fiscal year or for any future period. Principles of Consolidation The consolidated financial statements include the accounts of Cheap Tickets and its wholly-owned subsidiary. All significant intercompany transactions have been eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the useful lives of property and equipment, the valuation allowance for deferred tax assets and the allowance for doubtful receivables. Management believes that such estimates have been appropriately determined in accordance with generally accepted accounting principles. Revenue Recognition Cheap Tickets implemented several new accounting pronouncements in the fourth quarter of 2000 that affected its revenue recognition policies. These new pronouncements included EITF 99-19 "Reporting Revenue Gross as a Principal versus Net as an Agent", SAB 101 "Revenue Recognition in Financial Statements", and EITF 00-10 "Accounting for Shipping and Handling Fees and Costs". To promote the comparability of our financial statements, all periods presented have been restated to conform with these new pronouncements. EITF 99-19 "Reporting Revenue Gross as a Principal versus Net as an Agent" required that we report our revenue from sales of non-published fares on a net basis. Accordingly, only the net margin on the sale of non-published fares is reported as revenue. Previously we reported the sales of these fares on a gross basis, whereby the gross booking or retail amount was reported as revenue, and the amount we paid to the airline carrier was reported as cost of sales. The implementation of EITF 99-19 did not affect the reporting of commissions on published fares, which was and continues to be reported on a net basis. SAB 101 "Revenue Recognition in Financial Statements" required us to delay recognition of revenue until tickets had been delivered to our customers. Previously, we reported revenue once the reservation was ticketed and payment was received. This change in our policy did not have a material impact on our financial statements. Under EITF 00-10 "Accounting for Shipping and Handling Fees and Costs" we now report distribution, handling and service fees as revenue. The related cost of distribution is reported as cost of sales. Previously we reported distribution costs as part of selling, general and administrative expenses with the fees charged to our customers as an offset to that expense. Revenue is reported net of an allowance for cancellations and refunds. Due to the restrictive nature of our sales, which are generally noncancellable and nonrefundable, cancellations and refunds are not significant. 7 Volume bonus and override revenue are recognized at the end of each monthly or quarterly measurement period if the specified target has been achieved. Bonuses received in connection with contract acceptances or extensions are deferred and recognized as income over the life of the contract. Advertising revenue from internet banner advertising is reported on a net basis, which is the net amount remitted to Cheap Tickets by its advertising service provider. Such revenue has been immaterial to date. 2. Net Income Per Share In accordance with the requirements of Statement of Financial Accounting Standards No. 128, "Earnings Per Share," a reconciliation of the numerator and denominator of basic and diluted EPS is provided as follows (in thousands, except per share data).
Three months ended Six months ended June 30, June 30, ------------------ ------------------ 2000 2001 2000 2001 Numerator: Income available to common shares... $ 4,899 $ 1,221 $ 7,212 $ 2,401 ------- ------- ------- ------- Denominator: Shares - basic...................... 23,171 23,254 23,137 23,243 Effect of Dilutive Securities: Common stock warrants............ -- 48 -- -- Stock options.................... 371 494 424 403 ------- ------- ------- ------- Shares - diluted.................... 23,542 23,796 23,561 23,646 ------- ------- ------- ------- Basic earnings per share:............. $ 0.21 $ 0.05 $ 0.31 $ 0.10 ======= ======= ======= ======= Diluted earnings per share:........... $ 0.21 $ 0.05 $ 0.31 $ 0.10 ======= ======= ======= =======
Net income per share is computed using the weighted average number of common and common equivalent shares outstanding during the period. Options to purchase 1,018,348 shares of common stock at a range of $12.5625 to $35.875 were outstanding during the three months ended June 30, 2001 but were not included in the computation of the diluted EPS because the options' exercise price was greater than the average market price of the common stock. 3. Restructuring Costs On August 2, 2001, Cheap Tickets announced plans to close all but one of its retail stores and other corporate actions. Cheap Tickets will record pre-tax restructuring costs totaling $2.5 million in the third quarter of 2001 primarily for severance and asset write-offs. 4. Contract Acquisition Costs On May 14, 2001, Cheap Tickets entered into a five-year agreement with Delta Air Lines, Inc ("Delta"). Cheap Tickets will receive excess Delta inventory that will be sold to customers at retail travel stores, call centers, and on the Internet. As part of the agreement, Cheap Tickets granted a stock warrant to acquire 1,626,426 shares of Cheap Tickets stock at $11.805 per share. The fair value of the warrant, $3.5 million, was determined by an independent appraisal and has been recorded as an intangible asset (contract acquisition costs). The warrant is being amortized over the life of the agreement. The equity instrument is accounted for in accordance with EITF 00-18 "Accounting Recognition for Certain Transactions Involving Equity Instruments Granted to Other Than Employees" and EITF 96-18 "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services". 5. Subsequent Events On August 13, 2001, the Company, Cendant Corporation, a Delaware Corporation ("Cendant") and Diamondhead Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary of Cendant, entered into an Agreement and Plan of Merger dated August 13, 2001 (the "Merger Agreement"), pursuant to which Cendant will commence a cash tender offer to purchase all of the Company's issued and outstanding shares of common stock, par value $.001 per share. The purchase price is $16.50 per share. 8 Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere herein. Overview Cheap Tickets is principally engaged in the sale of discount tickets for domestic leisure travel. A significant portion of our gross bookings have historically come from the sale of non-published fares, which Cheap Tickets acquires from airlines and resells to the public at a profit. Cheap Tickets purchases non-published fares only when it resells them to customers, so that it has no inventory carrying costs. On these fares, Cheap Tickets sets its resale prices to meet the demands of leisure travelers who are generally looking for the lowest price. Cheap Tickets also sells published fares for which it receives commissions from the airlines. Sales of non-published fares generally carry higher profit margins as a percentage of gross bookings than commissions on published fare bookings as a percentage of those bookings. Cheap Tickets' revenue is generated by ticket sales through Cheap Tickets' five call centers, on-line through our website at www.cheaptickets.com, and to a -------------------- lesser extent through 10 walk-in retail stores. In the second quarter of 2001, gross bookings were derived approximately 59% from call centers and retail stores and 41% from online bookings. During this quarter, Cheap Tickets added approximately 2,354,200 registered online users. At June 30, 2001, we had approximately 13,138,500 online registered users. Cheap Tickets expects online gross bookings and revenue to represent an increasing portion of gross bookings and revenue in future periods. In August 2001, we made a determination to close nine of our ten retail travel stores, primarily to reduce costs and improve efficiency as we shift resources to our growing call center and Internet business segments. These closures and other actions are expected to result in a one-time special charge in the third quarter of 2001 of approximately $2.5 million pre-tax, or a $0.07 effect on earnings per diluted share, due to the fulfillment of lease obligations, write- off of equipment and technical applications, and employee severance packages. These actions are expected to reduce expense by approximately $2 million annually in the future. We expect to launch, in August 2001, our upgraded Web site, which will introduce e-ticketing, enhanced price-finding capabilities and improved customer-usability features. Gross bookings represent the aggregate retail value of tickets sold under non- published fares and published fares. Cheap Tickets records as revenue in its statement of operations only the commissions earned by Cheap Tickets on the sale of published fares and gross profit on the sale of non-published fares. Our statement of gross bookings is not required by generally accepted accounting principles ("GAAP") and should not be considered in isolation or as a substitute for other information prepared in accordance with GAAP. Management uses gross bookings as a key indicator of general business activity, success of promotional efforts, capacity to handle customer demand and efficiency of reservation agents. In addition, management believes that gross bookings provide a useful comparison between historical periods, and that year-to-year changes in such information provide a useful measure of market acceptance of Cheap Tickets' products. Cheap Tickets' gross bookings are substantially comprised of airline ticket sales. For the three months ended June 30, 2001 and 2000, approximately 95% and 98% respectively, of gross bookings were derived from airline ticket sales. The remaining gross bookings were derived from sales of cruise tickets, auto rentals, hotel reservations and other travel related products. Cheap Tickets expects gross bookings from sources other than airline ticket sales to increase in future periods. Revenue consists of gross profit on non-published fare sales, published fare commissions, net advertising revenue and service fees. Cheap Tickets' cost of sales consists of distribution costs related to the sale of tickets. Commissions, including incentive overrides, are earned primarily on published air fares sold and include certain other payments based on the volume of transactions. Gross profits include (1) the gross profit on non-published sales, (2) commissions earned on the sale of published fares sold, (3) net advertising revenue and (4) service fees less distribution costs. Cheap Tickets earns higher profits on the sale of non-published fares than on the sale of published fares. Cheap Tickets' selling, general and administrative expenses include all operating and corporate overhead. Major expense categories include compensation, advertising, communications, credit card bank fees, outside services and occupancy. 9 Subsequent Events On August 13, 2001, the Company, Cendant Corporation, a Delaware Corporation ("Cendant") and Diamondhead Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary of Cendant, entered into an Agreement and Plan of Merger dated August 13, 2001 (the "Merger Agreement"), pursuant to which Cendant will commence a cash tender offer to purchase all of the Company's issued and outstanding shares of common stock, par value $.001 per share. The purchase price is $16.50 per share. Results of Operations Three months ended June 30, 2001 and June 30, 2000 Total revenue. Total revenue for the second quarter of 2001 decreased $1.1 million to $28.5 million, a 3.6% decrease compared to the second quarter of 2000. Revenue for the 2001 period was adversely affected by a lower-than- expected percentage of non-published airline ticket sales, which typically contribute more to the bottom line than published airfares. The shift in this mix was due primarily to technical errors on our Web site, a decline in call- handling ability at our call centers as call volume increased, and airline fare sales which reduced the competitiveness of our non-published inventory. Commissions and bonuses increased $3.2 million, or 36.2%, to $11.9 million in the 2001 quarter, primarily reflecting increased sales of published fares and a 97% increase in airline overrides from published fare sales and incentives received from our global distribution system, or GDS, on higher sales volumes. Commissions on published fare sales as a percentage of total revenue increased from 29.6% to 41.9%. Total gross bookings rose 20.6% to $232.8 million for the second quarter of 2001 compared to the same period in 2000. Service fees and other revenues decreased $744,513 to $2.8 million. These revenues include gross service fees and banner advertising. The decrease was due primarily to our free service fee promotion on the Internet continuing through the second quarter of 2001 offset by increased amounts received from banner advertising. Total revenue through call centers and retail operations increased $230,000, or 1.3%, to $18.4 million as a result of higher call volume due to increased advertising. Total revenue from Internet sales decreased $1.3 million to $10.1 million. Total revenue through the Internet represented 35.6% of total revenue in the second quarter of 2001, compared with 38.7% in the second quarter of 2000. However, total Internet gross bookings for the second quarter of 2001 increased 30.3% over the second quarter of 2000 to $98.0 million. The decrease in total revenue from Internet sales was primarily the result of a higher proportion of published fares sold in the second quarter of 2001 compared with the same period in 2000, which generally carry lower commissions compared to gross profit on non- published fare sales. Gross Profit. Gross profit for the second quarter of 2001 decreased $918,000, or 3.4%, to $26.4 million, compared to the second quarter of 2000. This decrease was primarily attributable to reduced service fees collected due to the free service fee promotion on Internet sales and an increase in lower profit published fare sales. This quarter also included amortization of the warrant we issued to Delta Air Lines, which accounted for approximately 47.5% of the total decrease in gross profit. As a percentage of total revenue, gross profit increased from 92.4% in the 2001 quarter compared to 92.7% for the 2000 period. Selling, General and Administrative Expenses. For the three months ended June 30, 2001, selling, general and administrative expenses increased $5.0 million, or 23.4%, to $26.4 million, and increased as a percentage of total revenue from 72.4% to 92.7%. The increase in selling, general and administrative expenses as a percentage of total revenue was primarily due to increased technology related expenses and higher compensation costs. Total advertising expenses were $320,000 higher for the three months ended June 30, 2001 compared to the same quarter in 2000. Net Earnings. Net earnings for the three months ended June 30, 2001 decreased $3.7 million, or 75.1% to $1.2 million. The decrease reflected increased expenditures related to staffing, outside services, and technological infrastructure related to Company initiatives. 10 Six months ended June 30, 2001 and June 30, 2000 Total Revenue. Total revenue for the six months ended June 30, 2001 increased $2.6 million to $53.4 million, a 5.0% increase compared to the six months ended June 30, 2000. Commissions and bonuses increased $6.9 million, or 46.1%, to $22.0 million, offset by decreases in commissions on non-published fares of $3.9 million and services fees of $1.1 million. The $6.9 million increase in commissions and bonuses primarily reflected a 64.1% increase in commissions on published fares and a 27.9% increase in airline overrides and GDS incentive payments. The decrease in commissions on non-published fares was due primarily to technical errors on our Web site, a decline in call-handling ability at our call centers as call volume increased, and airline fare sales that reduced the competitiveness of our non-published inventory. Total gross bookings rose to $424.8 million for the six months ended June 30, 2001, an increase of 20.8% compared to the six months ended June 30, 2000. Gross Profit. Gross profit for the six months ended June 30, 2001 increased $2.6 million, or 5.5%, to $49.3 million. The increase was due primarily to increased commissions on published fare sales, including higher airline overrides and GDS commission fees, offset by a reduction in service fees due to our free service fee promotion on the Internet. Selling, General and Administrative Expenses. For the six months ended June 30, 2001, selling, general and administrative expenses increased $10.7 million, or 27.5%, to $49.6 million and increased as a percentage of revenue from 76.5% to 92.9%. The increase as a percentage of revenue was primarily the result of increases in compensation, advertising, telephone, and technology related expenses due to the enhancements of our technology platform and proposed new Web site. Advertising expenses increased $2.5 million, representing an increase from 19.1% to 22.8% of total revenue, reflecting the new marketing strategy implemented in the first quarter of 2001. Net Earnings. Net earnings for the six months ended June 30, 2001 decreased $4.8 million, or 66.7%, to $2.4 million. The decrease primarily reflected increased expenditures related to staffing, advertising, telephone and technological infrastructure related to Company initiatives. Operating Segments Cheap Tickets' reported segments are comprised of Internet and Call Center/Other operations. The accounting policies of the segments are the same as those used in the preparation of Cheap Tickets' consolidated financial statements. Cheap Tickets evaluates the performance of its operating segments based on segment operating contribution, which includes sales and marketing expenses and other overhead charges directly attributable to the operating segment. Certain expenses managed outside of the operating segments are excluded, such as corporate expenses, including other income and expense items, unallocated shared expenses, and income taxes. Asset information by operating segment is not reported since Cheap Tickets does not identify assets by segment.
Total revenue by segment ------------------------ Three Months Ended June 30, Six Months Ended June 30, ---------------------------------------------- ----------------------------------------------- 2001 2000 2001 2000 ---------------------------------------------- ----------------------------------------------- In Percent In Percent In Percent In Percent Thousands of Total Thousands of Total Thousands of Total Thousands of Total ---------------------------------------------- ----------------------------------------------- Segments - -------- Internet $ 10,142 36% $ 11,449 39% $ 18,802 35% $ 19,245 38% Call Center/ Other 18,359 64% 18,130 61% 34,573 65% 31,565 62% ---------------------------------------------- ----------------------------------------------- Total revenue $ 28,501 100% $ 29,579 100% $ 53,375 100% $ 50,810 100% ============================================== ===============================================
11
Gross profit by segment ----------------------- Three Months Ended June 30, Six Months Ended June 30, ---------------------------------------------- ----------------------------------------------- 2001 2000 2001 2000 ---------------------------------------------- ----------------------------------------------- In Percent In Percent In Percent In Percent Thousands of Total Thousands of Total Thousands of Total Thousands of Total ---------------------------------------------- ----------------------------------------------- Segments Internet $ 8,940 34% $ 10,429 38% $ 16,554 34% $ 17,492 37% Call Center/ Other 17,474 66% 16,903 62% 32,776 66% 29,264 63% ---------------------------------------------- ----------------------------------------------- Gross profit $ 26,414 100% $ 27,332 100% $ 49,330 100% $ 46,756 100% ============================================== ===============================================
Operating contribution by segment --------------------------------- Three Months Ended June 30, Six Months Ended June 30, ---------------------------------------------- ----------------------------------------------- 2001 2000 2001 2000 ---------------------------------------------- ----------------------------------------------- In Percent In Percent In Percent In Percent Thousands of Total Thousands of Total Thousands of Total Thousands of Total ---------------------------------------------- ----------------------------------------------- Segments - -------- Internet $ 2,422 50% $ 4,992 57% $ 4,633 49% $ 8,525 62% Call Center/ Other 2,433 50% 3,763 43% 4,742 51% 5,334 38% ---------------------------------------------- ----------------------------------------------- Operating contribution $ 4,855 100% $ 8,755 100% $ 9,375 100% $ 13,859 100% ============================================== ===============================================
Three Months Ended June 30, 2001 and June 30, 2000 by Segment Total Revenue. Total revenue through the Internet decreased $1.3 million, or 11.4% to $10.1 million. Total revenue through the Internet represented 35.6% of total revenue for the second quarter of 2001 compared to 38.7% for the second quarter of 2000. This decrease in the proportion of revenue was the result of increases in sales of published fares for the second quarter 2001, compared to the same period last year. Published fare commissions are generally lower as a percentage of bookings than gross profit on non-published fare bookings. Gross bookings increased as a result of a targeted advertising campaign, growing acceptance of Internet commerce, and a significant increase in registered users to our website. Total Internet gross bookings for the second quarter increased 30.3% over the second quarter 2000 to $98.0 million. Total revenue through call centers and retail operations increased $230,000, or 1.3%, to $18.4 million due primarily to higher call volume from increased advertising expenses. Gross Profit. Gross profit from Internet sales decreased $1.5 million, or 14.3% to $8.9 million. As a percentage of total revenue, Internet gross profit decreased from 91.1% to 88.2%. The decrease was mainly the result of a free service fee promotion on Internet sales continuing through the second quarter of 2001. Call center gross profit increased $570,000, or 3.4% to $17.5 million. As a percentage of total revenue, gross profit from call centers increased from 93.2% to 95.2% for the three months ended June 30, 2000 and 2001, respectively. Call center gross profit increased as a percentage of total revenue due to increased published fare commissions, including higher volume incentives and net service fee income. Operating Contribution. Operating contribution from Internet sales decreased $2.6 million or 51.5% to $2.4 million. The decrease in operating contribution was primarily due to higher advertising expenditures and to a lesser extent, increased technological costs related to enhancement of the Cheap Tickets website. 12 Call center operating contribution decreased $1.3 million, or 35.3% to $2.4 million. As a percentage of total call center revenue, operating contribution decreased from 20.8% to 13.3% for the three months ended June 30, 2000 and 2001, respectively. As a percentage of total call center revenue, operating expenses increased from 72.5% to 81.9% reflecting higher compensation, telephone and outside service costs. Six Months Ended June 30, 2001 and June 30, 2000 by Segment Total Revenue. Total revenue through the Internet decreased $443,000, or 2.3% to $18.8 million. Total revenue through the Internet represented 35.2% of total revenue for the first six months of 2001 compared to 37.9% for the first six months of 2000. This decrease in the proportion of revenue was the result of increases in sales of published fares for the first six months of 2001, compared to the same period last year. Commissions on public fares are generally lower as a percentage of bookings than gross profit on non-published fare bookings. Gross bookings increased as a result of a targeted advertising campaign, growing acceptance of Internet sales of air transportation, and a significant increase in registered users to our web site. Total Internet gross bookings for the six months ended June 30, 2001 increased 29.9% over the six months ended June 30, 2000 to $175.7 million. Total revenue through call centers and retail operations increased $3.0 million, or 9.5%, to $34.6 million due to increased call volume resulting from increased advertising. Gross Profit. Gross profit from Internet sales decreased $938,000, or 5.4% to $16.6 million. As a percentage of total revenue, Internet gross profit decreased from 90.9% to 88.0%. The decrease was mainly the result of a free service fee promotion on Internet sales continuing through the second quarter of 2001 and increased published fare commissions in the sales mix. Call center gross profit increased $3.5, or 12.0% to $32.8 million. As a percentage of total revenue, gross profit from call centers increased from 92.7% to 94.8% for the six months ended June 30, 2000 and 2001, respectively. Call center gross profit increased as a percentage of total revenue due to increased sales volumes, higher volume incentives and higher service fee income. Operating Contribution. Operating contribution from Internet sales decreased $3.9 million, or 45.7% to $4.6 million. The decrease in operating contribution was primarily due to higher advertising expenditures and to a lesser extent, increased technological costs related to enhancement of the Cheap Tickets web site. Call center operating contribution decreased $592,000, or 11.1% to $4.7 million. As a percentage of total call center revenue, operating contribution decreased from 16.9% to 13.7% for the six months ended June 30, 2000 and 2001, respectively. Call center operating contribution decreased due to higher operating expenses, particularly compensation, telephone, and outside services. Seasonality and Quarterly Financial Information Cheap Tickets' business is seasonal due primarily to customers' leisure travel patterns and changes in the availability of non-published fares. As a result, Cheap Tickets typically has higher sales and gross profit in the second and third quarters and lower sales and gross profit in the fourth quarter. During periods of high-volume air travel, such as occur in the fourth quarter of each year, Cheap Tickets historically has had access to fewer non-published fares, and such fares on certain major routes may be blacked out or otherwise unavailable. Online gross bookings also tend to follow the same seasonal pattern. The seasonal sales cycle is fairly predictable, but the cycle may shift year-to-year, corresponding to changes in the economy or other factors affecting the market such as price wars. This could lead to unusual volatility in revenue and earnings. Liquidity and Capital Resources For the six months ended June 30, 2001, Cheap Tickets generated cash from operating activities of $14.8 million, compared with $18.7 million for the six months ended June 30, 2000. For the six months ended June 30, 2001, cash generated from operating activities was comprised principally of net earnings of $2.4 million plus depreciation of $1.5 million, an increase in accounts payable of $13.5 million and net changes in working capital and other accounts. For the six months ended June 30, 2000, cash generated from operating activities was comprised principally of net earnings of $7.2 million plus depreciation of $1.2 million, an increase in accounts payable of $11.4 million and net changes in working capital and other accounts. The primary account payable is the weekly settlement to the Airline Reporting Corporation for airline tickets purchased less 13 commissions earned. This is generally a significant balance and the timing of the current payment relative to month-end can cause fluctuations in month-end balances. For the six months ended June 30, 2001, Cheap Tickets used cash in investing activities of $7.2 million, while in the prior period it received cash from investing activities of $4.1 million. Cash used for investing activities for the six months ended June 30, 2001 included net purchases of short-term marketable securities of $925,000 and capital expenditures of $6.3 million. For the six months ended June 30, 2000, net proceeds of short-term marketable securities were $4.8 million and capital expenditures were $779,000. At June 30, 2001, Cheap Tickets maintained on hand cash and cash equivalents of $47.3 million and short-term marketable securities of $101.7 million. Cheap Tickets' net working capital was $136.9 million. Cheap Tickets had outstanding long-term debt net of current installments of $474,000 and capital lease obligations net of current installments of $1.5 million. In January 2000, Cheap Tickets completed its stock repurchase program. Cheap Tickets repurchased 1,037,288 shares of its outstanding common stock for an aggregate price of $14.7 million through periodic open market transactions. All funds required for the repurchase of common stock were obtained from available cash resources and marketable securities. Cheap Tickets believes that its current cash and cash equivalents, short-term marketable securities and anticipated cash flow from operations will be sufficient to meet its anticipated cash needs for working capital, debt service and capital expenditures, at least for the foreseeable future. If cash generated from internal operations is not sufficient to satisfy Cheap Tickets' liquidity requirements, Cheap Tickets may seek to acquire bank lines or sell additional equity or debt securities. The sale of convertible debt or equity securities could result in additional dilution to Cheap Tickets' stockholders. There is no assurance that financing will be available in amounts or on terms acceptable to Cheap Tickets, if at all. Risks Associated with Forward-Looking Statements Forward-Looking Statements contained in this Quarterly Report on Form 10-Q which are not historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. A forward- looking statement may contain words such as "anticipate," "believe," "expect," "estimate," "project," "plan" and similar expressions. These forward-looking statements include statements relating to our expectations as to: . an increasing portion of gross bookings and revenue in future periods will be represented by online gross bookings and online revenue; . an increasing portion of gross bookings will come from sources other than airline ticket sales; . the non-materiality of our interest rate exposure; and . sufficiency of our current cash and cash equivalents, short-term marketable securities and anticipated cash flow from operations to meet our anticipated cash needs for working capital, debt service and capital expenditures, at least for the foreseeable future. Management cautions that these forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause our actual results to differ materially from those projected in such forward-looking statements. Some of the factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, but are not limited to, the following possibilities: . the continued growth of online commerce and Internet infrastructure; . our ability to enter into new supply agreements and to expand, enhance and renew existing supply agreements; . our ability to maintain and renew our technological infrastructure and to maintain the security of our communications network; . our ability to obtain needed services from reliable third parties; and . the availability of sufficient liquidity and capital resources for the future. Some of these factors and additional risks and uncertainties are further discussed under the other factors identified in the "Risk Factors" section contained in our Annual Report on Form 10-K for the year ended December 31, 2000. Further, our future business, financial condition and results of operations could differ materially from those anticipated by such forward- looking statements and are subject to risks and uncertainties including the risks set forth above. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward- looking statements. We are under no 14 duty to update any of the forward-looking statements after the date of this Quarterly Report on Form 10-Q to conform such statements to actual results or to changes in our expectations. General There are several risks and uncertainties that may affect the future operating results, business and financial condition of Cheap Tickets, including, without limitation: (1) the risk of reduction in consumer demand for Cheap Tickets' products; (2) the risk of loss of one or more of the major airline carriers with whom Cheap Tickets does business; (3) the risk that Cheap Tickets may not be able to continue to provide its products at prices which are competitive or that it can continue to market its products in a manner that appeals to consumers even if price-competitive; (4) the risk that Cheap Tickets may not be able to obtain its products on substantially similar terms, including cost, in order to sustain its operating margins; (5) the risks associated with the exercise of management's discretion in the use of proceeds from the initial and secondary public offerings; and (6) the risks inherent in legal proceedings. Readers are encouraged to refer to Cheap Tickets' Annual Report on Form 10-K for the year ended December 31, 2000 for a further discussion of Cheap Tickets' business and the risks and opportunities attendant thereto. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Cheap Tickets does not use derivative financial instruments. We generally place our marketable security investments in high credit quality instruments, primarily U.S. Government obligations and corporate obligations with contractual maturities of less than one year. We do not expect any material loss from our marketable security investments and therefore believe that our potential interest rate exposure is not material. PART II--OTHER INFORMATION Item 1. LEGAL PROCEEDINGS Cheap Tickets may from time to time become a party to various legal proceedings arising in the ordinary course of its business. Any such proceeding against Cheap Tickets, even if not meritorious, could result in the expenditure of significant financial and managerial resources. Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Not applicable. Item 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS Not applicable. Item 5. OTHER INFORMATION Not applicable. 15 Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10.15+ Sabre Travelbase System Lease Agreement (United States) between Sabre Inc. and the Company, dated October 21, 1999. 10.24+ General Agreement, dated May 14, 2001, by and between the Company and Delta Air Lines, Inc. 10.25+ Warrant dated May 14, 2001 from the Company to Delta Air Lines, Inc. 10.26+ Corporate Master Agreement between Vignette Corporation and the Company effective October 31, 2000. 10.27+ Consolidator Agreement dated January 1, 2001 between America West Airlines, Inc. and the Company. 10.28 Sublease Agreement between Customer Communications Center, Inc. and the Company effective as of June 6, 2001. + Portions have been omitted pursuant to a confidential treatment request. (b) Reports on Form 8-K During the quarter ended June 30, 2001, Cheap Tickets filed the following reports on Form 8-K: . Current Report on Form 8-K dated May 15, 2001 regarding a press release issued by the Company announcing a strategic alliance with Delta Air Lines disclosed under Item 5. . Current Report on Form 8-K dated June 25, 2001 regarding a press release issued by the Company reporting preliminary results for the second quarter ending June 30, 2001 disclosed under Item 5. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CHEAP TICKETS, INC. (Registrant) /s/ Samuel D. Horgan Date: August 13, 2001 Samuel D. Horgan Chief Financial Officer and Vice President (Principal Financial Officer and Principal Accounting Officer) 16 EX-10.15 3 dex1015.txt SYSTEM LEASE AGREEMENT Exhibit 10.15 NOTE: PORTIONS OF THIS EXHIBIT INDICATED BY "[****]" ARE SUBJECT TO A CONFIDENTIAL TREATMENT REQUEST, AND HAVE BEEN OMITTED FROM THIS EXHIBIT. COMPLETE, UNREDACTED COPIES OF THIS EXHIBIT HAVE BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AS PART OF THIS COMPANY'S CONFIDENTIAL TREATMENT REQUEST. SABRE TRAVELBASE SYSTEM LEASE AGREEMENT --------------------------------------- (United States) This Sabre TravelBase System Lease Agreement (the "Agreement") is entered into by and between Sabre Inc. ("Sabre") and Cheap Tickets, Inc. ("Customer"), as of the date executed by Sabre below ("Effective Date") regarding the provision of products and services set forth herein. Article 1 - Term - ----------------- 1.1 The term of the Sabre TravelBase System shall commence on the completion of data conversion (the "Effective Date") and shall continue in effect for the number of months as stated on the Schedule ("Initial Term") unless terminated as provided herein. Any additional Sabre TravelBase System installed subsequent to the date of execution of this Agreement by Sabre shall be subject to the terms and conditions of this Agreement and shall have a term as specified on the Supplement ("Additional Term"), commencing on the date of installation. Upon expiration of the applicable term, the Agreement for such Sabre TravelBase System shall continue on a month-to-month basis until termination by either party upon thirty days notice. Article 2 - Definitions - ----------------------- 2.1 Agreement means this Sabre TravelBase System Lease Agreement, and all --------- Amendments, Schedules and Supplements made a part hereof. 2.2 Confidential Information means this Agreement, any and all applicable ------------------------ rights to patents, copyrights, trademarks and trade secrets, proprietary and confidential information of each party hereto and each party's affiliates, subsidiaries, successors or assigns concerning such party's past, present or future research, development, business activities or affairs, finances, properties, methods of operation, processes and systems, agreements related to the business of such party. 2.3 Instructions means any and all manuals, operation procedures, ------------ manufacturer's recommendations, rules and instructions delivered or made available to Customer (either in hard copy, verbally or on-line) all of which must be complied with by Customer. Such Instructions may be unilaterally revised or amended by Sabre at any time in its reasonable discretion. 2.4 Sabre Subscriber Agreement means that separate agreement entered into by -------------------------- the parties effective December 31, 1998 as modified by Amendment No. 1 also effective December 31, 1998 and its Appendix A. 2.5 Sabre TravelBase System means the Standard Equipment, Sabre TravelBase ----------------------- System Components, Instructions and/or the Sabre TravelBase System Software as identified on the Schedule and all Supplements. 2.6 Sabre TravelBase System Component means all memory, disk storage space, --------------------------------- ports, workstations, printers and any other element of the Standard Equipment. 2.7 Sabre TravelBase System Software means that Software delivered by Sabre to -------------------------------- Customer as identified on the Schedule and all Supplements including all upgrades, improvements, enhancements and modifications thereto. 2.8 Schedule means the document reflecting the Charges and term for the Sabre -------- TravelBase System. 2.9 Standard Equipment means the items of computer hardware leased to Customer ------------------ by Sabre in accordance with this Agreement. 2.10 Supplement means the document reflecting any changes to the Sabre ---------- TravelBase System, and/or charges or credits related thereto. Article 3 - Charges and Payments - -------------------------------- 3.1 Charges. All amounts payable to Sabre ("Charges") shall be due and payable ------- within thirty (30) days of the date of Sabre's invoice, without set off or counterclaim. 3.2 Additional Charges. Customer agrees to pay to Sabre an additional charge ------------------ at Sabre's then prevailing rate for services and materials including without limitation the following: (a) the installation or removal of Standard Equipment; (b) excess cable or teflon coated cable required for installation; (c) Standard Equipment relocation within the site; (d) additional support and expenses outside of the scope of this Agreement. 3.3 Increases. Sabre shall have the right to increase the Charges as shown on --------- the Schedule and any Supplements for the remaining term of this Agreement upon thirty days written notice to the Customer. The total amount of such increase shall not exceed ten percent of the Charges in any consecutive twelve month period. Hardware maintenance payments may be increased; Page 1 however, such increase may not be more than a rounded-up percentage equal to the percentage of increase charged to Sabre by its maintenance vendors. 3.4 Interest. Charges not paid when due shall accrue interest at the rate of -------- one hundred twenty-five percent (125%) of the prime rate of interest announced from time to time by the home office of Bank of America or the highest rate permitted by Texas law, whichever is less. 3.5 Taxes. Customer shall pay any taxes, or assessments including any interest ----- or penalty thereon levied as a result of this Agreement, excluding taxes measured by the net income of Sabre. Customer shall indemnify and hold harmless Sabre from all costs, fines and expenses (including reasonable legal costs) incurred by Sabre resulting from Customer's failure to pay taxes as provided in this Article. 3.6 [****]. Consistent with the provisions of the Sabre Subscriber ------ Agreement, and only for as long as such Sabre Subscriber Agreement and this Agreement remain in effect and Customer complies with the provisions of Appendix A to the Sabre Subscriber Agreement Amendment No. 1, [****]: 3.6.1 [****]; 3.6.2 [****]; 3.6.3 [****]; 3.6.4 [****]; 3.6.5 [****]; 3.6.6 [****]. Article 4 - Installation and Delivery - ------------------------------------- 4.1 Delivery. Sabre shall arrange for delivery of the Sabre TravelBase System -------- F. O. B. to the site, as identified on the Schedule and all Supplements thereto. 4.2 Installation. Subject to Article 4.3, Sabre shall install, or cause to be ------------ installed, the Sabre TravelBase System at the site. 4.3 Customer's Obligations Prior to Installation. Customer, at its expense, -------------------------------------------- shall be responsible for preparing the site for Sabre TravelBase System in accordance with the Instructions. If installation of the Sabre TravelBase System is prevented or delayed because of Customer's failure to prepare the site, Sabre shall use reasonable efforts to install the Sabre TravelBase System upon Customer's compliance with this Article and upon payment of all reasonable expenses incurred by Sabre resulting from Customer's failure to prepare the site. 4.4 Relocation and Possession. Customer shall at all times keep the Sabre ------------------------- TravelBase System in its sole possession and control at the site. Customer shall not move any part of the Sabre TravelBase System from or within the site without first obtaining the written consent of Sabre which consent Sabre shall not unreasonably withhold or delay. 4.5 Communications Access. Customer shall provide at its own expense such --------------------- communication lines in accordance with the Instructions for access by Sabre or its designated third-party to the Sabre TravelBase System. 4.6 Non-Standard System. Customer shall not connect or use any hardware, or ------------------- firmware not acquired from Sabre with the Sabre TravelBase System without Sabre's prior written consent, which consent Sabre shall not unreasonably withhold or delay and which shall be granted provided that such hardware, or firmware is approved by Sabre for use with Sabre TravelBase System and Customer executes the Non-Standard System Amendment. 4.7 Acceptance of Sabre TravelBase System. Upon installation of the Sabre ------------------------------------- TravelBase System, Customer shall be deemed to have accepted the Sabre TravelBase System. Any use of the Sabre TravelBase System, and/or Sabre TravelBase System Components or Sabre TravelBase System Software further constitutes acceptance of the Agreement and applicable Amendments and Supplements by the Customer. Article 5 - Repairs and Maintenance - ----------------------------------- 5.1 Repairs and Maintenance. Upon prompt notification from Customer, Sabre or ----------------------- its designated agent, shall promptly repair and maintain the Standard Equipment and shall keep it in good working order provided that the Standard Equipment has been subject to reasonable operation. Customer shall not make any modifications nor attempt to perform repairs or maintenance of any kind without previous written permission from Sabre, which permission Sabre shall not unreasonably withhold or delay. Sabre or its designated agent, shall have free access to the Standard Equipment at reasonable times during normal business hours (9:00 a.m. to 5:00 p.m. local time, Monday through Friday, excluding legal holidays) to provide such service. Damage [****] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. Page 2 resulting from negligence other than Sabre's or its agents' or contractors' negligence, transport not authorized by Sabre, repairs not done by Sabre or its agents, will not be covered. 5.2 Changes to Coverage. If Customer has title to hardware that operates in -------------------- conjunction with the Standard Equipment, he may elect, at any time during the term of the Agreement, to discontinue or change hardware maintenance upon giving Sabre sixty (60) days written notice. 5.3 Limitations. Items consumed in the normal course of business, including ----------- but not limited to printer ribbons and software media are excluded from coverage. 5.4 Charges. Repair or maintenance services on Standard Equipment during ------- normal business hours (9:00 a.m. to 5:00 p.m. local time, Monday through Friday, excluding legal holidays) are included in the Charges, provided that the Customer has not been negligent and the Standard Equipment has been subject to reasonable operation; otherwise, Customer will be charged a service fee in accordance with Sabre's or its designated third-party's then prevailing rates. Article 6 - Title and Ownership of Sabre TravelBase System - ---------------------------------------------------------- 6.1 Title and Ownership of Sabre TravelBase Standard Equipment. The Sabre ---------------------------------------------------------- TravelBase System leased hardware hereunder shall remain the property of Sabre. Customer shall not in any other manner dispose of the Sabre TravelBase System or any part thereof or suffer any lien or legal process to be incurred or levied on the Sabre TravelBase System. 6.2 Risk of Loss. Risk of loss for and damage to the Sabre TravelBase System ------------ shall pass to the Customer upon delivery of the Sabre TravelBase System to the site. Article 7 - Insurance - --------------------- 7.1 General. Upon delivery of any part of the Sabre TravelBase System to the ------- site, Customer shall maintain Comprehensive General Liability (including bodily injury, product liability, property damage and contractual liability) and All Risk Property Insurance. 7.2 Comprehensive General Liability. The Comprehensive General Liability ------------------------------- coverage shall be in the amount not less than one million dollars combined single limit. The coverage shall include the following special provisions: (a) Sabre shall be named as an additional insured; (b) such insurance shall be primary without any right of contribution from any insurance maintained by the additional insureds; and (c) insurers will provide Sabre with thirty days' prior written notice of any cancellation or material change. 7.3 All Risk Property. The All Risk Property insurance shall be in an amount ----------------- to cover the replacement value of the Standard Equipment as set forth in the Schedule and all Supplements. Such policy shall: (a) name Sabre as additional insured; (b) name Sabre as the sole loss payee for loss of the Standard Equipment; (c) be primary without right of contribution from any insurance carried by Sabre; and (e) provide that Sabre will be given thirty days' prior written notice of any cancellation or material change of such policy. 7.4 Certificates. Customer will provide to Sabre, on or before delivery of any ------------ part of the Sabre TravelBase System to the site, a Certificate issued by its insurer (s), evidencing the insurance coverage required by this Article. Failure to provide such Certificate will be deemed an Event of Default under Article 15.1.3. Article 8 - Confidential Information - ------------------------------------ 8.1 The Confidential Information shall remain the property of the party disclosing such information. 8.2 Each party shall maintain in perpetuity the confidentiality of the other party's Confidential Information using the highest degree of care. Each party shall not use, sell, sublicense, transfer, publish, disclose, display, or otherwise make available to others, except as authorized in this Agreement, the other party's Confidential Information or any other material relating to such Confidential Information at any time before or after the termination of this Agreement nor shall either party permit its officers, employees, agents, contractors or subcontractors to divulge the Confidential Information without prior written consent of the other party. Article 9 - Sabre TravelBase System Software License - ---------------------------------------------------- 9.1 Ownership of Sabre TravelBase System Software. Customer acknowledges --------------------------------------------- that Sabre or the original manufacturer of the Sabre TravelBase System Software, as applicable, owns or has licensed from the owner, copyrights in the respective Sabre TravelBase System Software and that ownership and title are retained by the manufacturer or its licensor. All applicable rights to patents, copyrights, trademarks, and trade secrets inherent in the Sabre TravelBase System Software and pertinent thereto are and shall remain Sabre's or the original manufacturer's sole and exclusive property. Any copy of such Software must incorporate any copyright, trade secret, or trademark notices or legends appearing in the original version delivered to Customer. Page 3 9.2 Grant of License. Subject to the provisions of this Agreement and for ---------------- the term specified on the Schedule, either Sabre or the original manufacturer grants to Customer a non-transferable, non-exclusive, limited license to use the Sabre TravelBase System Software subject to the following restrictions: (a) Customer shall use the Sabre TravelBase System Software only to process data related to Customer's own travel agency business transactions, (b) Customer must do business as a bona fide travel agency, (c) The Sabre TravelBase System Software shall be used and installed solely at the site and solely used on the Standard Equipment, or other equipment reasonably authorized by Sabre, (d) the Sabre TravelBase System Software shall be used solely for internal purposes and only in the ordinary course of business; (e) Customer shall not reverse engineer, compile, reverse compile, decompile, disassemble, or reverse assemble the Sabre TravelBase System Software or any portion thereof, (f) the Sabre TravelBase System Software shall not be copied or reprinted in whole or in part except (i) a reasonable number of copies of each program may be made in machine readable form for reasonable archival or backup purposes, or (ii) when Sabre as granted permission to do so, and (g) Customer shall not lease, sell, license, sublicense or otherwise transfer the Sabre TravelBase System Software to any other party. Nothing in this Agreement shall convey title to the Sabre TravelBase System Software to Customer. 9.3 Modification Rights. Customer shall not modify the Sabre TravelBase ------------------- System Software or merge such software into other programs or create derivative works based on such software without Sabre's prior consent, which consent Sabre shall not unreasonably withhold or delay. 9.4 Upgrades and Modifications. All tangible objects containing or relating --------------------------- to the Sabre TravelBase System Software are the sole and exclusive property of Sabre or the manufacturer. In the event Sabre, in its sole discretion, modifies the Sabre TravelBase System Software, it will deliver and install, either on- site or through remote dial-up capabilities, such modified Sabre TravelBase System Software to Customer at its then current charge, if any, and Customer shall promptly return to Sabre any and all tangible objects relating to the previous version of the Sabre TravelBase System Software which Customer is no longer using as provided in Article 16.6. If Sabre designates such modified Sabre TravelBase System Software to be self-installable by Customer and Customer requests Sabre to perform the installation on-site, for reasons other than the in-operability or malfunctioning of the modified Sabre TravelBase System Software or its installation routine, Customer will pay Sabre's then current fee for such installation assistance. Customer shall install or allow Sabre to install all such modifications within ninety days of receipt of the new revision of Sabre TravelBase System Software. Customer shall be solely responsible for protecting all software not obtained from Sabre hereunder and the data related thereto in the event of a software upgrade. Customer, in order to receive an upgraded or updated program, shall comply with any and all terms and conditions and Instructions reasonably imposed by Sabre. 9.5 Processing Units. The TravelBase System Software will solely reside on ---------------- the processing units (the "Fileserver" and "Database server") located at Customer's site. In the event a Fileserver or Database server is upgraded, replaced or moved, Customer shall be solely responsible for moving and protecting all software not obtained from Sabre and the data related thereto. 9.6 Operating Program. ----------------- 9.6.1. Customer acknowledges that the Sabre TravelBase System Software incorporates, in part, copyrighted materials pertinent to the Operating Program as identified on the Schedule. Customer agrees that such copyrighted portions shall be subject to the Operating Program copyright and license. 9.6.2. Customer will look only to Sabre and not to the manufacturer for any support, maintenance, assistance and upgrades and the like with respect to the Operating Program and the manufacturer shall have no liability to Customer in relation to this program. 9.6.3. THE LICENSE OF THE OPERATING PROGRAM, IF MANUFACTURED BY IBM, SHALL BE CONSTRUED AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND THE UNITED STATES OF AMERICA NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT. 9.7 Sabre TravelBase System Software. --------------------------------- 9.7.1. With respect to those portions of the Sabre TravelBase System Software that Sabre licenses from a third party, Customer acknowledges and agrees that Customer is not entitled to any greater warranty with respect to the Sabre TravelBase System Software than the warranty received by Sabre from its supplier of the respective Sabre TravelBase System Software. 9.7.2. EXCEPT AS SPECIFICALLY PROVIDED ELSEWHERE IN THIS AGREEMENT, THE SABRE TRAVELBASE SYSTEM SOFTWARE IS PROVIDED TO CUSTOMER AS IS AND WITH ALL ITS FAULTS WITHOUT ANY WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR THOSE IMPLIED WARRANTIES ARISING OUT OF COURSE OF PERFORMANCE, COURSE OF DEALING, USAGE OF TRADE OR ANY OTHER WARRANTY. THE ENTIRE RISK AS TO THE QUALITY AND PERFORMANCE OF THE SABRE TRAVELBASE SYSTEM SOFTWARE IS WITH THE CUSTOMER. SOME STATES DO NOT ALLOW THE EXCLUSION OF IMPLIED WARRANTIES, SO THE ABOVE EXCLUSION MAY NOT APPLY TO CUSTOMER. THIS WARRANTY GIVES THE CUSTOMER SPECIFIC LEGAL RIGHTS AND CUSTOMER MAY ALSO HAVE OTHER RIGHTS WHICH VARY FROM STATE TO STATE. ADDITIONALLY, CUSTOMER ASSUMES RESPONSIBILITY FOR THE SELECTION OF THE SABRE TRAVELBASE SYSTEM SOFTWARE TO ACHIEVE CUSTOMER'S INTENDED RESULTS, AND FOR THE INSTALLATION AND USE OF THE RESULTS OBTAINED FROM THE SABRE TRAVELBASE SYSTEM SOFTWARE. Page 4 9.7.3 Notwithstanding the above, Sabre warrants that during the Initial Term the media on which the Sabre TravelBase System Software is encoded is warranted to the Customer shall be free from defects in material or workmanship for a period of three months from the receipt of original purchase by Customer. If during such period, Customer discovers any defect in the media, Customer may return the media to Sabre and Sabre shall, as Customer's sole and exclusive remedy, repair, or replace the defective media. 9.7.4 In the event that (i) the Sabre TravelBase System fails to be Year 2000 Compliant (as defined below in this Article 9.7.4) and (ii) such failure is reported to Sabre and can be reproduced by Sabre, Sabre will use all reasonable diligence to correct such Year 2000 failure. If such nonconformity materially impairs Customer's use of the Sabre TravelBase System Software and cannot be cured as provided in this Section, then Customer's alternate sole and exclusive remedy will be to terminate this Agreement without further liability to Sabre for damages hereunder. "Year 2000 Compliant" means (i) the Sabre TravelBase System and each component thereof will accurately process date/time data (including, without limitation, calculating, comparing and sequencing) from, into and between the twentieth and twenty-first centuries, and the years 1999 and 2000 and leap year calculations; and (ii) the Sabre TravelBase System and each component thereof will accurately process date/time data (including, without limitation, calculating, comparing and sequencing) on or after January 1, 2000 in the same manner, and with the same functionality as the Sabre TravelBase System and each component thereof processes date/time data (including, without limitation, calculating, comparing and sequencing) on or before December 31, 1999. Article 10 - Documentation and Training - --------------------------------------- 10.1 Documentation. For each Sabre TravelBase System leased hereunder, Sabre ------------- will provide at the time of delivery of the Sabre TravelBase System, one copy of all such manuals as may be relative to the installation and operation of the Sabre TravelBase System and all such on-line documentation as may be available to enable Customer's personnel to use and understand the operation thereof. Additional copies may be purchased at Sabre's then prevailing rate. 10.2 Training. For each Sabre TravelBase System leased, Sabre shall provide -------- to Customer prior to installation of the Standard Equipment, training for a specific number of Customer employees on the basic use and operation of the Sabre TravelBase System Software as described on the schedule. This training must be completed prior to the installation of the Sabre TravelBase System. Additional classes may be offered on more advanced modules of the software as then may be available to the Customer. Some modules have a mandatory training requirement prior to the implementation of those modules. 10.2.1 Training for additional employees will be offered subject to availability and at Sabre's then prevailing rate per person, per class. The additional training charge will be assessed on Customer's monthly invoice. A prepayment may be necessary to secure a place in the class. 10.2.2 The training described in Article 10.2 shall be performed at a location designated by Sabre. 10.2.3 In addition to the charge for training, Sabre reserves the right to charge all reasonable costs directly related to such training, including transportation, meals, and lodging. 10.2.4 Except as otherwise provided herein, Customer is responsible for all training of all its employees in the proper use of Sabre TravelBase. Sabre has the right to reasonably require further training at the Customer's expense before adding or changing levels of software support or adding additional software options. 10.2.5 In addition to the training described in Article 10.2, Sabre may offer to Customer supplemental training programs at a local level. Such training may consist of, but not limited to, workshops, seminars, and individual consultations. These will be made available at Sabre's then prevailing rate. 10.2.6 Customer and its trainees agree to comply with all training procedures and rules established by Sabre, and Sabre reserves the right to remove any Customer trainee from the training program if such trainee fails to comply with such procedures and rules. 10.2.7 Sabre may, at its discretion, monitor or test Customer's employee's training levels. If Sabre determines the training level to be insufficient, the Customer will institute such additional training, at its own expense (including, if necessary, additional training by Sabre at Sabre's then prevailing rate) as may be reasonably necessary to bring Customer's employees to the level of training required by Sabre. Article 11 - Software Support - ----------------------------- Page 5 11.1 Software Support. Sabre agrees to provide software support to assist ---------------- the Customer's personnel of an understanding of the use of Sabre TravelBase. Such support will be in the form of a Help Desk available at specified times and hours via telephone. Support will be limited to the Sabre TravelBase System Software provided by Sabre and the formation of files by Sabre TravelBase System Software prior to transfer or export. The hours of support offered will be 6:00 a.m. to 7:30 p.m. Central time, Monday through Friday and 8:00 a.m. to 3:00 p.m. Central time on Saturdays excluding legal holidays which are subject to change. Unless otherwise specified, support will be limited to the Customer officer who signs this Agreement, or with whom Customer officer designates by providing the Help Desk telephone number. 11.2 Support Levels. Sabre will provide ninety days of unlimited support -------------- from the Effective Date. Thereafter, the support level elected by the Customer shall be provided at Sabre's then prevailing rate. Customer may elect any level as described in the Article 11.2.2 for the Initial Term. With thirty days written notice, Customer may upgrade the service level at any time during the contract term. With thirty days written notice, Customer may reduce the service level at the end of each twelve month period. 11.2.1 Definition of Call Types ------------------------ (i) Billable Calls. Customer will be charged for these calls. Calls -------------- include, but are not limited to operator knowledge for which information is available in a manual or accessible on-line, accounting knowledge relating to the procedures and processing of tickets, and ARC/BSP documents, other vendor/suppliers relating to questions that should be directed to CRS vendors, forms or supplies, hardware and software not sold or supported by Sabre. (ii) Non-Billable Calls. Customer will not be charged for these calls. ------------------- Calls include, but are not limited to Hardware Maintenance where a vendor is dispatched. 11.2.2 Definition of Support Levels. ---------------------------- (i) Level I Customer may call for support as desired and required. ------- Customer must pay for each Billable Call at the rate specified on the Schedule and Supplements. Such Charges will appear on the monthly invoice. (ii) Level II Customer may call for support as desired and required. -------- Customer will be allocated, at no charge, a limited number of Billable Calls per month as specified on the Schedule and any Supplements. All Billable Calls over that number will be charged at the rate specified on the Schedule and any Supplements. (iii) Level III Customer may call for support as desired and required. --------- There will be no charge for the Billable Calls at this level. Customer shall be billed a monthly flat rate for this support option. Article 12 - Warranty, and Limitation of Warranty, Liability and Remedy - ----------------------------------------------------------------------- 12.1 Standard Equipment. The Standard Equipment shall be delivered and ------------------ installed in good working order. 12.2 Sabre TravelBase System Software. The Sabre TravelBase System Software -------------------------------- provided will be in good working order when installed. Sabre TravelBase System Software and any additions, changes, improvements, and enhancements provided to Customer hereunder shall conform to any applicable requirements or rules of the Airline Reporting Corporation ("ARC"), Bank Settlement Plan ("BSP") or the International Air Transport Association ("IATA") as approved by the Department of Transportation ("DOT"). 12.3 Limitation of Warranty. THE WARRANTIES EXPLICITLY SPECIFIED HEREIN ARE ----------------------- THE ONLY WARRANTIES MADE BY SABRE AND THE MANUFACTURER AND THERE ARE NO OTHER WARRANTIES, EXPRESS OR IMPLIED, BY OPERATION OF LAW OR OTHERWISE OF SABRE TRAVELBASE OR THE SABRE TRAVELBASE SYSTEM OR ANY LIMITATION STATEMENTS REGARDING CAPACITY, SUITABILITY FOR USE, OR PERFORMANCE OF THE SABRE TRAVELBASE SYSTEM OR ANY COMPONENTS THEREOF, WHETHER MADE BY SABRE OR OTHERWISE, WHICH IS NOT CONTAINED IN THIS AGREEMENT, SHALL BE DEEMED TO BE A WARRANTY FOR ANY PURPOSE OR GIVE RISE TO ANY LIABILITY OF SABRE OR THE MANUFACTURER. 12.4 Limitation of Remedies. In the event of a material malfunction or ---------------------- defect in an unaltered component of the Sabre TravelBase System that can be reproduced by Sabre, Sabre will provide reasonable services to promptly correct such malfunction or defect. Customer will supply Sabre with such input files and other materials as may be necessary to enable Sabre to diagnose and correct the malfunction or defect. THE FORGOING SHALL BE CUSTOMER'S SOLE AND EXCLUSIVE PRIMARY REMEDY FOR ANY MALFUNCTION OR DEFECT IN THE SABRE TRAVELBASE SYSTEM. IF SUCH MALFUNCTION OR DEFECT MATERIALLY IMPAIRS CUSTOMER'S USE OF THE SABRE TRAVELBASE SYSTEM AND CANNOT BE CURED AS PROVIDED IN THIS PARAGRAPH, THEN CUSTOMER'S ALTERNATE SOLE AND EXCLUSIVE REMEDY SHALL BE TO TERMINATE THIS AGREEMENT WITHOUT FURTHER LIABILITY TO SABRE FOR DAMAGES HEREUNDER. 12.5 Limitation of Liability. CUSTOMER WAIVES ALL LIABILITY OF SABRE AND THE ----------------------- RESPECTIVE MANUFACTURER ARISING FROM NEGLIGENCE EXCEPT FOR SABRE'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. NOTWITHSTANDING THE FOREGOING AND EXCEPT FOR SABRE'S INDEMNIFICATION OBLIGATIONS UNDER ARTICLE 13, SABRE'S LIABILITY TO CUSTOMER HEREUNDER SHALL BE LIMITED TO THE LESSER OF (1) CUSTOMER'S DIRECT DAMAGES, OR (2) ONE MILLION DOLLARS ($1,000,000.00). NEITHER SABRE NOR ANY MANUFACTURER NOR CUSTOMER SHALL BE LIABLE TO EACH OTHER FOR ANY INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, UNDER ANY CIRCUMSTANCES, INCLUDING BUT NOT LIMITED TO LOST PROFITS, REVENUE OR SAVINGS, OR THE LOSS OF USE OF ANY DATA, EVEN IF SABRE Page 6 OR THE MANUFACTURER OR CUSTOMER HAS BEEN ADVISED OF, KNOWN, OR SHOULD HAVE KNOWN, OF THE POSSIBILITY THEREOF. Article 13 - Indemnification - ---------------------------- 13.1 Customer and Sabre hereby agree to indemnify and hold each other, their affiliates, subsidiaries, successors and assigns and their officers, directors, agents, and employees ("Indemnitees") harmless from and against third-party liabilities, including, but not limited to, reasonable attorney's fees, and other expenses incident thereto, which may be threatened against, or recoverable from the Indemnitees by reason of any injuries to or death of persons or loss of, damage to, or destruction of property arising out of or in connection with (a) any act, or omission of Customer or Sabre, including without limitation any act, or omission constituting negligence; and/or (b) any breach of the representations or warranties made by the other party. 13.2 Sabre, at is own expense, will indemnity, defend and hold harmless Customer and its employees, representatives, agents and affiliates, against any third-party claim, suit, action or other proceeding brought against Customer based on or arising from a claim that the Sabre TravelBase System provided hereunder (other than material provided by Customer) infringes and/or violates in any manner any copyright, patent, trademark, trade secret or any other intellectual property right of any third party. Sabre will pay any and all costs, damages, and expenses, including, but not limited to, reasonable attorneys' fees and costs awarded against or otherwise incurred by Customer in connection with or arising from any such claim suit action or proceeding. 13.3 All indemnification obligations under this Article 13 shall be subject to the following requirements: (a) the indemnified party shall provide the indemnifying party with prompt written notice of any claim; (b) the indemnified party shall permit the indemnifying party to assume and control the defense of any action upon the indemnifying party's written acknowledgment of the obligation to indemnify (unless, in the opinion of counsel of the indemnified party, such assumption would result in a material conflict of interest); and (c) the indemnifying party shall not enter into any settlement or compromise of any claim without the indemnified party's prior written consent, which shall not be unreasonably withheld. In addition, the indemnified party may, at is own expense, participate in its defense of any claim. In the event that the indemnifying party assumes the defense of any such claim, the indemnifying party shall have no liability for attorney's fees and costs incurred by the indemnified party. Article 14 - Assignment - ----------------------- Neither party will assign, transfer, license, franchise nor otherwise convey this Agreement or any rights or services hereunder or delegate obligations hereunder to any third party without the other party's prior written consent except that each party may from time to time and without consent assign this Agreement and all of its rights and obligations hereunder to: (i) any affiliated company; or (ii) to any third person with which the assigning party is amalgamated, merged or consolidated; or (iii) to any third person that directly or indirectly acquires all or substantially all of the business or assets of the assigning party to which this Agreement relates; upon any such assignment, the transferee will be substituted for the assigning party for all purposes under this Agreement and the assigning party will be released from all liability under this Agreement so long as the transferee accepts all liability and obligations of the assigning party under this Agreement in writing and the transferee has the financial and technical capacity to perform the obligations being assumed. The non-assigning party will be notified within fifteen (15) days of any such assignment. Article 15 - Termination and Default - ------------------------------------ 15.1 Default. The occurrence of any one of the following events shall ------- constitute a non-exclusive event of default (the "Event of Default") pursuant to the terms of this Agreement. 15.1.1 Customer fails to pay any amount when due; 15.1.2 Customer ceases to be a bona fide travel agency; 15.1.3 Any representation by either party is discovered to be materially misleading or inaccurate, or either party fails to perform any material covenant, agreement, obligation, term or condition contained herein; 15.1.4 Either party ceases to do business as a going concern, makes an assignment for the benefit of creditors, admits in writing its inability to pay debts as they become due, acquiesces in the appointment of a trustee, receiver or liquidator for it or any substantial part of its assets or properties, sells, or executes an agreement to sell all or substantially all of its assets without complying with the provisions of Article 14. 15.1.5 Events of Default described in 15.1.1, 15.1.3 and 15.1.4 shall not be cause for termination if the party in default cures such default within fifteen days after date of written notice from the other party. If the party in default cures its default as provided in this provision, said failure shall not be considered to be an Event of Default for the purposes of Article 15.2 or Article 15.3, as applicable. Page 7 15.2 Sabre's Rights Upon Termination. Upon the occurrence of an Event of ------------------------------- Default and subject to Article 15.1.5, Sabre shall have the right to any one or more of the following remedies; (i) terminate this Agreement; and (ii) seek all legal and equitable remedies to which it is entitled. If Customer's Event of Default results in termination, Customer agrees to pay to Sabre damages suffered by Sabre as a result of such Event of Default. In the event of termination, Sabre will allow Customer to continue to utilize the Sabre TravelBase System, pursuant to the terms and conditions of this Agreement, for a period of [****] after the termination date ("Transition Period") on the following conditions: 15.2.1 The discounts in Article 3.6 will be forfeited during the Transition Period and Customer agrees to pay Sabre all applicable Charges for the Sabre TravelBase System during the Transition Period; 15.2.2 Customer will advise Sabre at least fifteen (15) days in advance of the date it wishes to discontinue its continued use of the Sabre TravelBase System; 15.2.3 Upon such discontinuance Sabre may retake immediate possession of the Sabre TravelBase System; 15.2.4 The Transition Period may only be extended by written agreement of both parties. 15.3 Customers Rights Upon Termination. Upon the occurrence of an Event of --------------------------------- Default and subject to Article 15.1.5, Customer may terminate this Agreement immediately upon written notice to Sabre and/or seek all legal and equitable remedies to which it is entitled. Article 16 - Miscellaneous - -------------------------- 16.1 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE -------------- STATE OF NEW YORK AND THE UNITED STATES OF AMERICA. 16.2 Binding Effect. Except as otherwise provided, the Agreement shall inure -------------- to the benefit of and bind the successors and assigns of the parties hereto. 16.3 Entire Agreement. This Agreement and the Instructions constitute the ---------------- entire agreement of the parties as to the matters set forth herein and shall supersede any previous understandings, agreements, representations, statements, negotiations and undertakings, whether written or oral, between the parties relating to the matters set forth herein. Any amendment to this Agreement must be in writing and signed by the authorized representatives of both parties. 16.4 Force Majeure. Each party shall be relieved of its obligations -------------- hereunder in the event and to the extent that performance is delayed or prevented by any cause reasonably beyond its control, including, but not limited to acts of God, public enemies, war, civil disorder, fire, flood, explosion, labor dispute or strikes, or any acts or orders of any governmental authority, inability to obtain supplies and materials (including and without limitation computer hardware) or any delay of deficiency caused by the electrical or telephone line suppliers or other third parties. 16.5 Notices. Unless otherwise stated, notices given or required under this ------- Agreement must be in writing and shall be deemed delivered upon receipt to Sabre Inc. at 4255 Amon Carter Blvd, Ft. Worth TX 76155 (to be sent to the attention of General Counsel) or to the Customer at the address set forth in the Schedule or such other address as either party indicates in writing to the other. 16.6 Return of Sabre TravelBase System. Upon the termination of this --------------------------------- Agreement for any reason, (a) Customer, at its sole cost and expense, shall return to Sabre all Confidential Information of Sabre and the Sabre TravelBase System as requested by Sabre, in good condition, less normal wear and tear, and (b) Sabre, at its sole costs and expense, shall return to Customer all Confidential Information of Customer. 16.7 Modifications. Sabre retains the right to modify the Sabre TravelBase ------------- System, at its discretion at any time during the term of this Agreement. However, such modifications will not materially impair Customer's ability to access and use Sabre TravelBase in the manner expressly permitted in this Agreement. During the term hereof, Sabre shall make additions, changes, improvements or enhancements in the Sabre TravelBase System Software necessary to enable Customer to comply with applicable requirements or rules of ARC, BSP or IATA, as approved by DOT. 16.8 Severability. Any provision of this Agreement which may be determined ------------ by a court or other competent governmental authority to be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability, without invalidating the remaining provisions thereof, unless said prohibition or unenforceability materially alters the rights or obligations of either party. 16.9 Surviving Sections. Upon the expiration or earlier termination of this ------------------ Agreement, Customer shall promptly pay Sabre any and all outstanding sums that are due and payable. Notwithstanding anything to the contrary referenced herein Articles 6, 8, 9, 12, and 13 shall survive the termination of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth below. Cheap Tickets, Inc. Sabre Inc. [****] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. Page 8 By: /s/ TAMMY ISHIBASHI By: /s/ [SIGNATURE ILLEGIBLE] ---------------------------- ------------------------------- (Signature) (Signature) Name: TAMMY ISHIBASHI [SIGNATURE ILLEGIBLE] -------------------------- Name:----------------------------- (Print Name) (Print Name) Title: EXEC. V.P. Title: Manager - Financial Services Date: 10/15/99 Date: 10/21/99 PCC______ Page 9 EX-10.24 4 dex1024.txt GENERAL AGREEMENT BETWEEN CHEAP TICKETS AND DELTA Exhibit 10.24 NOTE: PORTIONS OF THIS EXHIBIT INDICATED BY "[****]" ARE SUBJECT TO A CONFIDENTIAL TREATMENT REQUEST, AND HAVE BEEN OMITTED FROM THIS EXHIBIT. COMPLETE, UNREDACTED COPIES OF THIS EXHIBIT HAVE BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AS PART OF THIS COMPANY'S CONFIDENTIAL TREATMENT REQUEST. General Agreement ----------------- This General Agreement (this "Agreement"), dated May 14, 2001, is by and --------- between Cheap Tickets, Inc., a Delaware corporation with an address at 1440 Kapiolani Blvd., Honolulu, Hawaii 96814 ("CTI"), and Delta Air Lines, Inc., a --- Delaware corporation having a principal place of business at 1030 Delta Boulevard, Hartsfield Atlanta International Airport, Atlanta, Georgia 30320 ("Delta"). ----- Recitals: -------- Delta is a major carrier providing scheduled air transportation services to domestic and international destinations. CTI is an ARC accredited travel agency and distributor of leisure travel products that operates an internet site (the "Web Site"), toll-free call centers (the "Call Centers") and retail stores (the -------- ------------ "Travel Stores") that sell travel products and services to the public including, ------------- without limitation, airline tickets, hotel rooms and rental cars. CTI desires (i) to sell Delta fares published through the Airline Tariff Publishing Company ("ATP") and available for sale by Delta appointed agents for scheduled air transportation ("Delta Published Fares"); (ii) to participate in Delta's net fare program (the "Net Fare Program") to offer and sell Delta fares ---------------- that are not so published ("Delta Unpublished Fares") to customers; and (iii) for Delta to participate in CTI's opaque air fare program, which provides for the offer and sale of unpublished fares on the Web Site without identifying the carrier prior to ticketing (the "Opaque Fare Program"). ------------------- Delta desires (i) to authorize CTI to sell Delta Published Fares; (ii) for CTI to participate in Delta's Net Fare Program; and (iii) to participate in CTI's Opaque Fare Program. In connection with each of the above, the parties desire to document their understandings in this Agreement and the following related agreements by and between the parties: (i) an Agency Agreement dated as of the date hereof; (ii) various net fare agreements (the "Net Fare Agreements"); (iii) a Warrant to ------------------- purchase 1,626,426 shares of CTI common stock (the "Warrant") dated as of the ------- date hereof; and (iv) an Investor Rights Agreement dated as of the date hereof (this Agreement, the Agency Agreement, the Net Fare Agreements, the Warrant and the Investor Rights Agreement are collectively referred to herein as the "Transaction Documents"). --------------------- In consideration of the covenants and agreements set forth in the Transaction Documents, the parties agree as follows: 1. Definitions ----------- As used in this Agreement, terms with their initial letters capitalized (or otherwise defined) shall have the meanings assigned to them in this Agreement. 2. Preferred Airline Status ------------------------- 2.1 During the term of this Agreement, CTI will designate and promote Delta as a "Preferred Airline" in all CTI distribution channels, whether now existing or created later including, without limitation, the Web Site, the Call Centers and the Travel Stores. As a Preferred Airline, Delta shall receive the benefits set forth on Exhibit 2.1 ----------- attached hereto and incorporated herein by reference, including with respect to Delta's participation in the Opaque Fare Program. 2.2 During the term of this Agreement, CTI shall not designate and promote more than three (3) U.S.-based airlines as a Preferred Airline, including Delta. 3. Participation in the Opaque Fare Program ---------------------------------------- 3.1 Participation. Delta shall participate in the Opaque Fare Program and, ------------- in connection therewith, will provide CTI with Delta Unpublished Fares subject to the Opaque Restrictions (defined herein) for select origin and destination city pairs (each, an "O&D") identified by Delta in --- accordance with the terms and conditions set forth in this Article 3. CTI will brand the Opaque Fare Program as "SuperCheapTickets" or such other brand that CTI may determine from time to time which will distinguish the Opaque Fare Program from its other product offerings. 3.2 Opaque Fare Program Ticket Restrictions and Related Matters ----------------------------------------------------------- a. Delta Unpublished Fares provided to CTI under the Opaque Fare Program must be issued in accordance with the rules and restrictions described below in Section 3.2(b), and such additional reasonable fare rules and -------------- restrictions as are provided by Delta to CTI from time to time (such as for specific routings or flight/day criteria on certain O&Ds) (the "Opaque Restrictions"). None of the Opaque Restrictions shall be ------------------- modified, removed or waived at any time without the prior written consent of Delta. At all times during the term of this Agreement, Delta will control and determine the Delta Unpublished Fares and levels of inventory provided to CTI for use in the Opaque Fare Program. It is expressly understood and agreed that Delta makes no commitment whatsoever regarding the level of inventory, number of O&Ds or the level of Delta Unpublished Fares that will be provided to CTI for sale through the Opaque Fare Program. -2- b. All tickets (each, an "Opaque Ticket") issued by CTI through the ------------- Opaque Fare Program on any airline participating in the Opaque Fare Program (each a "Participating Carrier") shall be subject to the following general restrictions (the "Restrictions"): (i) Opaque Tickets will be non-refundable, non-endorsable, non- transferable and non-changeable; (ii) All travel will be round-trip with no stopovers or open-jaw travel permitted; (iii) Frequent flyer mileage and upgrades will not be permitted; (iv) Opaque Fare Program customers must agree to accept a ticket on any Participating Carrier; (v) All Opaque Fare Program travel reservations and bookings shall be made without allowing Opaque Fare Program customers to specify, request or require a certain carrier, flight or time of day (other than requiring no overnight flights) on the specified date(s) of travel. Carrier attributes including, without limitation, name, carrier code, flight times, equipment type and connecting points shall not be revealed to customers until after a transaction is completed; (vi) All Opaque Tickets require instant ticketing guaranteed with a major credit card if CTI is able to provide an airline ticket within the customer's departure and return date parameters; (vii) Opaque Ticket reservations are limited to no more than eight (8) persons traveling in the same itinerary; and (viii) All travel will require a Saturday night minimum stay requirement and an advance purchase requirement of three (3) days or greater. c. The Restrictions will be communicated by CTI to the customer via the Web Site (or through CTI's customer service representatives if the consumer contacts CTI through its toll free customer service number), and the Restrictions set forth in subparagraphs (i), (ii) and (iii) of Section 3.2(b) will additionally be set forth on ticketing and/or -------------- itinerary documentation issued by CTI. d. All Opaque Tickets issued for carriage on Delta shall be subject to the published conditions of carriage and the fare rules of Delta, to the extent such conditions and fare rules are consistent with the Restrictions. Delta will honor all Opaque Tickets issued for travel on Delta in accordance with the Restrictions and other rules and conditions established by Delta in accordance with Section 3.2(a) hereof. 3.3 Opaque Ticket Reservations, Bookings, Payment and Fulfillment. -------------------------------------------------------------- -3- a. Delta will file Delta Unpublished Fares and rules for Opaque Tickets with the computer reservation system ("CRS") used by CTI. --- [****] b. CTI shall not identify Delta in any advertising for Opaque Tickets. c. All Delta Unpublished Fares made available by Delta for sale through the Opaque Fare Program shall not be commissionable (but shall be included for purposes of determining CTI's market share levels for purposes of the O&D Market Share Program described in Section 5.2 ----------- hereof) and shall be inclusive of the domestic federal transportation excise tax. All such Delta Unpublished Fares shall be exclusive of any domestic federal segment taxes, and any domestic or international fuel, departure, arrival, passenger facility, airport, terminal and/or security taxes or surcharges which, when applicable, must be added to the fare amount collected from the passenger and shown on the Opaque Ticket. d. In all Opaque Fare Program transactions for Delta, CTI will be the merchant of record and will pay all associated merchant credit card fees. All Opaque Tickets sold on Delta will be settled through ARC. e. All tickets of Delta issued through the Opaque Fare Program will be issued by CTI using a specific agency ARC number or numbers to be provided to Delta by CTI from time to time. In collecting payment for Opaque Tickets, CTI will act as the agent of Delta pursuant to Agent's ARC Agent Reporting Agreement with the Airlines Reporting Corporation ("ARC"). --- f. CTI will encourage its customers to accept electronic ticketing for all Opaque Tickets sold on Delta by imposing an additional charge for the issuance of paper tickets and maintaining the issuance of electronic tickets as the default option for Delta fares on the Opaque Fare Program. After issuance of Opaque Tickets for Delta fares, CTI will promptly forward to the customer a receipt of proof of purchase and contract of carriage on Delta. g. All Opaque Tickets issued in paper form for carriage on Delta will be issued by CTI on standard ARC traffic documents and will be validated with Delta's validation in accordance with ARC requirements. The passenger coupon will show "bulk" for the fare amount and will include all additional collections noted in [****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -4- Section 3.3(c) above. The auditor's coupon will show Delta's -------------- Unpublished Fare as authorized by CTI. 3.4 Opaque Ticketing Procedures. CTI will handle sales of Opaque Tickets --------------------------- according to the procedures described in Exhibit 2.1 attached hereto. ----------- 3.5 Opaque Fare Program Customer Service. ------------------------------------- a. CTI will provide customer support services to all Opaque Fare Program customers through a toll-free number during at least such hours as CTI makes available support services to its customers generally. Customer support will be adequately staffed with personnel trained to take Opaque Ticket requests by phone and respond to all customer inquiries for related service and support. b. CTI will use commercially reasonable efforts to ensure that its customer service representatives provide quality customer service and support to Opaque Fare Program customers in a prompt, reliable and courteous manner. c. CTI will respond to Opaque Fare Program customer questions and issues pertaining to special handling requirements for Opaque Tickets including processing any special customer handling requirements in respect of Opaque Tickets issued on Delta. 3.6 Reporting. CTI will provide monthly reports in a format reasonably --------- designated by Delta summarizing (i) information concerning each fare issued by CTI through the Opaque Fare Program on Delta; and (ii) aggregate information (not identifying any air carrier) for all fares issued by CTI through the Opaque Fare Program in each O&D in which Delta participates. 3.7 Modifications to the Restrictions. None of the Restrictions shall be --------------------------------- modified, removed or waived at any time without the prior written consent of Delta. 3.8 No Exclusivity. Delta's participation in CTI's Opaque Fare Program -------------- shall be non-exclusive to Delta and to CTI. As such, Delta may participate in other programs similar to the Opaque Fare Program, and CTI may invite other airlines to participate in the Opaque Fare Program. 4. Net Fare Program ---------------- 4.1 Subject to the terms of the Net Fare Agreements, Delta will make available point of sale Delta Unpublished Fares for distribution through the Call Centers, the Web Site and the Travel Stores. Delta will control and determine the Delta Unpublished -5- Fares and levels of inventory provided to CTI in the Net Fare Program. It is expressly understood and agreed that Delta makes no commitment whatsoever regarding the level of inventory, number of O&Ds or the level of Delta Unpublished Fares that will be provided to CTI through the Net Fare Program. 4.2 CTI will serve as merchant of record for all Delta Net Fares sold by CTI pursuant to the Net Fare Agreements. 4.3 [****] 5. Override and Incentive Program ------------------------------ 5.1 Pursuant to the terms of the Agency Agreement, Delta will make available to CTI a point of sale override commission (the "POS --- Commission") in conjunction with domestic Published Fares sold by CTI ---------- Call Centers and Travel Stores (but not sales through the Web Site). 5.2 Pursuant to the terms of the Agency Agreement, Delta will also make available to CTI participation in an additional O&D Market Share Program that will allow CTI to potentially earn a performance based quarterly incentive on sales of Published Fares. Delta may update periodically the performance goals expected of CTI in the O&D Market Share Program; provided, however, that the maximum increase in performance goals for each level of incentive compensation shall not exceed the amounts set forth in the following table: --------------------------------------------------------------------- Maximum increase in target O&D MSP compared to same quarter in Incentive compensation level: prior calendar year: --------------------------------------------------------------------- [****] [****] --------------------------------------------------------------------- [****] [****] --------------------------------------------------------------------- [****] [****] --------------------------------------------------------------------- [****] [****] --------------------------------------------------------------------- [****] [****] --------------------------------------------------------------------- [****] [****] --------------------------------------------------------------------- [****]. [****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -6- For purposes of this Section 5.2, the terms "O&D" and "O&D MSP" shall ----------- --- ------- have the meanings assigned to such terms in the Agency Agreement. 5.3 [****] 5.4 [****] 6. Other Benefits to CTI --------------------- 6.1 SkyMiles Program. Delta will provide to CTI the opportunity to ---------------- purchase SkyMiles(R) frequent flyer miles, on terms mutually agreeable by the parties, for CTI to use in promotions that promote Delta. Any such promotions must be approved by Delta in advance in writing. 6.2 Delta Equity Account. Subject to the terms and conditions set forth in -------------------- Exhibit 6.2 attached hereto and incorporated herein by reference, during the term of this Agreement Delta shall establish for CTI a Delta Equity Account to be used by CTI for corporate business travel credit with travel credits (the "Delta Credits") in amount of [****]% ------------- of the annual Delta flown revenues (net of applicable commissions, overrides, charges, surcharges and taxes) received by Delta for air transportation sold by CTI at fares made available under this Agreement; provided, however, such Delta Credits shall not exceed $[****] per year. 6.3 AD 100 Tickets. During each calendar quarter that the Agency Agreement -------------- is in effect, in the event that CTI earns an incentive compensation during any such quarter, Delta shall provide CTI with fifty ([****]) ([****] domestic and [****] international) AD-100 tickets, subject to the standard terms and conditions of Delta's AD-100 program then in effect. [****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -7- 7. Affirmative Covenants of CTI. Within ninety (90) days of the date set ---------------------------- forth at the top of this Agreement, CTI shall fulfill the following obligations, each subject to Delta's reasonable satisfaction: (a) Provide to Delta a beta demonstration of the Web Site and Call Centers display screens that provide for Delta receiving the Preferred Airline rights and benefits set forth in Article 2 and Exhibit 2.1 hereof; ----------- (b) Make any modifications to its Opaque Fare Program service to comply with the terms and conditions set forth in Article 3 hereof; (c) Report all sales of Delta tickets via the internet including, without limitation, via the Web Site and through the Opaque Fare Program, through dedicated ARC numbers; and (d) Require and provide that all purchases of Delta tickets through CTI via the Web Site or the Opaque Fare Program, will be immediate ticketing and have no reservation holding period. 8. Representations and Warranties of CTI. CTI represents and warrants to ------------------------------------- Delta as follows: 8.1 Organization and Qualification. CTI is a duly organized and validly ------------------------------ existing corporation in good standing under the laws of the State of Delaware and has the corporate power and authority to own, operate and lease the properties and assets it now owns, operates or leases and to conduct its business as it is now being conducted. 8.2 Authority Relative to this Agreement. CTI has the corporate power and ------------------------------------ authority to execute and deliver the Transaction Documents and to consummate the transactions contemplated thereby in accordance with the terms thereof. The execution and delivery of the Transaction Documents and the consummation of the transactions contemplated thereby have been duly authorized by all necessary corporate action on the part of the CTI. The Transaction Documents have been duly and validly executed and delivered by CTI and are, assuming due execution and delivery thereof by Delta and that Delta has full legal power and right to enter into the Transaction Documents, valid and binding obligations of CTI, enforceable against CTI in accordance with their terms, except as enforcement thereof may be limited by the availability of certain equitable remedies or by bankruptcy, insolvency or similar laws affecting creditors' rights generally. 9. Representations and Warranties of Delta. Delta represents to CTI as --------------------------------------- follows: -8- 9.1 Organization and Qualification. Delta is a duly organized and validly ------------------------------ existing corporation in good standing under the laws of the State of Delaware and has the corporate power and authority to own, operate and lease the properties and assets it now owns, operates or leases and to conduct its business as it is now being conducted. 9.2 Authority Relative to this Agreement. Delta has the corporate power ------------------------------------ and authority to execute and deliver the Transaction Documents and to consummate the transactions contemplated thereby in accordance with the terms thereof. The execution and delivery of the Transaction Documents and the consummation of the transactions contemplated thereby have been duly authorized by all necessary corporate action on the part of the Delta. The Transaction Documents have been duly and validly executed and delivered by Delta and are, assuming due execution and delivery thereof by CTI and that CTI has full legal power and right to enter into the Transaction Documents, valid and binding obligations of Delta, enforceable against Delta in accordance with their terms, except as enforcement thereof may be limited by the availability of certain equitable remedies or by bankruptcy, insolvency or similar laws affecting creditors' rights generally. 10. Confidentiality --------------- 10.1 Subject to the other terms of this Section 10, CTI and Delta will each hold in confidence and, without the prior written consent of the other, will not reproduce, distribute, transmit, transfer or disclose, directly or indirectly, in any form, by any means or for any purpose, any Confidential Information of the other party. As used herein, the term "Confidential ------------ Information" shall mean the Transaction Documents and their subject matter, ----------- and proprietary information that is provided to or obtained from one party to the other party including any information which derives economic value, actual or potential, from not being generally known to, and not generally ascertainable by proper means by, other persons, including the Unpublished Fares provided by Delta to CTI pursuant to this Agreement. The recipient of Confidential Information may only disclose such information to its employees on a need-to-know basis. 10.2 The obligations of a recipient party with respect to Confidential Information shall remain in effect during and after the term of this Agreement (including any renewals or extensions hereof) and for a period of two (2) years thereafter, except to the extent Confidential Information: (a) is or becomes generally available to the public other than as a result of a disclosure by the recipient, or its directors, officers, employees, agents or advisors, -9- (b) becomes available to the recipient on a non-confidential basis from a source other than the disclosing party or its affiliated companies, provided that such source is not, to CTI's knowledge, bound by any confidentiality obligations to the disclosing party or its affiliated companies (as applicable); (c) is required to be disclosed by the recipient in order to comply with applicable law or the order or other legal process of any court, governmental or similar authority having jurisdiction over the recipient; or (d) is required to be disclosed by the recipient pursuant to the requirements of the federal securities laws, including without limitation the Securities Exchange Act of 1934, as amended, or the rules and regulations thereunder. 10.3 In the event that the recipient becomes legally compelled to disclose any of such Confidential Information by any governmental body or court, recipient will provide the disclosing party with prompt notice so that the disclosing party may seek a protective order or other appropriate remedy and/or waive compliance (in writing) with the provisions hereof. In the event that such protective order or other remedy is not obtained, or the disclosing party waives (in writing) compliance with the provisions hereof, recipient will furnish only that portion of such Confidential Material which is legally required and will exercise its reasonable business efforts to obtain appropriate assurance that confidential treatment will be accorded such Confidential Information. 10.4 The recipient of Confidential Information will exercise reasonable commercial care in protecting the confidentiality of the other party's Confidential Information. 10.5 CTI will not disclose (including, without limitation, by sale) to any third party information obtained through the Opaque Fare Program concerning a customer who has acquired a ticket on Delta. 10.6 If Delta elects not to terminate the Agency Agreement after receipt of the Notice in Section 7.3(a) of the Agency Agreement, then Agency may make a copy of this Agreement and the Agency Agreement available to the person or persons who propose to acquire a majority interest in Agency in the Change of Control transaction or the successor in interest in a proposed transaction that constitutes a Change of Control, subject to execution of a non-disclosure agreement, reasonably acceptable to Delta, by such person or persons. 11. Proprietary Marks ----------------- During the term of this Agreement neither CTI nor Delta shall use the other party's (or its affiliates') trademarks, trade names, service marks, logos, emblems, symbols or other -10- brand identifiers in advertising or marketing materials, unless it has obtained the prior written approval of the other party. The consent required by this Article 11 shall extend to the content of the specific advertising or marketing items as well as the placement and prominence of the applicable trademark, trade name, service mark, logo, emblem, symbol or other brand identifier of the other party. CTI or Delta, as applicable, shall cause the withholding, discontinuance, recall or cancellation, as appropriate, of any advertising or promotional material not approved in writing by the other party, that differs significantly from that approved by the other party, or that is put to a use or used in a media not approved by the other party. 12. Term of Agreement ----------------- 12.1 Subject to the terms of this Article 12, this Agreement will commence effectively on April 1, 2001 (the "Commencement Date") and will ----------------- continue for a period of five (5) years; provided, however, Articles 5 and 6 hereof shall only continue for a period of three (3) years from the Commencement Date. 12.2 Any party may terminate this Agreement at any time after the Commencement Date if another party is in material breach of its obligations hereunder and has failed to fully cure such breach within thirty (30) days following its receipt of notice of such breach; provided, however, Delta may terminate this Agreement immediately in the event CTI breaches any of the covenants set forth in Article 7 hereof. 12.3 The obligations of the parties under Articles 10, 13 and 14 of this Agreement shall indefinitely survive the expiration or any termination of this Agreement. 13. Indemnification --------------- 13.1 For purposes of this Section 13, "Losses" shall mean any and all ------ costs, demands, losses, claims (including any claim by a third party), liabilities, fines, penalties, assessments, damages, including, without limitation, interest, penalties, reasonable attorneys' fees and expenses and all amounts paid in proceedings, claims, complaints, disputes, arbitrations, investigations, defense or settlement of any of the foregoing. 13.2 Except as otherwise provided in this Article 13, Delta agrees to indemnify, defend and hold harmless CTI and its affiliates and their respective officers, directors, agents, employees and subsidiaries (each, a "CTI Indemnified Party") to the fullest extent permitted by --------------------- law from and against any and all Losses resulting from, arising out of or relating to any breach of any representation, warranty, covenant or agreement by Delta in the Transaction Documents; provided, that Delta -------- shall not -11- be liable under this Section 13.2 to any CTI Indemnified Party to the extent that it is finally judicially determined that such Losses resulted primarily from the material breach by any CTI Indemnified Party of any representation, warranty, covenant or agreement of such CTI Indemnified Party contained in the Transaction Documents; and provided, further, that if and to the extent that such indemnification -------- ------- is unenforceable for any reason, Delta shall make the maximum contribution to the payment and satisfaction of such Losses which shall be permissible under applicable laws. 13.3 Except as otherwise provided in this Article 13, CTI agrees to indemnify, defend and hold harmless Delta and its affiliates and their respective officers, directors, agents, employees, and subsidiaries (each, a "Delta Indemnified Party") to the fullest extent permitted by ----------------------- law from and against any and all Losses resulting from, arising out of or relating to any breach of any representation or warranty, covenant or agreement by CTI in the Transaction Documents; provided, that CTI -------- shall not be liable under this Section 13.3 to any Delta Indemnified Party to the extent that it is finally judicially determined that such Losses resulted primarily from the material breach by any Delta Indemnified Party of any representation, warranty, covenant or agreement of an Delta Indemnified Party contained in the Transaction Documents; and provided, further, that if and to the extent that such -------- ------- indemnification is unenforceable for any reason, CTI shall make the maximum contribution to the payment and satisfaction of such Losses which shall be permissible under applicable laws. 13.4 Each CTI Indemnified Party or Delta Indemnified Party, as the case may be (for purposes of this Section 13.4, an "Indemnified Party"), under ----------------- this Section 13 shall, promptly after the receipt of notice of the commencement of any action, investigation, claim or other proceeding against such Indemnified Party in respect of which indemnity may be sought from Delta or CTI (for purposes of this Section 13.4, an "Indemnifying Party") under this Section 13, notify the Indemnifying ------------------ Party in writing of the commencement thereof. The omission of any Indemnified Party so to notify the Indemnifying Party of any such action shall not relieve the Indemnifying Party from any liability which it may have to such Indemnified Party unless, and only to the extent that, such Indemnifying Party has been prejudiced thereby. In case any such action, claim or other proceeding shall be brought against any Indemnified Party, and it shall notify the Indemnifying Party of the commencement thereof, the Indemnifying Party shall be entitled to assume the defense thereof at its own expense, with counsel satisfactory to such Indemnified Party in its reasonable judgment; provided, however, that any Indemnified Party may, at its -------- ------- own expense, retain separate counsel to participate in such defense at its own expense. Notwithstanding the foregoing, in any action, claim or proceeding in which both the Indemnifying Party, on the one hand, and an Indemnified Party, -12- on the other hand, are, or are reasonably likely to become, a party, such Indemnified Party shall have the right to employ separate counsel at the expense of the Indemnifying Party and to control its own defense of such action, claim or proceeding if, in the reasonable opinion of counsel to such Indemnified Party, a conflict or potential conflict exists between the Indemnifying Party, on the one hand, and such Indemnified Party, on the other hand, that would make such separate representation advisable; provided, however, that the -------- ------- Indemnifying Party shall not be liable for the fees and expenses of more than one counsel to all Indemnified Parties. The Indemnifying Party agrees that it will not, without the prior written consent of the Indemnified Party, settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated hereby (if any Indemnified Party is a party thereto or has been actually threatened to be made a party thereto) unless such settlement, compromise or consent includes an unconditional release of the Indemnified Party from all liability arising or that may arise out of such claim, action or proceeding. The Indemnifying Party shall not be liable for any settlement of any claim, action or proceeding effected against an Indemnified Party without the Indemnifying Party's written consent, which consent shall not be unreasonably withheld. 14. General Provisions ------------------ 14.1 No waiver or breach of any of the provisions of this Agreement shall be construed as a waiver of any succeeding breach of the same or any other provision. 14.2 If any paragraph, sentence or clause of this Agreement shall be adjudged illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall not affect the legality, validity or enforceability of this Agreement as a whole or of any paragraph, sentence or clause hereof not so adjudged. 14.3 Any notice required or permitted hereunder shall be deemed sufficient if given in writing and delivered personally, by facsimile transmission, by reputable overnight courier service or United States mail, postage prepaid, to the addresses shown below or to such other addresses as are specified by similar notice, and shall be deemed received upon personal delivery, upon confirmed facsimile receipt, two (2) days following deposit with such courier service, or three (3) days from deposit in the United States mails, in each case as herein provided: If to CTI, Inc.: If to Delta: -13- Cheap Tickets, Inc. Delta Air Lines, Inc. 1440 Kapiolani Blvd. 1030 Delta Boulevard Honolulu, HI 96814 Hartsfield Atlanta International Airport Atlanta, GA 30320 Attention: Chief Financial Officer Attention: VP-Reservations Sales & Distribution Planning Phone: 808-945-7439 Phone: 404-715-4079 Fax: 808-945 Fax: 404-715- With a copy to: With a copy to: --------------- --------------- Morrison & Foerster LLP Delta Air Lines, Inc. 555 West 5th Street 1030 Delta Boulevard Suite 3500 Hartsfield Atlanta International Airport Los Angeles, California 90013 Atlanta, GA 30320 Attention: Henry Fields, Esq. Attention: General Counsel Phone: 213-892-5200 Phone: 404-715-2387 Fax: 213-892-5454 Fax: 404-773-1657
A party may change its address and the name of its designated recipient of copies of notices for purposes of this Agreement by giving the other parties written notice of the new name and the address, phone and facsimile number of its designated recipient in accordance with this Section 14.3. 14.4 This Agreement and the Attachments hereto, and the Transaction Documents, supersede and replace all previous understandings or agreements, whether oral or written, with respect to the subject matter hereof. The captions in this Agreement are for convenience only and do not alter any terms of this Agreement. 14.5 This Agreement may be amended or modified only by a written amendment executed by the parties. 14.6 The formation, construction, performance and validity of this Agreement shall be governed by the internal laws of the State of Georgia. Each party agrees that any civil suit or action brought against it as a result of any of its obligations under this Agreement may be brought against it either in the state or federal courts of the principal place of business of either party, and each party hereby irrevocably submits to the jurisdiction of such courts and irrevocably waives, to the fullest extent permitted by law, any objections that it may now or hereafter have to the laying of the venue of such civil suit or action and any claim that such civil suit or -14- action has been brought in an inconvenient forum, and each party further agrees that final judgment in any such civil suit or action shall be conclusive and binding upon it and shall be enforceable against it by suit upon such judgment in any court of competent jurisdiction. 14.7 This Agreement may be executed in counterparts, each of which shall be deemed an original, and together, shall constitute one and the same instrument. Execution may be effected by delivery of facsimiles of signature pages (and the parties shall follow such delivery by prompt delivery of originals of such pages). 14.8 No party will in any manner or by any device, either directly or indirectly, act in violation of any applicable law, governmental order or regulation. CTI shall comply at all times with the provisions of Delta's tariffs (except where such tariffs are specifically amended by Delta under the terms of this Agreement) and the terms of the Airlines Reporting Corporation ("ARC") Agent --- Reporting Agreement and any addenda thereto. 14.9 No party hereto shall assign or transfer or permit the assignment or transfer of this Agreement without the prior written consent of the other parties. 14.10 This Agreement shall not be deemed to create any partnership or joint venture between Delta and CTI, nor to create any rights in favor of any person or entity other than the parties hereto. This Agreement is for the sole benefit of the parties and nothing herein expressed or implied shall give or be construed to give any other person any legal or equitable rights hereunder. 14.11 NO PARTY WILL BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING LOST REVENUES, LOST PROFITS, OR LOST PROSPECTIVE ECONOMIC ADVANTAGE, ARISING FROM THIS AGREEMENT OR ANY BREACH HEREOF. 14.12 THE PARTIES AGREE THAT IRREPARABLE DAMAGE WOULD OCCUR IN THE EVENT ANY PROVISION OF THIS AGREEMENT IS NOT PERFORMED IN ACCORDANCE WITH THE TERMS HEREOF AND THAT THE PARTIES SHALL BE ENTITLED TO AN INJUNCTION OR INJUNCTIONS TO PREVENT BREACHES OF THIS AGREEMENT AND TO ENFORCE SPECIFICALLY THE TERMS AND PROVISIONS OF THIS AGREEMENT. 14.13 Each party has participated jointly in the negotiation and drafting of this Agreement. In the event any ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption -15- or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement 14.14 In the event that either party hereto is prevented from fulfilling any of its obligations under this Agreement for a period not exceeding one hundred twenty (120) consecutive days for a reason beyond its control, including, but not limited to, strikes, lockouts, work stoppages or other labor disputes, riots, civil commotions, acts of God, fire, flood and other weather-related reasons, governmental action or directive (a "Force Majeure Event"), ------------------- such party shall not, by reason of being so prevented, be in breach of this Agreement and such condition shall not be cause of termination by the other party. If a Force Majeure Event continues for a period in excess of one hundred twenty (120) consecutive days as to one party which prevents that party from fulfilling in any material way its obligations under this Agreement to the other party, the other party shall have the right to terminate this Agreement upon thirty (30) days' advance written notice to the other party. [Signatures on next page] -16- [Signatures to the General Agreement dated May __, 2001] IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on the date indicated above. CHEAP TICKETS, INC. DELTA AIR LINES, INC. /s/ Sam E. Galeotos /s/ [SIGNATURE ILLEGIBLE] - ---------------------------- --------------------------------- By: By: V Caminiti Title: Title: SR V.P. E-BUS Sam E. Galeotos President and Chief Executive Officer - ------------------------------------- -17- EXHIBIT 2.1 Preferred Airline Benefits -------------------------- If a query or request for a reservation, booking or ticket is made through any CTI distribution channel, the default, fare led response will display the Delta ("DL") fares that result from such query or request in the following manner: -- (1) [****] (2) [****] (3) [****] (4) [****] [****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -18- EXHIBIT 2.1 (Continued) Additional Marketing Assistance to be provided by CTI to Delta: - -------------------------------------------------------------- 1) Regular home page recognition as a CTI "Preferred Airline". 2) Bi-weekly newsletter emails - distributed to CTI subscribers in order to highlight special fares in selected markets. The identified fares must apply to a minimum of 5 city-pairs per market. 3) Delta Exclusive emails - distributed to CTI subscribers in order to highlight special DL fares in selected markets. The identified fares must apply to a minimum of 10 city-pairs per market. 4) Confirmation emails - Distributed to CTI new subscribers following their initial sign up, in order to highlight special fares in selected markets. The identified fares must apply to a minimum of 5 city-pairs per market. 5) CTI will provide to Delta on a monthly basis market data relating to CTI's top 150 domestic and 50 international markets. -19- EXHIBIT 6.2 DELTA EQUITY ACCOUNT -------------------- Delta shall establish a Delta Air Lines Equity Account in the name of CTI (the "Account") to which Delta will credit as hereafter described transportation credits that may be used by CTI to purchase air transportation on Delta anywhere on Delta's worldwide route system. Such transportation may be used only for travel by CTI's directors, officers and employees for business purposes. The following terms and conditions shall govern the establishment of the Account and the use by CTI of the Delta Credits therein: 1. Delta shall issue to CTI a Delta Equity Card that may be used to purchase transportation from the Account. Delta Credits may be used solely for the purchase of travel on Delta (not including the Delta Connection carriers or any other carrier now or hereafter using Delta's two letter carrier code) and for excess baggage charges. Travel on a Delta Connection carrier is permitted only in exceptional circumstances at the sole discretion and with the authorization of the local Delta Station Manager. 2. The value of tickets and other documents (including all applicable tariff and other charges, surcharges and taxes) purchased by CTI will be debited against the Account. All tickets shall be issued exclusively by Delta or by CTI in accordance with mutually agreed upon procedures. All tickets will be validated on Delta. Tickets purchased with the Delta Equity Card are subject to all rules applicable to the general public for the fare structure selected. 3. All tickets shall be issued at the applicable published fare. Reservations must be booked in applicable class of service, and travel is subject to all applicable tariffs and other rules and regulations relating thereto. Transatlantic or transpacific travel may not be booked in first class (F) without prior approval from Delta's Leisure Sales Department. Delta reserves the right to require, in its discretion, that reservations be made in specific inventory classifications, and CTI understands that any such requirement may restrict seat availability. 4. Denied boarding compensation rules shall not apply and frequent flyer credits shall not be awarded in connection with travel pursuant to this Rider. CTI shall imprint on each ticket issued pursuant to this Agreement the phrase "NO FF CREDIT/DBC ALLOWED" to reflect the restrictions on frequent flyer credits and denied boarding compensation contained herein. 5. CTI is responsible for the security of the Delta Equity Card issued to it and is responsible for all charges made against the Account. Lost or stolen cards should be reported immediately. -20- 6. Phone authorization, including an approval code, may be required for purchases with the Delta Equity Card to insure that sufficient Delta Credits are available in the Account for payment. If available Delta Credits are insufficient for payment of any charge, CTI may use a separate form of payment to pay the difference. -21- 7. If any charges are made that exceed the balance in the Account, CTI agrees to pay the difference, plus a handling charge equal to five percent (5%) of the difference. If a Delta Equity Card is used to purchase travel or other services on carriers other than Delta and the Delta Connection carriers, Delta is authorized to deduct from the Account Delta Credits equal to 200% of the purchase price of such unauthorized services. Any sums payable by the CTI pursuant to this Item 7 are payable in full immediately upon receipt of a statement from Delta. No Delta Credits earned in accordance with this Agreement will be posted to the Account until all such sums are paid in full, and use of the Account will be suspended until remittance in full is received. 8. The Account shall be used solely for conducting CTI's business in the ordinary course, and tickets purchased with the Delta Credits shall not be bartered, sold, refunded in cash, or converted into cash compensation. The endorsement box on tickets issued against the Delta Equity Card must be marked "Non-Refundable in Cash," "Non-Endorseable," and Non-Transferable." 9. Delta is expressly permitted to offset any amount owed by CTI to Delta or Delta's subsidiaries or affiliates (including WORLDSPAN) against any Delta Credits earned hereunder. 10. CTI may not assign, pledge or otherwise transfer the Account, in whole or in part. Delta may refuse to honor tickets issued pursuant to this Agreement and/or reduce credits available in the Account at any time in Delta's sole judgment, if the Account has been or is being used in any manner not authorized by this Agreement. 11. All credits in the Account will be forfeited automatically (i) upon termination of this Agreement by Delta and (ii) at the end of thirty (30) days following the expiration of this Agreement by its terms or its termination for any other reason. 12. Delta may require that tickets not be used during the blackout periods established from time to time by Delta. 13. Not more than five (5) tickets may be used on any one Delta flight. -22- EX-10.25 5 dex1025.txt WARRANT TO PURCHASE SHARES OF COMMON STOCK Exhibit 10.25 NOTE: PORTIONS OF THIS EXHIBIT INDICATED BY "[****]" ARE SUBJECT TO A CONFIDENTIAL TREATMENT REQUEST, AND HAVE BEEN OMITTED FROM THIS EXHIBIT. COMPLETE, UNREDACTED COPIES OF THIS EXHIBIT HAVE BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AS PART OF THIS COMPANY'S CONFIDENTIAL TREATMENT REQUEST. THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS THERE IS (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER(S) FROM THE APPROPRIATE GOVERNMENTAL AUTHORITY(IES), OR (iv) UNLESS PURSUANT TO AN EXEMPTION THEREFROM UNDER RULE 144 (OR ANY SUCCESSOR PROVISION) OF THE ACT. WARRANT TO PURCHASE 1,626,426 SHARES OF COMMON STOCK OF CHEAP TICKETS, INC. This certifies that Delta Air Lines, Inc., a Delaware corporation (the "Initial Holder"), or its registered transferees, successors or assigns (each, a "Holder"), for value received, is entitled to purchase at the Exercise Price (as defined below) from Cheap Tickets, Inc., a Delaware corporation (the "Company"), up to One Million Six Hundred Twenty Six Thousand Four Hundred Twenty Six (1,626,426) fully paid and nonassessable shares (the "Warrant Shares") of the Company's Common Stock, par value $0.001 per share (the "Common Stock"), subject to adjustment pursuant to Section 4 hereof and the terms and conditions set forth herein. This Warrant shall be exercisable during the period beginning on May 14, 2006 until the Expiration Date (as defined below), unless the exercise period is accelerated as provided in the exercise schedule contained in Schedule -------- A hereto (the "Exercise Schedule"). - - As used herein, (a) the term "Issue Date" shall mean May 14, 2001, (b) the term "Expiration Date" shall mean the earlier of the date upon which all Warrant Shares shall have been exercised or December 31, 2006, (c) the term "Exercise Price" shall mean $11.805, subject to adjustment pursuant to Section 4 hereof, and (d) the term "General Agreement" shall mean that certain General Agreement of even date herewith between the Company and the Initial Holder. This Warrant is being issued pursuant to the General Agreement. The Initial Holder is entitled to the rights and benefits and subject to the obligations under that certain Investor Rights Agreement of even date herewith between the Initial Holder and the Company. 1. Exercise; Issuance of Certificates; Acknowledgement. This --------------------------------------------------- Warrant may be exercised, in whole or in part, for shares of Common Stock (but not for a fraction of a share) upon surrender to the Company at its principal office (or at such other location as the Company may advise the Holder in writing) of this Warrant properly endorsed with (i) the Form of Subscription attached as Annex A hereto duly completed and executed, and (ii) payment ------- pursuant to Section 2 of the aggregate Exercise Price for the number of shares for which this Warrant is being exercised determined in accordance with the provisions hereof. The shares of Common Stock purchased under this Warrant shall be and are deemed to be issued to the Holder, as the record owner of such shares, as of the close of business on the date of exercise. Certificates for 1 the shares of the Common Stock so purchased, together with any other securities or property to which the Holder hereof is entitled upon such exercise, shall be delivered to the Holder hereof by the Company at the Company's expense as soon as practicable after the rights represented by this Warrant have been so exercised, but in any event within ten (10) business days after the date of exercise. Each stock certificate so delivered shall be in such denominations of Common Stock as may be requested by the Holder hereof and shall be registered in the name of such Holder. In case of a purchase of less than all the Warrant Shares, the Company shall execute and deliver to Holder within a reasonable time an Acknowledgement in the form attached hereto indicating the number of Warrant Shares which remain subject to this Warrant, if any. 2. Payment for Shares. The aggregate purchase price for Warrant ------------------ Shares being purchased hereunder may be paid either (i) by check or wire transfer of immediately available funds or (ii) by surrender of a number of Warrant Shares which have a fair market value equal to the aggregate purchase price of the Warrant Shares being purchased ("Net Issuance") as determined herein. If the Holder elects the Net Issuance method of payment, the Company shall issue to Holder upon exercise a number of shares of Warrant Shares determined in accordance with the following formula: X = Y(A-B) ------- A where: X = the number of Warrant Shares to be issued to the Holder; Y = the number of Warrant Shares with respect to which the Holder is exercising its purchase rights under this Warrant; A = the fair market value of one (1) Warrant Share on the date of exercise; and B = the Exercise Price on the date of exercise. No fractional shares arising out of the above formula for determining the number of shares to be issued to the Holder shall be issued, and the Company shall in lieu thereof make payment to the Holder of cash in the amount of such fraction multiplied by the fair market value of one share of the Warrant Shares on the date of exercise. For purposes of the above calculation, the fair market value of one (1) share of the Warrant Shares shall mean (a) if the Common Stock is then traded on a national securities exchange or Nasdaq, the average of the high and low trading prices of such Common Stock on such exchange on the date of exercise, multiplied by the number of shares of Common Stock into which each share of the Warrant Shares is then convertible, (b) if the Common Stock is then regularly traded over-the-counter, the average of the high and low trading prices of such Common Stock on the over-the-counter market on the date of exercise, multiplied by the number of shares of Common Stock into which each share of the Warrant Shares is then convertible, or (c) if there is no active public market for the Common Stock, the fair market value thereof as determined in good faith by the Board of Directors of the Company, multiplied by the number of shares of Common Stock into which each share of the Warrant Shares is then convertible. 2 3. Shares to be Fully Paid; Reservation of Shares. ---------------------------------------------- 3.1 The Company covenants and agrees that all shares of Common Stock which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be duly authorized, validly issued, fully paid and nonassessable and free from all preemptive rights of any stockholder and free of all taxes, liens and charges with respect to the issue thereof. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved, for the purpose of issue or transfer upon exercise of the subscription rights evidenced by this Warrant, a sufficient number of shares of authorized but unissued shares of Common Stock or other securities and property, when and as required to provide for the exercise of the rights represented by this Warrant. If at any time prior to the Expiration Date the number of authorized but unissued shares of Common Stock shall not be sufficient to permit the exercise of the rights represented by this Warrant, the Company will take such corporate action, subject to receipt of any required stockholder approval, as may be necessary to increase its authorized but unissued shares of Common Stock as shall be sufficient for such purpose. 3.2 The Company hereby represents and warrants to the Initial Holder that (a) as of the Issue Date the authorized equity securities of the Company consist of 70,000,000 shares of Common Stock, of which 23,234,654 shares were issued and outstanding as of April 1, 2001, and 10,000,000 shares of preferred stock, none of which are issued or outstanding, and (b) as of April 1, 2001, the Warrant Shares represent seven percent (7%) of the issued and outstanding shares of Common Stock. 4. Adjustment of Exercise Price and Number of Shares. The Exercise ------------------------------------------------- Price and the number of shares purchasable upon the exercise of this Warrant shall be subject to adjustment from time to time upon the occurrence of certain events described in this Section 4. Upon each adjustment of the Exercise Price, the Holder of this Warrant shall thereafter be entitled to purchase, at the Exercise Price resulting from such adjustment, the number of shares obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares purchasable pursuant hereto immediately prior to such adjustment, and dividing the product thereof by the Exercise Price resulting from such adjustment. 4.1 Stock Dividends. If the Company at any time while this --------------- Warrant is outstanding and unexpired shall pay a dividend or distribution payable in Common Stock, then the Exercise Price shall be adjusted, from and after the date of determination of stockholders entitled to receive such dividend or distribution, to that price determined by multiplying the Exercise Price in effect immediately prior to such date of determination by a fraction (i) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to such dividend or distribution, and (ii) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately after such dividend or distribution. 4.2 Stock Splits, Subdivisions or Combinations. In case the ------------------------------------------ Company shall at any time split or subdivide its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision shall be 3 proportionately reduced, and in case the outstanding shares of the Common Stock of the Company shall be combined or reverse split into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased. 4.3 Reclassification. In case of any reclassification, change ---------------- or conversion of securities of the class issuable upon exercise of this Warrant (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination described in Section 4.2 hereof), then the Company shall take all necessary actions (including but not limited to executing and delivering to the Holder of this Warrant an additional Warrant or other instrument, in form and substance satisfactory to the holder of this Warrant) to ensure that the Holder of this Warrant shall thereafter have the right to receive, at a total purchase price not to exceed that payable upon the exercise of the unexercised portion of this Warrant, and in lieu of the shares of Common Stock theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money and property receivable upon such reclassification, change or conversion by a holder of the number of shares of Common Stock then purchasable under this Warrant. Such new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 4. The provisions of this Section 4.3 shall similarly apply to successive reclassifications, changes and conversions. 4.4 Consolidation, Merger or Sale. In case of any ----------------------------- consolidation or merger of the Company with or into any other corporation, entity or person, or any other corporate reorganization in which the Company shall not be the continuing or surviving entity of such consolidation, merger or reorganization, or any transaction in which in excess of 50% of the Company's voting power is transferred, or any sale of all or substantially all of the assets of the Company (any such transaction being hereinafter referred to as a "Reorganization"), then the Company will have the right to cancel this Warrant, provided, however, that, upon the consummation or effective date of such Reorganization, the Holder will receive, in lieu of this Warrant, the stock and other securities and property (including cash) to which such Holder would have been entitled upon the date of such Reorganization if such Holder had exercised this Warrant immediately prior thereto pursuant to the Net Issuance provisions of Section 2 hereof and this Warrant had been exercisable for all of the Warrant Shares (notwithstanding the Exercise Schedule) as of the date of such Reorganization. 4.5 Notice of Adjustment. Upon any adjustment provided for -------------------- under this Section 4, the Company shall give written notice thereof, by first class mail postage prepaid, addressed to the registered Holder of this Warrant at the address of such Holder as shown on the books of the Company. The notice shall be signed by the Company's chief financial officer and shall state the Exercise Price resulting from such adjustment and the increase, decrease or change, if any, in the number or type of shares purchasable at such price upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. 4 4.6 Other Notices. If at any time: ------------- (1) the Company shall declare any cash dividend upon its Common Stock; (2) there shall be any capital reorganization or reclassification of the capital stock of the Company; or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another entity or person; or (3) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company; then, in any one or more of said cases, the Company shall give, by first class mail, postage prepaid, addressed to the Holder of this Warrant at the address of such Holder as shown on the books of the Company, (a) at least ten (10) days prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or public offering, at least thirty (30) days prior written notice of the date when the same shall take place; provided, however, that the Holder shall use its reasonable best efforts to respond to such notice as early as possible after the receipt thereof. Any notice given in accordance with the foregoing clause (a) shall also specify, in the case of any such dividend, the date on which the holders of Common Stock shall be entitled thereto. Any notice given in accordance with the foregoing clause (b) shall also specify the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up, conversion or public offering, as the case may be. 5. No Impairment. Except and to the extent as waived or consented ------------- to by the Holder, the Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may be necessary or appropriate in order to protect the exercise rights of the Holder against impairment. 6. No Voting or Dividend Rights. Nothing contained in this Warrant ---------------------------- shall be construed as conferring upon the Holder hereof the right to vote or to consent to receive notice as a stockholder of the Company or any other matters or any rights whatsoever as a stockholder of the Company prior to the exercise of the Holder's right to purchase the Warrant Shares. No cash dividends or interest shall be payable or accrued in respect of this Warrant or the interest represented hereby until, and only to the extent that, this Warrant shall have been exercised. 5 7. Transfer. Subject to compliance with applicable laws, this -------- Warrant and all rights hereunder may be transferred by a Holder, in whole or in part, only to an affiliate (as such term is defined under Rule 405 of the Act) of such Holder. Any such transfer to an affiliate shall be made upon surrender of this Warrant together with a written request for transfer accompanied by an opinion of counsel that such transfer is in compliance with applicable federal and state securities laws, or the Company is provided with information sufficient for the Company to make such determination. Except as expressly permitted by this Section 7, this Warrant may not be transferred by the Holder. 8. Representations and Warranties of Holder. Holder hereby agrees, ---------------------------------------- represents and warrants as follows: (i) Holder is acquiring this Warrant solely for its own account for investment and not with a view to or for sale or distribution of the Warrant or any portion thereof in violation of the Act; (ii) Holder is an "accredited investor" within the meaning of Rule 501 under the Act, as presently in effect; (iii) the entire legal and beneficial interest of the Warrant is being acquired for, and will be held for the account of, Holder only and neither in whole nor in part for any other person, except for such transfer of any of the Warrant as may be permitted hereunder; (iv) Holder either (a) has a prior business relationship with the Company and/or its officers and directors, or (b) by reason of its business or financial experience or the business or financial experience of its professional advisors who are unaffiliated with the Company, and who are not compensated by the Company, has the capacity to protect its own interests in connection with its acquisition of the Warrant; and (v) the transaction under which Holder is acquiring the Warrant has not been registered under the Act and the Warrant must be held indefinitely unless subsequently registered under the Act or an exemption from such registration is available. 9. Lost Warrants. Upon receipt of evidence reasonably satisfactory ------------- to the Company of the loss, theft, destruction, or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company, or in the case of any such mutilation upon surrender and cancellation of such Warrant, the Company, at its expense, will make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant. 10. Modification and Waiver. Any term of this Warrant may be amended ----------------------- and the observance of any term of this Warrant may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of Warrants representing at least a majority of the aggregate number of Warrant Shares then issuable upon exercise of this Warrant. Any amendment or waiver effected in accordance with this paragraph shall be binding upon the Company, the Holder and the holders of all Warrants issued pursuant to this Warrant. 11. Notices. Except as may be otherwise provided herein, all ------- notices, requests, waivers and other communications made pursuant to this Warrant shall be in writing and shall be conclusively deemed to have been duly given (a) when hand delivered to the other party; (b) when sent by facsimile to the number set forth below if sent between 8:00 a.m. and 5:00 p.m. recipient's local time on a business day, or on the next business day if sent by facsimile to the number set forth below if sent other than between 8:00 a.m. and 5:00 p.m. recipient's local 6 time on a business day; (c) three business days after deposit in the U.S. mail with first class or certified mail receipt requested postage prepaid and addressed to the other party at the address set forth below; or (d) the next business day after deposit with a national overnight delivery service, postage prepaid, addressed to the parties as set forth below with next business day delivery guaranteed, provided that the sending party receives a confirmation of delivery from the delivery service provider. Each person making a communication hereunder by facsimile shall promptly confirm by telephone to the person to whom such communication was addressed each communication made by it by facsimile pursuant hereto but the absence of such confirmation shall not affect the validity of any such communication. A party may change or supplement the addresses given above, or designate additional addresses, for purposes of this Section 11 by giving the other party written notice of the new address in the manner set forth above. 12. Titles and Subtitles; Governing Law; Venue. The titles and ------------------------------------------ subtitles used in this Warrant are used for convenience only and are not to be considered in construing or interpreting this Agreement. This Warrant is to be construed in accordance with and governed by the internal laws of the State of Delaware without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of Delaware to the rights and duties of the Company and the Holder. All disputes and controversies arising out of or in connection with this Warrant shall be resolved exclusively by the state and federal courts located in the State of Delaware , and each of the Company and the Holder hereto agrees to submit to the jurisdiction of said courts and agrees that venue shall lie exclusively with such courts. 13. Counterparts. This Warrant may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 14. Publicity. This Warrant and the transactions contemplated hereby --------- shall be considered "Confidential Information" for purposes of the General Agreement and neither party shall make any disclosure of such Confidential Information except in accordance with the provisions of the General Agreement relating to Confidential Information, except that nothing in this Warrant or the General Agreement shall restrict the Holder from disclosing such Confidential Information to its attorneys, accountants, consultants and other advisors to the extent necessary to obtain their services in connection with the Holder's investment or participation in the Company. 15. Charges; Taxes and Expenses. Issuance of certificates for shares --------------------------- upon the exercise of the Warrant shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company. 16. Redemption. This Warrant is not redeemable by the Company. ---------- 17. Further Assurances. Each of the parties shall execute such ------------------ documents and perform such further acts (including, without limitation, obtaining any consents, exemptions, 7 authorizations or other actions by, or giving any notices to, or making any filings with, any governmental authority or any other person, and otherwise fulfilling, or causing the fulfillment of, the various obligations made herein, as may be reasonably required or desirable to carry out or to perform the provisions of this Warrant and to consummate and make effective as promptly as possible the transactions contemplated by this Warrant. [Signatures on following page] 8 IN WITNESS WHEREOF, the Company and the Initial Holder have caused this Warrant to be duly executed by its officers, thereunto duly authorized, as of the date first above written. CHEAP TICKETS, INC. DELTA AIR LINES, INC. By: /s/ Sam E. Galeotos By: /s/ [SIGNATURE ILLEGIBLE] ------------------------------------ --------------------------- Sam E. Galeotos, Name:_________________________ President and Chief Executive Officer Its:__________________________ By: /s/ Sam Horgan ------------------------------------ Sam Horgan, Chief Financial Officer
Address and Facsimile Number for Notice: Address and Facsimile Number for Notice: - --------------------------------------- --------------------------------------- Cheap Tickets, Inc. Delta Air Lines Inc. 1440 Kapiolani Blvd. 1030 Delta Boulevard Honolulu, Hawaii 96814 Atlanta Hartsfield International Airport Facsimile: (808) 946-3844 Atlanta, Georgia 30320 Attention: Chief Financial Officer Facsimile: (404) 715-4098 - --------- Attention: Executive Vice President - Chief --------- Financial Officer With a copy to: With a copy to: Morrison & Foerster LLP Delta Air Lines Inc. 555 West 5th Street 1030 Delta Boulevard Suite 3500 Atlanta Hartsfield International Airport Los Angeles, California 90013 Atlanta, Georgia 30320 Facsimile: 213-892-5454 Facsimile: (404) 773-1657 Attention: Henry Fields, Esq. Attention: Senior Vice President - General - --------- --------- Counsel
9 SCHEDULE A ---------- EXERCISE SCHEDULE 1. The dates on which Warrant Shares may be purchased may be accelerated prior to the Expiration Date according to the following schedule (the "Exercise Schedule"). Capitalized terms not otherwise defined herein have the meanings set forth in the General Agreement. . 25% of the Warrant Shares may be purchased on or after June 1, 2002 if the Company has earned and been paid an average performance based incentive of at least [****]% (the "Target Percentage") under the Override and Incentive Program described in Article 5 of the General Agreement and as set forth in the Agency Agreement for the twelve- month period ending March 31 (the "Measuring Period") in the year 2002 (or for such shorter period that the General Agreement was effective); . an additional 25% of the Warrant Shares may be purchased on or after June 1, 2003 if the Company has earned and been paid at least the Target Percentage for the Measuring Period in the year 2003; . an additional 25% of the Warrant Shares may be purchased on or after June 1, 2004 if the Company has earned and been paid at least the Target Percentage for the Measuring Period in the year 2004; and . an additional 25% of the Warrant Shares may be purchased on or after June 1, 2005 if the Company has earned and been paid at least the Target Percentage for the Measuring Period in the year 2005. In addition, if the Warrant is not accelerated for any Measuring Period described above, but as of the end of any subsequent Measuring Period it is determined that the Company has earned and been paid a cumulative average performance based incentive of at least the Target Percentage over the failed Measuring Period, such subsequent Measuring Period and any intervening Measuring Periods, then the amount of Warrant Shares for which this Warrant is exercisable shall, as of June 1 following the end of such subsequent Measuring Period, include the amount of Warrant Shares for the failed Measuring Period(s). For example, if the Company fails to obtain the Target Percentage for the Measuring Period ending March 31, 2003, but obtains a cumulative average market share of at least the Target Percentage for the Measuring Periods ending March 31, 2003 and 2004, then the number of exercisable Warrant Shares shall, as of June 1, 2004 include the 25% of the Warrant Shares that were previously excluded for the Measuring Period ending March 31, 2003, as well as the additional 25% of the Warrant Shares for the Measuring Period ending March 31, 2004. 2. Additionally, in the event that the Initial Holder terminates the General Agreement or the Agency Agreement pursuant to the terms thereof, the dates on which the Warrant Shares may be purchased shall be accelerated to the effective date of any such termination. [****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. ANNEX A ------- FORM OF SUBSCRIPTION -------------------- (To be signed only upon exercise of the Warrant) To: Cheap Tickets, Inc. The undersigned, the holder of a right to purchase shares of Common Stock of Cheap Tickets, Inc. (the "Company") pursuant to that certain Warrant to Purchase Common Stock of Cheap Tickets, Inc. (the "Warrant"), dated as of May 14, 2001, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, __________________________ (_________) shares of Common Stock of the Company and herewith makes payment of _________________________________ Dollars ($__________) therefor by the following method: (Check one of the following): _______ (check if applicable) The undersigned hereby elects to make payment of ______________ Dollars ($___________) therefor in cash. _______ (check if applicable) The undersigned hereby elects to make payment for the aggregate exercise price of this exercise using the Net Issuance method pursuant to Section 2 of the Warrant. The undersigned, in order to induce the issuance of such securities, makes to the Company, as of the date hereof, the following representations and warranties: 1. Purchase for Own Account. The undersigned represents that it is acquiring ------------------------ the Common Stock issuable upon exercise of the Warrant (collectively, the "Shares") solely for investment for such undersigned's own account not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, except as may be permitted under the federal securities laws, and that such undersigned has no present intention of selling, granting any participation in, or otherwise distributing the same. The acquisition by such undersigned of any of the Shares shall constitute confirmation of the representation by such undersigned that such undersigned does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Shares. 2. Disclosure of Information. Such undersigned has received all the information ------------------------- it considers necessary or appropriate for deciding whether to acquire the Shares. Such undersigned 1 ANNEX A ------- further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the Shares and the business, properties, prospects and financial condition of the Company. 3. Investment Experience. Such undersigned represents that it is able to fend --------------------- for itself and can bear the economic risk of its investment in the Shares, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Shares. If other than an individual, such undersigned also represents it has not been organized for the purpose of acquiring the Shares. Such undersigned acknowledges that any investment in the Shares involves a high degree of risk, and represents that it is able, without materially impairing its financial condition, to hold the Shares for an indefinite period of time and to suffer a complete loss of its investment. 4. Accredited Investor. Such undersigned represents that it is an "accredited ------------------- investor" within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of Regulation D, as presently in effect. 5. Further Limitations on Disposition. Without in any way limiting the ---------------------------------- representations set forth above, such undersigned further agrees not to make any disposition of all or any portion of the Shares unless and until: a) there is then in effect a registration statement under the Securities Act of 1933, as amended (the "Act") covering such proposed disposition and such disposition is made in accordance with such registration statement; or b) such undersigned shall have furnished the Company with an opinion of counsel reasonably satisfactory to the Company that such disposition will not require registration of such shares under the Act. c) Notwithstanding the provisions of paragraphs (a) and (b) above, no such registration statement or opinion of counsel shall be necessary for a transfer by the undersigned (i) to any entity that, directly or indirectly, is in control of, is controlled by, or is under common control with, the undersigned ("control" shall mean the power, directly or indirectly, to vote 51% or more of the voting securities of an entity) or (ii) the transfer by gift, provided that the transferee agrees in writing to be subject to the terms hereof to the same extent as the original undersigned hereunder. DATED: ________________ DELTA AIR LINES, INC. By:____________________ Name:__________________ Its:___________________ 2 ANNEX A ------- ACKNOWLEDGMENT -------------- To: Delta Air Lines, Inc. The undersigned hereby acknowledges that as of the date hereof, __________________ (_______) shares of Common Stock remain subject to the right of purchase in favor of Delta Air Lines pursuant to that certain Warrant to Purchase Common Stock of Cheap Tickets, Inc. dated as of May 14, 2001. DATED: ________________ CHEAP TICKETS, INC. By:__________________________ Name:________________________ Its:_________________________ 3 EX-10.26 6 dex1026.txt CONSOLIDATOR AGREEMENT Exhibit 10.26 NOTE: PORTIONS OF THIS EXHIBIT INDICATED BY "[****]" ARE SUBJECT TO A CONFIDENTIAL TREATMENT REQUEST, AND HAVE BEEN OMITTED FROM THIS EXHIBIT. COMPLETE, UNREDACTED COPIES OF THIS EXHIBIT HAVE BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AS PART OF THIS COMPANY'S CONFIDENTIAL TREATMENT REQUEST. America West Airlines CONSOLIDATOR AGREEMENT This Agreement is made January 1, 2001, between America West Airlines Inc., a Delaware corporation at 4000 East Sky Harbor Boulevard, Phoenix, Arizona 85034 (herein "America West") and Cheap Tickets Inc., a Hawaii corporation at 1440 Kapiolani Boulevard, Suite 800, Honolulu, Hawaii 96814 (herein "Customer"). The parties agree to the following mutual covenants: 1. FARES: a) This Agreement is valid for use by Cheap Tickets, Inc. b) Seats sold will be at specific fare levels in markets specified by America West and under the conditions stated in Attachments A and B herein. c) The net fares offered in conjunction with this Agreement shall be applicable for travel wholly over the services of America West and America West Express as specified in Attachment A; all other codeshare flights are not applicable. Net fares are provided in Consolidator Fares schedules per previous and/or future fare distributions. d) Net fares are subject to change at the sole discretion of America West. Written notice shall be provided to Customer not less than five (5) business days prior to the effective ticketing date of any net-fare change, or two (2) business days for electronically filed fares. Customer agrees that all tickets issued as of the effective date of any net-fare change shall reflect the applicable fares of such fare change. Customer agrees to sign and return the confirmation page of all Bulk Fare Advisories, thereby signifying acceptance of all terms, conditions and fares contained in said advisory. Failure to sign and return confirmation does not release Customer from adherence to any revisions made on such advisories. e) Fares do not include the following: U.S. transportation or --- international taxes, fuel surcharges, passenger facility charges, and/or other city/governmental surcharges. 2. Payment/Reporting: Customer agrees to issue tickets on standard industry ticket stock. In accordance with ARC policies and procedures, tickets will be reported and funds due for tickets will be remitted through ARC each week. Invoices for other than ticket sales shall be due and payable within fifteen (15) days from the date of invoice and shall not be subject to any offset or deduction for any purpose. Page 1 of 9 Consolidator Agreement Cheap Tickets, Inc. 3. Advertising: Customer agrees not to use the America West trade name, service marks, logos, emblems, symbols or other brand identifiers in any advertising, promotional material, brochures, facsimiles, printed matter, signs or Internet sites without the prior review and written approval of such material by America West. 4. Internet: If Customer utilizes an Internet site to facilitate the sale of America West seats, Customer agrees to the following: a) A complete list of all Internet addresses connected to the sale of America West seats will be provided to America West within ten (10) business days of submission of this signed Agreement. Any additions, deletions or corrections to this list must be communicated to America West within ten (10) business days of said additions, deletions or corrections. Communication must be made via electronic mail to sp&a@americawest.com. b) Customer agrees to provide monthly reports listing the number of America West tickets sold via the Internet and the grand total of America West ticket sales (Internet sales plus all other sales). Reports must be received by America West by the 10th business day of each month, with totals representing the previous month's ticket sales. The report must be sent via electronic mail to sp&a@americawest.com. c) If an Internet site contains restricted pages that are used to facilitate business, Customer agrees to provide America West with passwords necessary to gain access to restricted pages. 5. Contract Noncompliance: a) America West is entitled to receive compensation for the full value of the coach fare in the event that inventory sold is not ticketed or released in accordance with this Agreement, including Attachments A and B. b) Compensation due America West will be invoiced to Customer due and payable fifteen (15) business days after notification. c) Noncompliance with booking and/or ticketing procedures set forth in this Agreement and its Attachments will result in a debit memo to Customer. Noncompliance includes but is not limited to reservations booked and/or ticketed in the wrong class of service, wrong fare, individual bookings that qualify as a group, and/or booking published fares without ticketing in accordance with tariff rules. Customer will be responsible for noncompliance. America West will issue debit memos to recover CRS fees and full-ticket value of noncompliant bookings/tickets. Page 2 of 9 Consolidator Agreement Cheap Tickets, Inc. 6. Default: In the event Customer fails to make payment as required by this Agreement, America West shall provide written notice to Customer to cure such default within five (5) business days from the date of such notice. In the event such non-payment is not cured within said five (5) days, this Agreement shall be terminated immediately. If Customer fails to perform any other terms of this Agreement and is in default thereof, this Agreement may be terminated after thirty (30) days written notice of those matters in default and the failure of Customer to cure such default. America West shall be free to pursue all legal and equitable remedies available for any default. 7. Terms and Termination: a) The term of this Agreement is from January 1, 2001, through December 31, 2001, with all travel completed forty-five (45) days after the Agreement expires. Either party may terminate this Agreement without cause by giving not less than thirty (30) days prior written notice of the intention to do so. Such termination shall not relieve either party from payment of amounts currently due and owing. b) Should Customer fail to perform its duties as outlined in this Agreement, and such default continues after thirty (30) days written notice to correct such default, America West may terminate this Agreement without further notice. 8. Lost Tickets: When a passenger loses his/her America West ticket, the passenger may purchase a replacement ticket for the portion lost and will be refunded the price of the replacement ticket, minus the applicable fee, provided the itinerary (flight number, travel date, city) of the replacement ticket is exactly the same as the lost ticket. If a replacement ticket is not ------- purchased for the exact itinerary, no refund will be made. ----- 9. Commission: Attachment B herein represents the only commission program for which Customer is eligible. Customer shall be entitled to a commission on applicable published fares in specified markets for individual travel per --------- Attachment B. All published-fare commissions must be taken at point of sale. Net fares offered under this agreement are not eligible for commission. ARC ticketing locations included under this agreement shall not be eligible for further override commission or soft dollar incentives. 10. Confidentiality: All terms and conditions of this Agreement are strictly confidential. Any breach of confidentiality; duplication of the Agreement, its Attachments, Bulk Fare Advisories and/or Consolidator Fare schedules; use or disclosure of this Agreement in whole or in part for any purpose shall immediately render this Agreement null and void and subject to immediate cancellation at the option of America West. Page 3 of 9 Consolidator Agreement Cheap Tickets, Inc. 11. Entire Agreement: This Agreement represents the entire understanding between the parties. No waiver, alteration or modification of any of the provisions herein shall be binding unless in writing and signed by and authorized agent or representative of the parties. 12. Assignment and Binding Effect: The provisions of this Agreement shall be binding upon any successor to either of the parties, but shall not be assignable by Customer. 13. Attorney Fees: In the event action is necessary to enforce the terms of this Agreement, the prevailing party in such action shall be entitled to recover its reasonable attorney fees and costs. 14. Applicable Law: The laws of the State of Arizona shall govern this Agreement. 15. Authorized Ticketing Locations: Tickets issued under this Agreement may be issued only through designated ticketing locations as shown on Attachment C. Customer agrees to provide written notice of any changes, additions or deletions to designated ticketing locations upon not less than ten (10) days prior written notice to America West via electronic mail to sp&a@americawest.com. If e-mail is not available, changes should be sent to the following postal address: America West Airlines Off-Tariff Contracts, Mail Code CH-SPA 4000 East Sky Harbor Boulevard Phoenix, Arizona 85034 Page 4 of 9 Consolidator Agreement Cheap Tickets, Inc. All ARC lists, changes and additions submitted must include the following information: The complete eight-digit ARC number, agency name, address and phone number. If the number of ARC locations exceeds ten (10), Customer agrees to provide ARC numbers via electronic mail or floppy diskette (IBM compatible) in MS Excel format. Cheap Tickets, Inc. America West Airlines, Inc. By: /s/ Michael Hartley By: /s/ Ron L. Cole ------------------------------ ------------------------------ Michael Hartley Ron L. Cole, President & CEO Vice President, Sales Date: 12-18-00 Date: ---------------------------- ---------------------------- Initials: _________ __________ T. Christ Page 5 of 9 Consolidator Agreement Cheap Tickets, Inc. ATTACHMENT A -- NET FARE PROGRAM -------------------------------- PROGRAM TITLE: Cheap Tickets, Inc. - ------------- Address: 1440 Kapiolani Boulevard, Suite 800 Honolulu, Hawaii 96814 ARC Number(s): See Attachment C Automation System(s): Sabre Contact: Michael Hartley Phone: (808) 945-7439 Fax: (808) 945-0610 E-mail: mhartley@cheaptickets.com Internet site: www.cheaptickets.com RESERVATIONS: Booked by Customer only, through automation. Bookings made - ------------ [****] are permitted with [****]. Booking Class: Day: V class / Night KN class Groups: Not Permitted. OSI Entries: 3 OSI HP CTCT (808) 945-7439 CHEAP TICKETS 3 OSI HP CHANGES THROUGH CONSOLIDATOR ONLY 3 OSI HP FLIGHTFUND CREDIT NOT PERMITTED 3 OSI HP TKNA 401 xxxx xxx xxx TICKET INFORMATION: - ------------------ Changes: [****] non-commissionable fee per ticket. Ticket reissuance by Customer only, prior to original travel date only. Changes to name, origin or destination are not permitted. Once travel has commenced, changes to return are not permitted (standby travel only). Standby travel is permitted on night flights only, within 30 days of original travel date. Tickets are not valid after thirty (30) days from original travel date. Fares: As listed on Consolidator Fare list. All net fares are subject to change with five (5) business days notice or two (2) days for electronically filed fares. Fares are net, non-commissionable. Fares do not include taxes or surcharges. --- Net fares are subject to change until ticketed. When LAX-CMH nonstop night service is used for LAX to East Coast, the night fare may be used when the connecting flight out of CMH departs at or before 10 a.m. Applicable East Coast cities are BDL, BOS, BWI, DCA, EWR, LGA, MDW, ORD, PHL.
Page 6 of 9 Consolidator Agreement Cheap Tickets, Inc. ------------------------------------------------------------------------------ Fare Basis Codes: FARE BASIS CODES ------------------------------------------------------------------------------ Day Night Fare Type Off-Peak Day Peak Off-Peak Night Peak ------------------------------------------------------------------------------ HIGH Season One-Way VHO3CNO VHP3CNO KNHO2CNO KNHP2CNO ------------------------------------------------------------------------------ HIGH Season Roundtrip VHO3CN VHP3CN KNHO2CN KNHP2CN ------------------------------------------------------------------------------ LOW Season One-Way VO3CNO VP3CNO KNO2CNO KNP2CNO ------------------------------------------------------------------------------ LOW Season Roundtrip VO3CN VP3CN KNO2CN KNP2CN ------------------------------------------------------------------------------
IT Code: ITLPCTI (must appear in tour code box) Restrictions: Tickets are nontransferable and nonrefundable, with the exception of death of the passenger (properly documented). Ticketing Agency: Cheap Tickets, Inc. Ticket Time Limit: All tickets must be issued [****]. Ticket Entries: 1. Base net fare, tax and total on auditor's coupon only. --------------------- 2. Flight coupons shall show zero (0) or BULK plus applicable XF charges. 3. Not valid before date of travel. 4. Not valid after thirty (30) days from original travel date. PROGRAM SPECIFICS: - ----------------- Days/Travel: Off-Peak [****] (both directions). Peak [****]. Flight Fund: Not permitted on net fares; permitted on published fares only. Net fares must include the following PNR entry: 3GRPS/HPNN1 TCP1 CHEAP TICKETS Markets: Systemwide (consolidator) Domestic, Mexico and ANC [****] [****] [****] [****] Open Jaw Permitted Open Returns Not Permitted PTA/TBM: Not Permitted Routing: Published America West and America West Express routings only. All other codeshare flights are not applicable. Rule 240: Permitted [****] [****] Stopover: Not Permitted Waitlists: Not Permitted
[****] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. Page 7 of 9 Consolidator Agreement Cheap Tickets, Inc. ATTACHMENT B -- COMMISSION ON PUBLISHED FARES (Individual Travel) ----------------------------------------------------------------- RESERVATIONS: - ------------ Booking Class: Applicable published fare type Groups: Not permitted Reservations: Booked by Customer only TICKET INFORMATION: - ------------------ Applicable Fares: America West published fares in effect at the time of ticketing and according to the tariff rules of that published fare (except as stated below). See "Restrictions" below. Disclaimer: Certain short-term, introductory or other published ---------- promotional fares specifically prohibiting additional discounts do not apply. Restrictions: ------------ 1. Companion fares do not apply 2. Promotional fares specifically prohibiting additional discounts do not apply 3. Other discounts do not apply (senior discounts, vouchers, etc.) 4. F-class excursion fares do not apply (FE14, etc.) [****] [****] Fare Basis Code: Applicable to the published fare used. IT Code: ITLPCTIPBA (must appear in tour code box) --- Ticketing Agency: Cheap Tickets, Inc. ARC Number(s): See Attachment D Ticket Entries: All published fare ticket entries are required, with the exception of the following: The discounted published fare should be omitted from the base, tax and total box of the passenger coupon if Customer uses all of or a portion of commission to discount the published fare. The discounted published fare and applicable base, tax, total and commission amounts must be shown on all auditor's coupons. PROGRAM SPECIFICS: - ----------------- Markets: Published America West and America West Express routings only. Codeshare flights are not applicable. Restrictions: All published rules apply, unless otherwise stated above.
Page 8 of 9 Consolidator Agreement Cheap Tickets, Inc. [****] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. ATTACHMENT C -- AUTHORIZED TICKETING LOCATIONS ---------------------------------------------- PROGRAM TITLE: Cheap Tickets, Inc. - ------------- 1440 Kapiolani Boulevard, Suite 800 Honolulu, Hawaii 96814 ARC NUMBERS OF AUTHORIZED TICKETING LOCATIONS UNDER THIS AGREEMENT: - ------------------------------------------------------------------ 05508274 05513266 05521714 05644236 05685713 05709745 06644444 12505964 12518483 12530954 12601676 12916120 33514526 33965750 36975820 50523911 Page 9 of 9 Consolidator Agreement Cheap Tickets, Inc. EX-10.27 7 dex1027.txt CORPORATE MASTER AGREEMENT Exhibit 10.27 NOTE: PORTIONS OF THIS EXHIBIT INDICATED BY "[****]" ARE SUBJECT TO A CONFIDENTIAL TREATMENT REQUEST, AND HAVE BEEN OMITTED FROM THIS EXHIBIT. COMPLETE, UNREDACTED COPIES OF THIS EXHIBIT HAVE BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AS PART OF THIS COMPANY'S CONFIDENTIAL TREATMENT REQUEST. CORPORATE MASTER AGREEMENT Between Cheap Tickets, Inc. Vignette Corporation "Client" "Vignette" a Delaware corporation a Delaware corporation and 1440 Kapiolani Blvd. Suite 800 901 South Mo Pac Expressway Street Address Building 3 Honolulu, HI 96814 Austin, Texas 78746-5776 City, State, Zip This Corporate Master Agreement (this "Agreement"), effective October 31, 2000 (the "Effective Date"), sets forth the terms and conditions under which the parties agree that Client may, pursuant to one or more separately executed Schedules, (i) obtain licenses to use (a) Vignette's proprietary, non-custom software (the "Programs") listed on the relevant Schedule(s), (b) Vignette- furnished proprietary, custom software (the "Custom Programs") provided pursuant to consulting services listed on the relevant Schedule(s) and (c) the user documentation (the "Documentation") that Vignette makes generally available in hard copy or electronic form to its general customer base in conjunction with licenses of the Programs, (ii) purchase the services listed on the relevant Schedules, and (iii) purchase the services (the "Services") listed on one or more separately executed Assignments of Work. In this Agreement, the term "Software" shall mean the Programs and/or the Custom Programs, along with the Documentation, as appropriate. This Agreement shall consist of this Agreement Form, the attached Exhibits, and all executed Schedules, as well as all other referenced attachments and any amendments. This Agreement is effective only upon full execution by both parties. If Client is not a corporation or other legal entity formed in a state of the United States, the terms and conditions of Exhibit B attached hereto shall apply to this Agreement. By signing below, each party agrees to the terms of this Agreement. Any executed copy of this Agreement made by reliable means (e.g., photocopy or facsimile) is considered an original. Agreed to by: Vignette Corporation Cheap Tickets, Inc. (Client) By: By: /s/ Paul B. Halstead -------------------------------- --------------------------------- (Signature) (Signature) By: By: Paul B. Halstead -------------------------------- --------------------------------- (Name typed or printed) (Name typed or printed) By: By: CTO -------------------------------- --------------------------------- (Title) (Title) By: By: 10/30/00 -------------------------------- --------------------------------- (Date) (Date) 1 EXHIBIT A CORPORATE MASTER AGREEMENT GENERAL TERMS AND CONDITIONS 1. LICENSE GRANT AND RIGHT OF USE. a. Provided that the Agreement and each relevant Schedule have been fully executed by both Vignette and Client, Vignette grants to Client a nonexclusive and nontransferable license to install and use the number of copies of the object code version of the Programs and if applicable, the source code version of Custom Programs, pursuant to the terms and conditions herein and in the executed Schedules. Unless otherwise designated, all licenses granted hereunder shall be perpetual. b. Unless otherwise specified on the relevant Schedule, each copy of the Software licensed hereunder [****]. Client may use the Software for the functions expressly licensed by Client solely for Client's own internal business purposes in the software operating environment (if any) specified on the applicable Schedule. The Software may not be used to provide computer time sharing, third-party training on the use of the Software, virtual or actual hosting or as a service bureau for any third parties. Client shall not (and shall not permit any employee or other third party to copy, use, analyze, reverse engineer, decompile, disassemble, translate, convert or apply any procedure or process to the Software in order to ascertain, derive, and/or appropriate for any reason or purpose, the source code or source listings for the Programs or any trade secret information or process contained in the Software. Other special license terms and restrictions specified on the relevant executed Schedules are incorporated by reference into this Section 1. Client's rights in the Software will be limited to those expressly granted in this Agreement. Vignette reserves all rights and licenses in and to the Software not expressly granted to Client under this Agreement. 2. FEES a. Client shall pay Vignette the license fees and the Maintenance fees for the Software specified on the applicable Schedule within 30 days after receipt of Vignette's invoice. [****] All Software will be shipped FOB Vignette's site. Invoices may contain shipping and handling charges. b. Client shall pay any other fees and prices specified on a Schedule or Assignment of Work within 30 days after receipt of Vignette's applicable invoice. c. All prices and fees are in U.S. dollars unless otherwise specified. All amounts payable under this Agreement are exclusive of all sales, use, value-added, excise, property, withholding, and other taxes and duties. Client will pay all taxes and duties assessed in connection with this Agreement and Client's performance hereunder by any authority. Client will promptly reimburse Vignette for any and all taxes or duties that Vignette may be required to pay in connection with this Agreement or its performance. This provision does not apply to any taxes for which Client is exempt, provided Client has furnished [****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 2 Vignette with a valid tax exemption certificate, or to Vignette's income or franchise taxes. 3. REPRODUCTION OF THE SOFTWARE a. Vignette shall provide Client with a single copy (the "Master Copy") of each Software product licensed hereunder. Subject to the other terms and conditions herein, Client may use the Master Copy (including all Updates provided hereunder) to install the number of copies specified on the relevant Schedule on Client's computer server(s) in accordance with the license grant. b. Client may also (i) make one copy of the Master Copy for archival purposes, (ii) install one copy of the Software at a backup location for its use only as and when necessary for business resumption purposes in the event of Client's primary computing facility, becoming inoperable, (iii) install an additional copy as necessary to accommodate a move of the installed Software from one server to another (provided that the original installation is removed after the new server is operational), and (iv) copy the installed copies of the Software onto system backup media to the extent necessary to accommodate Client's normal system backup routines. Otherwise, Client may not copy the Software, in whole or in part. c. Client shall assume all responsibility for the quality of the copies made hereunder. Client shall include Vignette's copyright notice(s), proprietary rights legend(s), and other indicia of ownership on all copies, in the content and format as those that were contained on the Master Copy. Client shall pay all duplication and distribution costs incurred by Client by copying the Software, and shall also pay applicable use taxes, customs duties and similar fees. 4. MAINTENANCE AND OTHER SERVICES a. Provided Client elects to obtain maintenance services ("Maintenance") for a Program and pays all applicable Maintenance fees, Vignette shall provide Client with the following Maintenance services for the period commencing on the date Vignette delivers the relevant Program to Client through the period ending one anniversary year thereafter (the "Initial Maintenance Period"): i. Updates to the Programs. [****] ii. [****] iii. [****] [****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 3 b. Upon expiration of the Initial Maintenance Period, Maintenance shall automatically renew for successive annual periods (each an "Annual Maintenance Period"), provided (i) Vignette continues to offer Maintenance for the relevant Program(s) to its general client base; (ii) Client pays the Maintenance fees applicable for the relevant Annual Maintenance Period, and (iii) Client does not terminate Maintenance by providing Vignette with at least 30 days written notice prior to the expiration of the applicable Initial or Annual Maintenance Period. Maintenance fees for the Program(s) shall be calculated [****]. All Maintenance fees shall be due and payable at the beginning of each Maintenance Period. Further, Updates shall be deemed Software for purposes of this Agreement. c. Client agrees to provide Vignette with all information and materials requested by Vignette for use in replicating, diagnosing and correcting an error or other Program problem reported by Client. Client acknowledges that all Updates provided by Vignette will be cumulative in nature, and therefore Client agrees to install all Updates provided by Vignette Client further acknowledges that Vignette's ability to provide satisfactory Maintenance is dependent on Client (i) installing all Updates and (ii) providing Vignette with the information necessary to replicate Program problems. d. Vignette shall not be obligated to provide Maintenance for any software other than the Programs (including all Updates) as delivered by Vignette to Client. Except to the extent Vignette modifies the Programs pursuant to the provision of Maintenance, [****]. e. Vignette shall provide consulting and training Services (each an "Assignment"), under the terms of this Agreement, agreed to by the parties and specified on one or more separately executed Schedule(s) or Assignment of Work(s). In the event of any conflict between this Agreement and an Assignment of Work, the provisions of the Assignment of Work shall prevail. All Assignments shall be billed on a time and materials basis at Vignette's then-current consulting rates unless otherwise agreed in writing by the parties. Any monetary limit referenced in an Assignment of Work shall be an estimate only for purposes of Client's budgeting and Vignette's resource scheduling unless expressly stated to be a definitive limit. Vignette shall have the right to use third parties in performance of Assignments hereunder and, for purposes of this Agreement, all references to Vignette or its employees shall be deemed to include such third parties. Client shall provide Vignette access to its equipment, systems and other facilities to the extent reasonably required by Vignette for the performance [****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 4 of Assignments hereunder. For any on-site services requested by Client, Client agrees to reimburse Vignette for its actual, reasonable travel and other out-of-pocket expenses incurred. 5. CONFIDENTIALITY a. Any business, operational or technical information provided to Client by Vignette hereunder that is marked or otherwise identified as confidential or proprietary, or that Client knows or should know is confidential or proprietary, the Software and other deliverables furnished by Vignette (including, but not limited to the oral and visual information relating thereto and provided in Vignette's training classes, seminars, and publications), and the terms of and pricing under this Agreement (collectively Vignette's "Proprietary Information") contain valuable and confidential information that is proprietary to Vignette and to third parties from whom Vignette has obtained marketing rights (the "Third Party Licensors"), and which includes and constitutes trade secrets and unpublished copyrighted material of Vignette and the Third Party Licensors. Client agrees to maintain the confidentiality of Vignette's Proprietary Information and to only use it in carrying out its rights and obligations under this Agreement. Nothing in this Agreement shall be construed to convey any title or ownership rights to the Software or Proprietary Information to Client. Client shall not sublicense, rent, assign, transfer or disclose the Proprietary Information to any third party and shall not reproduce, perform, display, prepare derivative works of, or distribute the Proprietary Information except as expressly permitted in this Agreement. Client shall not disclose the results of any benchmark tests of the Programs to any third party without Vignette's prior written approval. Client shall make commercially reasonable efforts to prevent the theft of any Proprietary Information and/or the disclosure, copying, reproduction, performance, display, distribution and preparation of derivative works of the Proprietary Information except as expressly authorized herein. b. Vignette agrees to maintain the confidentiality of business, operational and other information provided by Client to Vignette hereunder, provided such information is marked or otherwise identified by Client as confidential or proprietary or is of a nature that Vignette knows or should know is confidential or proprietary (also referred to herein as "Proprietary Information"), and will only use it in carrying out its rights and obligations under this Agreement. c. Both parties agree to restrict access to the Proprietary Information of the other only to employees who (i) require access in the course of their assigned duties and responsibilities in connection with this Agreement, and (ii) have agreed in writing to be bound by provisions no less restrictive than those set forth in this Section 5. d. The confidentiality obligations of the parties regarding the Proprietary Information of the other shall not apply to any material or information that (i) is or becomes a part of the public domain through no act or omission by the receiving party, (ii) is independently developed by employees of the receiving party without use or reference to the Proprietary Information of the other party, (iii) is disclosed to the receiving party by a third party that, to the 5 receiving party's knowledge, was not bound by a confidentiality obligation to the other party, or (iv) is demanded by a lawful order from any court or any body empowered to issue such an order. Each party agrees to notify the other promptly of the receipt of any such order, and to provide the other with a copy of such order. 6. TERM AND TERMINATION a. This Agreement shall continue in force and effect perpetually unless terminated pursuant to its provisions. b. This Agreement, any Assignment of Work, and/or any license granted hereunder may be terminated in accordance with the following: i. Vignette may terminate this Agreement, any Assignment of Work and/or any licenses granted herein: A. Upon 15 calendar days notice if Client uses, transfers or discloses any of the Software or other Proprietary Information, or any copy or modification thereof, in violation of this Agreement, unless Client has fully cured such breach within such 15 day period; B. Upon 30 calendar days written notice if Client has breached any other material provision of this Agreement, including failure to make payments when due, and such breach is not fully cured within such 30 day period. ii. Client may terminate this Agreement or any Assignment of Work on 30 calendar days written notice if Vignette has breached any material provision of this Agreement and such breach is not fully cured within such 30 day period. c. Upon termination of the Agreement or any license(s) granted herein, [****]. Client shall immediately stop using all such Proprietary Information (including Software) and shall return all copies to Vignette, except that Client may instead choose to delete all installed copies off of any and all storage media possessed by Client. Client shall provide Vignette with written certification signed by an officer of Client that all copies of the Software have been returned or destroyed and that Client has retained no copies. d. Any incomplete Assignment of Work(s) shall be terminated concurrently with this Agreement. Client shall pay a pro-rata portion of any Assignment that is incomplete at the time of termination and for which payments have not been made and Vignette shall deliver to Client copies of all such incomplete work for which payment has been made, unless any applicable license for such work has been terminated. e. Termination of this Agreement, any Assignment of Work or any license granted hereunder shall not limit the remedies otherwise available to either party, including injunctive relief. 7. WARRANTIES Vignette warrants that for the first [****] following delivery of the Program to Client (the "Warranty Period"), (i) the Programs as delivered will perform substantially in [****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 6 conformance with the applicable Documentation, and (ii) that the digital or electronic media on which the Programs and the Documentation are distributed are free from defects in materials and workmanship. Vignette does not warrant that the Programs will operate in combinations except as specified in the Documentation. Notwithstanding any other provision of this Agreement, Vignette and Client acknowledge that Client's use of the Software or other deliverables provided hereunder may not be uninterrupted or error-free. As Client's sole and exclusive remedy and Vignette's entire liability for any breach of the foregoing warranty, Vignette will, at its sole option and expense, promptly repair or replace any medium or Program which fails to meet this limited warranty or, if Vignette is unable to repair or replace the medium or the Program, refund to Client the applicable license fees paid upon return of the nonconforming item to Vignette. If Vignette remits to Client a refund for a particular Program, as contemplated by this paragraph, [****]. a. Vignette warrants that its Services provided hereunder shall be performed consistent with generally accepted industry standards. This warranty shall be valid for [****] days from the date of performance of the relevant service. b. Vignette warrants to Client that Vignette has the right to enter into this Agreement and to grant the rights and licenses herein and, that to the best of Vignettes knowledge, that Software does not infringe any patent or copyright or violate any other proprietary rights of a third party. Vignette's sole and exclusive obligation, and Client's sole and inclusive remedy, for breach of this warranty with respect to intellectual property or proprietary rights of any kind, is Vignette's indemnification of Client as set forth in Section 8 below. c. Provided that all date data provided to the Programs is in full 4 digit year format, Vignette warrants that the Programs as delivered to Client by Vignette: (i) have been designed to be Year 2000 compliant, which shall include, as an illustration but not a limitation, date data century recognition, and calculations that accommodate same and multi-century formulae and date values; (ii) will operate in substantial accordance with the Documentation prior to, during and after the calendar year 2000 AD; and (iii) shall not end abnormally or provide invalid or incorrect results as a result of date data, specifically including date data which represents different centuries or more than one century. The foregoing warranty shall not apply to (iv) third party software that is or may be used in conjunction with the Programs, including database and operating systems vendors, (v) any non-compliance to the extent caused by hardware, third party software or applications and content developed with or operating with the Programs as delivered, or (vi) Client's use of other than a current unaltered release of the Programs if use of a current, unaltered release of the Programs would avoid the nonconformance. Client is solely responsible for all system integration and testing of the Software in a fully Year 2000 compliant operating, environment, including all hardware, system software, databases, network environment, and other interoperating components. [****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 7 d. Vignette warrants that it will use commercially reasonable efforts to ensure the Software as delivered by Vignette does not contain viruses, worms, Trojan horses or other unintended malicious or destructive code ("Malicious Code"). If Malicious Code is discovered in Software as delivered by Vignette, Vignette shall provide Client with a clean copy that does not contain such Malicious Code within [****] days following Client's notice to Vignette of a breach of this warranty. However, Client is hereby notified that the Software may contain time-out devices, counter devices, and/or other devices intended to ensure the limits of a particular license will not be exceeded ("Limiting Devices"). If the Software does contain Limiting Devices, Vignette shall ensure that Client receives any codes or other materials necessary to use the Software to the limits of Client's license. e. EXCEPT AS EXPLICITLY STATED IN THIS AGREEMENT, VIGNETTE MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY, NONINFRINGEMENT AND FITNESS OF A PARTICULAR PURPOSE. 8. VIGNETTE INDEMNITIES a. Vignette will defend or settle, at its expense, any action brought or allegation made against Client to the extent that it is based upon a claim that the Software, as provided by Vignette to Client under this Agreement and used within the scope of this Agreement, infringes any copyright, trade secret, U.S. patent or other proprietary right, and [****]. Vignette's obligations hereunder are contingent on the following conditions: i. Client must notify Vignette in writing promptly after Client becomes aware of a claim or the possibility thereof; and ii. Client must grant Vignette the sole control of the settlement, compromise, negotiation, and defense of any such action; and iii. Client must provide Vignette with all information related to the action that is reasonably requested by Vignette; and iv. Vignette may, at its option, (A) obtain the right for Client to continue using the Software; or (B) replace or modify the Software so it is no longer infringing, or (C) terminate the applicable license(s) and remove the Software. If Vignette so terminates the applicable license(s) and removes the Software, [****]. b. The foregoing indemnity shall not apply to any infringement claim to the extent arising from (i) [****]; and/or (ii) [****]; and/or (iii) [****]; and/or (iv) [****]; and/or (v) [****]. [****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 8 c. Vignette will indemnify and hold Client harmless from all actual liabilities, damages and losses incurred by Client arising out of any legal action based on any claim of wrongful death, bodily injury or physical destruction of tangible property to the extent resulting from any acts or omissions of Vignette in the performance of its duties hereunder. The indemnity specified in this subsection is contingent on the conditions specified in subsections (a)(i)-(iii) above. d. Vignette shall not be liable hereunder for any settlement made by Client without Vignette's advance written approval or for any award from any action in which Vignette was not granted control of the defense. e. The parties agree to cooperate in good faith in the defense of any legal action or suit that causes one party to invoke an indemnity hereunder. f. This Section 8 states Vignette's entire liability and Client's exclusive remedy for infringement of intellectual property rights of any kind. 9. CLIENT INDEMNITIES a. Except to the extent Client is entitled to indemnification under Section 8.a. above, Client will defend or settle, at its expense, any action brought or allegation made against Vignette to the extent that it is based upon (i) [****] or (ii) [****]. Client's obligations hereunder are subject to the following conditions: i. Vignette must notify Client in writing promptly after Vignette becomes aware of a claim or the possibility thereof; ii. Vignette must grant Client the sole control of the settlement, compromise, negotiation, and defense of any such action; and iii. Vignette must provide Client with all information related to the action that is reasonably requested by Client. b. Client will indemnify and hold Vignette harmless from all actual liabilities, damages and losses incurred by Vignette arising out of any legal action based on any claim of wrongful death, bodily injury or physical destruction of tangible property to the extent resulting from any acts or omissions of Client hereunder. The indemnity specified in this subsection is subject to the conditions specified in subsections (a)(i)-(iii) above. c. Client represents and warrants that it shall comply with all laws, rules, and [****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 9 regulations of the United States and other countries that may be applicable to the Software or to Client's activities under this Agreement. [****] arising from breach of the warranties or Client's obligations set forth in this paragraph. The indemnity specified in this subsection is subject to the conditions specified in subsections (a)(i)-(iii) above d. Client shall not be liable hereunder for any settlement made by Vignette without Client's advance written approval or for any award from any action in which Client was not granted control of the defense. e. The parties agree to cooperate in good faith in the defense of any legal action or suit that causes one party to invoke an indemnity hereunder. f. This Section 9 states Client's entire liability and Vignette's exclusive remedy for infringement of intellectual property of any kind. 10. LIMITATIONS OF LIABILITY a. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EXCEPT WITH RESPECT TO VIGNETTE'S OBLIGATIONS UNDER SECTION 8, NOTWITHSTANDING THE FORM (E.G., CONTRACT, TORT (INCLUDING NEGLIGENCE) STATUTORY LIABILITY OR OTHERWISE) IN WHICH ANY LEGAL OR EQUITABLE ACTION MAY BE BROUGHT AGAINST VIGNETTE, NEITHER VIGNETTE NOR ITS THIRD PARTY LICENSORS SHALL BE LIABLE HEREUNDER FOR DAMAGES WHICH [****]. b. TO THE EXTENT PERMITTED BY APPLICABLE LAW, IN NO EVENT SHALL VIGNETTE OR ITS THIRD PARTY LICENSORS BE LIABLE FOR ANY SPECIAL, INCIDENTAL, INDIRECT, EXEMPLARY, PUNITIVE DAMAGES, OR FOR ANY INDIRECT OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO THOSE FOR BUSINESS INTERRUPTION OR LOSS OF PROFITS, EVEN IF VIGNETTE HAS BEEN NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGE. c. NOTHING IN THIS AGREEMENT SHALL LIMIT EITHER PARTY'S LIABILITY FOR DEATH OR PERSONAL INJURY CAUSED BY A PARTY'S NEGLIGENCE OR LIABILITY FOR FRAUD. d. The provisions of this Agreement allocate the risks between Client and Vignette. Vignette's pricing reflects this allocation of risk and the limitations of liability specified herein. 11. MISCELLANEOUS a. In the event any action is brought to enforce any provision of this Agreement, or to declare a breach of this Agreement, the prevailing party shall be entitled to recover, in addition to any other amounts awarded, reasonable legal and other related costs and expenses, including attorney's fees, incurred thereby. [****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 10 b. Client shall comply with all then current export and import laws and regulations of the United States and such other governments as are applicable to the Software. Client hereby certifies that it will not directly or indirectly, export, re-export, or transship the Software or related information, media, or products in violation of United States laws and regulations. d. Client may not assign this Agreement or any license granted or created hereunder whether by operation of law, change of control, or in any other manner, without the prior written consent of Vignette, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, [****]. ("Affiliate" of a party shall mean such party's parent corporation, any entity under the control of such party's parent corporation at any tier, or any entity controlled by such party at any tier. "Control" shall mean the power to direct or cause the direction of the management and policies of the entity through the ownership of more than 50% of the outstanding voting interests in such entity.) e. The parties are independent contractors and nothing in this Agreement shall be deemed to make either party an agent, employee, partner or joint venturer of the other party. Neither party shall have the authority to bind, commit, or otherwise obligate the other party in any manner whatsoever. Vignette may use Client's plain text name to list Client as a customer of Vignette. f. During the term of this Agreement and for [****] months thereafter, both parties agree not to solicit or to offer employment to any employees of the other party without it's the other party's prior written consent. g. Any notice required under this Agreement shall be given in writing and shall be deemed effective upon mailing by first class mail, properly addressed and postage prepaid, or delivery by courier service to the address specified on the face page hereof or to such other address as the parties may designate in writing. h. If any portion of this Agreement is determined to be or becomes unenforceable or illegal, such portion shall be deemed eliminated and the remainder of this Agreement shall remain in effect in accordance with its terms as modified by such deletion. This Agreement shall be governed by and interpreted in accordance with the laws of the United States and the State of Texas, excluding its choice of law rules. i. Definitions set forth in any part of this Agreement shall apply to all parts of this Agreement. In the event of a conflict between the terms of different parts of this Agreement, the following order of priority shall apply: first, the relevant Schedule(s); second, the relevant Assignment(s) of Work; third the Exhibits; and fourth, the Agreement. j. Client shall permit Vignette by any reasonable and appropriate means to verify that Client has complied with the provisions of Sections 1 (Software [****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 11 License), 5 (Confidentiality) and 6 (Termination), and Client agrees to cooperate fully with such a verification. [****] unless Client is in material breach of this Agreement. All such verifications shall take place upon not less than [****] business days notice to Client, during Client's regular business hours and will be conducted in a manner designed to minimize any impact on Client's normal business operations. Vignette shall be entitled, in addition to its other legal remedies, to obtain injunctive relief to enforce the terms of Sections 1, 2, 5 and 6. k. The following terms and conditions will survive termination: Sections l(b) (except for the first 2 sentences), 2, 5, 6(c), 6(d) 8, 9, 10 and 11. l. If Client is the United States Government or any contractor thereof, all licenses granted hereunder are subject to the following: (i) for acquisition by or on behalf of civilian agencies, as necessary to obtain protection as "commercial computer software" and related documentation in accordance with the terms of this Commercial Software Agreement as specified in 48 C.F.R. 12.212 of the Federal Acquisition Regulations and its successors; (ii) for acquisition by or on behalf of units of the Department of Defense ("DOD") as necessary to obtain protection as "commercial computer software" and related documentation in accordance with the terms of this commercial computer software license as specified in 48 C.F.R. 227-7202-2 of the DOD F.A.R. Supplement and its successors. m. This Agreement (including the attached Schedules, Assignment of Work(s) Exhibits and referenced attachments) constitute the entire agreement between the parties regarding the subject matter hereof and supersede all proposals and prior discussions and writings between the parties with respect thereto. The parties agree that this Agreement cannot be altered, amended or modified, except in writing that is signed by an authorized representative of both parties. It is expressly agreed that the terms of any Client purchase order or other ordering document (except for mutually executed license Schedules and Assignments of Work) shall be without force and effect. This Agreement shall also supersede all term of any unsigned or "shrinkwrap" license included in any package, media or electronic version of software licensed under a Schedule. n. Except for actions for preliminary injunctive relief, actions arising from a breach of confidentiality, actions brought to enforce a claim which is covered by the indemnity provisions of this Agreement and actions to enforce the decisions of the arbitrators, all disputes arising out of or related to this Agreement, including the scope, the construction or application of this Agreement, shall be resolved by arbitration in accordance with the commercial arbitration rules of the American Arbitration Association then in force. Notwithstanding the preceding, both sides agree that the Federal Rules of Evidence will govern any such proceeding. The arbitration hearings shall be held in Honolulu, Hawaii, and shall be conducted in English. If the parties cannot agree upon a single arbitrator within 15 days after demand by either of them, each party shall select one arbitrator knowledgeable of the computer service industry and notify the other of its selection, and such two arbitrators shall select a third. All [****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 12 arbitrators must be licensed attorneys with experience in contract law. All arbitrators must be able to sign an oath of neutrality evidencing no demonstrable bias. The arbitrator(s) shall conduct a hearing within 30 days after their selection. A majority of the arbitrators shall determine the decision/award, which shall be rendered within five days after the completion of the hearing. The decision of the arbitrator(s) shall be final and binding upon the parties both as to law and to fact, and shall not be appealable to any court in any jurisdiction. The expenses of the arbitrators shall be shared equally by the parties. Nothing in any indemnification provision hereunder shall be construed as having any bearing on the award of attorneys fees under this Section. The provisions for integration contained in this Agreement shall also apply to the admissibility of evidence in any dispute subject to arbitration. 13 EXHIBIT B Terms and Conditions for Non-U.S. Corporations or Entities If Client is not a corporation or other legal entity formed in a state of the United States, the terms and conditions of this Exhibit B shall apply to this Agreement. If Client is a corporation or other legal entity formed in a state of the United States, this Exhibit B is inapplicable. 1. Notwithstanding anything to the contrary in this Agreement, Vignette may give notice in writing to Client to terminate this Agreement, with immediate effect: a. Upon (A) the institution by or against Client of insolvency, receivership or bankruptcy administration or compulsory winding-up proceedings or any other proceedings for the settlement of Client's debts; (B) Client's making any assignment for the benefit of creditors; or (C) Client's liquidation, dissolution or ceasing to conduct business in the normal course; b. In the event that any current legislation or exchange controls under applicable law preclude Client from making payments to Vignette in United States currency for a period of 60 days; provided, however, that termination under this subsection shall not relieve Client of its payment obligations under this Agreement; or c. Upon the enactment of any law, or regulation by any governmental authority which would impair or restrict (A) the right of Vignette to terminate this Agreement as herein provided, (B) Vignette's right, title or interest in the Software and the intellectual property rights therein and thereto, or (C) Vignette's rights to receive the payments under this Agreement. 2. Client represents and warrants that the provisions of this Agreement, and the rights and obligations of the parties hereunder, are enforceable under the laws of the countries to which the Software will be delivered and in which the Software will be used. Client agrees to indemnify and hold harmless Vignette from all liabilities, damages, losses, claims, actions and expenses (including attorneys' fees) arising from breach of the warranties or Client's obligations set forth in this paragraph. 3. Client represents and warrants that no currency control laws prevent the payment to Vignette of any sums due under this Agreement. 4. Client represents and warrants that, as of the Effective Date of this Agreement, no consent, approval or authorization of, or designation, declaration or filing with, any governmental authority which has not been made or obtained by Client prior to the Effective Date, is required in connection with the valid execution, performance and delivery of this Agreement. If the laws or regulations of any country require this Agreement to be approved, registered or notified with or by any governmental authority, Client will be solely responsible for such obligations. Vignette will have the right to withhold delivery of the Software until it has received satisfactory evidence that any 14 required approvals, registrations or notifications have been obtained. Vignette will provide Client with such assistance as Client may reasonably request in making or obtaining any such approvals, registrations or notifications. In the event that the issuance of any approvals, registrations or notifications is conditioned upon an amendment or modification to this Agreement which is unacceptable to Vignette, Vignette will have the right to terminate this Agreement without further obligation whatsoever to Client. 5. Client will advise Vignette of any legislation, rule, regulation or other law (including but not limited to any customs, tax, trade, intellectual property or tariff law) which is in effect or which may come into effect after the Effective Date of this Agreement which affects the importation of the Software into, or the use and the protection of the Software within the country or countries to which the Software will be shipped and in which the Software will be used, or which has a material effect on any provision of this Agreement. 6. If any withholding or similar tax must be paid under the laws of any country outside of the U.S. based on the payments to Vignette specified in this Agreement, then Client will pay all such taxes and the amounts payable to Vignette under this Agreement will be increased such that the amounts actually paid to Vignette will be no less than the amounts Vignette would have received notwithstanding such tax. Client will provide Vignette with written documentation, including copies of receipts, of any and all such taxes paid in connection with this Agreement. 7. The parties specifically disclaim the UN Convention on Contracts for the International Sale of Goods. 8. Except for actions for preliminary injunctive relief and actions to enforce the decisions of the arbitrators, all disputes arising out of or related to this Agreement, including the scope, the construction or application of this Agreement, shall be resolved by arbitration in accordance with the commercial arbitration rules of the American Arbitration Association then in force. The arbitration hearings and all meetings pursuant to this section shall be held in Austin, Texas, and shall be conducted in English. If the parties cannot agree upon a single arbitrator within 15 days after demand by either of them, each party shall select one arbitrator knowledgeable of the computer service industry and notify the other of its selection, and such two arbitrators shall select a third. The arbitrator(s) shall conduct a hearing within 30 days after their selection. A majority of the arbitrators shall determine the decision/award, which shall be rendered within five days after the completion of the hearing. The decision of the arbitrator(s) shall be final and binding upon the parties both as to law and to fact, and shall not be appealable to any court in any jurisdiction. The expenses of the arbitrators shall be shared equally by the parties. Nothing in any indemnification provision hereunder shall be construed as having any bearing on the award of attorneys fees under this Section. The provisions for integration contained in this Agreement shall also apply to the admissibility of evidence in any dispute subject to arbitration. 9. This Agreement is in the English language only, which language shall be controlling in all respects, and all versions hereof in any other language shall be for accommodation only and shall not be binding upon the parties hereto. All communications and notices to 15 be made or given pursuant to this Agreement shall be in the English language. Les parties aux presentes confirment leur volonte que cette convention de meme que tous les documents y compris tout avis qui s y rattache, soient rediges en langue anglaise (translation: "The parties confirm that this Agreement and all related documentation is and will be in the English language."). 10. The terms and conditions of this Exhibit B shall survive termination of the Agreement. 16 APPENDIX A ENTERPRISE LICENSE SCHEDULE Schedule to Corporate Master Agreement. This Schedule supplements and amends the Corporate Master Agreement (the "Agreement"), by and between Vignette Corporation ("Vignette") and Cheap Tickets, Inc., ("Client") to license the Software specified herein and to incorporate the additional terms set forth below to grant Client an Enterprise License (the "Enterprise License") for the Software specified herein (the "Included Software"). This Enterprise License is in effect for the limited term specified below. 1. License Grant: a) Vignette grants Client one Domain License to install and use [****] number of copies of the Included Software throughout the Enterprise (defined below) on [****] number of Servers owned and operated by Client in connection with and in support of Client's world wide web sites operated through only those Universal Resource Locators ("URLs") that are wholly owned and controlled by Client. This Domain License does not extend to any use except for the operation of the Domain. This Domain License [****]. In the event that a third party does acquire Client, the Domain License shall be limited to Client's license configuration in effect as of the time of the acquisition. For purposes of this Schedule, "Enterprise" shall mean Client and any legal entity wholly owned and controlled by Client. b) The parties agree that the number of copies that Client may install pursuant to this Domain License shall be limited to the [****], in support of the Domain, as of the end of the Domain Term. If, after the end of the Domain Term, Client desires to install additional copies and/or utilize additional or increased functionality, Client must purchase such additional licenses pursuant to terms and conditions set forth on a separate Schedule mutually acceptable to the parties. Certain terms and definitions relevant to the scope of use of the Included Software are appended hereto as Appendix A ("Product Descriptions"). Notwithstanding the preceding sentence, to the extent the Product Descriptions refer to or reference restrictions that require additional licenses for that particular product based on usage, such restrictions shall not apply during the Domain Term. c) At the end of the Domain Term, Client shall possess a perpetual, fully-paid license to use the number of copies of Included Software [****] in support of the Domain, as of the end of the Domain Term. [****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 1 2. Included Software, Term and Fees: a) The "Included Software" is defined as: i) [****] ii) [****] iii) [****] iv) [****] v) [****] vi) [****] viii) [****] b) Vignette will ship one copy of each Included Software product listed above and associated documentation to Client at the following address within five business days after execution of this Schedule: Cheap Tickets, Inc. ------------------ 1440 Kapiolani Blvd., Suite 800 ------------------------------- Honolulu, HI 96814 ------------------ Attn: Eric Gomez ---------------- c) Term of Domain License: beginning October 31, 2000 and expiring October 30, 2003, (the "Domain Term") d) Fees: Product/Service Total Domain License Fee for the Domain Term $[****] Enterprise Level Support for the Domain Term $[****] - See Exhibit B Total Amount due upon execution of Agreement: [****] 3. Optional Maintenance Service and Fees: a) Provided that Client pays the fees specified above for Maintenance service ("Domain Level Support"), Vignette will provide Central Site Maintenance to the Client through the following Designated Location of Client (the "Central Site") Cheap Tickets, Inc. 1440 Kapiolani Blvd., Suite 800 Honolulu, HI 96814 Phone:___________________________________ Fax: ___________________________________ [****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 2 i) Client agrees that all Maintenance and Phone Support for the Included Software as required under Article 4 of the Agreement shall be provided by Vignette only [****]. Vignette shall have no obligation to provide any support for any copy of the Included Software at [****]and all inquiries to Vignette and communications between the parties shall be only with the Central Site. ii) Vignette shall provide one (1) copy of each correction, improvement, or update to the Central Site. Client shall have the right and obligation to copy and distribute each such correction, improvement, or update to the other Designated Locations. b) The Maintenance Fee for each subsequent year after the Domain Term shall be equal to [****]for the configuration installed and in production use by Client pursuant to the license granted herein 4. Additional Terms and Conditions a) During the Domain Term, the following terms and conditions shall apply to this Domain License and supersede and replace for such term only, those provisions of the Agreement which directly conflict with these terms and conditions. i) Client shall have the right to make and use multiple copies of the Included Software without obligations to pay additional License fees for copies made. ii) Upon Vignette's prior written request, Client shall conduct an annual audit to determine the quantities and the addresses of the then current locations at which the Included Software is installed at the end of each anniversary year and shall give Vignette written notice of the address of each such location on or before thirty (30) days following the end of each such anniversary year. b) Client shall not use the Included Software for service bureau or time sharing purposes. c) So that Vignette may accurately track the usage of the Included Software by Client, no later than two anniversary months prior to the end of the Domain Term, upon Vignette's prior written request, Client shall conduct an audit to determine the quantities and the addresses of the then current locations at which copies of the Included Software are installed pursuant to each type of license listed on Appendix 1 and shall give Vignette written notice of the quantities of licenses in use for installed Included Software on or before 90 days prior to the end of the Domain Term. Client shall notify Vignette of the final quantities of licenses in use for installed Included Software at the end of the Domain Term within 30 days following the end of the Domain Term. Such reports shall include, at a minimum, the following information regarding each installed copy of the Included Software: i) [****] [****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 3 ii) [****] iii) [****] iv) [****] v) [****] vi) [****] vii) [****] d) Client agrees, that in the event there is a good faith dispute regarding the audit results, that Client will cooperate fully in a secondary audit to be conducted by Vignette to ascertain Client's installed configuration at the end of the Domain Term for purposes of documenting the Included Software installed at the end of the Domain Term. e) Client agrees to serve as a "reference site". Vignette may refer up to two (2) potential new customers per calendar quarter to Client as a reference for the Software and Vignette, and Client agrees to respond reasonably to all such reference contacts. Client shall respond reasonably to questions from such prospective customers about Client's use of the Included Software (without breaching any duty of confidentiality hereunder and without any obligation to disclose any confidential information of Client). f) Client agrees to cooperate with Vignette to publish a joint press release with Vignette announcing Client's purchase of a license for the Included Software to be released after the execution of this Agreement. g) h) The pricing and other consideration reflected in this Schedule are contingent upon Client's execution of this Schedule by 6:00 pm Central Time on October 31, 2000 All other terms and conditions of the Agreement which are not expressly modified herein shall remain in full force and effect. [****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 4 IN WITNESS WHEREOF, duly authorized representatives of the parties have executed this Schedule as of the last date written below. Vignette Corporation (Cheap Tickets, Inc.) By: By: /s/ Paul B. Halstead _______________________________ ------------------------------ (Signature) (Signature) By: By: Paul B. Halstead _______________________________ ------------------------------ (Name typed or printed) (Name typed or printed) By: By: CTO _______________________________ ------------------------------ (Title) (Title) By: By: 10/30/00 _______________________________ ------------------------------ (Date) (Date) 5 APPENDIX A A. V/5 Products [****] [****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 6 EXHIBIT B --------- Maintenance and Support Services offered by Vignette A. Maintenance ----------- 1. Updates ------- [****] 2. Electronic Support Included --------------------------- [****] 3. Extent of Maintenance --------------------- [****] B. Support Offerings ----------------- 1. Electronic Support (Included with the purchase of Basic, Extended or Enterprise Support) [****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 1 a. Problem Submission . [****] . [****] . [****] . [****] . [****] b. Knowledge Base . [****] . [****] . [****] c. Online, Searchable Program Documentation (as available) d. Client Private Newsgroups e. Informational Broadcasts . [****] . [****] . [****] . [****] 2. Basic Support [****]
Problem Severity: Initial Response to Representative by Subsequent Responses: ---------------- -------------------------------------- -------------------- Vignette Within: --------------- [****] [****] [****]
[****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 2 Critical Errors: [****] Major Errors: [****] Minor Errors: [****] [****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 3 3. Extended Support [****] 4. Enterprise Support [****] 5. Upgrade Assistance . [****] . [****] . [****] 6. Onsite Support (Additional Charges apply) [****] C. Services Not Included In Support Service: [****] D. Exclusions to Maintenance and Support services: [****] [****] - CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 4 AMENDMENT TO APPENDIX A OF THE CORPORATE MASTER AGREEMENT BETWEEN CHEAP TICKETS, INC. AND VIGNETTE CORPORATION This Amendment, effective January 10, 2001 clarifies the intent of Appendix A titled as: Enterprise License Schedule (the "Appendix") of the Corporate Master Agreement between Cheap Tickets, Inc. ("Client") and Vignette Corporation ("Vignette"), executed on October 31, 2000 (the "Agreement"). The parties hereby agree to amend Section 3 of the Appendix by adding the following subsection in its entirety: "3(c) Client and Vignette agree that for the purposes of this Agreement, the Enterprise Level Support for the Domain Term will commence on January 1, 2001, and terminate on October 26, 2003." Except as specifically set forth above, all other terms and conditions of the Agreement entered into between the parties shall remain unchanged and in full force and effect. IN WITNESS WHEREOF, Client and Vignette have duly executed this Amendment by and on their behalf by their duly authorized representatives as of the date provided above. Agreed to by: VIGNETTE CORPORATION CHEAP TICKETS, INC. By: /s/ Robert R. Robinson By: /s/ Paul Halstead --------------------------------------- ---------------------------- Name: Robert R. Robinson Name: Paul Halstead ------------------------------------- -------------------------- Title: Legal Counsel Title: CTO ------------------------------------ ------------------------- EX-10.28 8 dex1028.txt LONG TERM NET LEASE AGREEMENT EXHIBIT 10.28 Sublease Agreement This Sublease (this "Sublease") is entered into as of June 6, 2001 ("Effective Date"), between Customer Communications Center, Inc., a Minnesota corporation ("Sublessor"), as sublandlord, and Cheap Tickets, Inc., a Delaware corporation ("Subtenant"), as subtenant. Recitals: A. Sublessor is tenant under the Long Term Net Lease Agreement (the "Primary Lease"), dated April 26, 1996, originally between Opus South Corporation, a Florida corporation, as landlord, and Sublessor. Sublessor represents to Subtenant that Exhibit A hereto contains a true copy of the Primary Lease, and that there are no defaults under the Primary Lease by either party thereto (for purposes hereof, this reference to default shall be to same which has continued uncured beyond the applicable notice and grace period therefor stated in the Primary Lease). The premises leased pursuant to the Primary Lease are the parcel of land situated in Hillsborough County, Florida, more particularly described on Exhibit B hereto, and the building ("Building") and all other Improvements thereon (the "Demised Premises"). B. All of the landlord's right, title and interest in the Primary Lease was assigned by Opus South Corporation to Opus Estates, L.L.C., on December 31, 1996, and then on December 22, 1997 by Opus Estates, L.L.C. to Glenborough Properties, L.P. ("Owner"), who presently owns fee title to the Demised Premises and all of such landlord's interest in the Primary Lease. C. Sublessor now desires to sublease the Demised Premises to Subtenant on the terms stated in this Sublease. Now, therefore, for other good and valuable consideration, and intending to be legally bound, the parties hereto agree as follows: I. Sublease. -------- A. Grant of Sublease. For and in consideration of the rents, covenants and agreements in the Primary Lease and in this Sublease, Sublessor demises and subleases to Subtenant and Subtenant takes and subleases from Sublessor the Demised Premises with the right and privilege to exclusively occupy and use the Building and together with all other rights, privileges, easements, appurtenances, and amenities belonging to or in any way pertaining to the Demised Premises, upon and subject to the terms of this Sublease and the terms of the Primary Lease. Notwithstanding anything in this Sublease apparently to the contrary, except as provided in Section A of Part III hereof, Subtenant shall have no rights under Sections 1.3 or 1.4 of the Primary Lease or under Article XXII thereof, which rights are reserved by Sublessor. Subject to the preceding sentence, Sublessor authorizes and instructs Subtenant to pay Rent directly to Owner, and to directly deal with Owner as if Subtenant were the tenant under the Primary Lease. Notwithstanding the foregoing, however, Subtenant acknowledges that it has no privity 1 of contract with Owner, and that Owner's sole obligations under the Lease inure to Sublessor. B. Sale of Personalty. Exclusive possession of the Demised Premises ------------------ (subject to the Primary Lease) shall be delivered to Subtenant on the Effective Date in broom clean condition, with the items within the Demised Premises described in Exhibit C hereto (the "Personalty") left in place. Various items of the Personalty are or were formerly leased or financed equipment. Subtenant agrees to pay to Sublessor within seven (7) days after the Effective Date the sum of $400,000 as an aggregate purchase price for the Personalty, whereupon Sublessor shall promptly cancel or buy out all such leases and security agreements to the extent they cover the Personalty and Sublessor shall deliver to Subtenant a bill of sale (in the form of Exhibit D hereto) transferring ownership to the Personalty to Subtenant in its "AS-IS, WHERE IS" condition, with warranty of title and free and clear of all liens and encumbrances. Notwithstanding the foregoing, and without additional consideration, Sublessor may retain as its own property and remove from the Demised Premises within seven (7) days after the Effective Date any or all items of personal property located on the Demised Premises which are not listed on Exhibit C. Any and all property not so removed by Sublessor shall belong to Subtenant, who may use or dispose of same as Subtenant sees fit and at its sole expense. C. Assumption of Primary Lease. Subtenant assumes and agrees to be --------------------------- bound by and to observe and perform all of the terms, covenants and conditions to be kept, observed and performed by Sublessor as tenant under the Primary Lease accruing on and after the Effective Date, including the obligation to pay directly to Owner (or as otherwise provided in the Primary Lease) all rent and Items constituting Additional Rent under the Primary Lease. Subtenant hereby agrees to indemnify, defend and hold Sublessor harmless from and against any and all low, cost, damage, expense (including reasonable attorney's fees and court costs at trial and all appellate levels), liability, claims or causes of action existing in favor of or asserted by Owner under the Primary Lease arising out of or relating to Subtenant's failure to timely observe and perform any of the tenant's obligations under the Primary Lease which arise on or after the effective Date. D. Term. Subtenant shall have and hold the Demised Premises for and ---- during a term (the "Term") commencing on the Effective Date and continuing thereafter until and ending on December 31, 2003, unless the Term is extended as provided in Section A of Part III of this Sublease or this Sublease is terminated as provided herein or because the Primary Lease is terminated. E. Rent. Commencing as of the Effective Date, Subtenant shall pay on ---- Sublessor's behalf all Basic Rent and Additional Rent due and accruing under the Primary Lease directly to Owner (or as otherwise provided in the Primary Lease) when and as often as the same become due under the Primary Lease without demand, deduction or setoff. Within 20 days after the Effective Date, rent, real estate taxes and other charges payable by the tenant under the Primary Lease relating to any period before the Effective Date which become due and payable after the Effective Date and such amounts heretofore paid by Sublessor relating to any period from and after the Effective Date shall be prorated on a dally basis between Sublessor and Subtenant so that Sublessor pays all 2 such amounts relating to periods prior to the Effective Date and Subtenant pays all such amounts relating to any part of the Term. The net amount so owed by one party to the other shall be paid within 30 days after the Effective Date. If Subtenant fails to timely pay or perform any of the tenant's obligations under the Primary Lease and Sublessor pays or performs same in accordance with Section B of Part III of this Sublease, Subtenant shall reimburse such amounts paid or the actual and reasonable cost of such performance to Sublessor Immediately upon demand, as additional rent under this Sublease. F. Use. The Demised Premises shall be used throughout the Term only --- for general office use, including a telephone call center related to Subtenant's travel bookings business and/or for any other use or uses permitted by the Primary Lease. Subtenant shall, at its own expense, comply with all laws, rules, orders, ordinances, directions, regulations and requirements of federal, state, county and municipal authorities now in force or which hereafter may be in force, with respect to Subtenant's specific use, occupation or alteration of the Demised Premises, including without limitation, environmental laws and regulations (collectively, "Laws"). Subtenant agrees to indemnify, defend and hold Sublessor harmless from and against any penalty, damage or charge imposed for any violation by Subtenant, its agents, contractors or employees of any Laws. G. Assignment and Subletting. Subtenant shall not assign, mortgage ------------------------- or hypothecate the subleasehold estate created hereby or any interest therein, nor may Subtenant sublet the Demised Premises or any portion thereof, without in each and every instance obtaining the prior written consent of Sublessor and Owner, which consent by Sublessor may be withheld or conditioned in its sole and absolute discretion. Neither the sale or acquisition of the stock of Subtenant nor the merger of Subtenant into or with another corporation shall be deemed a breach of the foregoing covenant. H. Alterations and Repairs. Any installation, alterations ----------------------- construction or modification to the Demised Premises by Subtenant requiring Owner's approval under the Primary Lease shall additionally require Sublessor's prior written approval. Sublessor shall either approve or disapprove such alterations or other changes on the same terms, conditions and within the same time periods as apply to Owner and are stipulated in the Primary Lease. Due to Sublessor's potential liability for any such alterations or Improvements under Section 19.1 of the Primary Lease, Sublessor may withhold such approval in its sole and absolute discretion. In no circumstances shall Sublessor have any obligation to Subtenant to in any way maintain, repair, alter or reconstruct any improvements, equipment, fixtures or personalty in or on the Demised Premises. Subtenant shall have no responsibility to Sublessor or Owner under Section 19.1 with respect to Improvements or alterations made by Sublessor prior to the Effective Date. I. Entry by Sublessor. Subtenant acknowledges that Owner has certain ------------------ rights of access to the Demised Premises as stated in the Primary Lease. Subtenant agrees that, in addition, Sublessor shall have the same rights of access to the Demised 3 Premises under this Sublease as Owner has under the Primary Lease, except that Sublessor may also enter the Demised Premises at any time following a default by Subtenant under this Sublease after the lapse of the applicable grace or cure period stated in Section M below. Sublessor agrees not to do or permit its agents, contractors, or employees to do anything during the Term of this Sublease that would constitute a breach or default by the tenant under the Primary Lease. J. Rights under Primary Lease. Subtenant acknowledges and agrees -------------------------- that the only services, amenities and rights with respect to the Demised Premises to which Subtenant is entitled under this Sublease are those belonging to the tenant under the Primary Lease (subject to all the provisions, restrictions and conditions imposed by the Primary Lease). Sublessor shall have no liability to Subtenant for any failure of Owner to observe and perform its obligations as the landlord under the Primary Lease, nor shall any such failure by Owner entitle Subtenant to any abatement or setoff of any amount payable under this Sublease, except and only to the extent provided in the Primary Lease. Notwithstanding the foregoing, upon the reasonable request of subtenant, Sublessor will demand performance by Owner of its obligations under the Primary Lease and so long as Subtenant pays the costs and expenses thereof (including, without limitation, attorneys' fees) Sublessor will commence and prosecute appropriate judicial proceedings to enforce the tenant's rights and remedies under the Primary Lease and available at law or in equity. Subtenant hereby acknowledges that it has no privity of contract with Owner, and that Owner's obligations under the Lease inure solely to the Sublessor. K. Indemnification and Insurance. Subtenant agrees to indemnify, ----------------------------- defend and hold Sublessor harmless from all claims, damages, losses, liabilities and expenses in connection with loss of life, bodily or personal injury or property damage occurring (a) on or about the Demised Premises during the Term and any other period of Subtenant's occupancy of the Demised Premises or (b) arising from or out of the use or occupancy of the Demised Premises by Subtenant, its employees, contractors or agents. Subtenant shall provide Sublessor with certificates evidencing the existence of the insurance coverages required of the tenant under the Primary Lease prior to the date of Subtenant's use or occupancy of the Demised Premises, which policies shall name Sublessor and Owner as additional insureds. Such policies or certificates shall bear endorsements by which the insurer agrees to notify Sublessor not less than ten days in advance of any reduction or cancellation of coverage. L. Surrender of Possession. Upon expiration of the Term or earlier ----------------------- termination of this Sublease, Subtenant will quit and surrender the Demised Premises to Sublessor or Owner, as applicable, in the condition required by the Primary Lease. M. Default. Each of the following shall constitute a default by ------- Subtenant under this Sublease: 1. If Subtenant fails to pay Basic Rent or any other amount payable by Subtenant under this Sublease or the Primary Lease when due, and such failure continues for ten days after receipt of written notice from Owner or Sublessor of such nonpayment, or 4 2. If Subtenant fails to observe or perform any of its obligations under this Sublease or the Primary Lease when due, and such failure continues for 20 days after receipt of written notice from Owner or Sublessor thereof. Upon the occurrence of any default, Sublessor may, in addition to exercising any of its legal or equitable remedies, elect to: (1) terminate this Sublease, whereupon Subtenant will immediately surrender possession of the Demised Premises and remain liable for all outstanding amounts accrued and owed under this Sublease and the Primary Lease, or (2) subject to Owner's rights under the Primary Lease, without terminating this Sublease, re-enter the Demised Premises and remove all persons and property, either by summary eviction proceedings or by any other suitable action or proceeding at law, or by self-help lawfully repossess the Demised Premises, without demand or notice except as required by law, without being guilty of trespass, and without prejudice to any other right or remedy of Sublessor or Owner. If this Sublease is terminated without the Primary Lease being terminated, Sublessor may, at its option, relet the Demised Premises or any portion thereof (subject to Owner's rights under the Primary Lease to approve an assignment or subletting), and receive and collect the rents therefor, applying the same first to the payment of such expenses as Sublessor may incur in recovering possession of the Demised Premises, including attorneys' fees, and for putting the Demised Premises into good order or condition, or preparing or altering the same for re-rental, and all other expenses, commissions and charges paid, assumed or incurred by Sublessor in or for reletting the Demised Premises, and Subtenant shall remain liable for any deficiency in amounts then due or thereafter payable under this Sublease and the Primary Lease. N. Limitation of Sublessor's Liability. Unless negligently or ----------------------------------- intentionally caused by Sublessor or its agents, contractors or employees, Sublessor shall not be liable for, and, to the extent permitted by law, Subtenant hereby releases Sublessor and its agents and employees from, all claims, damages, losses, liabilities and expenses in connection with loss of life, bodily or personal injury or property damage sustained by Subtenant or its agents, contractors, employees, invitees, or licensees on or about the Demised Premises and resulting from any cause whatsoever. Without limiting the foregoing, unless negligently or intentionally caused by Sublessor or its agents, contractors or employees, Sublessor shall not be liable for any damage to Subtenant's property caused by bursting, stoppages, or leaking of water, gas, sewage or steam pipes, flooding, or by refrigerators, sprinkling devices, air conditioning apparatus, water, snow, ice, frost, steam, excessive heat or cold, broken glass, odor or noise, or any other cause. All property belonging to Subtenant or any occupant of the Demised Premises shall be at the risk of Subtenant, and Sublessor shall not be liable for loss or damage thereto by reason of theft or misappropriation. O. Accord and Satisfaction. No payment by Subtenant or receipt by ----------------------- Sublessor or Owner of a lesser amount than any payment of rent or other charges herein or in the Primary Lease stipulated shall be deemed to be other than on Subtenant's account and applied to the earliest stipulated rent or charge, nor shall any endorsement or statement on any check or any letter accompanying any check or payment be deemed an accord and satisfaction, and Sublessor may accept such check or payment without 5 prejudice to Sublessor's right to recover the balance due or pursue any other remedy provided for in this Sublease or available at law or in equity. P. Estoppel. Sublessor and Subtenant agree at any time, upon not -------- less than 30 days' prior written request, to execute, acknowledge and deliver a written statement certifying that this Sublease is unmodified and in full force and effect (or, to the modifications if applicable), the dates to which Rent and other charges have been paid pursuant to this Sublease, and whether it has any known claim against the requesting party for a breach of this Lease (or specifying the nature and extent of each known breach). Q. Consents and Waivers. Subtenant agrees that it shall be obligated -------------------- to obtain Sublessor's prior written consent (in addition to Owner's consent), within the same time periods required for Owner's consent, to any action to which Owner's consent or waiver would be required under the Primary Lease (this includes not only matters stated in the Primary Lease as requiring Owner's approval, but also any deviation from the terms of the Primary Lease requiring Owner's consent or waiver); provided that where Owner is required not unreasonably to withhold a consent, then Sublessor likewise agrees not unreasonably to withhold its consent to the matter or request in question (except as otherwise stated herein). II. Subordination and Attornment by Subtenant. ----------------------------------------- A. Subordination by Subtenant to Third Parties. Subtenant agrees ------------------------------------------- that this Sublease shall be subordinate to the Primary Lease, any existing ground leases, mortgages, conditions, easements, restrictions or encumbrances of record. Subtenant agrees that, upon the request of Sublessor or Owner, it will subordinate this Sublease, in writing, to any present or future ground lease or to the lien of any present or future mortgage to a bank, insurance company or similar commercial lender that may become necessary or desirable from time to time irrespective of the time of execution hereof or the time of recording of any such mortgage or ground lease on condition only that the holder of any such mortgage or ground lease, or any other person claiming thereunder, agrees to recognize that this Sublease and the rights of Subtenant hereunder shall continue in full force and effect and that Subtenant's rights and possession of the Demised Premises shall not be terminated or disturbed unless Subtenant defaults under this Sublease. B. Attornment by Subtenant. Subtenant agrees to attorn to Owner ----------------------- under the Primary Lease as if it were a direct lease between Subtenant and Owner. If a mortgagee or holder of any ground lease or any person claiming under a mortgage or ground lease succeeds to the interest of Sublessor in this Sublease or Owner in the Primary Lease, Subtenant shall recognize and attorn to the mortgagee or person as landlord under this Sublease or landlord under the Primary Lease. The word "mortgage" as used herein includes mortgages, deeds of trust or other similar security instruments and modifications, consolidations, extensions, renewals, replacements and substitutes thereof. 6 C. Acceptance of Payment or Performance and Reservation of Rights. -------------------------------------------------------------- Owner shall accept payment or performance of the tenant's obligations under the Primary Lease from time to time from either or both of Subtenant and Sublessor. Owner reserves the right to enforce Sublessor's liability as tenant under the Primary Lease without any prior demand, proceeding or judgment against Subtenant. Any failure or refusal of Subtenant to perform its obligations under this Sublease will not constitute a defense or excuse for Sublessor's nonperformance of the tenant's obligations under the Primary Lease. III. Extension of Term; Sublessor's Cure Rights and Liabilities ---------------------------------------------------------- A. Assignment or Early Termination of Primary Lease. Sublessor ------------------------------------------------ agrees that if before May 15, 2003, Subtenant obtains Owner's consent to the assignment of the Primary Lease by Sublessor to Subtenant and Owner's agreement to release Sublessor and its guarantor from all liability under the Primary Lease upon such assignment, Sublessor will, upon Subtenant's request, assign its interest as tenant under the Primary Lease to Subtenant (without having exercised its early termination right under the Primary Lease) and pay to Subtenant the sum of $270,000.00. In the alternative, if by no later than May 15, 2003, Sublessor receives a written request from Subtenant for a 3-year extension of the Term of this Sublease, Sublessor shall notify Subtenant on or before May 31, 2003 of Sublessor's election and agreement to take one of the following two actions: 1. Sublessor will notify Subtenant that Sublessor will exercise the early termination option in Section 1.3 of the Primary Lease (the "Termination Option"), and the Term of this Sublease will not be extended. If Sublessor makes this election it shall be obligated to exercise the Termination Option vis a vis Owner so that Subtenant will be free to negotiate with Owner to continue its occupancy of the Demised Premises. 2. Sublessor agrees to the 3-year extension of the Term of this Sublease and Sublessor will not exercise the Termination Option. Thereupon, the Term of this Sublease shall be extended from December 31, 2003 to December 31, 2006, on all the same terms and conditions of this Sublease and the Primary Lease, including without limitation, rent as provided in the Primary Lease. Absent a timely request by Subtenant for a 3-year extension of the Term of this Sublease, this Sublease shall expire as provided in Section D of Part I of this Sublease and Sublessor may exercise or refrain from exercising its rights under Section 1.3 of the Primary Lease in its sole discretion, without imparting any rights or obligations on Subtenant as a result thereof. B. Sublessor' Right to Cure. If Subtenant fails to make any payment ------------------------ or observe or perform any other obligation of Subtenant under this Sublease or the Primary 7 Lease before the lapse of the applicable cure period under Section M of Part I of this Sublease, then Sublessor may (but shall not be obligated to Subtenant to) make or perform the same, without waiving any default or releasing Subtenant of any of its obligations under this Sublease. Provided Sublessor gives Subtenant written notice thereof within 30 days after such performance by Sublessor, Subtenant shall be liable for all reasonable costs so incurred by Sublessor, together with interest at the rate of one percent (1%) above the prime rate from time to time charged by Citibank, N.A. or its successor, to corporate customers, which interest shall be deemed additional rent and shall be due and payable to Sublessor within 30 days after demand. C. Sublessor's Liability. Neither this Sublease nor the existence of --------------------- this Sublease will relieve Sublessor from liability to Owner for the observance and performance of the tenant's covenants, duties and obligations under the Primary Lease. During the term of the Primary Lease, Sublessor will continue to be directly and primarily liable to Owner for the full observance and performance of all of the tenant's covenants, duties and obligations under the Primary Lease, including, without limitation, the payment of rent and real estate taxes as provided in the Primary Lease. Owner may enforce Sublessor's liability as tenant under the Primary Lease without any prior demand, proceeding or judgment against Subtenant. Any failure or refusal of Subtenant to perform its obligations under this Sublease will not constitute a defense or excuse for Sublessor's nonperformance of the tenant's obligations under the Primary Lease. Any acts by Subtenant, its employees, agents, contractors, licensees, subtenants and concessionaires which violate any of the terms or conditions of the Primary Lease shall constitute a breach of the Primary Lease by Sublessor. Owner retains all rights against Sublessor in the Primary Lease for the nonperformance of any of the tenant's obligations thereunder. IV. Notices. ------- Any notice required or permitted hereunder to be delivered by Sublessor to Subtenant, or vice versa, shall be in writing and shall be deemed given (a) when delivered or refused, if delivered personally or by an overnight or other courier service which verifies delivery, or (b) the second business day after the postmark of a letter sent by registered or certified mail, return receipt requested, to the addressee's notice address stated below or at such other U.S. address as either party may designate by notice given as provided above. Copies of all such notices and requests from Subtenant to Owner, and vice versa, shall be concurrency sent as a courtesy to Owner. To Sublessor: with a copy to: Federated Department Stores, Inc. Federated Department Stores, Inc. 7 West Seventh Street 7 West Seventh Street Cincinnati, Ohio 45202 Cincinnati, Ohio 45202 Attn: Real Estate Department Attn: Law Department 8 To Subtenant: Cheap Tickets Inc. 1440 Kapiolani, Suite 800 Honolulu, Hawaii 96814 Attn: Dan Ternes V. Miscellaneous ------------- A. Brokers. ------- (a) Subtenant warrants and represents to Sublessor that, other than Paladin Group, Inc., no other real estate broker and/or consultant has been involved by Subtenant in connection with this Sublease and Subtenant further agrees to indemnify and hold Sublessor harmless against any and all claims of any real estate broker and/or consultant resulting from a breach of the foregoing warranty and representation. (b) Sublessor warrants and represents to Subtenant that, other than Cushman & Wakefield, no other real estate broker and/or consultant has been involved by Sublessor in connection with this Sublease and Sublessor further agrees to indemnify and hold Subtenant harmless against any and all claims of any real estate broker and/or consultant resulting from a breach of the foregoing warranty and representation. (c) Within 15 days after the Effective Date, Sublessor shall pay to Paladin Group, Inc., a commission equal to $2.50 multiplied by the rentable square footage of the Demised Premises (48,840 square feet). Any fees or commissions payable to Cushman & Wakefleld as a result of this Sublease shall be the obligation of and paid by Sublessor. B. Entire Agreement; Amendment. This Sublease and the Primary Lease --------------------------- contain the entire agreement between the parties relating to the Demised Premises, and there is no other statement, agreement or representation, either oral or written. No present or past dealings or custom between the parties shall be permitted to contradict or modify the terms hereof or of the Primary Lease. No modification of this Sublease shall be binding unless in writing and signed by both parties. Subtenant's approval (not to be unreasonably withheld) shall be obtained before Sublessor agrees to any amendment of the Primary Lease while this Sublease is in force. C. Interpretation, Severability. The laws of the state of Florida shall ---------------------------- govern the validity, performance and enforcement of this Sublease. As used herein, the word "including" is not limiting. If any part of this Sublease is held by any court of competent jurisdiction to be invalid, such judgment shall not affect or impair any other provision. Headings contained herein are for convenience only and do not define, limit, construe or 9 amplify the terms hereof. Capitalized terms used, but not defined in this Sublease, shall have the meanings given them in the Primary Lease. D. Successors and Assigns. The conditions, covenants and agreements ---------------------- contained in this Sublease shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors (including successors by merger, reincorporation, or operation of law) and permitted assigns. All covenants and terms of this Sublease shall run with the land. This Sublease shall not be recorded. E. Authority. Each party and the individual(s) executing this Sublease on --------- its behalf represent and warrant to the other parties that such individual(s) have full right, power and authority to execute this Sublease on behalf of the party indicated and, if such party is an entity rather than a natural person, that such entity has full corporate, partnership or other power and authority to enter into this Sublease and has taken all corporate, partnership or other organizational action necessary to carry out the transaction contemplated hereby, so that when executed this Sublease constitutes a valid and binding obligation enforceable against such corporation. F. Attorney's Fees. If any party institutes legal proceedings in --------------- connection with the terms, conditions or covenants of this Sublease, the party(ies) against whom judgment is entered shall pay, in the respective amounts awarded by the court, all reasonable costs, charges and expenses relative thereto, including reasonable attorney's fees at all trial and appellate levels, of the prevailing party. G. Counterparts. This Sublease may be signed in several counterparts ------------ with the same effect as if all parties signed the same document. The signature of a party on any counterpart may be removed and attached to any other counterpart to form a fully executed original of this Sublease. Sublessor: Witness/Attest: Customer Communications Center, Inc. /s/ Klaus M. Ziermaier By: /s/ Gary J. Nay - -------------------------------------- -------------------------------- Klaus M. Ziermaier, Ass't. Secretary Gary J. Nay, Vice President 10 Witness/Attest: Subtenant: Cheap Tickets, Inc., /s/ Maria Sullivan a Delaware corporation - -------------------------------------- MARIA SULLIVAN By:/s/ Sam E. Galeotos -------------------------------- Print Name: SAM E. GALEOTOS -------------------- Title: PRESIDENT & CEO ------------------------ 11 Owner's Consent to Sublease The undersigned ("Owner") is the current holder of the lessor's interest in the Primary Lease referenced in the above Sublease. Owner hereby consents to Sublessor subletting the Demised Premises to Subtenant as provided in such Sublease, which Sublease shall be subject and subordinate in all respects to the terms and conditions of the Primary Lease. Owner agrees to accept payment or performance of the tenant's obligations under the Primary Lease from time to time from either or both of Subtenant and Sublessor. Owner reserves the right to enforce Sublessor's liability as tenant under the Primary Lease without any prior demand, proceeding or judgment against Subtenant, and, notwithstanding the Sublease, Sublessor shall remain liable for the tenant's obligations under the Primary Lease. Any failure or refusal of Subtenant to observe or perform the tenant's obligations under the Primary Lease pursuant to the Sublease will not constitute a defense or excuse for Sublessor's breach of such tenant's obligations under the Primary Lease. Owner agrees to concurrently send to Subtenant at its notice address pursuant to the Sublease courtesy copies of all notices it sends to Sublessor pursuant to or concerning the Primary Lease. Owner hereby notifies Sublessor and Subtenant that notices and rent payments to Owner under the Primary Lease hereafter shall be sent to the following address: Glenborough Properties, LP. 4561 Gunn Highway Tampa, Florida 33624 Owner represents to Sublessor and Subtenant that: (a) the Primary Lease currently is in full force and effect and has not been modified; (b) Owner has given no notice to Sublessor of any breach of the Primary Lease by Sublessor which has not been cured; (c) Sublessor is current in the payment of rent under the Primary Lease, and (d) no consent or signature of any other person or entity (including any mortgagee) is required for Owner to execute and deliver this Consent to Sublease. Owner: Witness/Attest: Glenborough Properties, L.P., a California limited partnership By: - ------------------------------ -------------------------------------- Print Name: ------------------------------ Title: ----------------------------------- 12 STATE OF FLORIDA ) ) SS: COUNTY OF ____________) The foregoing instrument was acknowledged before me on June __, 2001, by general partner of Glenborough Properties, L.P., a California limited partnership, on behalf of the partnership. --------------------------------------------- Notary Public in and for the State of Florida 13 STATE OF OHIO ) ) SS: COUNTY OF HAMILTON ) The foregoing instrument was acknowledged before me on June 4, 2001, by Gary J. Nay, Vice President of Customer Communications Center, Inc., a Minnesota corporation, on behalf of the corporation. ------------------------------------------ Notary Public in and for the State of Ohio 14 STATE OF HAWAII ) ) SS: COUNTY OF HONOLULU) The foregoing instrument was acknowledged before me on June 4, 2001, by Sam E. Galeotes, President and CEO of Cheap Tickets, Inc., a Delaware corporation, on behalf of the corporation. -------------------------------------------- Notary Public in and for the State of Hawaii 15 EXHIBIT B --------- [Legal Description] 16 EXHIBIT C --------- Equipment and Furniture Transfer Inventory I. Computer/Telephone Room/Emergency Power --------------------------------------- II. A. Two (2) fifteen (15) ton Liebert air-conditioning units with connecting lines and roof-top condensers B. One (1) 225 KVA UPS System with all batteries, connecting lines and associated equipment C. One (1) 750 KW Emergency Diesel Powered Generator with all connecting lines, switch gear, 1,000 gallon diesel fuel tank and associated equipment III. Workstation Furniture --------------------- A. Approximately (but not less than) 400 Steelcase modular workstations, the majority of which are assembled in clusters of six (6), including all existing wiring, data cables, chairs and associated equipment, except that one hundred six (106) Steelcase Rally chairs will not be included. IV. Miscellaneous Furniture & Equipment Located in Various Offices, --------------------------------------------------------------- Training Rooms and Break room throughout the Facility ----------------------------------------------------- 1. Modular Knoll - paneled walls office chair 2. Modular Knoll office chair and 2 side chairs 3. Modular Knoll - paneled walls office chair 4. Raised Stations modular work surface 2 chairs 2 door cabinet 5. Two modular Knoll workstations, with 2 additional desk and panels, 4 chairs 6. Storage Room steel and wood shelving minimum of 18 four shelf units 17 7. Lobby 3 office chairs 2 glass display cabinets 8. Table and work surface for Applicants Minimum of 11 chairs 9. 2 side chairs 1 office chair 10. Storage Room 1 - 4 drawer vertical 3 shelves for paper 11. 5 Modular Knoll Office Furniture 2 door steel cabinet 12. 1 - two ped desk 1 - two door shelf 1 desk chairs 13. 1 - 2 ped desk 1 - 2 drawer file 2 chairs 14. Storage Room 2 - four shelf modular units 15. 1 - 2 ped desk 16. Interview Room 1 round table 17. 8 - Knoll Modular panel systems 8 - chairs 2 - two door metal cabinets 1 - 4 shelves 1 - two drawer lateral 18. Knoll Module Office 1 desk chair 19. Storage 4 shelf unit 20. 13 training tables 18 21. 3 overhead projectors Minimum of 24 chairs 1 - two door metal cabinet 22. 14 training tables 2 - two door metal cabinets 1 - four drawer vertical file 1 - stand 23. Conference Table 9 chairs 24. Conference Table 4 folding tables 6 chairs 25. 3 Knoll Modular desks and panels 2 - two ped desks 5 chairs Misc. steel shelving units 2 - two door cabinets 2 - four shelf book 26. 21 round tables 72 lunchroom chairs 2 refrigerator 27. 7 - two pedestal desks 1 conference table 3 training room tables 1 bank of 18 personnel lockers 1 bank of 6 personnel lockers 6 chairs 2 Knoll Modular office furniture and multiple panel systems 28. 9 tables - 8 chairs 29. Office Knoll Modular office cabinet and file credenza round table and four chairs 1 office chair 2 side chairs 30. 2 Knoll Modular Stations 2 chairs 2 drawer files 19 31. Storage 7 metal shelves 32. 1 - two ped desk 2 chairs 1 - two shelf book 33. 3 - two ped desks 2 - four drawer files 3 chairs 34. Knoll Modular Office 3 chairs 1 - six shelf steel book 1 - two shelf steel book 35. Existing white boards, easels and overhead projection screens 20 Telecommunications Network/Equipment Inventory PBX Equipment Inventory
Description Leased Owned - ----------- ------ ----- Avaya/Lucent Definity G3r x Currently configured for: 528 Digital Phones and 39 T1's MAPD/CVLAN x Centigram/Bay/Point x CMS and BCMS x Music on Hold x Paging System x
Installed Sets Phone Type Quantity Leased Owned - -------------- ---------- -------- ------ ----- Call Master 3 338 x 7406 54 x 7402 34 x 8410 14 x 8110 1 x Switch Real Estate Board Type Quantity Leased Owned - ------------------ ---------- -------- ------ ----- TN767 DS1 Interface 22 x TN464 DS1 Interface 17 x 8 Port Digital Line 66 x 16 Port Digital Line 1 x Analog Line 3 x COT (Central Office Trunk) 1 x Auxiliary Trunk 2 x Map D 1 x Announcement 3 x Call Classifier 6 x DS1 Interface 11 x Miscellaneous Lock & Key - Model #615 x - ------------- Emergency Transfer Panel x Monitor and Key Board x Inter alia - Recording x Equipment (1) DDM1000 Multiplexor x (52) Larsecom TNDS x CSU's Cabling infrastructure, x equipment racks Patch panels (for x workstation cabling), patch cables LAN/WAN Equipment Inventory (2) Cisco 3640's - 3600 4 slot mod router x (2) Mem3640-32U128D - 32-128MB Dram upgrade x (2) Mem3600-8U16FS - 8 to 16 Mb Flash Factory x (4) NM - 1E1R2W 1 Ethernet, 1TR, 2 Wan x (4) WIC-1T 1 Port Ser Wan Inter x (2) NM-1FE-TX 1 Port Fst Eth Net Mod x (2) Canary Transceiver racks and associated transceivers x
21 EXHIBIT D --------- BILL OF SALE Customer Communications Center, Inc., a Minnesota corporation ("Seller"), for and in consideration of the sum of TEN DOLLARS ($10.00) and other valuable consideration paid by Cheap Tickets, Inc., a Delaware corporation ("Buyer"), the receipt and adequacy of which are hereby acknowledged, has BARGAINED, SOLD and DELIVERED, and by these presents does BARGAIN, SELL and DELIVER, unto Buyer all of the installations, furnishings, furniture, building systems equipment, trade fixtures, lighting fixtures, showcases, mirrors, carpets, and all other items of personal property not intended for retail sale which are owned by Seller and are now attached to or located upon the real property described in Exhibit A, or installed in any improvements situated upon such real property (except for the Excluded Personalty, collectively the "Personalty"), together with all assignable warranties relating thereto, if any. The items listed or described in Exhibit B are specifically excluded from this Bill of Sale and are retained by Seller or the other owner(s) thereof (collectively, the "Excluded Personalty"). Seller represents and warrants to Buyer that the Personalty is free of all liens and encumbrances, and that Seller has full right, power and authority to sell the Personalty. THE PERSONALTY IS SOLD "AS IS, WHERE-IS", WITH ALL FAULTS, AND, EXCEPT AS STATED ABOVE, SELLER EXPRESSLY DISCLAIMS ANY AND ALL REPRESENTATIONS, WARRANTIES OR GUARANTIES, OF ANY KIND, ORAL OR WRITTEN, EXPRESS OR IMPLIED, CONCERNING THE PERSONALTY, INCLUDING, BUT NOT LIMITED TO, (I) THE VALUE, MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE, OF THE PERSONALTY, (II) THE MANNER OF REPAIR, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF ANY PERSONALTY, AND (III) ANY WARRANTIES THAT MIGHT ARISE BY COMMON LAW. EXECUTED and delivered as of __________, 200__. Customer Communications Center, Inc. By: -------------------------------------- Gary J. Nay, Vice President 22 LONG TERM NET LEASE AGREEMENT OPUS SOUTH CORPORATION - Landlord CUSTOMER COMMUNICATIONS CENTER, INC. - Tenant TABLE OF CONTENTS ARTICLE I TERM OF LEASE........................................................................... 1 Section 1.1 Term of Lease........................................................................... 1 Section 1.2 Early Occupancy......................................................................... 1 Section 1.3 Early Term Expiration Date.............................................................. 2 Section 1.4 Option to Renew......................................................................... 2 Section 1.5 Arbitration............................................................................. 3 ARTICLE II CONSTRUCTION OF IMPROVEMENTS............................................................ 4 Section 2.1 Landlord's Improvements................................................................. 4 Section 2.2 Possession Date; Excused Delay.......................................................... 5 Section 2.3 Possession of Demised Premises.......................................................... 5 Section 2.4 Construction Guaranty................................................................... 6 Section 2.5 Tenant's Acceptance of Demised Premises................................................. 6 Section 2.6 Repair and Maintenance.................................................................. 7 ARTICLE III BASIC RENT.............................................................................. 7 Section 3.1 Basic Rent.............................................................................. 7 Section 3.2 Basic Rent Adjustment................................................................... 8 Section 3.3 Additional Rent......................................................................... 8 Section 3.4 Delinquent Rental Payments.............................................................. 8 ARTICLE IV USE OF DEMISED PREMISES................................................................. 9 Section 4.1 Permitted Use........................................................................... 9 Section 4.2 Preservation of Demised Premises........................................................ 9 Section 4.3 Hazardous Substances.................................................................... 9 Section 4.4 Hazardous Material Representation by Landlord........................................... 11 Section 4.5 Landlord's Hazardous Materials Indemnification.......................................... 11 Section 4.6 Discovery of Hazardous Materials Not Caused by Landlord or Tenant....................... 12 ARTICLE V PAYMENT OF TAXES, ASSESSMENTS, ETC...................................................... 12 Section 5.1 Payment of Impositions.................................................................. 12 Section 5.2 Tenant's Right to Contest Impositions................................................... 13 Section 5.3 Levies and Other Taxes.................................................................. 14 Section 5.4 Evidence of Payment..................................................................... 14 Section 5.5 Escrow for Taxes and Assessments........................................................ 14 Section 5.6 Landlord's Right to Contest Impositions................................................. 15 ARTICLE VI INSURANCE............................................................................... 15 Section 6.1 Tenant's Insurance Obligations.......................................................... 15 Section 6.2 Insurance Coverage...................................................................... 16 Section 6.3 Insurance Provisions.................................................................... 16 Section 6.4 Waiver of Subrogation................................................................... 16 Section 6.5 Tenant's Indemnification of Landlord.................................................... 17 Section 6.6 Unearned Premiums....................................................................... 17
i Section 6.7 Blanket Insurance Coverage.............................................................. 17 Section 6.8 Landlord's Insurance Obligations........................................................ 17 ARTICLE VII UTILITIES............................................................................... 17 Section 7.1 Payment of Utilities.................................................................... 17 Section 7.2 Additional Charges...................................................................... 18 ARTICLE VIII REPAIRS................................................................................. 18 Section 8.1 Tenant's Repairs........................................................................ 18 Section 8.2 Maintenance............................................................................. 18 Section 8.3 Tenant's Waiver of Claims Against Landlord.............................................. 18 Section 8.4 Prohibition Against Waste............................................................... 19 Section 8.5 Landlord's Obligations with Respect to Roof or Structural Failure....................... 19 Section 8.6 Landlord's Obligation to Reimburse Tenant for Certain Repairs........................... 19 ARTICLE IX COMPLIANCE WITH LAWS AND ORDINANCES..................................................... 19 Section 9.1 Compliance with Laws and Ordinances..................................................... 19 Section 9.2 Compliance with Permitted Encumbrances.................................................. 20 Section 9.3 Tenant's Obligations.................................................................... 20 Section 9.4 Tenant's Right to Contest Laws and Ordinances........................................... 20 ARTICLE X MECHANIC'S LIENS AND OTHER LIENS........................................................ 21 Section 10.1 Freedom from Liens...................................................................... 21 Section 10.2 Landlord's Indemnification.............................................................. 22 ARTICLE XI INTENT OF PARTIES....................................................................... 22 Section 11.1 Net Lease............................................................................... 22 Section 11.2 Entry by Landlord....................................................................... 23 Section 11.3 Interest on Unpaid Amounts.............................................................. 23 ARTICLE XII DEFAULTS................................................................................ 24 Section 12.1 Event of Default........................................................................ 24 Section 12.2 Surrender of Demised Premises........................................................... 25 Section 12.3 Reletting by Landlord................................................................... 25 Section 12.4 Survival of Tenant's Obligations........................................................ 25 Section 12.5 Damages................................................................................. 26 Section 12.6 No Waiver............................................................................... 26 Section 12.7 Landlord's Remedies..................................................................... 26 Section 12.8 Bankruptcy.............................................................................. 27 Section 12.9 Landlord's Default - Offset Rights...................................................... 27 ARTICLE XIII DESTRUCTION AND RESTORATION............................................................. 28 Section 13.1 Destruction and Restoration............................................................. 28 Section 13.2 Application of Insurance Proceeds....................................................... 29 Section 13.3 Continuance of Tenant's Obligations..................................................... 29 Section 13.4 Availability of Insurance Proceeds...................................................... 30 Section 13.5 Completion of Restoration............................................................... 30
ii Section 13.6 Termination of Lease.................................................................... 30 ARTICLE XIV CONDEMNATION............................................................................ 31 Section 14.1 Condemnation of Entire Demised Premises................................................. 31 Section 14.2 Partial Condemnation/Termination of Lease............................................... 31 Section 14.3 Partial Condemnation/Continuation of Lease.............................................. 32 Section 14.4 Continuance of Obligations.............................................................. 34 Section 14.5 Adjustment of Rent...................................................................... 34 ARTICLE XV ASSIGNMENT, SUBLETTING, ETC............................................................. 34 Section 15.1 Restriction on Transfer................................................................. 34 Section 15.2 Restriction From Further Assignment..................................................... 35 Section 15.3 Tenant's Failure to Comply.............................................................. 35 ARTICLE XVI SUBORDINATION, NONDISTURBANCE, NOTICE TO MORTGAGEE AND ATTORNMENT...................... 36 Section 16.1 Subordination by Tenant................................................................. 36 Section 16.2 Landlord's Default...................................................................... 36 Section 16.3 Attornment.............................................................................. 37 ARTICLE XVII SIGNS................................................................................... 37 Section 17.1 Tenant's Signs.......................................................................... 37 ARTICLE XVIII REPORTS BY TENANT....................................................................... 37 Section 18.1 Annual Statements....................................................................... 37 ARTICLE XIX CHANGES AND ALTERATIONS................................................................. 37 Section 19.1 Tenant's Changes and Alterations........................................................ 37 ARTICLE XX MISCELLANEOUS PROVISIONS................................................................ 40 Section 20.1 Entry by Landlord....................................................................... 40 Section 20.2 Exhibition of Demised Premises.......................................................... 40 Section 20.3 Indemnification......................................................................... 40 Section 20.4 Notices................................................................................. 41 Section 20.5 Quiet Enjoyment......................................................................... 42 Section 20.6 Landlord's Continuing Obligations....................................................... 42 Section 20.7 Estoppel................................................................................ 43 Section 20.8 Memorandum of Lease..................................................................... 43 Section 20.9 Severability............................................................................ 43 Section 20.10 Successors and Assigns.................................................................. 44 Section 20.11 Captions................................................................................ 44 Section 20.12 Relationship of Parties................................................................. 44 Section 20.13 Entire Agreement........................................................................ 44 Section 20.14 No Merger............................................................................... 44 Section 20.15 Possession and Use...................................................................... 44 Section 20.16 No surrender During Lease Term.......................................................... 44 Section 20.17 Surrender of Demised Premises........................................................... 45
iii Section 20.18 Holding Over............................................................................ 45 Section 20.19 Survival................................................................................ 45 Section 20.20 Attorneys' Fees......................................................................... 45 Section 20.21 Landlord's Limited Liability............................................................ 46 Section 20.22 Radon Gas............................................................................... 46 Section 20.23 Broker's................................................................................ 46 Section 20.24 Waiver of Jury Trial.................................................................... 46 ARTICLE XXI GUARANTY BY FINGERHUT COMPANIES, INC.................................................... 46 Section 21.1 Guaranty................................................................................ 46 ARTICLE XXII OPTION TO PURCHASE...................................................................... 47 Section 22.1 Option to Purchase...................................................................... 47 Section 22.2 Purchase Price.......................................................................... 47 Section 22.3 Title Evidence.......................................................................... 47 Section 22.4 Phase I Environmental Report............................................................ 47 Section 22.5 Current Survey.......................................................................... 47 Section 22.6 Uniform Commercial Code................................................................. 48 Section 22.7 Cure of Title and Survey Defects........................................................ 49 Section 22.8 Permitted Exceptions.................................................................... 49 Section 22.9 Closing Date............................................................................ 49 Section 22.10 Landlord's Obligations at Closing....................................................... 49 Section 22.11 Tenant's Obligations at Closing......................................................... 50 Section 22.12 Closing Costs........................................................................... 51 Section 22.13 Prorations.............................................................................. 51 Section 22.14 Option Not to be Separated from Lease................................................... 51 ARTICLE XXIII EXTRA TENANT IMPROVEMENTS............................................................... 51 Section 23.1 Extra Tenant Improvements............................................................... 51
iv EXHIBITS Exhibit "A" Legal Description and Permitted Encumbrances Exhibit "B" Plans and Outline Specifications Exhibit "C" Construction Schedule Exhibit "D" Absolute and Unconditional Lease Guaranty Exhibit "E" EXTRAS 1 LONG TERM NET LEASE AGREEMENT THIS AGREEMENT OF LEASE (the "Lease Agreement"), made this _____ day of April, 1996, by and between OPUS SOUTH CORPORATION, a Florida corporation ("Landlord") and CUSTOMER COMMUNICATIONS CENTER INC., a Minnesota corporation ("Tenant"). WITNESSETH: Landlord, for and in consideration of the rents, covenants and agreements hereinafter reserved, mentioned and contained on the part of Tenant, its successors and assigns, to be paid, kept, observed and performed, has leased, rented, let and demised, and by these presents does lease, rent, let and demise unto Tenant, and Tenant does hereby take and hire, upon and subject to the conditions and limitations hereinafter expressed, all that parcel of land situated in the City of Tampa, County of Hillsborough and State of Florida, described in Exhibit "A" attached hereto and made a part hereof, together with any appurtenant easements described in said Exhibit "A" (the "Land"), together with all improvements located on and to be constructed thereon. Landlord's Improvements (as defined in Article II) and all other improvements, machinery, equipment, fixtures and other property, real, personal or mixed (except Tenant's trade fixtures) installed or located thereon, together with all additions, alterations and replacements thereof are hereinafter referred to as the "Improvements." The Land and the Improvements are hereinafter referred to as the "Demised Premises." The Demised Premises are subject to the easements, restrictions, reservations and other matters (collectively, the "Permitted Encumbrances") set forth in said Exhibit "A". The structures located upon and being a part of the Demised Premises which are constructed for human occupancy or for storage of goods, merchandise, equipment, or other personal property are collectively called the "Building." ARTICLE I TERM OF LEASE Section 1.1 Term of Lease. The term of this Lease Agreement shall commence on the later of (a) January 1, 1997, or (b) the date of substantial completion (as hereinafter defined) of Landlord's Improvements and delivery of possession of the Demised Premises and the substantially completed Landlord's Improvements to Tenant (the "Commencement Date"), and shall end ten (10) years thereafter, unless sooner terminated as provided herein or unless properly extended for the Renewal Term (as hereinafter defined). The initial term of the Lease Agreement, as set forth above, is sometimes hereinafter referred to as the "Initial Term." Section 1.2 Early Occupancy. Without adjusting the Commencement Date of this Lease Agreement or the Initial Term of this Lease Agreement, Tenant shall be permitted to occupy and use the Demised Premises for the period from and after the Possession Date (as hereinafter defined) to the Commencement Date (the "Early Occupancy Period") subject to all terms and conditions of this Lease Agreement, including, but not limited to Tenant's obligation to pay all Additional Rent (as hereinafter defined) and all other amounts payable by Tenant hereunder which may be payable or accrue during the Early Occupancy Period; provided, however, during the Early Occupancy Period Tenant shall not be obligated to pay Basic Rent (as 1 hereinafter defined) to Landlord. The Commencement Date shall remain the same regardless of any change in the Possession Date from August 1, 1996. Section 1.3 Early Term Expiration Date. Notwithstanding anything contained in Section 1.1 of this Lease Agreement, Tenant may elect to accelerate the expiration of the Initial Term of this Lease Agreement from the date specified in Section 1.1 hereof to the last day of the eighty-fourth (84th) month following the Commencement Date (the "Early Term Expiration Date"), so that the Initial Term of this Lease Agreement shall expire on the Early Term Expiration Date, by (a) providing Landlord with written notice on or before a date which is one hundred eighty (180) days prior to the Early Term Expiration Date (the "Early Term Expiration Notification Date") (time being of the essence with respect to such notice), of Tenant's election to accelerate the expiration of the Initial Term of this Lease Agreement to the Early Term Expiration Date, and (b) paying a termination fee in consideration of Landlord's agreement to so accelerate the expiration of the Initial Term of this Lease Agreement to the Early Term Expiration Date in an amount equal to Two Hundred Seventy Thousand and No/100ths Dollars ($270,000.00) (the "Early Term Expiration Fee"), which amount shall be paid concurrently with the written notification delivered to the Landlord on or before the Early Term Expiration Notification Date. The Early Term Expiration Fee shall not be deemed to be rent payable by Tenant hereunder, but rather, a payment by Tenant in consideration of Landlord's agreement to accelerate the expiration of the Initial Term of this Lease Agreement as provided in this Section 1.3. Section 1.4 Option to Renew. Tenant shall have the right, to be exercised as hereinafter provided, to extend the term of this Lease Agreement for one (1) extension period of ten (10) years, such period sometimes hereinafter referred to as the "Renewal Term" upon the following terms and conditions and subject to the limitations hereinafter set forth: (a) That at the time hereinafter set forth for the exercise of the Renewal Term or the commencement of the Renewal Term, as the case may be, this Lease Agreement shall be in full force and effect, and Tenant shall not be in default in the performance of any of the terms, covenants and conditions herein contained which has not been remedied within the cure period in this Lease Agreement as of the exercise of the Renewal Term or the commencement of the Renewal Term, as the case may be. It is provided, however, that Landlord, at Landlord's sole option, may elect to waive this condition and any default which may exist on the part of Tenant, as Landlord may determine, in Landlord's sole and absolute discretion. (b) Except as otherwise specifically provided in this Section 1.4, the Renewal Term shall be upon the same terms, covenants and conditions contained in this Lease Agreement except the Basic Rent for each year of the Renewal Term shall be equal to the annual fair market Basic Rent for the Demised Premises including all buildings, structures and fixtures erected thereon, together with all additions, alterations and replacements thereof (except Tenant's trade fixtures, machinery and equipment and except all alterations constructed by Tenant at Tenant's sole cost and expense), but in no event shall such annual fair market Basic Rent be less than the annual Basic Rent payable by Tenant during the last year of the Initial Term of this Lease Agreement. All other payments on the part of Tenant to be made as provided in this Lease Agreement shall 2 continue to be paid during the Renewal Term including, but without limitation, all payments of Additional Rent as required herein. Landlord and Tenant shall endeavor to agree upon the fair market annual Basic Rent for the entire Renewal Term for a period of thirty (30) days following the date of Tenant's delivery of the Renewal Notice (as hereinafter defined). Any agreement reached by the parties with respect to such annual fair market Basic Rent for the Renewal Term shall be expressed in writing and shall be executed by the parties and a copy thereof delivered to each of the parties. Should Landlord and Tenant fail to agree within said thirty (30) day period upon the annual fair market Basic Rent for the Renewal Term, then such annual fair market Basic Rent shall be determined once for the entire Renewal Term by arbitration in accordance with the provisions of Section 1.5 hereof; provided, however, in no event shall the annual fair market Basic Rent for any year in the Renewal Term as determined by such arbitration be less than the annual Basic Rent paid by Tenant under this Lease Agreement for the last year of the Initial Term hereof. (c) The annual Basic Rent during the Renewal Term shall be payable in equal monthly installments equal to one-twelfth (1/12th) of the annual Basic Rent as established for the Renewal Term, in advance on the first day of each calendar month during the Renewal Term. (d) Tenant shall exercise its right to extend the term of this Lease Agreement for the Renewal Term by notifying Landlord, in writing, of its election to exercise the right to renew and extend the term of this Lease Agreement for the Renewal Term on or before April 1, 2006, time being of the essence with respect to such notice (the "Renewal Notice"). (e) There shall be no further additional right to renew this Lease Agreement other than as herein set forth. Any termination of this Lease Agreement shall terminate the right of renewal contained hereunder. Section 1.5 Arbitration. Any determination of the annual fair market Basic Rent for the Renewal Term required by or arising under the provisions of Section 1.4 hereof requiring arbitration shall be carried on and concluded in accordance with the following provisions: (a) In each case where it shall become necessary to resort to arbitration, and the subject of the arbitration is to determine the annual fair market Basic Rent for the Renewal Term, all arbitrators appointed by or on behalf of either party or appointed pursuant to the provisions hereof shall be MAI members of the American Institute of Real Estate Appraisers of improved commercial industrial real estate in the Tampa, Florida, metropolitan area and be devoting substantially all of their time to professional appraisal work at the time of appointment and be in all respects impartial and disinterested. (b) The party desiring such arbitration shall give written notice to that effect to the other party, specifying in such notice the name, address and professional qualifications of the person designated to act as arbitrator on its behalf. Within ten (10) days after service of such notice, the other party shall give written notice to the party 3 desiring such arbitration specifying the name, address and professional qualifications of the person designated to act as arbitrator on its behalf. If the two arbitrators so selected cannot agree within fifteen (15) business days after the appointment of the second arbitrator, the two arbitrators shall, within ten (10) business days thereafter select a third arbitrator. The three arbitrators as then so chosen shall undertake to render a decision within thirty (30) days after the appointment of such third arbitrator, and in the event that the three arbitrators cannot agree, then the decision of any two of the three arbitrators shall be deemed binding upon the parties. Each party shall pay the fees and expenses of the arbitrator appointed by or on behalf of such party, and the fees and expenses of the third arbitrator shall be borne equally by both parties. If the party receiving a request for arbitration fails to appoint its arbitrator within the time above specified, then either party on behalf of both parties may request such appointment of such second or third arbitrator, as the case may be, by application to any judge of the Circuit Court of Hillsborough County, Florida, upon ten (10) days prior written notice to the other party. The arbitrators so selected shall have all rights and powers conferred on them by the Florida Arbitration Code, and, except as otherwise provided herein, the arbitration proceeding shall be carried and governed by such code. ARTICLE II CONSTRUCTION OF IMPROVEMENTS Section 2.1 Landlord's Improvements. Landlord agree to furnish at Landlord's sole cost and expense all of the material, labor and equipment for the construction on the Land of the improvements specified on the Plans and Outline Specifications (the "Plans and Specifications") which are attached hereto or described on and made a part hereof as Exhibit "B" ("Landlord's Improvements"). Landlord's Improvements shall be constructed in a good and workmanlike manner in accordance with the Plans and Specifications and Landlord agrees to complete the construction thereof in accordance with all applicable federal, state, local and governmental codes (including building codes), statutes, laws, rules and regulations as in effect and interpreted on the date that all of the applicable building permits for Landlord's Improvements have been received (the "Permit Date"). If there occurs any change in any such applicable codes (including building codes) statutes, laws, rules or regulations or the interpretation or enforcement thereof between the Permit Date and the Possession Date then (i) if such change is not caused by any change requested in Landlord's Improvements by Tenant and as a result of such change Landlord will be unable to obtain a certificate of occupancy for Landlord's Improvements, then Landlord shall undertake to comply with any such change at Landlord's sole cost and expense, (ii) if such change results from a change in Landlord's Improvements requested by Tenant and such change prevents the obtaining of a certificate of occupancy for Landlord's Improvements, then the costs associated with such change shall be borne by Tenant, and (iii) if such change does not result in any inability to obtain a certificate of occupancy for Landlord's Improvements, then Landlord shall have no obligation to cause Landlord's Improvements to comply with any such change occurring after the Permit Date. Construction of Landlord's Improvements shall take place in accordance with the construction schedule attached hereto as Exhibit "C" (the "Construction Schedule"). The Construction Schedule is based upon the following deliveries of equipment by Tenant to Landlord on or before the following dates: UPS System, May 10, 1996; Auto Transfer Switch, 4 May 15, 1996; TVSS, June 1, 1996; Emergency Generator, June 25, 1996. To the extent that Tenant delays the delivery of any of the aforesaid items of equipment beyond the date above specified, such delay shall entitle Landlord to claim an "Excused Delay" (as hereinafter defined) equal to the number of days which such delinquent delivery delays construction of Landlord's Improvements. Tenant shall pay to Landlord all increased costs or damages incurred by Landlord attributable to delays caused by Tenant (provided, however, Tenant shall not be liable for Landlord's increased costs or damages resulting from delays in delivery of the aforesaid items of equipment). Section 2.2 Possession Date; Excused Delay. Landlord shall diligently proceed with the construction of the Landlord's Improvements and substantially complete the same ready for Tenant's occupancy (provided, however, substantial completion shall not require the delivery of a certificate of occupancy for Landlord's Improvements if such certificate of occupancy is not obtainable because of Tenant's delay in installing Tenant's furniture, fixtures or systems within Landlord's Improvements) and deliver possession thereof to Tenant on or before August 1, 1996 (the "Possession Date"); provided, however, if delay is caused or contributed to by act or neglect of Tenant, or those acting for or under Tenant, labor disputes, casualties, acts of God or the public enemy, governmental embargo restrictions, shortages of fuel, labor or building materials, action or non-action of public utilities, or of local, state or federal governments affecting the work, or other causes beyond Landlord's reasonable control, then the time of completion of said construction shall be extended for the additional time caused by such delay, provided that Landlord notifies Tenant of such delay as soon as possible, but not later than within five (5) business days of the Landlord's becoming aware of such delay. Such delays are each hereinafter referred to as an "Excused Delay." Section 2.3 Possession of Demised Premises. Tenant shall, not later than April 22, 1996, advise Landlord of required color selections. Tenant shall be responsible for Landlord's increased cost of labor and materials if any, and loss of rent, arising out of delay in the completion of the Demised Premises caused by Tenant's failure to comply in a timely manner with the foregoing schedule. Except as provided for in Section 2.2, if the Landlord's Improvements are not substantially completed on January 1, 1997, subject to extension for Excused Delays, Tenant may, but need not, terminate this Lease upon written notice to Landlord or occupy the portion of same that is ready for occupancy, and in the event of such occupancy Tenant shall pay to Landlord the pro rata portion of the full Basic Rent and the pro rata portion of the full amount of other obligations to be paid by Tenant hereunder equitably based upon the value and area of the Demised Premises occupied by Tenant. If Tenant occupies any portion of the Demised Premises prior to substantial completion of the Landlord's Improvements the terms of this Lease shall apply to such occupancy or use of the Demised Premises by Tenant. Basic Rent or a portion thereof provided above shall commence on the Commencement Date, and the payment of other obligations to be paid by Tenant, including, but not limited to, all Additional Rent, shall commence upon the Possession Date. The failure of Tenant, to take possession of or to occupy the Demised Premises or any portion thereof from and after the Possession Date or the Commencement Date, as the case may be, shall not, unless Tenant has terminated the Lease as provided in this Section 2.3, serve to relieve Tenant of said obligations or delay payments by Tenant to Landlord Tenant shall be allowed not less than 30 days prior to the Possession Date to install its machinery, equipment, fixtures and other personal property on the Demised Premises during the final stages of completion of construction provided that Tenant does not thereby 5 materially interfere with the completion of construction or occasion any labor dispute as a result of such installations and provided further that Tenant does hereby agree to assume all risk of loss or damage to such machinery, equipment, fixtures and other personal property, and to indemnify, defend and hold harmless Landlord from any loss or damage to such machinery, equipment, fixtures and personal property, and all liability, loss or damage arising from any injury to the property of Landlord, or its contractors, subcontractors or materialmen, and any death or personal injury to any person or persons to the extent arising out of such installations, except for liability, loss or damage caused by Landlord's gross negligence or willful misconduct. Delay in putting Tenant in possession of the Demised Premises shall not serve to extend the term of this Lease Agreement or to make Landlord liable for any damages arising therefrom. In the event the Possession Date does not occur on or before Aug 21, 1996, subject to extension for Excused Delays, then in such event Landlord, as liquidated damages for such delay, shall provide to Tenant a credit against the Basic Rent due under this Lease commencing on the Commencement Date equal to the amount of $3,000 for each day after August 21, 1996, subject to extension for Excused Delays, that the Possession Date is not achieved by Landlord, subject to a maximum, aggregate credit of $396,000. The foregoing liquidated damages shall be Tenant's sole and exclusive damages in the event of a delay in the Possession Date or the Commencement Date, and Tenant shall not be entitled to any other damages or remedies whatsoever (except for Tenant's right of termination as contained in this Section 2.3), and the parties agree that said liquidated damages are not a penalty and have been agreed upon because of the difficulty and uncertainty of calculating Tenant's damages as of the date hereof. Section 2.4 Construction Guaranty. Landlord guarantees the Landlord's Improvements against defective workmanship and/or materials for a period of one year from the date of substantial completion of Landlord's Improvements, and Landlord agrees, at its sole cost and expense, to repair or replace any defective item occasioned by poor workmanship and/or materials during said one- year period. The Landlord's Improvements shall be considered substantially completed at such time as the municipality having jurisdiction thereof issues a certificate of occupancy permitting Tenant to occupy the Landlord's Improvements or takes such other action as may be customary to permit occupancy or use thereof, provided, however, the issuance of a certificate of occupancy or such other action as may be customary to permit occupancy or use thereof shall not be a condition to payment of rent or commencement of the term if failure to secure such certificate or action is caused by the act or neglect of Tenant. From and after the expiration of the one year guaranty of Landlord against defective workmanship and materials, Landlord agrees to cooperate with Tenant in the enforcement by Tenant, at Tenant's sole cost and expense, of, and at Tenant's request to assign to Tenant, any express warranties or guaranties of workmanship or materials given by subcontractors or materialmen that guarantee or warrant against defective workmanship or materials for a period of time in excess of the one-year period described above and to cooperate with Tenant in the enforcement by Tenant at Tenant's sole cost and expense, of any service contracts that provide service, repair or maintenance to any item incorporated in the Building for a period of time in excess of such one-year period. Section 2.5 Tenant's Acceptance of Demised Premises. Within a period of 120 days after the Possession Date, Tenant shall notify Landlord, in writing, of all portions of the Landlord's Improvements which are incomplete, and Landlord shall forthwith complete such items in good faith and with due diligence within 60 days of such notice. 6 Section 2.6 Repair and Maintenance. Save and except for (i) the one year guaranty against defective items occasioned by poor workmanship and/or materials referred to in Section 2.4 above, (ii) the incomplete items referred to in Section 2.5 above, (iii) the obligations of Landlord to replace certain portions of the Demised Premises as specifically contained in Section 8.5 of this Lease, and (iv) the obligations of Landlord to reimburse Tenant for certain repairs made by Tenant to the Demised Premises during the last three (3) years of the Initial Term or the Renewal Term, as the case may be, as contained in Section 8.6 of this Lease, Tenant upon commencement of the term shall have and hold the Demised Premises as the same shall then be without any liability or obligation on the part of Landlord for making any alterations, improvements or repairs of any kind in or about the Demised Premises for the term of this Lease Agreement, or any extension or renewal thereof, except as specifically provided in Sections 2.4, 2.5, 8.5 and 8.6 hereof, Tenant agrees to maintain the Demised Premises and all parts thereof in a good and sufficient state of repair as required by the provisions of this Lease Agreement. ARTICLE III BASIC RENT Section 3.1 Basic Rent. In consideration of the leasing of the Demised Premises and the construction of the Landlord's Improvements referred to in Article II hereof, Tenant covenants to pay Landlord, without previous demand therefore and without any right of setoff or deduction whatsoever, at the office of Landlord at: 4200 West Cypress Street, Suite 444 Tampa, Florida 33607 or at such other place as Landlord may from time to time designate in writing, a rental for the Initial Term of this Lease as follows (the "Basic Rent"): (a) From the Commencement Date through and including the twelfth (12th) month following the Commencement Date, an annual Basic Rent in the amount of Three Hundred Eighty-Five Thousand Eight Hundred Thirty-Six and 00/100ths Dollars ($385,836.00) per year, payable monthly, in advance, in equal installments of Thirty-Two Thousand One Hundred Fifty-Three and 00/100ths Dollars ($32,153.00); (b) Commencing as of the thirteenth (13th) month following the Commencement Date and continuing through and including the sixtieth (60th) month following the Commencement Date, an annual Basic Rent in the amount of Four Hundred Thirty-Four Thousand Six Hundred Seventy-Six and 00/100ths Dollars ($434,676.00) per year, payable monthly, in advance, in equal installments of Thirty-Six Thousand Two Hundred Twenty-Three and 00/100ths Dollars ($36,223.00); and (c) Commencing as of the sixty-first (61st) month following the Commencement Date and continuing through and including the one hundred twentieth (120th) month following the Commencement Date, an annual Basic Rent in the amount of Five Hundred Thousand Six Hundred Ten and 00/100ths Dollars($500,610.00) per year, payable monthly, in advance, in equal installments of Forty-One Thousand Seven Hundred Seventeen and 50/100ths Dollars ($41,717.50). 7 The Basic Rent shall be payable commencing on the Commencement Date and continuing on the first day of each month thereafter for the succeeding months during the balance of the Initial Term. Section 3.2 Basic Rent Adjustment. If the term of this Lease Agreement does not commence on the first clay of a calendar month or end on the last day of a calendar month, the installment of Basic Rent for the partial calendar month at the commencement or the termination of the term shall be prorated on the basis of the number of days of the term within such calendar month. Section 3.3 Additional Rent. Except as specifically provided herein, the Basic Rent shall be absolutely net to Landlord so that this Lease Agreement shall yield, not to Landlord, the Basic Rent specified in Section 3.1 in each year of the term of this Lease Agreement and, except as specifically provided herein, that all Impositions (a hereinafter defined), insurance premiums, utility charges, maintenance, repair and replacement expenses, all expenses relating to compliance with laws, other than laws governing the construction of Landlord's Improvements to the extent that compliance with such is the obligation of Landlord as provided in Section 2.1 hereof, and all other costs, fees, charges, expenses, reimbursements and obligations of every kind and nature whatsoever relating to the Demised Premises (excepting only Landlord's portion of the proration of real estate taxes and special assessments for the first and last years of the term of this Lease Agreement referred to in Section 5.1 and certain taxes of Landlord referred to in the last sentence of Section 5.3 of this Lease Agreement) which may arise or become due during the term (or the Early Occupancy Period) or by reason of events occurring during the term (or the Early Occupancy Period) of this Lease Agreement shall be paid or discharged by Tenant (all such items being sometimes hereinafter collectively referred to as "Additional Rent"). In the event Tenant fails to pay or discharge any Imposition, which is Tenant's obligation hereunder, insurance premium, utility charge, maintenance repair or replacement expense which it is obligated to pay or discharge, Landlord may, but shall not be obligated to pay the same, and in that event Tenant shall immediately reimburse Landlord therefore and pay the same as Additional Rent, and Tenant hereby agrees to indemnify, defend and save Landlord harmless from and against such Impositions, costs and expenses which are Tenant's obligations hereunder. Section 3.4 Delinquent Rental Payments. All payments of Basic Rent and Additional Rent shall be payable without previous demand therefor and without any right of setoff or deduction whatsoever, except as specifically provided in Sections 2.3 and 12.9 hereof, and in case of nonpayment of any item of Additional Rent by Tenant when the same is due, Landlord shall have, in addition to all its other rights and remedies, all of the rights and remedies available to Landlord under the provisions of this Lease Agreement or by law in the case of nonpayment of Basic Rent. The performance and observance by Tenant of all the terms, covenants, conditions and agreements to be performed or observed by Tenant hereunder shall be performed and observed by Tenant at Tenant's sole cost and expense. Any installment of Basic Rent or Additional Rent or any other charges payable by Tenant under the provisions hereof which shall not be paid when due or within ten days after notice of such delinquency shall bear interest at an annual rate equal to two percentage points per annum in excess of the published "prime rate" or "base rates" of interest charged by NationsBank, N.A. (South) (or similar institution if said bank shall cease to exist or to publish such a prime rate) from the date when the same is due hereunder until the same shall be paid, but in no event in excess of the maximum 8 lawful rate permitted to be charged by Landlord against Tenant. Said rate of interest is sometimes hereinafter referred to as the "Maximum Rate of Interest." Notwithstanding the foregoing sentence, in no event shall Landlord be obligated to provide Tenant with more than two (2) notices of Tenant's delinquency in the payment of Basic Rent or Additional Rent under this Section 3.4 in any calendar year, and after delivery by Landlord of two (2) such notices of delinquency in any calendar year during the term of this Lease, any subsequent delinquency in such calendar year shall not require the giving of notice prior to Landlord's imposition of default interest as provided in this Section 3.4. ARTICLE IV USE OF DEMISED PREMISES Section 4.1 Permitted Use. The Demised Premises including all buildings or other improvements hereafter erected upon the same shall be used solely for office and telemarketing purposes and purposes reasonably related thereto and no other use or purpose. Tenant shall not use or occupy the same, or knowingly permit them to be used or occupied, contrary to any statute, rule, order, ordinance, requirement or regulation applicable thereto, or in any manner which would violate any certificate of occupancy affecting the same, or which would make void or voidable any insurance then in force with respect thereto or which would make it impossible to obtain fire or other insurance thereon required to be furnished hereunder by Tenant, or which would cause structural injury to the improvements or cause the value or usefulness of the Demised Premises, or any portion thereof, substantially to diminish (reasonable wear and tear expected), or which would constitute a public or private nuisance or waste, and Tenant agrees that it will promptly, upon discovery of any such use, take all necessary steps to compel the discontinuance of such use. Section 4.2 Preservation of Demised Premises. Tenant shall not use, suffer, or permit the Demised Premises, or any portion thereof, to be used by Tenant, any third party or the public in such manner as might reasonably tend to impair Landlord's title to the Demised Premises, or any portion thereof, or in such manner as might reasonably make possible a claim or claims of adverse usage or adverse possession by the public, as such, or third persons, or of implied dedication of the Demised Premises, or any portion thereof. Nothing in this Lease Agreement contained and no action nor inaction by Landlord shall be deemed or construed to mean that Landlord has granted to Tenant any right, power or permission to do any act or make any agreement that may create, or give rise to or be the foundation for any such right, title, interest, lien, charge or other encumbrance upon the estate of Landlord in the Demised Premises. Section 4.3 Hazardous Substances. Tenant shall at all times and in all respects comply with all federal, state and local laws, ordinances and regulations ("Hazardous Materials Laws") relating to the industrial hygiene, environmental protection or the use, analysis, generation, manufacture, storage, presence, disposal or transportation of any oil, flammable explosives, asbestos, urea formaldehyde, radioactive materials or waste, or other hazardous toxic, contaminated or polluting materials, substances or wastes, including without limitation any "hazardous substances," "hazardous wastes," "Hazardous materials" or "toxic substances" under any such laws, ordinances or regulations (collectively, "Hazardous Materials"). 9 Tenant shall at its own expense procure, maintain in effect and comply with all conditions of any and all permits, licenses and other governmental and regulatory approvals required for Tenant's use of the Demised Premises, including, without limitation, discharge of (appropriately treated) materials or waste into or through any sanitary sewer system serving the Demised Premises, but excluding conditions of any permits, licenses and other governmental regulatory approvals required by reason of the condition of the Demised Premises prior to Tenant's occupancy thereof. Except as discharged into the sanitary sewer in strict accordance and conformity with all applicable Hazardous Materials Laws, Tenant shall cause any and all Hazardous Materials to be removed from the Demised Premises and transported solely by duly licensed haulers to duly licensed facilities for final disposal of such Hazardous Materials and wastes. Tenant shall in all respects, handle, treat, deal with and manage any and all Hazardous Materials, deposited, stored or used on, in, under or about the Demised Premises by or on behalf of Tenant in complete conformity with all applicable Hazardous Materials laws and prudent industry practices regarding the management of such Hazardous Materials. All reporting obligations with respect to such Hazardous Materials imposed by Hazardous Materials Laws are solely the responsibility of Tenant. Upon expiration or earlier termination of this Lease, Tenant shall cause all Hazardous Materials, deposited, stored or used on, in, under or about the Demised Premises by or on behalf of Tenant to be removed from the Demised Premises and transported for use, storage or disposal in accordance with and in complete compliance with all applicable Hazardous Materials Laws. Tenant shall not take any remedial action in response to the presence of any Hazardous Materials in, on, about or under the Demised Premises or in any Improvement situated on the Land, nor enter into any settlement agreement, consent decree or other compromise in respect to any claims relating to any Hazardous Materials in any way connected with the Demised premises or the Improvements on the Land without first notifying Landlord of Tenant's intention to do so and affording Landlord ample opportunity to appear, intervene or otherwise appropriately assert and protect Landlord's interest with respect thereto. In addition, at Landlord's request, Tenant shall remove all tanks or fixtures which contain or contained or are contaminated with Hazardous Materials which were deposited on the Demised Premises by or on behalf of Tenant. Tenant shall immediately notify Landlord in writing of (a) any enforcement, clean-up, removal or other government or regulatory action instituted, completed or threatened pursuant to any Hazardous Materials Laws; (b) any claim made or threatened by any person against Landlord, or the Demised Premises, relating to damage, contribution, cost recovery, compensation, loss or injury resulting from or claimed to result from any Hazardous Materials; and (c) any reports made to any environmental agency arising out of or in connection with any Hazardous Materials in, on or about the Demised Premises or with respect to any Hazardous Materials removed from the Demised Premises, including, any complaints, notices, warnings, reports or asserted violations in connection therewith. Tenant shall also provide to Landlord, as promptly as possible, and in any event within five business days after Tenant first receives or sends the same, with copies of all claims, reports, complaints, notices, warnings or asserted violations relating in any way to Hazardous Materials on, in, under or about the Demised Premises or Tenant's use thereof. Upon written request of Landlord (to enable Landlord to defend itself from any claim or charge related to any Hazardous Materials Law), Tenant shall promptly deliver to Landlord notices of hazardous waste manifests reflecting the legal and proper disposal of all such Hazardous Materials deposited, stored or present upon the Demised Premises by or on behalf of Tenant and subsequently removed from the Demised Premises. All 10 such manifests shall list the Tenant or its agent as a responsible party and in no way shall attribute responsibility for any such Hazardous Materials to Landlord. Tenant shall indemnify, defend (with counsel reasonably acceptable to Landlord), protect and hold Landlord and each of Landlord's officers, directors, partners, employees, agents, attorneys, successors and assigns free and harmless from and against any and all claims, liabilities, damages, costs, penalties, forfeitures, losses or expenses (including attorneys' fees) for death or injury to any person or damage to any property whatsoever (including water tables and atmosphere) arising or resulting in whole or in part, directly or indirectly, from the presence or discharge of Hazardous Materials, in, on, under, upon or from the Demised Premises or the Improvements located thereon or from the transportation or disposal of Hazardous Materials to or from the Demised Premises to the extent caused by Tenant whether knowingly or unknowingly, the standard herein being one of strict liability. Tenant's obligations hereunder shall include, without limitation, and whether foreseeable or unforeseeable, all costs of any required or necessary repairs, clean-up or detoxification or decontamination of the Demised Premises or the Improvements, and the presence and implementation of any closure, remedial action or other required plans in connection therewith, and shall survive the expiration of or early termination of the term of this Lease. For purposes of the indemnity provided herein, any acts or omissions of Tenant, or its employees, agents, customers, sub-lessees, assignees, contractors or sub-contractors of Tenant (whether or not they are negligent, intentional, willful or unlawful) shall be strictly attributable to Tenant. If Landlord reasonably believes that there has been some failure of Tenant to comply with its obligations under this Section 4.3, then Landlord shall have the right to require Tenant to undertake and submit to Landlord an environmental audit from an environmental company reasonably acceptable to Landlord which audit shall evidence Tenant's compliance with this provision. Landlord may, at its expense, commission an environmental audit of the Demised Premises at any time after prior written notice to Tenant provided such audit does not materially interfere with Tenant's use of the Demised Premises. For the purposes of the covenants and agreements contained in Section 4.3, any acts or omissions of Tenant, its employees, agents, customers, sublessees, assignees, contractors or subcontractors shall be strictly attributable to Tenant. Section 4.4 Hazardous Material Representation by Landlord. To Landlord's knowledge, based upon that certain report of Phase I Environmental Site Assessment as prepared by Law Engineering and Environmental Services, Inc. dated March 1996 and any other information in Landlord's possession, if any, Landlord is not aware of any Hazardous Materials which exist or are located on or in the Demised Premises. Further, Landlord represents to Tenant that to the Landlord's knowledge, Landlord has not caused the generation, storage or release of hazardous materials upon the Demised Premises, except in accordance with all applicable Hazardous Materials laws. Section 4.5 Landlord's Hazardous Materials Indemnification. Landlord shall indemnify, defend (with counsel reasonably acceptable to Tenant), protect and hold Tenant and each of Tenant's officers, directors, partners, employees, agents, attorneys, successors and assigns free and harmless from and against any and all claims, liabilities, damages, costs, penalties, forfeitures, losses or expenses (including attorneys' fees), death or injury to any person 11 or damage to any property whatsoever (including water tables and atmosphere) arising or resulting in whole or in part, directly or indirectly from the presence or discharge of Hazardous Materials in, or, under, upon or from the Demised Premises or the Improvements located thereon or from the transportation or disposal of Hazardous Materials to or from the Demised Premises to the extent caused by Landlord whether knowingly or unknowingly. Landlord's obligations hereunder shall include, without limitation, and whether foreseeable or unforeseeable, all costs of any required or necessary repairs, clean-up or detoxification or decontamination of the Demised Premises or the Improvements, and the presence and implementation of any closure, remedial action or other required plans in connection therewith and shall survive the expiration of the term of this Lease. For the purposes of the indemnity provided herein any acts and omissions of Landlord, or its employees, agents, contractors or subcontractors (whether or not they are negligent, intentional, willful or unlawful) shall be strictly attributable to Landlord. Section 4.6 Discovery of Hazardous Materials Not Caused by Landlord or Tenant. In the event (a) Hazardous Materials are discovered upon the Demised Premises, (b) Landlord has been given written notice of the discovery of such Hazardous Materials, and (c) the presence or existence of such Hazardous Materials was not caused by Landlord or Tenant and neither Landlord nor Tenant are required pursuant to the provisions of Sections 4.3 or 4.5 to clean-up or remediate such Hazardous Materials or otherwise pay for the cost of compliance with any applicable Hazardous Materials Laws related to such Hazardous Materials, then and in that event, Landlord may, but shall not be obligated to, voluntarily agree with Tenant to take all action necessary to bring the Demised Premises into compliance with the Hazardous Materials Laws applicable to such Hazardous Materials at Landlord's sole cost and expense. In the event that Landlord fails to notify Tenant in writing within thirty days of the notice to Landlord of the discovery of such Hazardous Materials that Landlord intends to voluntarily take such action as is necessary to bring the Demised Premises into compliance with the Hazardous Materials Laws applicable to such Hazardous Materials, and in the event such notice is given, commences within such thirty (30) day period and proceeds diligently thereafter to bring the Demised Premises into compliance within a reasonable period of time, then Tenant may (i) bring the Demised Premises into compliance with such Hazardous Material Laws as are applicable to such Hazardous Materials at Tenant's sole cost and expense, or (ii) provided such Hazardous Materials (A) endanger persons or property in, on or about the Demised Premises, (B) materially interfere with Tenant's use and enjoyment of the Demised Premises, or (C) may result in liability to Tenant for any costs associated with remediation or cleanup of such Hazardous Materials, terminate the term of this Lease upon a date not less than ninety (90) days following Tenant's delivery of written notice to Landlord of Tenant's intent to so terminate and (X) Landlord's failure to bring the Demised Premises into compliance with the applicable Hazardous Materials Laws relating to such Hazardous Materials within said ninety (90) days, or (Y) in the case of potential termination of this Lease under subparagraph (ii)(C) above because of liability to Tenant which does not exceed Five Hundred Thousand and No/100ths Dollars ($500,000.00), Landlord's failure to agree in writing to fully indemnify Tenant from such liability within said ninety (90) days. ARTICLE V PAYMENT OF TAXES, ASSESSMENTS, ETC. Section 5.1 Payment of Impositions. Tenant covenants and agrees to pay during the term of this Lease Agreement (and the Early Occupancy Period), as Additional Rent, before any 12 fine, penalty, interest or cost may be added thereto for the nonpayment thereof, all real estate taxes, special assessments, water rates and charges, sewer rates and charges, including any sum or sums payable for present or future sewer or water capacity, charges for public utilities, street lighting, excise levies, licenses, permits, inspection fees, other governmental charges, and all other charges or burdens of whatsoever kind and nature (including costs, fees, and expenses of complying with any restrictive covenants, easements, declarations or similar agreements to which the Demised Premises are subject) incurred in the use, occupancy, ownership, operation, leasing or possession of the Demised Premises, without particularizing by any known name or by whatever name hereafter called, and whether any of the foregoing be general or special, ordinary or extraordinary, foreseen or unforeseen (all of which are sometimes herein referred to as "Impositions"), which at any time during the term (or the Early Occupancy Period) may have been or may be assessed, levied, confirmed, imposed upon, or become a lien on the Demised Premises, or any portion thereof, or any appurtenance thereto, rents or income therefrom, and such easements or rights as may now or hereafter be appurtenant or appertain to the use of the Demised Premises. Tenant shall pay (and if Tenant shall elect over the longest period allowed for such payment) all special (or similar) assessments for public improvements or benefits which, during the term of this Lease Agreement (or the Early Occupancy Period) shall be laid, assessed, levied or imposed upon or become a lien upon the Demised Premises, or any portion thereof and which shall be due and payable during the term of this Lease; provided, however, that if by law any special assessment is payable (without default) or, at the option of the owner, may be paid (without default) in installments (whether or not interest shall accrue on the unpaid balance of such special assessment), Tenant may pay the same, together with any interest accrued on the unpaid balance of such special assessment in installments as the same respectively become payable during the term hereof and before any fine, penalty, interest or cost may be added thereto for the nonpayment of any such installment and the interest thereon. Tenant shall pay all special assessments or installments thereof (including interest accrued thereon), whether heretofore or hereafter laid, assessed, levied or imposed upon the Demised Premises, or any portion thereof, which are due and payable during the term of this Lease Agreement (or the Early Occupancy Period). Landlord shall pay all installments of special assessments (including interest accrued on the unpaid balance) which are payable prior to the commencement of the Early Occupancy Period and after the termination date of the term of this Lease Agreement regardless of when such assessments become a lien upon the Demised Premises. Tenant shall pay all Impositions, whether heretofore or hereafter levied or assessed upon the Demised Premises, or any portion thereof, which are due and payable during the term of this Lease Agreement (or the Early Occupancy Period). Landlord shall pay all Impositions which are due and payable prior to the commencement of the Early Occupancy Period of the term of this Lease Agreement. Provisions herein to the contrary notwithstanding, Landlord shall pay that portion of Impositions accruing or payable with respect to the Demised Premises during the year the Early Occupancy Period commences and the year in which the term ends which the number of days in said year not within the term of this Lease Agreement bears to 365, and Tenant shall pay the balance of said Impositions during said years. Section 5.2 Tenant's Right to Contest Impositions. Tenant shall have the right at its own expense to contest the amount or validity, in whole or in part, of any Imposition by appropriate proceedings diligently conducted in good faith, and in the event of such contest, Tenant may postpone or defer payment of such Imposition if (a) neither the Demised Premises nor any portion thereof would, by reason of such postponement or deferment, be in danger of 13 being forfeited or lost, and (b) Landlord is not subjected to any criminal or civil liability as a result of such postponement or deferment. Upon the termination of any such proceedings, Tenant shall pay the amount of such Imposition or part thereof, if any, as finally determined in such proceedings, the payment of which may have been deferred during the prosecution of such proceedings, together with any costs, fees, including attorney's fees, interest, penalties, fines and other liability in connection therewith. Tenant shall be entitled to the refund of any Imposition, penalty, fine and interest thereon received by Landlord which have been paid by Tenant or which have been paid by Landlord but for which Landlord has been previously reimbursed in full by Tenant. Landlord shall not be required to join in any proceedings referred to in this Section 5.2 unless the provisions of any law, rule or regulation at the time in effect shall require that such proceedings be brought by or in the name of Landlord, in which event Landlord shall join in such proceedings or permit the same to be brought in Landlord's name upon compliance with such conditions as Landlord may reasonably require. Landlord shall not ultimately be subject to any liability for the payment of any fees, including attorney's fees, costs and expenses in connection with such proceedings. Tenant agrees to pay all such fees (including reasonable attorney's fees), costs and expenses or, on demand, to make reimbursement to Landlord for such payment. Section 5.3 Levies and Other Taxes. If, at any time during the term of this Lease Agreement (or the Early Occupancy Period), any method of taxation shall be such that there shall be levied, assessed or imposed on Landlord, or on the Basic Rent or Additional Rent, or on the Demised Premises, or any portion thereof, a capital levy, gross receipts tax, sales tax, use tax or other tax on the rents received therefrom, or a franchise tax, or an assessment, levy or charge measured by or based in whole or in part upon such rents, Tenant covenants to pay and discharge the same, it being the intention of the parties hereto that the rent to be paid hereunder shall be paid to Landlord absolutely net without deduction or charge of any nature whatsoever foreseeable or unforeseeable, ordinary or extraordinary, or of any nature, kind or description, except as in this Lease Agreement otherwise expressly provided, without limiting the foregoing, Tenant expressly agrees to pay all state and local sales taxes payable upon the Basic Rent or Additional Rent hereunder. Nothing in this Lease Agreement contained shall require Tenant to pay any municipal, state or federal net income or excess profits taxes assessed against Landlord, or any municipal, state or federal capital levy, estate, succession, inheritance or transfer taxes of Landlord, or corporation franchise taxes imposed upon any corporate owner of the fee of the Demised Premises. Section 5.4 Evidence of Payment. Tenant covenants to furnish Landlord, within 30 days after the date upon which any Imposition or other tax, assessment, levy or charge is payable by Tenant, official receipts of the appropriate taxing authority, or other appropriate proof satisfactory to Landlord, evidencing the payment of the same unless Tenant is contesting the same as provided in Section 5.2 hereof. The certificate, advice or bill of the appropriate official designated by law to make or issue the same or to receive payment of any Imposition or other tax, assessment, levy or charge may be relied upon by Landlord as sufficient evidence that such Imposition or other tax, assessment, levy or charge is due and unpaid at the time of the making or issuance of such certificate, advice or bill. Section 5.5 Escrow for Taxes and Assessments. At Landlord's written demand after any monetary Event of Default and for as long as such monetary Event of Default is uncured, Tenant shall pay to Landlord the known or estimated yearly real estate taxes and assessments 14 payable with respect to the Demised Premises in monthly payments equal to one- twelfth of the known or estimated yearly real estate taxes and assessments next payable with respect to the Demised Premises. From time to time Landlord may reestimate the amount of real estate taxes and assessments, and in such event Landlord shall notify Tenant, in writing, of such reestimate and fix future monthly installments for the remaining period prior to the next tax and assessment due date in an amount sufficient to pay the reestimated amount over the balance of such period after giving credit for payments made by Tenant on the previous estimate. If the total monthly payments made by Tenant pursuant to this Section 5.5 shall exceed the amount of payments necessary for said taxes and assessments, such excess shall be credited on subsequent monthly payments of the same nature; but if the total of such monthly payments so made under this paragraph shall be insufficient to pay such taxes and assessments when due, then Tenant shall pay to Landlord such amount as may be necessary to make up the deficiency. Payment by Tenant of real estate taxes and assessments under this section shall be considered as performance of such obligation under the provisions of Section 5.1 hereof. Section 5.6 Landlord's Right to Contest Impositions. In addition to the right of Tenant under Section 5.2 to contest the amount or validity of Impositions, Landlord shall also have the right, but not the obligation, to contest the amount or validity, in whole or in part, of any Impositions not contested by Tenant, by appropriate proceedings conducted in the name of Landlord or in the name of Landlord and Tenant. If Landlord elects to contest the amount or validity, in whole or in part, of any Impositions, such contests by Landlord shall be at Landlord's expense, provided, however, that if the amounts payable by Tenant for Impositions am reduced (or if a proposed increase in such amounts is avoided or reduced) by reason of Landlord's contest of Impositions, Tenant shall reimburse Landlord for reasonable costs incurred by Landlord in contesting Impositions, but such reimbursements shall not be in excess of the amount saved by Tenant by reason of Landlord's actions in contesting such Impositions. ARTICLE VI INSURANCE Section 6.1 Tenant's Insurance Obligations. Tenant, at its sole cost and expense, shall obtain and continuously maintain in full force and effect during the term of this Lease Agreement (and the Early Occupancy Period), commencing with the Possession Date policies of insurance covering the Improvements constructed, installed or located on the Demised Premises naming the Landlord, as an additional insured, against (a) loss or damage by fire; (b) loss or damage from such other risks or hazards now or hereafter embraced by an "Extended Coverage Endorsement," including, but not limited to, windstorm, hail, explosion, vandalism, riot and civil commotion, damage from vehicles, smoke damage, water damage and debris removal; (c) loss for flood if the Demised Premises are in a designated flood or flood insurance area of Zone A or a more flood prone zone designation (or any comparable designation that may subsequently replace such Zone A or more flood prone zone designation). At all times, such insurance coverage shall be in an amount equal to one hundred percent (100%) of the then "full replacement cost" of the Improvements. "Full Replacement Cost" shall be interpreted to mean the cost of replacing the improvements without deduction for depreciation or wear and tear. If a sprinkler system shall be located in the Improvements, sprinkler leakage insurance shall be procured and continuously maintained by Tenant at Tenant's sole cost and expense which 15 sprinkler leakage insurance may be maintained as a component of Tenant's overall casualty coverage. Section 6.2 Insurance Coverage. During the term of this Lease Agreement (and the Early Occupancy Period), Tenant, at its sole cost and expense, shall obtain and continuously maintain in full force and effect the following insurance coverage: (a) Commercial general liability insurance against any loss, liability or damage on, about or relating to the Demised Premises, or any portion thereof, with limits of not less than Two Million Dollars ($2,000,000.00) combined single limit, per occurrence and aggregate, coverage on an occurrence basis. Any such insurance obtained and maintained by Tenant shall name Landlord as an additional insured therein and shall be obtained and maintained from and with a reputable and financially sound insurance company authorized to issue such insurance in the state in which the Demised Premises are located. (b) Boiler and pressure vessel (including, but not limited to, pressure pipes, steam pipes and condensation return pipes) insurance, provided the Building contains a boiler or other pressure vessel or pressure pipes. (c) To the extent Tenant generally undertakes to increase or expand the insurance coverages which it maintains on a general, overall or national basis, then Tenant shall provide Landlord with the benefit of any such expanded or increased coverage during the term of this Lease; provided, however, in no event shall the coverages maintained by Tenant be reduced from those as contained in this Article VI. Section 6.3 Insurance Provisions. All policies of insurance required by Section 6.1 shall provide that the proceeds thereof shall be payable to Tenant. Each policy required under this Article VI shall have attached thereto (a) an endorsement that such policy shall not be cancelled or materially changed without at least 10 days prior written notice to Landlord, and (b) an endorsement to the effect that the insurance as to the interest of Landlord shall not be invalidated by any act or neglect of Landlord or Tenant. All policies of insurance shall be written in companies authorized to do business in the State of Florida with a Best's rating of B+, IX or better or equal or better rating as determined by another nationally recognized rating agency. Tenant shall provide Landlord with certificates evidencing such insurance on an ACCORD Form 27 or similar form, which certificate shall be delivered to Landlord prior to the Possession Date, with updated certificates of insurance to be delivered to Landlord not less than twenty (20) days following the expiration of any then current policy term; provided, however, Tenant shall not in any event permit there to be any gap or lapse in coverage with respect to any insurance required in Article VI. Section 6.4 Waiver of Subrogation. Tenant shall cause to be inserted in the policy or policies of insurance required by this Article VI hereof a so- called "Waiver of Subrogation Clause" as to Landlord. Tenant hereby waives, releases and discharges Landlord, its agents and employees from all claims whatsoever arising out of loss, claim, expense or damage to or destruction covered or coverable by insurance required under this Article VI notwithstanding that 16 such loss, claim, expense or damage may have been caused by Landlord, its agents or employees, and Tenant agrees to look to the insurance coverage only in the event of such loss, except for those claims arising from willful misconduct of Landlord, its employees, agents, contractors or assigns. Section 6.5 Tenant's Indemnification of Landlord. Tenant shall maintain insurance coverage (including loss of use and business interruption coverage) upon Tenant's business and upon all personal property of Tenant kept, stored or maintained on the Demised Premises against loss or damage by fire, windstorm (during the term hereof and the Early Occupancy Period) or other casualties or causes for such amount as Tenant may desire, and Tenant agrees that such policies shall contain a waiver of subrogation clause as to Landlord, except for those claims arising from willful misconduct of Landlord, its employees, agents, contractors or assigns. Section 6.6 Unearned Premiums. Upon expiration of the term of this Lease Agreement, the unearned premiums upon any insurance policies or certificates thereof lodged with Landlord by Tenant shall, subject to the provisions of Article XIII hereof, be payable to Tenant, provided that Tenant shall not then be in default in keeping, observing or performing the terms and conditions of this Lease Agreement. Section 6.7 Blanket Insurance Coverage. Nothing in this Article shall prevent Tenant from taking out insurance of the kind and in the amount provided for under the preceding paragraphs of this Article under a blanket insurance policy or policies (certificates thereof reasonably satisfactory to Landlord shall be delivered to Landlord) which may cover other properties owned or operated by Tenant as well as the Demised Premises; provided, however, that any certificate of blanket insurance of the kind provided for shall specify therein the amounts thereof applicable to the Demised Premises or Tenant shall furnish Landlord and the holder of any fee mortgage with a written statement from the insurers under such policies specifying the amounts of the total insurance applicable to the Demised Premises; and further provided, however, that such policies of blanket insurance shall, as respects the Demised Premises, contain the various provisions required of such an insurance policy by the foregoing provisions of this Article VI. Section 6.8 Landlord's Insurance Obligations. During the period of construction of Landlord's Improvements and for all periods prior to the Possession Date, Landlord shall maintain builder's risk insurance coverage on Landlord's Improvements as then under construction as well as Worker's Compensation insurance as required by law and general liability insurance coverage of not less than $2,000,000.00 combined single limit, per occurrence and aggregate, coverage on an occurrence basis. Further, from and after the Possession Date, Landlord shall maintain comprehensive general liability coverage with limits of not less than $2,000,000.00 combined single limit, per occurrence and aggregate, coverage on an occurrence basis. ARTICLE VII UTILITIES Section 7.1 Payment of Utilities. During the term of this Lease Agreement (and the Early Occupancy Period), Tenant will pay, when due, all charges of every nature, kind or 17 description for utilities furnished to the Demised Premises or chargeable against the Demised Premises, including all charges for water, sewage, heat, gas, light, garbage, electricity, telephone, steam, power, or other public or private utility services. Section 7.2 Additional Charges. In the event that any charge or fee is required after the Possession Date by the state in which the Demised Premises are located, or by any agency, subdivision, or instrumentality thereof, or by any utility company furnishing services or utilities to the Demised Premises, as a condition precedent to furnishing or continuing to furnish utilities to the Demised Premises, such charge or fee shall be deemed to be a utility charge payable by Tenant. Nothing contained in this Section 7.2 shall be construed to relieve Landlord of the obligation to finish Landlord's Improvements described in Exhibit "B", and Landlord shall pay all book up or other installation charges with respect to the initial installation of utilities to the Demised Premises as provided therein. ARTICLE VIII REPAIRS Section 8.1 Tenant's Repairs. Save and except for the one-year guaranty against defective materials and workmanship or other guaranties provided for in Section 2.4 hereof, Landlord's obligations as contained in Section 8.5 and 8.6 hereof, and the completion of incomplete items provided for in Section 2.5 hereof, Tenant, at its sole cost and expense, throughout the term of this Lease Agreement, shall take good care of the Demised Premises (including any improvements hereafter erected or installed on the Land), and shall keep the same in good order and condition, and irrespective of such guaranty shall make and perform all routine maintenance thereof and all necessary repairs thereto, interior and exterior, structural and nonstructural, ordinary and extraordinary, foreseen and unforeseen, of every nature, kind and description. When used, in this Article VII, "repairs" shall include all necessary replacements, renewals, alterations, additions and betterments. All repairs made by Tenant shall be at least equal in quality and cost to the original work and shall be made by Tenant in accordance with all laws, ordinances and regulations whether heretofore or hereafter enacted. The necessity for or adequacy of maintenance and repairs shall be measured by the standards which are appropriate for improvements of similar construction and class, provided that Tenant shall in any event make all repairs necessary to avoid any structural damage or other damage (subject to Landlord's obligations under Sections 2.4, 2.5, 8.5 and 8.6 hereof) or injury to the Improvements. Section 8.2 Maintenance. Tenant, at its sole cost and expense (subject to Landlord's obligations under Sections 2.4, 2.5, 8.5 and 8.6 hereof), shall take good care of, repair and maintain all driveways, pathways, roadways, sidewalks, curbs, spur tracts, parking areas, loading areas, landscaped areas, entrances and passageways in good order and repair and shall promptly remove all accumulated snow, ice and debris from any and all driveways, pathways, roadways, sidewalks, curbs, parking areas, loading areas, entrances and passageways, and keep all portions of the Demised Premises, including areas appurtenant thereto, in a clean and orderly condition free of snow, ice, dirt, rubbish, debris and unlawful obstructions. Further, Tenant shall keep the Demised Premises safe for human occupancy and use. Section 8.3 Tenant's Waiver of Claims Against Landlord. Except as expressly provided in Sections 2.4, 2.5, 8.5 and 8.6 hereof, Landlord shall not be required to furnish any 18 services or facilities or to make any repairs or alterations in, about or to the Demised Premises or any improvements hereafter erected thereon. Except as expressly provided in Sections 2.4, 2.5, 8.5 and 8.6 hereof, Tenant hereby assumes the full and sole responsibility for the condition, operation, repair, replacement, maintenance and management of the Demised Premises and all improvements hereafter erected thereon, and Tenant hereby waives any rights created by any law now or hereafter in force to make repairs to the Demised Premises or improvements hereafter erected thereon at Landlord's expense except as expressly provided in Sections 2.4, 2.5, 8.5 and 8.6 hereof. Section 8.4 Prohibition Against Waste. Tenant shall not do or suffer any waste or damage, disfigurement or injury to the Demised Premises, or any improvements hereafter erected thereon, or to the fixtures or equipment therein or permit or suffer any overloading of the floors or other use of the Improvements that would place an undue stress on the same or any portion thereof beyond that for which the same was designed. Section 8.5 Landlord's Obligations with Respect to Roof or Structural Failure. Should the roof on the Demised Premises, the parking lot for the Demised Premises or the structural walls of the Demised Premises fail in such a manner as to require replacement or major repair or major reworking of such roof, parking lot or structural walls (except if such failure results from Tenant's failure to maintain the roof, parking lot or structural walls as required in this Lease), then Landlord, at its sole cost and expense shall undertake to so replace the roof, parking lot or structural walls of the Demised Premises within a reasonable period following Tenant's notice to Landlord of such failure. Section 8.6 Landlord's Obligation to Reimburse Tenant for Certain Repairs. Should the roof, structural walls or parking lot for the Demised Premises require major repair or replacement (for which Landlord is not otherwise obligated to make replacement under Section 8.5 hereof) during the last three (3) years of the Initial Term or Renewal Term, as the case may be, then to the extent that (a) Tenant undertakes such major repair or replacement and (b) the reasonable useful life of such repair or replacement extends beyond the expiration of the Initial Term or the Renewal Term, as the case may be, then Landlord agrees that within fifteen (15) days following Landlord's receipt of an invoice from Tenant detailing such major repairs or replacements undertaken by Tenant, together with reasonable evidence of the payment by Tenant of such amounts, Landlord shall reimburse Tenant for its prorata share of the cost of such repair or replacement based upon the percentage that the portion of the useful life of such major repair or replacement following the end of the Initial Term or the Renewal Term, as the case may be, bears to the total useful life of such major repair or replacement. ARTICLE IX COMPLIANCE WITH LAWS AND ORDINANCES Section 9.1 Compliance with Laws and Ordinances. Except for those laws, ordinances, orders, rules, regulations and requirements which are applicable to the construction of Landlord's Improvements and Landlord's repairs and are the responsibility of Landlord as provided in Sections 2.1, 2.5 and 8.5 hereof, Tenant shall, throughout the term of this Lease Agreement (and the Early Occupancy Period), and at Tenant's sole cost and expense, promptly comply or cause compliance with or remove or cure any violation of any and all present and 19 future laws, ordinances, orders, rules, regulations and requirements of all federal, state, municipal and other governmental bodies having jurisdiction over the Demised Premises and the appropriate departments, commissions, boards and officers thereof, and the orders, rules and regulations of the Board of Fire Underwriters where the Demised Premises are situated, or any other body now or hereafter constituted exercising lawful or valid authority over the Demised Premises, or any portion thereof, or the sidewalks, curbs, roadways, alleys, entrances or railroad tract facilities adjacent or appurtenant thereto, or exercising authority with respect to the use or manner of use of the Demised Premises, or such adjacent or appurtenant facilities, and whether the compliance, curing or removal of any such violation and the costs and expenses necessitated thereby shall have been foreseen or unforeseen, ordinary or extraordinary, and whether or not the same shall be presently within the contemplation of Landlord or Tenant or shall involve any change of governmental policy, or require structural or extraordinary repairs, alterations or additions by Tenant and irrespective of the costs thereof. Section 9.2 Compliance with Permitted Encumbrances. Tenant, at its sole cost and expense, shall comply with all agreements, contracts, easements, restrictions, reservations or covenants, if any, set forth in Exhibit "A" attached, or hereafter created by Tenant or consented to, in writing, by Tenant or requested, in writing, by Tenant. Tenant shall also comply with, observe and perform all provisions and requirements of all policies of insurance at any time in force with respect to the Demised Premises and required to be obtained and maintained by Tenant under the terms of Article VI hereof and shall comply with all development permits issued by governmental authorities issued in connection with development of the Demised Premises. Section 9.3 Tenant's Obligations. Notwithstanding that it may be usual or customary for Landlord to assume responsibility and performance of any or all of the obligations of Tenant set forth in this Article IX, and notwithstanding any order, rule or regulation directed to Landlord to perform, except as provided in Section 9.1 above, Tenant hereby assumes such obligations because, by nature of this Lease Agreement the rents and income derived from this Lease Agreement by Landlord are net rentals not to be diminished by any expense incident to the ownership, occupancy, use, leasing, or possession of the Demised Premises or any portion thereof. Section 9.4 Tenant's Right to Contest Laws and Ordinances. After prior written notice to Landlord, Tenant, at its sole cost and expense and without cost or expense to Landlord, shall have the right to contest the validity or application of any law or ordinance referred to in this Article IX in the name of Tenant or Landlord, or both, by appropriate legal proceedings diligently conducted but only if the term of any such law or ordinance, compliance therewith pending the prosecution of any such proceeding may legally be delayed without the incurrence of any lien, charge or liability of any kind against the Demised Premises, or any portion thereof, and without subjecting Landlord or Tenant to any liability, civil or criminal, for failure so to comply therewith until the final determination of such proceeding; provided, however, if any lien, charges or civil liability would be incurred by reason of any such delay, Tenant nevertheless, on the prior written consent of Landlord, may contest as aforesaid and delay as aforesaid, provided that such delay would not subject Tenant or Landlord to criminal liability and Tenant (a) furnishes Landlord security, reasonably satisfactory to Landlord, against any loss or injury by reason of any such contest or -delay, (b) prosecutes the contest with due diligence 20 and in good faith and (c) agrees to indemnify, defend and hold harmless Landlord and the Demised Premises from any charge, liability or expense whatsoever. The security furnished to Landlord by Tenant shall be in the form of a cash deposit or a Certificate of Deposit issued by a national bank or federal savings and loan association payable to Landlord. Said deposit shall be held, administered and distributed in accordance with the provisions of Section 5.2 hereof relating to the contest of the amount or validity of any Imposition. If necessary or proper to permit Tenant so to contest the validity or application of any such law or ordinance, Landlord shall, at Tenant's sole cost and expense, including reasonable attorneys' fees incurred by landlord, execute and deliver any appropriate papers or other documents; provided, Landlord shall not be required to execute any document or consent to any proceeding which would result in the imposition of any cost, charge, expense or penalty on Landlord or the Demised Premises. ARTICLE X MECHANIC'S LIENS AND OTHER LIENS Section 10.1 Freedom from Liens. Tenant shall not suffer or permit any mechanic's lien or other lien to be filed against the Demised Premises, or any portion thereof, by reason of work, labor, skill, services, equipment or materials supplied or claimed to have been supplied to the Demised Premises at the request of Tenant, or anyone holding the Demised Premises, or any portion thereof, through or under Tenant. If any such mechanic's lien or other lien shall at any time be filed against the Demised Premises, or any portion thereof, Tenant shall cause the same to be discharged of record within 45 days after the date of filing the same. If Tenant shall fail to discharge such mechanic's lien or liens or other lien within such period, then, in addition to any other right or remedy of Landlord, after fifteen days prior written notice to Tenant, Landlord may, but shall not be obligated to, discharge the same by paying to the claimant the amount claimed to be due or by procuring the discharge of such lien as to the Demised Premises by deposit in the court having jurisdiction of such lien, the foreclosure thereof or other proceedings with respect thereto, of a cash sum sufficient to secure the discharge of the same, or by the deposit of a bond or other security with such court sufficient in form, content and amount to procure the discharge of such lien, or in such other manner as is now or may in the future be provided by present or future law for the discharge of such lien as a lien against the Demised Premises. Any amount paid by Landlord, or the value of any deposit so made by Landlord, together with all costs, fees and expenses in connection therewith (including reasonable attorneys' fees of Landlord), together with interest thereon at the Maximum Rate of Interest set forth in Section 3.4 hereof, shall be repaid by Tenant to Landlord on demand by Landlord and if unpaid may be treated as Additional Rent. Tenant shall indemnify and defend Landlord against and save Landlord and the Demised Premises, and any portion thereof, harmless from all losses, costs, damages, expenses, liabilities, suits penalties, claims, demands and obligations, including, without limitation, reasonable attorneys' fees resulting from the assertion, filing, foreclosure or other legal proceedings with respect to any such mechanic's lien or other lien. All materialmen, contractors, artisans, mechanics, laborers and any other person now or hereafter furnishing any labor, services, materials, supplies or equipment to Tenant with respect to the Demised Premises, or any portion thereof, are hereby charged with notice that they must look exclusively to Tenant to obtain payment for the same. Notice is hereby given that Landlord 21 shall not be liable for any labor, services, materials, supplies, skill, machinery, fixtures or equipment furnished or to be furnished to Tenant upon credit, and that no mechanic's lien or other lien for any such labor, services, materials, supplies, machinery, fixtures or equipment shall attach to or affect the state or interest of Landlord in and to the Demised Premises, or any portion thereof. Section 10.2 Landlord's Indemnification. The provisions of Section 10.1 above shall not apply to any mechanic's lien or other lien for labor, services, materials, supplies, machinery, fixtures or equipment furnished to the Demised Premises in the performance of Landlord's obligation to construct the Landlord's Improvements required by the provisions of Article 11 hereof, and Landlord does hereby agree to indemnify and defend Tenant against and save Tenant and the Demised Premises, and any portion thereof, harmless from all losses, costs, damages, expenses, liabilities and obligations, including, without limitation, reasonable attorneys' fees resulting from the assertion, filing, foreclosure or other legal proceedings with respect to any such mechanic's lien or other lien. ARTICLE XI INTENT OF PARTIES Section 11.1 Net Lease. Landlord and Tenant do each state and represent that it is their respective intention that this Lease Agreement be interpreted and construed as an absolute net lease and all Basic Rent and Additional Rent shall be paid by Tenant to Landlord without abatement, deduction, diminution, deferment, suspension, reduction or setoff (except as provided in Sections 2.3 and 12.9 hereof), and the obligations of Tenant shall not be affected by reason of damage to or destruction of the Demised Premises from whatever cause (except as provided for in Section 13.6 hereof); nor shall the obligations of Tenant be affected by reason of any condemnation, eminent domain or like proceedings (except as provided in Article XIV hereof); nor shall the obligations of Tenant be affected by reason of any other cause whether similar or dissimilar to the foregoing or by any laws or customs to the contrary. It is the further express intent of Landlord and Tenant that (a) the obligations of Landlord and Tenant hereunder shall be separate and independent covenants and agreements and that the Basic Rent and Additional Rent, and all other charges and sums payable by Tenant hereunder, shall commence at the times provided herein and shall continue to be payable in all events unless the obligations to pay the same shall be terminated pursuant to in express provision in this Lease Agreement; (b) all costs or expenses of whatsoever character or kind, general or special, ordinary or extraordinary, foreseen or unforeseen, and of every kind and nature whatsoever that may be necessary or required in and about the Demised Premises, or any portion thereof, and Tenant's possession or authorized use thereof during the term of this Lease Agreement (and the Early Occupancy Period), shall be paid by Tenant, except as provided in this Section 11.1 above, and all provisions of this Lease Agreement are to be interpreted and construed in light of the intention expressed in this Section 11.1; (c) the Basic Rent specified in Section 3.1 shall be absolutely net to Landlord, except as provided in this Section 11.1 above, so that this Lease Agreement shall yield net to Landlord the Basic Rent specified in Section 3.1 in each year during the term of this Lease Agreement (unless extended or renewed at a different Basic Rent); (d) all Impositions, insurance premiums, utility expense, repair and maintenance expense, and all other costs, fees, interest, charges, expenses, reimbursements and obligations of every kind and nature whatsoever relating to the Demised Premises, or any portion thereof, which may arise or become due during the term 22 of this Lease Agreement (and the Early Occupancy Period), or any extension or renewal thereof, shall be paid or discharged by Tenant as Additional Rent, except for those obligations of Landlord expressly provided herein; and (e) Tenant hereby agrees to indemnify, defend and save Landlord harmless from and against such costs, fees, charges, expenses, reimbursements and obligations, any interest thereon, except those obligations of Landlord expressly provided herein. Section 11.2 Entry by Landlord. If Tenant shall at any time fail to pay any Imposition in accordance with the provisions of Article V, or to take out, pay for, maintain and deliver any of the insurance policies or certificates of insurance provided for in Article VI, or shall fail to make any other payment or perform any other act on its part to be made or performed, then Landlord, after prior written notice to Tenant as provided In Section 12.1 (or without notice in case of emergency), and without waiving or releasing Tenant from any obligation of Tenant contained in this Lease Agreement, may, but shall be under no obligation to do so, (a) pay any Imposition payable by Tenant pursuant to the provisions of Article V; (b) take out, pay for and maintain any of the insurance policies provided for in this Lease Agreement; or (c) make any other payment or perform any other act on Tenant's part to be paid or performed as in this Lease Agreement provided, and Landlord may enter upon the Demised Premises for any such purpose without materially interfering with Tenant's use of the Demised Premises and take all such action therein or thereon as may be necessary therefor. Nothing herein contained shall be deemed as a waiver or release of Tenant from any obligation of Tenant in this Lease Agreement contained. Section 11.3 Interest on Unpaid Amounts. If Tenant shall fail to perform any act required of it, Landlord may perform the same, but shall not be required to do so, in such manner and to such extent as Landlord may deem necessary or desirable, and in exercising any such right to employ counsel and to pay necessary and incidental costs and expenses, including reasonable attorneys' fees. All sums so paid by Landlord and all necessary and incidental costs and expenses, including reasonable attorneys' fees, in connection with the performance of any such act by Landlord, together with interest thereon at the Maximum Rate of interest provided for in Section 3.4 hereof from the date of making such expenditure by Landlord, shall be deemed Additional Rent hereunder and, except as is otherwise expressly provided herein, shall be payable to Landlord on demand or, at the option of Landlord, may be added to any monthly rental then due or thereafter becoming due under this Lease Agreement, and Tenant covenants to pay any such sum or sums, with interest as aforesaid, and Landlord shall have, in addition to any other right or remedy of Landlord, the same rights and remedies in the event of nonpayment thereof by Tenant as in the case of default by Tenant in the payment of monthly Basic Rent. Landlord shall not be limited in the proof of any damages which Landlord may claim against Tenant arising out of or by reason of Tenant's failure to provide and keep in force insurance as aforesaid, to the amount of the insurance premium or premiums not paid or not incurred by Tenant, and which would have been payable upon such insurance, but Landlord shall be entitled to recover as damages for such breach the uninsured amount of any loss (to the extent of any deficiency between the dollar limits of insurance required by the provisions of this Lease Agreement and the dollar limits of the insurance actually carried by Tenant), damages, costs and expenses of suit, including reasonable attorneys' fees, suffered or incurred by reason of damage to or destruction of the Demised Premises, or any portion thereof or other damage or loss which Tenant is required to insure against hereunder, occurring during any period which Tenant shall have failed or neglected to provide insurance as aforesaid. 23 ARTICLE XII DEFAULTS Section 12.1 Event of Default. If any one or more of the following events (in this Article sometimes called "Events of Default" shall happen: (a) If default shall be made by Tenant, by operation of law or otherwise, under the provisions of Article XV hereof relating to assignment, sublease, mortgage or other transfer of Tenant's interest in this Lease Agreement or in the Demised Premises or in the income arising therefrom; (b) If default shall be made in the due and punctual payment of any Basic Rent or Additional Rent payable under this Lease Agreement or in the payment of any obligation to be paid by Tenant, when and as the same shall become due and payable, and such default shall continue for a period of ten days after written notice thereof given by Landlord to Tenant; (c) If default shall be made by Tenant in keeping, observing or performing any of the terms contained in this Lease Agreement which are Tenant's obligations to perform, other than those referred to in Subparagraphs (a) and (b) of this Section 12.1, which does not expose Landlord to criminal liability, and such default shall continue for a period of 30 days after written notice thereof given by Landlord to Tenant, or in the case of such a default or contingency which cannot with due diligence and in good faith be cured within 30 days, and Tenant fails to proceed promptly and with due diligence and in good faith to cure the same and thereafter to prosecute the curing of such default with due diligence and in good faith, it being intended that in connection with a default which does not expose Landlord to criminal liability, not susceptible of being cured with due diligence and in good faith within 30 days, that the time allowed Tenant within which to cure the same shall be extended for such period as may be necessary for the curing thereof promptly with due diligence and in good faith; (d) If default shall be made by Tenant in keeping, observing or performing any of the terms contained in this Lease Agreement which are Tenant's obligations to perform, other than those referred to in Subparagraphs (a), (b) and (c) of this Section 12.1, and which exposes Landlord to criminal liability, and such default shall continue after written notice thereof given by Landlord to Tenant, and Tenant fails to proceed timely and promptly with all due diligence and in good faith to cure the same and thereafter to prosecute the curing of such default with all due diligence, it being intended that in connection with a default which exposes Landlords to criminal liability that Tenant shall proceed immediately to cure or correct such condition with continuity and with all due diligence and in good faith; then, and in any such event, Landlord, at any time thereafter during the continuance of any such Event of Default, may give written notice to Tenant specifying such Event of Default or Events of Default and stating that this Lease Agreement and the terms hereby demised shall expire and 24 terminate on the date specified in such notice, and upon the date specified in such notice this Lease Agreement and the terms hereby demised, and all rights of Tenant under this Lease Agreement, including all rights of renewal whether exercised or not, shall expire and terminate, or in the alternative or in addition to the foregoing remedy, Landlord may assert and have the benefit of any other remedy allowed herein, at law, or in equity. Section 12.2 Surrender of Demised Premises. Upon any expiration or termination of this Lease Agreement, Tenant shall quit and peaceably surrender the Demised Premises, and all portions thereof, to Landlord and Landlord, upon or at any time after any such expiration or termination, may, without further notice, enter upon and reenter the Demised Premises, and all portions thereof, and possess and repossess itself thereof, by force, summary proceedings ejectment or otherwise, and may dispossess Tenant and remove Tenant and all other persons and property from the Demised Premises, and all portions thereof, and my have, hold and enjoy the Demised Premises and the right to receive all rental and other income of and from the same. Section 12.3 Reletting by Landlord. At any time, or from time to time after any such expiration or termination, Landlord may relet the Demised Premises, or any portion thereof, in the name of Landlord or otherwise, for such term or terms (which may be greater or less than the period which would otherwise have constituted the balance of the term of this Lease Agreement) and on such conditions (which way include concessions or free rent) as Landlord, in its uncontrolled discretion, may determine and may collect and receive the rents therefor. Landlord shall in no way be responsible or liable for any failure to relet the Demised Premises, or any part thereof, or for any failure to collect any rent due upon any such reletting. Section 12.4 Survival of Tenant's Obligations. No such expiration or termination of this Lease Agreement shall relieve Tenant of its liabilities and obligations under this Lease Agreement (as if this Lease Agreement had not been so terminated or expired), and such liabilities and obligations shall survive any such expiration or termination. In the event of any such expiration or termination, whether or not the Demised Premises, or any portion thereof, shall have been relet, Tenant shall pay to Landlord a sum equal to the Basic Rent, and the Additional Rent and any other charges required to be paid by Tenant, up to the time of such expiration or termination of this Lease Agreement, and thereafter Tenant, until the end of what would have been the term of this Lease Agreement in the absence of such expiration or termination, shall be liable to Landlord for, and shall pay to Landlord, as and for liquidated and agreed current damages for Tenant's default: (a) The equivalent of the amount of the Basic Rent and Additional Rent which would be payable under this Lease Agreement by Tenant if this Lease Agreement were still in effect, less (b) The net proceeds of any reletting effected pursuant to the provisions of Section 12.3 hereof after deducting all of Landlord's reasonable expenses in connection with such reletting, including, without limitation, all repossession costs, brokerage commissions, legal expenses, reasonable attorneys' fees, alteration costs, and expenses of preparation of the Demised Premises, or any portion thereof, for such reletting. 25 Tenant shall pay such current damages in the amount determined in accordance with the terms of this Section 12.4, as set forth in a written statement thereof from Landlord to Tenant (hereinafter called the "Deficiency"), to Landlord in monthly installments on the days on which the Basic Rent would have been payable under this Lease Agreement if this Lease Agreement were still in effect, and Landlord shall be entitled to recover from Tenant each monthly installment of the Deficiency as the same shall arise. Section 12.5 Damages. At any time after an Event of Default, whether or not Landlord shall have previously collected any monthly Deficiency as set forth in Section 12.4, Landlord shall, at its option, be entitled to recover from Tenant in lieu of the collection of any further monthly Deficiencies, and Tenant shall pay to Landlord, on demand, as and for final damages for Tenant's default, an amount equal to the difference between the then present worth of the aggregate of the Basic Rent and Additional Rent (excluding items of Additional Rent that are incurred only as a direct result of occupancy) and any other charges to be paid by Tenant hereunder for the unexpired portion of the term of this Lease Agreement from and after the date through which any previously collected monthly Deficiencies have been paid, and the then present worth of the then aggregate fair and reasonable fair market rent of the Demised Premises for the same period. In the computation of present worth, a discount at the rate equal to the then existing Federal Reserve Discount Rate shall be employed. Nothing herein contained or contained in Section 12.4 shall limit or prejudice the right of Landlord to prove for and obtain, as damages by reason of such expiration or termination, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved, whether or not such amount be greater, equal to or less than the amount of the difference referred to above. Section 12.6 No Waiver. No failure by Landlord or by Tenant to insist upon the performance of any of the terms of this Lease Agreement or to exercise any right or remedy consequent upon a breach thereof, and no acceptance by Landlord of full or partial rent from Tenant or any third party during the continuance of any such breach, shall constitute a waiver of any such breach or of any of the terms of this Lease Agreement. None of the terms of this Lease Agreement to be kept, observed or perforated by Landlord or by Tenant, and no breach thereof, shall be waived, altered or modified except by a written instrument executed by Landlord and/or by Tenant, as the case may be. No waiver of any breach shall affect or alter this Lease Agreement, but each of the terms of this Lease Agreement shall continue in full force and affect with respect to any other then existing or subsequent breach of this Lease Agreement. No waiver of any default of Tenant herein shall be implied from any omission by Landlord to take any action on account of such default, if such default persists or is repeated and no express waiver shall affect any default other than the default specified in the express waiver and that only for the time and to the extent therein stated. One or more waivers by Landlord shall not be construed as a waiver of a subsequent breach of the same covenant, term or condition. Section 12.7 Landlord's Remedies. In the event of any breach or threatened breach by Tenant of any of the terms contained in this Lease Agreement, Landlord shall be entitled to enjoin such breach or threatened breach and shall have the right to invoke any right or remedy allowed at law or in equity or by statute or otherwise as though entry, reentry, summary proceedings and other remedies were not provided for in this Lease Agreement. Each remedy or right of Landlord provided for in this Lease Agreement shall be cumulative and shall be in 26 addition to every other right or remedy provided for in this Lease Agreement, or now or hereafter existing at law or in equity or by statute or otherwise, and the exercise or the beginning of the exercise by Landlord of any one or more of such rights or remedies shall not preclude the simultaneous or later exercise by Landlord of any or all other rights or remedies. Section 12.8 Bankruptcy. If, during the term of this Lease Agreement, (a) Tenant shall make an assignment for the benefit of creditors, (b) a voluntary petition be filed by Tenant under any law having for its purpose the adjudication of Tenant a bankrupt, or Tenant be adjudged a bankrupt pursuant to an involuntary petition in bankruptcy, (c) a receiver be appointed for the property of Tenant, or (d) any department of the state or federal government, or any officer thereof duly authorized, shall take possession of the business or property of Tenant, the occurrence of any such contingency shall be deemed it breach of the Lease Agreement and this Lease Agreement shall, ipso facto upon the happening of any of said contingencies, be terminated and the same shall expire as fully and completely as if the day of the happening of such contingency were the date hereon specifically fixed for the expiration of the term, and Tenant will then quit and surrender the Demised Premises, but Tenant shall remain liable as hereinafter provided. Notwithstanding other provisions of this lease Agreement, or any present or future law, Landlord shall be entitled to recover from Tenant or Tenant's estate (in lieu of the equivalent of the amount of all rent and other charges unpaid at the date of such termination) as damages for loss of the bargain and not as a penalty, an aggregate sum which at the time of such termination represents the difference between the then present worth of the aggregate of the Base Rent and Additional Rent and any other charges payable by Tenant hereunder that would have accrued for the balance of the term of this Lease Agreement (assuming this Lease Agreement had not been so terminated), over the then present worth of the aggregate fair market rent of the Demised Premises for the balance of such period, unless any statute or rule of law covering the proceedings in which such damages are to be proved shall limit the amount of such claim capable of being so proved, in which case Landlord shall be entitled to prove as and for damages by reason of such breach and termination of this Lease Agreement the maximum amount which may be allowed by or under any such statute or rule of law without prejudice to any rights of Landlord against any guarantor of Tenant's obligations herein. In the computation of present worth, a discount rate equal to the then existing Federal Reserve Discount Rate shall be employed. Nothing contained herein shall limit or prejudice Landlord's right to prove and obtain as damages arising out of such breach and termination the maximum amount allowed by any such statute or rule of law which may govern the proceedings in which such damages are to be proved, whether or not such amount be greater equal to, or less than the amount of the excess of the present value of the rent and other charges required herein over the present value of the fair market rents referred to above. Specified remedies to which Landlord my resort under the terms of this Section 12.8 are cumulative and are not intended to be exclusive of any other remedies or means of redress to which Landlord my be lawfully entitled. Section 12.9 Landlord's Default - Offset Rights. In the event that Landlord should default in its obligations with respect to Landlord's construction guaranty under Section 2.4 hereof, Landlord's obligation to complete incomplete items of Landlord's Improvements as provided in Section 2.5 hereof, Landlord's obligations to undertake certain replacements, major repairs or major reworkings as provided in Section 8.5 hereof or Landlord's obligations to reimburse Tenant as provided in Section 8.6 hereof, and Landlord has failed to commence to cure such default (or in the case of a default under Section 8.6 reimburse Tenant for amounts 27 owed) within thirty (30) days of Tenant's notice to Landlord of such default and thereafter proceed in good faith with reasonable diligence to complete such cure, then Tenant, upon a second notice to Landlord of such default and the failure of Landlord to commence to cure such default (or in the case of a default by Landlord under Section 8.6 to reimburse Tenant for amounts owed) within five (5) days following the date of such notice and thereafter proceed in good faith and with reasonable diligence to complete such cure, may elect, at Tenant's option, but without obligation, to undertake to perform such acts and pay such amounts as are reasonably necessary to cure such default, and Landlord reimburse Tenant for amounts owed. If such amounts are not so paid by Landlord within said fifteen (15) day period (or immediately after the expiration of said five (5) day notice period as referenced above, in the case of a default by Landlord under Section 8.6 to reimburse Tenant for amounts owed), then Tenant shall have the right to offset such sums from the Basic Rent payable by Tenant hereunder; provided, however, the amount of such offset for any given month shall not exceed the greater of (i) 30% of the Basic Rent payable for such month, or (ii) a percentage of monthly Basic Rent as is necessary to fully amortize the amount of such amounts expended by Tenant over the remaining term of the Lease. In addition, amounts expended by Tenant hereunder shall bear interest at the Maximum Rate of Interest from the date such amounts are expended by Tenant, except in the case of amounts owed to Tenant as reimbursement pursuant to Section 8.6, which shall bear interest at the Maximum Rate of Interest from a date which is fifteen (15) days after Tenant's initial invoice to Landlord for such amounts. ARTICLE XIII DESTRUCTION AND RESTORATION Section 13.1 Destruction and Restoration. Tenant covenants and agrees that in case of damage to or destruction of the Improvements after the commencement date of the term of this Lease Agreement, by fire or otherwise, Tenant, at its sole cost and expense, shall promptly restore, repair, replace and rebuild the same as nearly as possible to the condition that the same were in immediately prior to such damage or destruction with such changes or alterations (made in conformity with Article XIX hereof) as may be reasonably acceptable to Landlord or required by law. Tenant shall forthwith give Landlord written notice of such damage or destruction upon the occurrence thereof and specify in such notice, in reasonable detail, the extent thereof. Such restoration, repairs, replacements, rebuilding, changes and alterations, including the cost of temporary repairs for the protection of the Demised Premises, or any portion thereof, pending completion thereof are sometimes hereinafter referred to as the "Restoration." The Restoration shall be carried on and completed in accordance with the provisions and conditions of Section 13.2 and Article XIX hereof. If the net amount of the insurance proceeds (after deduction of all costs, expenses and fees related to recovery of the insurance proceeds) recovered by Tenant are reasonably deemed insufficient by Landlord to complete the restoration of such Improvements (exclusive of Tenant's personal property and trade fixtures which shall be restored, repaired or rebuilt out of Tenant's separate funds), Tenant shall, upon request of Landlord, deposit in the Restoration Account (as hereinafter defined) a cash deposit (or a completion bond or letter credit in form and substance reasonably acceptable to Landlord) equal to the reasonable estimate of the amount necessary to complete the restoration of such Improvements after taking into account the amount of such insurance proceeds available. Without limiting the foregoing, Tenant shall be responsible for all costs of Restoration including, but not limited to, all construction, 28 architectural, engineering, legal, administrative and supervisory fees connected with the Restoration. Section 13.2 Application of Insurance Proceeds. All insurance monies recovered by Tenant shall, to the extent paid to Tenant, be held by Tenant in a segregated account (the "Restoration Account") and shall be applied only to the payment of the costs of the Restoration and shall be paid out from time to time as the Restoration progresses with a simultaneous delivery to Landlord of a certificate of the architect or a qualified professional engineer in charge of the Restoration stating that as of the date, of such certificate (a) the sum disbursed is justly due to the contractors, subcontractors, materialmen, laborers, engineers, architects, or persons, firms or corporations furnishing or supplying work, labor, services or materials for such Restoration, or is justly required to reimburse Tenant for any expenditures made by Tenant in connection with such Restoration; (b) except for the amount, if any, stated in such certificates to be due for work, labor, services or materials, there is no outstanding indebtedness known to the person signing such certificate, after due inquiry, which is then due for work, labor, services or materials in connection with such Restoration, which, if unpaid, might become the basis of a mechanic's lien or similar lien with respect to the Restoration or a lien upon the Demised Premises, or any portion thereof, and (c) the costs, as estimated by the person signing such certificate, of the completion of the Restoration required to be done subsequent to the date of such certificate in order to complete the Restoration do not exceed the amount remaining in the Restoration Account. Tenant shall furnish Landlord at the time of any such payment with evidence reasonably satisfactory to Landlord that there are no unpaid bills in respect to any work, labor, services or materials performed, furnished or supplied in connection with such Restoration. If the insurance monies and such other sums, if any, deposited by Tenant in the Restoration Account pursuant to Section 13.1 hereof, shall be insufficient to pay the entire costs of the Restoration, Tenant agrees to pay any deficiency promptly upon demand. Upon completion of the Restoration and payment in full thereof by Tenant, Tenant may disburse to itself the balance remaining, if any, in the Restoration Account upon submission of proof reasonably satisfactory to Landlord that the Restoration has been paid for in full and the damaged or destroyed Building and other improvements repaired, restored or rebuilt as nearly as possible to the condition they were in immediately prior to such damage or destruction, or with such changes or alterations as may be made in conformity with Section 13.1 and Article XIV hereof. Section 13.3 Continuance of Tenant's Obligations. Except as provided for in Section 13.6, no destruction of or damage to the Demised Premises, or any portion thereof, by fire, casualty or otherwise shall permit Tenant to surrender this Lease Agreement or shall relieve Tenant from its liability to pay to Landlord the Base Rent and Additional Rent payable under this Lease Agreement or from any of its other obligations under this Lease Agreement, and Tenant waives any rights now or hereafter conferred upon Tenant by present or future law or otherwise to quit or surrender this Lease Agreement or the Demised Premises, or any portion thereof, to Lease Agreement, and Tenant waives any rights now or hereafter conferred upon Tenant by present or future law or otherwise to quit or surrender this Lease Agreement or the Demised Premises, or any portion thereof, to Landlord or to any suspension, diminution, abatement or reduction of rent on account of any such damage or destruction. 29 Section 13.4 Availability of Insurance Proceeds. To the extent that any insurance monies which would otherwise be payable to Tenant and used in the Restoration of the damaged or destroyed improvements are paid to any mortgagee of Landlord and applied in payment of or reduction of the sum or sums secured by any such mortgagee or mortgages made by Landlord on the Demised Premises, Landlord shall make available, for the purpose of Restoration of such improvements, an amount equal to the amount payable to its mortgagee out of such proceeds and such sum shall be applied in the manner provided in Section 13.2 hereof. Section 13.5 Completion of Restoration. The foregoing provisions of this Article XIII apply only to damage or destruction of the Improvements by fire, casualty or other cause occurring after the Possession Date. Any such damage or destruction occurring prior to such time shall be restored, repaired, replaced and rebuilt by Landlord and during such period of construction Landlord shall obtain and maintain the builder's risk insurance coverage referred to in Section 6.1 hereof. All monies received by Landlord under its builder's risk insurance coverage shall be applied by Landlord to complete the Restoration of such damage or destruction and if such insurance proceeds are insufficient Landlord shall provide all additional funds necessary to complete the Restoration of the Improvements. Section 13.6 Termination of Lease. (a) If within twelve (12) months prior to the expiration of the term of this Lease Agreement, the Improvements shall be destroyed or damaged to such an extent that (i) the Restoration thereof will cost an amount in excess of the net proceeds of the insurance required to be and maintained by Tenant, hereinafter referred to as the "Excess Funds", (ii) the amount of Excess Funds exceeds Five Hundred Thousand Dollars ($500,000.00), and (iii) Tenant shall be unable or unwilling to expend out of its own funds such Excess Funds for the purpose of Restoration of such damage or destruction for occupancy by Tenant, Tenant shall, with reasonable promptness, notify Landlord, in writing, of such fact, which notice shall be accompanied by a detailed statement of the nature and extent of such damage or destruction and detailed estimates of the total cost of Restoration. Within 30 days after the giving of such notice, Landlord shall notify Tenant either that (a) it will furnish, at its sole cost and expense, the Excess Funds which are necessarily required in connection with the Restoration (to be disbursed in conformity with the requirements of Section 13.2 and Article XIX hereof), or (b) it is unwilling to expend the Excess Funds for such purpose. Failure to give such notice within such 30-day period shall be deemed an election by Landlord not to make such expenditure. In the event that Landlord elects not to expend the Excess Funds, as aforesaid, then Tenant shall have the option, within 15 days after the expiration of said 30-day period, to terminate this Lease Agreement and surrender the Demised Premises to Landlord by a notice, in writing, addressed to Landlord, specifying such election accompanied by Tenant's payment of the balance of the Base Rent and Additional Rent and other charges apportioned as hereafter specified in this Section 13.6. Upon the giving of such notice and the payment of such amounts, the term of this Lease Agreement shall cease and come to an and on a day to be specified in Tenant's notice, which date shall not be more than 30 days after the date of delivery of such notice by Tenant to Landlord. Tenant shall accompany such notice with its payment of all Base Rent and Additional Rent and other charges payable by Tenant hereunder, justly apportioned to the date of such damage, 30 together with the dollar amount of Landlord's reasonable estimate of the Excess Funds. In such event Landlord shall be entitled to the proceeds of all property or casualty insurance on the Demised Premises required to be carried by Tenant under 6.1 hereof, and Tenant shall execute all documents reasonably requested by Landlord to allow such proceeds to be paid to Landlord. (b) If within six (6) months prior to the expiration of the term of this Lease Agreement, the Improvements shall be completely destroyed or there shall occur major damage (as hereinafter defined) to the Improvements, then within thirty (30) days after the event causing such destruction or major damage, either Landlord or Tenant upon giving written notice to the other may elect to terminate the term of the Lease as of the date of such destruction or major damage. Upon such termination, Landlord shall be entitled to the proceeds of all insurance upon the Demised Premises required to be carried by Tenant under Section 6.1 hereof, and Tenant shall execute all documents reasonably requested by Landlord to allow such proceeds to be paid to Landlord. In addition, Tenant shall simultaneously with Tenant's notice of termination (if Tenant is the terminating party) or within ten (10) days following Tenant's receipt of Landlord's notice of termination (if Landlord is the terminating party) pay to Landlord all Base Rent and Additional Rent and other charges payable by Tenant hereunder, justly apportioned to the date of such destruction or major damage of the Demised Premises, together with the dollar amount of Landlord's reasonable estimate of the Excess Funds. ARTICLE XIV CONDEMNATION hereunder shall cease and come to an end on the date of vesting of title pursuant to such Proceedings and Landlord shall be entitled to and shall receive the total award made in such Proceedings, Tenant hereby assigning any interest in such awards, damages, consequential damages and compensation to Landlord and Tenant hereby waiving any right Tenant has now or may have under present or future law to receive any separate award of damages for its interest in the Demised Premises, or any portion thereof, or its interest in this Lease Agreement; provided, however, the foregoing shall not prevent Tenant from maintaining a separate action to recover damages for moving expenses, loss of business and loss of trade fixtures, provided, in no event shall Tenant be permitted to maintain any action with respect to the loss of its leasehold estate. Section 14.2 Partial Condemnation/Termination of Lease. If, during the Initial Term of this Lease Agreement, or any extension or renewal thereof, less than the entire Demised Premises, but more than 15% of the floor area of the Building, or more than 25% of the land area of the Demised Premises, shall be taken in any such Proceedings, this Lease Agreement shall, upon vesting of title in the Proceedings, terminate as to the portion of the Demised Premises so taken, and Tenant may, at its option, terminate this Lease Agreement as to the remainder of the Demised Premises. Tenant shall not have the right to terminate this Lease pursuant to the preceding sentence unless (a) the business of Tenant conducted in the portion of the Demised Premises taken cannot reasonably be carried on with substantially the same utility and efficiency in the remainder of the Demised Premises (or any substitute space securable by Tenant pursuant 31 to clause [b] hereof) and (b) Tenant cannot construct or secure substantially similar space to the space so taken, on the Demised Premises. Such termination as to the remainder of the Demised Premises shall be effected by notice in writing given not more than 60 days after the date of vesting of title in such Proceedings, and shall specify a date not more than 60 days after the giving of such notice as the date for such termination. Upon the data specified in such notice, the term of this Lease Agreement, and all right, title and interest of Tenant hereunder, shall cease and come to an end. If this Lease Agreement is terminated as in this Section 14.2 provided, Landlord shall be entitled to and shall receive the total award made in such Proceedings, Tenant hereby assigning any interest in such award, damages, consequential damages and compensation to Landlord, and Tenant hereby waiving any right Tenant has now or may have under present or future law to receive any separate award of damages for its interest in the Demised Premises, or any portion thereof, or its interest in this Lease Agreement except as otherwise provided in Section 14.1. In the event that Tenant elects not to terminate this Lease Agreement as to the remainder of the Demised Premises, the rights and obligations of Landlord and Tenant shall be governed by the provisions of Section 14.3 hereof. Section 14.3 Partial Condemnation/Continuation of Lease. If 15%, or less, of the floor area of the Building, or 25 %, or less, of the land area of the Demised Premises, shall be taken in such Proceedings, or if more than 15% of the floor area of the Building or more than 25% of the land area of the Demised Premises is taken (but less than the entire Demised Premises), and this Lease Agreement is not terminated as in Section 14.2 hereof provided, this Lease Agreement shall, upon vesting of title in the Proceedings, terminate as to the parts so taken, and Tenant shall have no claim or interest in the award, damages, consequential damages and compensation, or any part thereof except as otherwise provided in Section 14.1. Landlord shall be entitled to and shall receive the total award made in such Proceedings, Tenant hereby assigning any interest in such award, damages, consequential damages and compensation to Landlord, and Tenant hereby waiving any right Tenant has now or may have under present or future law to receive any separate award of damages for its interest in the Demised Premises, or any portion thereof, or its interest in this Lease Agreement except as otherwise provided above in Section 14.1. The net amount of the award (after deduction of all costs and expenses, including attorneys' fees) that may be received by Landlord in any such proceedings for physical damage to the Improvements as the result of such taking shall be deposited by Landlord in Tenant's Restoration Account. Tenant, in such case, covenants and agrees, at Tenant's sole cost and expense (subject to reimbursement to the extent hereinafter provided), promptly to restore that portion of the Improvements on the Demised Premises not so taken to a complete architectural and mechanical unit for the use and occupancy of Tenant as in this Lease Agreement provided. In the event that the net amount of the award (after deduction of all costs and expenses, including attorneys' fees) that may be received by Landlord in any such Proceedings for physical damage to the Improvements as a result of such taking is insufficient to pay all costs of such restoration work, Landlord shall deposit in the Restoration Account such additional sum as may be required to update the Restoration as the Restoration progresses upon the written request of Tenant. The provisions and conditions in Article XIX applicable to changes and alterations shall apply to Tenant's obligations to restore that portion of the Improvements to a complete architectural and mechanical unit. Tenant shall apply so much of the net amount of any award (after deduction of all costs and expenses, including attorneys' fees) that may be received by Landlord in any such Proceedings for physical damage to the Improvements as a result of such taking and deposited by Landlord in the Restoration Account to the costs of such restoration work thereof and such 32 amounts in the Restoration Account shall be paid out from time to time to Tenant, or on behalf of Tenant, as such restoration work progresses with the simultaneous delivery to Landlord of a certificate of the architect or the registered professional engineer in charge of the restoration work stating that (a) the sum requested is justly due to the contractors, subcontractors, materialmen, laborer, engineers, architects or other persons, firms or corporations furnishing or supplying work, labor, services or materials for such restoration work or as is justly required to reimburse Tenant for expenditures made by Tenant in connection with such restoration work; and (b) the net amount of any such award for physical damage to the Improvements as a result of such taking remaining in the Restoration Account, together with the sums, if any, deposited by Landlord pursuant to the provisions hereof, will be sufficient upon the completion of such restoration work to pay for the same in full. If payment of the award for physical damage to the Improvements as a result of such taking, as aforesaid, shall not be received by Landlord in time to permit payments as the restoration work progresses, Tenant shall, perform such work without delay (except such delays as are referred to in Article XIX hereon, and Landlord shall deposit in the Restoration Account such amounts damage to the Improvements as a result of such taking, as aforesaid, shall not be received by Landlord in time to permit payments as the restoration work progresses, Tenant shall, perform such work without delay (except such delays as are referred to in Article XIX hereof), and Landlord shall deposit in the Restoration Account such amounts required to undertake the restoration work as the restoration work progresses pursuant to this Section 14.3. In which event Landlord shall be entitled to retain an amount equal to the sum disbursed to Tenant pursuant to the preceding sentence out of any award for physical damages to the Improvements as and when payment of such award is received by Landlord. Tenant shall also furnish Landlord with each certificate hereinabove referred to, together with evidence reasonably satisfactory to Landlord that there are no unpaid bills in respect to any work, labor, services or materials performed, furnished or supplied, or claimed to have been performed, furnished or supplied, in connection with such restoration work, and that no liens have been filed against the Demised Premises, or any portion thereof. Tenant shall not pay out any funds from the Restoration Account when there are unpaid bills for work, labor, services or materials performed, furnished or supplied in connection with such restoration work (other than bills to be paid by the amount being disbursed from the Restoration Account), or where a lien for work, labor, services or materials performed, furnished or supplied has been placed against the Demised Premises, or any portion thereof. Upon completion of the restoration work and payment in full therefor by Tenant, and upon submission of proof reasonably satisfactory to Landlord that the restoration work has been paid for in full and that the Improvements have been restored or rebuilt to a complete architectural and mechanical unit for the use and occupancy of Tenant as provided in this Lease Agreement, the amount remaining in the Restoration Account shall be disbursed to Landlord. To the extent that any award, damages or compensation which would otherwise be payable to Landlord and applied to the payment of the cost of restoration of the Improvements is paid to any mortgagee of Landlord and applied in payment or reduction of the sum or sums secured by any such mortgage or mortgages made by Landlord on the Demised Premises, Landlord shall make available for the use of Tenant, in connection with the payment of the cost of restoring the Improvements an amount equal to the amount of such net award payable to the mortgagee. From and after the date of delivery of petition to the condemning authority pursuant to the Proceedings, a just and proportionate part of the Basic Rent, according to the extent and nature of such taking, shall abate for the remainder of the term of this Lease Agreement. 33 Section 14.4 Continuance of Obligations. In the event of any termination of this Lease Agreement, or any part thereof, as a result of any such Proceedings, Tenant shall pay to Landlord all Basic Rent and all Additional Rent and other charges payable hereunder with respect to that portion of the Demised Premises so taken in such Proceedings with respect to which this Lease Agreement shall have terminated justly apportioned to the date of such termination. If this Lease is not terminated from and after the date of vesting of title in such Proceedings, Tenant shall continue to pay the Basic Rent and Additional Rent and other charges payable hereunder, as in this Lease Agreement provided, to be paid by Tenant subject to an abatement of a just and proportionate part of the Basic Rent according to the extent and nature of such taking as provided for in Paragraphs 14.3 and 14.5 hereof in respect to the Demised Premises remaining after such taking. Section 14.5 Adjustment of Rent. In the event of a partial taking of the Demised Premises under Paragraph 14.3 hereof, or a partial taking of the Demised Premises under Paragraph 14.2 hereof, followed by Tenant's election not to terminate this Lease Agreement, the fixed Basic Rent payable hereunder during the period from and after the date of vesting of title in such Proceedings to the termination of this Lease Agreement shall be reduced to a sum equal to the product of the Basic Rent provided for herein multiplied by a fraction, the numerator of which is the value of the Demised Premises after such taking and after the same has been restored to a complete architectural unit, and the denominator of which is the value of the Demised Premises prior to such taking. ARTICLE XV ASSIGNMENT, SUBLETTING, ETC. Section 15.1 Restriction on Transfer. Tenant shall not sublet the Demised Premises, or any portion thereof, nor assign, mortgage, pledge, transfer or otherwise encumber or dispose of this Lease Agreement, or any interest therein, or in any manner assign, mortgage, pledge, transfer or otherwise encumber or dispose of its interest or estate in the Demised Premises, or any portion thereof, without obtaining Landlord's prior written consent in each and every instance, which consent shall not be unreasonably withheld or delayed, provided the following conditions are complied with: (a) Any assignment of this Lease Agreement shall transfer to the assignee all of Tenant's right, title and interest in this Lease Agreement and all of Tenant's estate or interest in the Demised Premises. (b) At the time of any assignment or subletting, and at the time when Tenant requests Landlord's written consent thereto, this Lease Agreement must be in full force and effect, without any breach of default thereunder on the part of Tenant. (c) Any such assignee shall assume, by written, recordable instrument, in form and content satisfactory to Landlord, the due performance of all of Tenant's obligations under this Lease Agreement, including any accrued obligations at the time of the effective date of the assignment, and such assumption agreement shall state that the same is made by the assignee for the express benefit of Landlord as a third party beneficiary thereof. A copy of the assignment and assumption 34 agreement, both in form and content satisfactory to Landlord, fully executed and acknowledged ________________________________ (d) In the case of a subletting, a copy of any sublease fully executed and acknowledged by Tenant and the sublessee shall be mailed to Landlord ten days prior to the effective date of such subletting, which sublease shall be in form and content acceptable to Landlord. (e) Such assignment or subletting shall be subject to all the provisions, terms, covenants and conditions of this Lease Agreement, and Tenant-assignor (and the guarantor or guarantors of this Lease Agreement, if any) and the assignee or assignees shall continue to be and remain liable under the Lease Agreement, as it may be amended from time to time without notice to any assignor of Tenant's interest or to any guarantor. (f) Each sublease permitted under this Section 15.1 shall contain provisions to the effect that (i) such sublease is only for actual use and occupancy by the sublessee; (ii) such sublease is subject and subordinate to all of the terms, covenants and conditions of this Lease Agreement and to all of the rights of Landlord thereunder; and (iii) in the event this Lease Agreement shall terminate before the expiration of such sublease, the sublessee thereunder will, at Landlord's option, attorn to Landlord and waive any rights the sublessee may have to terminate the sublease or to surrender possession thereunder, as a result of the termination of this Lease Agreement. (g) Tenant agrees to pay on behalf of Landlord any and all costs of Landlord, including reasonable attorney's fees paid or payable to outside counsel, occasioned by such assignment or subletting. Section 15.2 Restriction From Further Assignment. Notwithstanding anything contained in this Lease Agreement to the contrary and notwithstanding any consent by Landlord to any sublease of the Demised Premises, or any portion thereof, or to any assignment of this Lease Agreement or of Tenant's interest or estate in the Demised Premises, no sublessee shall assign its sublease nor further sublease the Demised Premises, or any portion thereof, and no assignee shall further assign its interest in this Lease Agreement or its interest or estate in the Demised Premises, or any portion thereof, nor sublease the Demised Premises, or any portion thereof, without Landlord's prior written consent in each and every instance which consent shall not be unreasonably withheld or unduly delayed. No such assignment or subleasing shall relieve Tenant or any guarantor of this Lease from any of their respective obligations with respect to this Lease Agreement contained. Section 15.3 Tenant's Failure to Comply. Tenant's failure to comply with all of the foregoing provisions and conditions of this Article XV shall (whether or not Landlord's consent is required under this Article), at Landlord's option, under any purported assignment or subletting null and void and of no force and effect. Notwithstanding anything herein to the contrary, Landlord hereby consents to an assignment of this Lease in connection with the merger or restructuring of Tenant or the sale of all or substantially all of Tenant's assets or to any entity 35 controlled by, which controls or which is under common control with Tenant, such as any parent, subsidiary or affiliate of Tenant; provided that (i) any such assignment shall not in any way relieve or release Tenant or any guarantor of this Lease from any of their respective obligations with respect to this Lease Agreement, and (ii) Tenant shall provide Landlord with prompt notice of such assignment, together with all copy of all assignment documents related thereto. ARTICLE XVI SUBORDINATION, NONDISTURBANCE, NOTICE TO MORTGAGEE AND ATTORNMENT Section 16.1 Subordination by Tenant. This Lease Agreement and all rights of Tenant therein (including, but not limited to the Option to Purchase, as hereinafter defined), and all interest or estate of Tenant in the Demised Premises, or any portion thereof, shall be subject and subordinate to the lien of any mortgage, deed of trust, security instrument or other document of like nature ("Mortgage"), which at any time may be placed upon the Demised Premises, or any portion thereof, by Landlord, and to any replacements, renewals, amendments, modifications, extensions or refinancing thereof, and to each and every advance made under any Mortgage. Tenant agrees at any time hereafter, and from time to time on demand of Landlord, to execute and deliver to Landlord any instruments, releases or other documents that may be reasonably required for the purpose of subjecting and subordinating this Lease Agreement to the lien of any such Mortgage. It is agreed, nevertheless, and all instruments and documents executed by Tenant shall reflect that so long as Tenant be not in default in the payment of Basic Rent and Additional Rent and the performance and observance of all covenants, conditions, provisions, terms and agreements to be performed and observed by Tenant under this Lease Agreement, that such subordination agreement or other instrument, release or document and any prior mortgage or other lien upon the Demised Premises shall not interfere with, hinder or molest any and all of Tenant's rights and interests under this Lease including, but not limited to, Tenant's right to quiet enjoyment under this Lease Agreement, nor the right of Tenant to continue to occupy the Demised Premises, and all portions thereof, and to conduct its business thereon in accordance with the covenants, conditions, provisions, terms and agreements of this Lease Agreement. The lien of any such Mortgage shall not cover Tenant's trade fixtures or other personal property located in or on the Demised Premises. Section 16.2 Landlord's Default. In the event of any act of omission of Landlord constituting a default by Landlord, Tenant shall not exercise any remedy until Tenant has given Landlord prior written notice of such act or omission and until a 30-day period of time to allow Landlord or the mortgagee to remedy such act or omission shall have elapsed following the giving of such notice; provided, however, if such act or omission cannot, with due diligence and in good faith, be remedied within such 30-day period, the Landlord and/or mortgagee shall be allowed such further period of time as may be reasonably necessary provided that it shall have commenced remedying the same with due diligence and in good faith within said 30-day period and provided Tenant's rights and interests hereunder and Tenant's use of the Demised Premises are not materially interfered with during such period. Notwithstanding the foregoing provisions of this Section 16.2, the thirty (30) day grace period provided in this Section 16.2 shall be concurrent with and not in addition to the thirty (30) day grace period provided in Section 12.9 and shall not in any way limit Tenant's rights under Section 12.9. In the event Landlord's act or omission which constitutes a Landlord's default hereunder results in an immediate threat of 36 bodily harm to Tenant's employees, agents or invitees, or damage to Tenant's property Tenant may proceed to cure the default without prior notice to Landlord provided, however, in that event Tenant shall give written notice to Landlord as soon as possible under commencement of such cure. Nothing herein contained shall be construed or interpreted as requiring any mortgagee to remedy such act or omission. Section 16.3 Attornment. If any mortgagee shall succeed to the rights of Landlord under this Lease Agreement or to ownership of the Demised Premises, whether through possession or foreclosure or the delivery of a deed to the Demised Premises, then, upon the written request of such mortgagee so succeeding to Landlord's rights hereunder, Tenant shall attorn to and recognize such mortgagee as Tenant's Landlord under this Lease Agreement, and shall promptly execute and deliver any instrument that such mortgagee may reasonably request to evidence such attornment (whether before or after making of the mortgage). In the event of any other transfer of Landlord's interest hereunder, upon the written request of the transferee and Landlord, Tenant shall attorn to and recognize such transferee as Tenant's Landlord under this Lease Agreement and shall promptly execute and deliver any instrument that such transferee and Landlord may reasonably request to evidence such attornment. ARTICLE XVII SIGNS Section 17.1 Tenant's Signs. Tenant may erect signs on the exterior doors or windows or interior of the Improvements or on the landscaped area adjacent thereto, provided that such sign or signs (a) do not cause any structural damage or other damage to the Improvements; (b) do not violate applicable governmental laws, ordinances, rules or regulations; (c) do not violate any existing restrictions affecting the Demised Premises; and (d) are compatible with the architecture of the Improvements and the landscaped area adjacent thereto. Without limiting the foregoing, Tenant shall not be permitted to install signage on the roof or structure of the Demised Premises. ARTICLE XVIII REPORTS BY TENANT Section 18.1 Annual Statements. Upon request by Landlord at any time after 135 days after the end of the applicable fiscal year of Fingerhut Companies, Inc., a Minnesota corporation, Tenant shall cause Fingerhut Companies, Inc. to deliver to Landlord a copy of Fingerhut Companies, Inc.'s audited financial statement for such fiscal year. ARTICLE XIX CHANGES AND ALTERATIONS Section 19.1 Tenant's Changes and Alterations. Tenant shall have the right at any time, and from time to time during the term of this Lease Agreement, to make such changes and alterations, structural or otherwise, to the Improvements and fixtures hereafter erected on the Demised Premises as Tenant shall deem necessary or desirable in connection with the requirements of its business, which such changes and alterations (other than changes or alterations of Tenant's movable trade fixtures and equipment) shall be made in all cases subject to the following conditions, which Tenant covenants to observe and perform: 37 (a) Permits. No change or alteration shall be undertaken until Tenant shall have procured and paid for, so far as the same may be required from time to time, all municipal, state and federal permits and authorizations of the various governmental bodies and departments having jurisdiction thereof, and Landlord agrees to join in the application for such permits or authorizations whenever such action is necessary, all at Tenant's sole cost and expense, provided such applications do not cause Landlord to become liable for any cost, fees or expenses. (b) Compliance with Plans and Specifications. Before commencement of any change, alteration, restoration, repairs or construction (hereinafter sometimes referred to as "Work") requiring a building permit and involving in the aggregate an estimated cost of more than Ten Thousand and No/100ths Dollars ($10,000.00) or which in Landlord's reasonable judgment would materially alter or impact the roof, parking lot, mechanical, structural, or electrical systems of Improvements or which is undertaken by Tenant pursuant to Section 8.6 hereof, Tenant shall furnish Landlord with detailed plans and specifications of the proposed change or alteration, obtain Landlord's prior written consent, which consent shall not be withheld (but such consent may be withheld if the change or alteration would, in the reasonable judgment of Landlord, impair the value or usefulness of the Land or Improvements, or any substantial part thereof to Landlord); (iii) furnish Landlord the name and address of the licensed architect or licensed professional engineer selected and paid for by Tenant, who shall supervise any such work (hereinafter referred to as "Alterations Architect or Engineer"); and (iv) obtain Landlord's prior written approval of detailed plans and specifications prepared and approved in writing by said Alterations Architect or Engineer, and of each amendment and change thereto. Work which does not require a building permit or materially alter or impact the roof, parking lot, mechanical, structural or electrical system of the Improvements or which is not undertaken by Tenant pursuant to Section 8.6 hereof shall not be subject to the provisions of this subparagraph (b) or require Landlord's prior written consent; provided, however, such Work shall be subject to the remaining provisions of this Article XIX. (c) Value Maintained. Any change or alteration shall, when completed, be of such character as not to reduce the value or utility of the Demised Premises or the Improvements to which such change or alteration is made below its value or utility to Landlord immediately before such change or alteration, nor shall such change or alteration reduce the area or cubic content of the Building, nor change the character of the Demised Premises or the Improvements as to use without Landlord's express written consent. (d) Compliance with Laws. All Work done in connection with any change or alteration shall be done promptly and in a good and workmanlike manner and in compliance with all building and zoning laws of the place in which the Demised Premises are situated, and with all laws, ordinances, orders, rules, regulations and requirements of all federal, state and municipal governments and appropriate departments, commissions, boards and officers thereof, and in accordance with 38 the orders, rules and regulations of the Board of Fire Underwriters where the Demised Premises are located, or any other body exercising similar functions. The cost of any such change or alteration shall be paid so that the Demised Premises and all portions thereof shall at all times be free of liens for labor and materials supplied to the Demised Premises, or any portion thereof. The Work of any change or alteration shall be prosecuted with reasonable dispatch, delays due to strikes, lockouts, acts of God, inability to obtain labor or materials, governmental restrictions or similar causes beyond the control of Tenant excepted. Tenant shall obtain and maintain or cause its contractors and subcontractors to obtain and maintain, at its or their sole cost and expense, during the performance of the Work, workers' compensation insurance covering all persons employed in connection with the Work and with respect to which death or injury claims could be asserted against Landlord or Tenant or against the Demised Premises or any interest therein, together with comprehensive general liability insurance for the mutual benefit of Landlord and Tenant with limits of not less than One Million Dollars ($1,000,000.00) in the event of injury to one person, Two Million Dollars ($2,000,000.00) in respect to any one accident or occurrence, and One Hundred Thousand Dollars ($100,000.00) for property damage, and the fire insurance with "extended coverage" endorsement required by Section 6.1 hereof shall be supplemented with "builder's risk" insurance on a completed value form or other comparable coverage on the Work. All such insurance shall be in a company or companies authorized to do business in the state in which the Demised Premises are located with a Best's rating of B+, IX or similar and certificates of insurance on ACCORD Form 27 shall be delivered to Landlord prior to the commencement of any Work. (e) Property of Landlord. All improvements and alterations (other than Tenant's movable trade fixtures and equipment) made or installed by Tenant shall immediately upon completion or installation thereof, become the property of Landlord without payment therefor by Landlord, and shall be surrendered to Landlord on the expiration of the term of this Lease Agreement. (f) Location of Improvements. No change, alteration, restoration or new construction shall be in or connect the Improvements with any property, building or other improvement located outside the boundaries of the parcel of land described in Exhibit "A" attached, nor shall the same obstruct or interfere with any existing easement. (g) Removal of Improvements. As a condition to granting approval for any changes or alterations, Landlord may require Tenant to agree that Landlord, by written notice to Tenant, given at or prior to the time of granting such approval, may require Tenant to remove any improvements, additions or installations installed by Tenant in the Demised Premises at Tenant's sole cost and expense, and repair and restore any damage caused by the installation and removal of such improvements, additions, or installations; provided, however, the only improvements, additions or installations which Tenant shall remove shall be those specified in such notice. All improvements, additions or installations installed by 39 Tenant which did not require Landlord's prior approval shall be removed by Tenant as provided for in this Section 19.1(g), unless Tenant has obtained a written waiver of such condition from Landlord. ARTICLE XX MISCELLANEOUS PROVISIONS Section 20.1 Entry by Landlord. Tenant agrees to permit Landlord and authorized representatives of Landlord to enter upon the Demised Premises at all reasonable times upon twenty-four (24) hours prior notice during ordinary business hours for the purpose of inspecting the same and making any ordinary repairs to comply with any laws, ordinances, rules, regulations or requirements of any public body, or the Board of Fire Underwriters, or any similar body. Nothing herein contained shall imply any duty upon the part of Landlord to do any such work which, under any provision of this Lease Agreement, Tenant may be required to perform and the performance thereof by Landlord shall not constitute a waiver of Tenant's default in failing to perform the same. Landlord may, during the progress of any work, keep and store upon the Demised Premises all necessary materials, tools and equipment. Landlord shall not in any event be liable for inconvenience, annoyance, disturbance, loss of business or other damage to Tenant by reason of making repairs or the performance of any work in or about the Demised Premises, or on account of bringing material, supplies and equipment into, upon or through the Demised Premises during the course thereof, and the obligations of Tenant under this Lease Agreement shall not be thereby affected in any manner whatsoever. Section 20.2 Exhibition of Demised Premises. Landlord is hereby given the right during usual business hours at any time during the term of this Lease Agreement upon twenty-four (24) hours prior notice to enter upon the Demised Premises and to exhibit the same for the purpose of mortgaging or selling the same. During the final year of the term, Landlord shall be entitled to display on the Demised Premises, in such manner as to not unreasonably interfere with Tenant's business, signs indicating that the Demised Premises are for rent or sale and suitably identifying Landlord or its agent. Tenant agrees that such signs may remain unmolested upon the Demised Premises and that Landlord may exhibit said premises to prospective Tenants during said period. Section 20.3 Indemnification. (a) To the fullest extent allowed by law, Tenant shall at all times indemnify, defend and hold Landlord harmless against and from any and all claims by or on behalf of any person or persons, firm or firms, corporation or corporations, arising from the conduct or management, or from any work or things whatsoever done in or about the Demised Premises from and after the Possession Date by or on behalf of Tenant not resulting directly from Landlord's negligence (or the negligence of Landlord's employees, agents, contractors or subcontractors), and will further indemnify, defend and hold Landlord harmless against and from any and all claims arising from and after the Possession Date during the term of this Lease Agreement, from any condition of the Improvements (except for such conditions as are Landlord's obligations under Sections 2.1, 2.5 and 8.5 of this Lease), or of any passageways or space therein or appurtenant thereto, or arising from any 40 breach or default on the part of Tenant in the performance of any covenant or agreement on the part of Tenant to be performed, pursuant to the terms of this Lease Agreement, or arising from any act or negligence of Tenant, its agents, servants, employees or licensees, or arising from any accident, injury or damage whatsoever caused to any person, firm or corporation occurring from and after the Possession Date during the term of this Lease Agreement, in or about the Demised Premises, or upon the sidewalk and the land adjacent thereto, and from and against all costs, attorney's fees, expenses and liabilities incurred in or about any such claim or action or proceeding brought thereon; and in case any action or proceeding be brought against Landlord by reason of any such claim, Tenant, upon notice from Landlord, covenants to defend such action or proceeding by counsel reasonably satisfactory to Landlord. (b) To the fullest extent allowed by law, Landlord shall at all times indemnify, defend and hold Tenant harmless against and from any and all claims by or on behalf of any person or persons, firm or firms, corporation or corporations, arising from the conduct or management, or from any work or things whatsoever done in and about the Demised Premises prior to the Possession Date (except for matters arising from the act, omission or negligence of Tenant or Tenant's employees, agents, contractors or subcontractors present on the Demised Premises prior to the Possession Date) and will further indemnify, defend and hold Tenant harmless against and from any and all claims arising from any breach or default on the part of Landlord in the performance of any covenant or agreement on the part of Landlord to be performed, pursuant to the terms of this Lease Agreement, arising from any act or negligence of Landlord, its agents, servants, employees or licensees, arising from any accident, injury or damage whatsoever caused to any person, firm or corporation, occurring prior to the Possession Date (except for matters arising from the act, omission or negligence of Tenant or Tenant's employees, agents, contractors or subcontractors present on the Demised Premises prior to the Possession Date) in or about the Demised Premises or upon the sidewalk and land adjacent thereto, and from and against all costs, attorney's fees, expenses, liabilities incurred in or about any such claim or action or proceeding brought thereon, and in case any action or proceeding be brought against Tenant by reason of such claim, Landlord upon notice from Tenant, covenants to defend such action or proceeding by counsel reasonably satisfactory to Tenant. Section 20.4 Notices. All notices which are required or permitted hereunder must be in writing and shall be deemed to have been given, delivered or made, as the case may be (notwithstanding lack of actual receipt by the addressee) (i) when delivered by personal delivery or (ii) three (3) business days after having been deposited in the United States Mail, certified or registered, return receipt requested, sufficient postage affixed and prepaid, or (iii) one (1) business day after having been deposited with an expedited overnight courier service (such as by way of example, but not limitation, U.S. Express Mail, Federal Express or Purolator), addressed to the party to whom notice is intended to be given at the address set forth below: To Landlord: Opus South Corporation Suite 444, 4200 West Cypress Street 41 Tampa, Florida 33607 Attn: Neil Rauenhorst, President With a copy to: Opus U.S. Corp. Post Office Box 59110 Minneapolis, Minnesota 55440 Attn: Law Department To Tenant: Customer Communications Center, Inc. 4400 Baker Road Minnetonka, Minnesota 55343 Attn: Lee C. Stasny, Manager-Facilities Planning With a copy to: Fingerhut Companies, Inc. 4400 Baker Road Minnetonka, Minnesota 55343 Attn: Legal Department or at such other place as Landlord or Tenant may from time to time designate by written notice to the other party. Section 20.5 Quiet Enjoyment. Landlord covenants and agrees that Tenant, upon paying the Basic Rent and Additional Rent, and upon observing and keeping the covenants, agreements and conditions of this Lease Agreement on its part to be kept, observed and performed, shall lawfully and quietly hold, occupy and enjoy the Demised Premises (subject to the provisions of this Lease Agreement) during the term of this Least Agreement without hindrance or molestation by Landlord or by any person or persons claiming under Landlord. Section 20.6 Landlord's Continuing Obligations. The term "Landlord," as used in this Lease Agreement so far as covenants or obligations on the part of Landlord are concerned, shall be limited to mean and include only the owner or owners at the time in question of the fee of the Demised Premises, and in the event of any transfer or transfers or conveyance the then grantor shall be automatically freed and relieved from and after the date of assumption by grantee of all obligations under this Lease and of such transfer or conveyance of all liability as respects the performance of any covenants or obligations on the part of Landlord contained in this Lease Agreement thereafter to be performed, provided that any funds in the hands of such Landlord or the then grantor at the time of such transfer, in which Tenant has in interest, shall be turned over to the grantee, and any amount then due and payable to Tenant by Landlord or the then grantor under any provision of this Lease Agreement shall be paid to Tenant. The covenants and obligations contained in this Lease Agreement on the part of Landlord shall, subject to the aforesaid, be binding on Landlord's successors and assigns, during and in respect of their respective successive periods of ownership. Nothing herein contained shall be construed as relieving Landlord of its obligations under Article II of this Lease Agreement, or releasing Landlord from any obligation to complete the cure of any breach by Landlord during the period of its ownership of the Demised Premises or releasing Landlord from any other of its obligations under this Lease during the term of its ownership of the Demised Premises including, without 42 limitation, Landlord's obligation of indemnity for hazardous materials to the extent caused by Landlord during its term of ownership of the Demised Premises. Section 20.7 Estoppel. Landlord and Tenant shall, each without charge at any time and from time to time, within ten days after written request by the other party, certify by written instrument, duly executed, acknowledged and delivered to any mortgagee, assignee of a mortgagee, proposed mortgagee, or to any purchaser or proposed purchaser, or to any other person dealing with Landlord, Tenant or the Demised Premises: (a) That this Lease Agreement (and all guaranties, if any) is unmodified and in full force and effect (or, if there have been modifications, that the same is in full force and effect, as modified, and stating the modifications); (b) The dates to which the Basic Rent or Additional Rent have been paid in advance; (c) Whether or not there are then existing any breaches or defaults by such party or the other party known by such party under any of the covenants, conditions, provisions, terms or agreements of this Lease Agreement, and specifying such breach or default, if any, or any setoffs or defenses against the enforcement of any covenant, condition, provision, term or agreement of this Lease Agreement (or of any guaranties) upon the part of Landlord or Tenant (or any guarantor), as the case may be, to be preformed or complied with (and, if so, specifying the same and the steps being taken to remedy the same); and (d) Such other statements or certificates as Landlord or any mortgagee may reasonably request. It is the intention of the parties hereto that any statement delivered pursuant to this Section 20.7 may be relied upon by any of such parties dealing with Landlord, Tenant or the Demised Premises. Section 20.8 Memorandum of Lease. Upon not less than ten days prior written request by either party, the parties hereto agree to execute and deliver to each other a Memorandum and Short Form of Lease, in recordable form, setting forth the follows: (a) The date of this Lease Agreement; (b) The parties to this Lease Agreement; (c) The term of this Lease Agreement; (d) The legal description of the Demised Premises; and (e) Such other matters reasonably requested by Landlord or Tenant to be stated therein. Section 20.9 Severability. If any covenant, condition, provision, term or agreement of this Lease Agreement shall, to any extent, be held invalid or unenforceable, the remaining 43 covenants, conditions, provisions, terms and agreements of this Lease Agreement shall not be affected thereby, but each covenant, condition, provision, term or agreement of this Lease Agreement shall be valid and in force to the fullest extent permitted by law. This Lease Agreement shall be construed and be enforceable in accordance with the laws of the state in which the Demised Promise are located. Section 20.10 Successors and Assigns. The covenants and agreements herein contained shall bind and inure to the benefit of Landlord, its successors and assigns, and Tenant and its permitted successors and assigns. Section 20.11 Captions. The caption of each article of this Lease Agreement is for convenience and reference only, and in no way defines, limits or describes the scope of intent of such article or of this Lease Agreement. Section 20.12 Relationship of Parties. This Lease Agreement does not create the relationship of principal and agent, or of partnership, joint venture, or of any association or relationship between Landlord and Tenant, the sole relationship between Landlord and Tenant being that of Landlord and Tenant. Section 20.13 Entire Agreement. All preliminary and contemporaneous negotiations are merged into and incorporated in this Lease Agreement. This Lease Agreement together with the Exhibits contains the entire agreement between the parties and shall not be modified or amended in any manner except by an instrument in writing executed by the parties hereto. Section 20.14 No Merger. There shall be no merger of this Lease Agreement or the leasehold estate created by this Lease Agreement with any other estate or interest in the Demised Premises by reason of the fact that the same person, firm, corporation or other entity may acquire, hold or own directly or indirectly, (a) this Lease Agreement or the leasehold interest created by this Lease Agreement of any interest therein, and (b) any such other estate or interest in the Demised Premises, or any portion thereof. No such merger shall occur unless and until all persons, firms, corporations or other entities having an interest (including a security interest) in (1) this Lease Agreement or the leasehold estate created thereby, and (2) any such other estate or interest in the Demised Premises, or tiny portion thereof, shall join in a written instrument expressly effecting such merger and shall duly record the same. Section 20.15 Possession and Use. Tenant acknowledges that the Demised Premises are the property of Landlord and that Tenant has only the right to possession and use thereof upon the covenants, conditions, provisions, terms and agreements set forth in this Lease Agreement. Section 20.16 No surrender During Lease Term. No surrender to Landlord of this Lease Agreement or of the Demised Premises, or any portion thereof, or any interest therein, prior to the expiration of the term of this Lease Agreement shall be valid or effective unless agreed to and accepted in writing by Landlord and consented to in writing by all contract vendors and mortgagees, and no act or emission by Landlord or any representative or agent of Landlord, other than such a written acceptance by Landlord consented to by all contract vendors and the mortgagees, as aforesaid, shall constitute an acceptance of any such surrender. 44 Section 20.17 Surrender of Demised Premises. At the expiration of the term of this Lease Agreement, Tenant shall surrender the Demised Premises in the same condition as the same were in upon delivery of possession thereto at the commencement date of the term of this Lease Agreement, reasonable wear and tear excepted, and shall surrender all keys to the Demised Premises to Landlord at the place then fixed for the payment of Basic Rent and shall inform Landlord of all combinations on locks, safes and vaults, if any. Tenant shall at such time remove all to its property therefrom and all alterations and improvements placed thereon by Tenant if so requested by Landlord as provided herein. Tenant shall repair any damage to the Demised Premises caused by such removal, and any and all such property not so removed shall, at Landlord's option, become the exclusive property of Landlord or be disposed of by Landlord, at Tenant's cost and expense, without further notice to or demand upon Tenant. If the Demised Premises be not surrendered as above set forth, Tenant shall indemnify, defend and hold Landlord harmless against loss or liability resulting from the delay by Tenant in so surrendering the Demised Premises, including, without limitation any claim made by any succeeding occupant founded on such delay. Tenant's obligation to observe or perform this covenant shall survive the expiration or other termination of this Lease Agreement. All property of Tenant not removed within 30 days after the last day of the term of this Lease Agreement shall be deemed abandoned. Tenant hereby appoints Landlord its agent to remove all property of Tenant from the Demised Premises upon termination of this Lease Agreement and to cause its transportation and storage for Tenant's benefit, all at the sole cost and risk of Tenant and Landlord shall not be liable for damage, theft, misappropriation or loss thereof and Landlord shall not be liable in any manner in respect thereto. Tenant shall pay all costs and expenses of such removal, transportation and storage. Tenant shall reimburse Landlord upon demand for any expenses incurred by Landlord with respect to removal or storage of abandoned property and with respect to restoring said Demised Premises to good order, condition and repair. Section 20.18 Holding Over. In the event Tenant remains in possession of the Demised Premises after expiration of this Lease, and without the execution of a new lease, it shall be deemed to be occupying the Demised Premises as a Tenant from month to month, subject to all the provisions, conditions and obligations of this Lease insofar as the same can be applicable to a month-to- month tenancy, except that the Basic Rent shall be escalated to 150% of the then current Basic Rent for the Demised Premises. Section 20.19 Survival. All obligations (together with interest on money obligations at the Maximum Rate of Interest) accruing prior to expiration of the term of this Lease Agreement shall survive the expiration or other termination of this Lease Agreement. Section 20.20 Attorneys' Fees. In the event of any litigation or judicial action in connection with this Lease or the enforcement thereof, the prevailing party in any such litigation or judicial action shall be entitled to recover all costs and expenses of any such judicial action or litigation (including, but not limited to, reasonable attorneys' and paralegals' fees) from the other party, including, but not limited to all such fees and costs incurred at any pretrial, trial, appellate or bankruptcy proceedings. 45 Section 20.21 Landlord's Limited Liability. Except as specifically provided in this Section 20.21, Tenant agrees to look solely to Landlord's interest in the Demised Premises for recovery of any judgment from Landlord, it being agreed that Landlord (and if Landlord is a partnership, its partners, whether general or limited, and if Landlord is a corporation, its directors, officers or shareholders) shall never be personally liable for any personal judgment or deficiency decree or judgment against it, and none of Landlord's assets, other than Landlord's interest in the Demised Premises, shall ever be subject to any judgment against Landlord. Notwithstanding the foregoing, the limitation on Landlord's liability as contained herein shall not apply to any judgment against Opus South Corporation, a Florida corporation, rising out of Opus South Corporation's construction guaranty as contained in Section 2.4 hereof or Opus South Corporation's environmental indemnity as contained in Section 4.5 hereof. Section 20.22 Radon Gas. Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, my present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county public health unit. Section 20.23 Broker's. Tenant represents that Tenant has dealt with and only with Robert Elliott, as broker, in confection with this Lease Agreement and that no other broker has negotiated or participated in negotiations of this Lease Agreement or submitted or showed the Demised Premises or is entitled to any commission in connection therewith. Tenant shall indemnify and hold Landlord harmless from and against any and all commissions, fees and expenses and all claims therefor, by any broker, salesman or other party in connection with or rising out of Tenant's action in entering into this Lease Agreement, except for the commissions of Robert Elliott, which commissions Landlord shall be obligated to pay pursuant to its agreement with Robert Elliott. Section 20.24 Waiver of Jury Trial. Landlord and Tenant, each waive trial by jury in connection with proceedings and or counterclaims brought by either of the parties against the other arising out of related to this Lease Agreement. This waiver of jury trial by each of the parties is made by the parties voluntarily and with full knowledge and understanding of the rights which they are waiving. ARTICLE XXI GUARANTY BY FINGERHUT COMPANIES, INC. Section 21.1 Guaranty. Tenant's obligations under this Lease Agreement shall be absolutely and unconditionally guaranteed by Fingerhut Companies, Inc., a Minnesota corporation, and Tenant shall cause Fingerhut Companies, Inc. to deliver that certain Absolute and Unconditional Lease Guaranty in the form of Exhibit "D" attached hereto simultaneously with Tenant's execution of this Lease Agreement. 46 ARTICLE XXII OPTION TO PURCHASE Section 22.1 Option to Purchase. Tenant shall have the option to purchase the Demised Premises (the "Option to Purchase") upon the terms and conditions as set forth in this Article XXII. Tenant may -exercise the Option to Purchase by giving written notice to Landlord of Tenant's election to exercise the Option to Purchase (the "Option Notice") at any time within the within the later of (i) the period ending September 30, 1996, or (ii) the thirty (30) day period following the Possession Date, time being of the essence with respect to such Option Notice. It is provided, however, that Tenant may exercise its Option to Purchase only if (i) this Lease Agreement is in full force and effect at the time the Option to Purchase is exercised, and (ii) Tenant is not in default under any of the terms. covenants or conditions contained in this Lease Agreement at the time of the exercise. The exercise of the Option to Purchase may only be made by Tenant in accordance with the terms and conditions of this Article XXII. If Tenant should fail to properly exercise the Option to Purchase within the thirty (30) day period following the Possession Date, then the Option to Purchase contained herein shall automatically terminate and be of no further force or effect. The closing date for the purchase of the Demised Premises by Tenant pursuant to the Option to Purchase as contained herein shall be the date as established for the same by Tenant in the Option Notice, which date shall be no earlier than sixty (60) days following the date of the Option Notice and no later than January 31, 1997 (time being of the essence with respect to such Closing). Section 22.2 Purchase Price. Purchase Price for the Demised Premises pursuant to the Option to Purchase shall be $5,137,112.00 (the "Purchase Price") (which Purchase Price includes $307,379.00 of "EXTRAS" as described in Section 23.1 of this Lease). The Purchase Price shall be payable by Tenant, in cash, by wire transfer, to Landlord at the closing of the Option to Purchase. The Purchase Price shall be subject to closing prorations and adjustments as hereinafter set forth in this Article XXII. Section 22.3 Title Evidence. Within thirty (30) days after Landlord's receipt of the Option Notice, Landlord shall furnish to Tenant a commitment for title insurance covering the Demised Premises and issued by Chicago Title Insurance Company or other title company reasonably acceptable to Tenant (the "Title Company") in the amount of the Purchase Price and showing fee simple title to the Demised Premises vested in Landlord, together with legible copies of all instruments and documents affecting title to the Demised Premises and listed in the commitment. The commitment shall agree to issue Tenant, upon the closing of the Option to Purchase, a title insurance policy in the full amount of the Purchase Price, without exception for any matters other than the Permitted Exceptions as hereinafter set forth in Section 22.6. Section 22.4 Phase I Environmental Report. Within thirty (30) days after Landlord's receipt of the Option Notice, Landlord shall furnish to Tenant a Phase I Environmental Site Assessment addressed to Tenant and prepared by an independent environmental engineering firm acceptable to Tenant in form and content acceptable to Tenant and in conformance with ASTM standard E1527-93 and covering the Demised Premises (the "Plan I"). Section 22.5 Current Survey. Within thirty (30) after Landlord's receipt of the Option Notice, Landlord shall furnish to Tenant a survey of the Demised Premises prepared by 47 surveyors reasonably acceptable to Tenant. The survey shall be certified to Tenant and the title company within ninety (90) days prior to the closing of the Option to Purchase and shall: (a) Set forth an accurate description of the Demised Premises; (b) Locate all existing easements and rights-of-way (setting forth the book and page number of the recorded instruments creating the same), alleys, streets and roads; (c) Show any encroachments upon or by the Land and Improvements; (d) Show all existing Improvements (such as buildings, power lines, fences, etc.); (e) Contain a surveyor's certification in favor of Tenant and the Title Company and such other parties as Tenant may designate; (f) Show all dedicated and maintained public streets providing access to the Demised Premises and whether such access is paved to the property line of the Land; (g) Set forth the square footage of the Land and Improvements; (h) State whether the Demised Premises is located in a flood zone and, if so, the specific flood zone designation of the Demised Premises; (i) Show all applicable set-back lines with reference to the source of the setbacks; and (j) Be prepared in conformity with minimum standard detail requirements for land title surveys of the American Land Title Association and the American Congress on Surveying and Mapping; and (k) Show the location of all utility lines servicing the Demised Premises. In the event the survey shows any encroachment of any improvement upon, from or onto the Property, on or between any building setback line, a property line or any easement, or any other unacceptable matter, said encroachment or unacceptable matter shall be deemed to be a title defect and shall be treated as an objection to title by Tenant under Section 22.5 hereof. Prior to the closing of the Option to Purchase, Tenant may elect to have the survey recertified in order to cause the certification date to be closer to the closing date of the Option to Purchase, and any subsequent change in the required survey which my appear in the recertified survey, other than the certification date, shall be subject to the terms and provisions of Section 22.5 hereof. Section 22.6 Uniform Commercial Code. Uniform Commercial Code searches ("UCC Searches") in the name of Landlord from the appropriate filing office in Florida showing no security interests in the Demised Premises, the Improvements or any personal property thereon, other than those that will be released at the closing of the Option to Purchase. 48 Section 22.7 Cure of Title and Survey Defects. If the title commitment and/or survey and/or Phase I or UCC Searches reveal any defects or any matters that are unacceptable to Tenant, Tenant shall provide written notice thereof to Landlord within thirty (30) Days following Tenant's receipt of the last of the title commitment, survey, UCC Searches or Plan 1. Any matters of title, survey, the Phase I or UCC Searches not referenced in such notice shall be deemed accepted by Tenant. Upon receipt of such notice. Landlord shall use reasonable efforts to eliminate all such unacceptable matters to the reasonable satisfaction of Tenant and the Title Company. Landlord agrees to satisfy at closing any mortgage financing placed upon the Demised Premises by Landlord. In the event Landlord is unable or unwilling to satisfy such objections within sixty (60) days after said notice, Tenant may, at its option, (a) accept title subject to the objections raised by Tenant in which event said objections shall be deemed to be waived for all purposes or (b) rewind and cancel the Option to Purchase, whereupon the Option to Purchase shall be of no further force or effect or cure such defect and Landlord will contribute up to but not in excess of $50,000 to the cost thereof. Notwithstanding the foregoing in no event shall Landlord be obligated to undertake to cure any matters related to the Phase I or expend any amounts in connection therewith; provided, however, the foregoing clause shall not in anyway be deemed to relieve Landlord of any of its obligations as Landlord with respect to Hazardous Materials as provided in Article IV hereof. Section 22.8 Permitted Exceptions. The Demised Premises shall be conveyed to Tenant subject to no liens, charges, encumbrances, easements, restrictions, reservations or other matters of any kind or character other than the following exceptions (collectively, the "Permitted Exceptions"). (a) Ad valorem taxes and assessments for the year of closing and subsequent years, provided the same are not then due and payable; (b) Zoning ordinances; (c) This Lease Agreement; and (d) Any easements, restrictions or other matters of record or survey matters which may be accepted by Tenant pursuant to Section 22.4 hereof. Section 22.9 Closing Date. The consummation of the Option to Purchase shall take place on the closing date as specified in the Option Notice at the offices of Landlord's counsel located in Tampa, Florida, or at such other place as Landlord and Tenant may mutually agree to in writing. Section 22.10 Landlord's Obligations at Closing. At the closing of the Option to Purchase, Landlord shall do the following: (a) Execute, acknowledge and deliver to Tenant a special warranty deed conveying good. insurable and marketable title to the Demised Premises to the Tenant subject only to the Permitted Exceptions, which special warranty deed shall be in statutory form for recording; 49 (b) Furnish and deliver to Tenant an ALTA Form 1992 owner's title insurance policy or "marked up" title commitment insuring fee simple title to the Demised Property in a face amount equal to the Purchase Price and containing no exceptions other than the Permitted Exceptions and other exceptions, if any, which Tenant may, in Tenant's sole discretion consent to in writing. (c) Execute and deliver to Tenant and the Title Company a mechanic's lien and possession affidavit in sufficient form and substance so as to allow the Title Company to remove the mechanic's lien exception and parties in possession exception from the title policy (excepting only the Lease Agreement); (d) Execute and deliver to Tenant to affidavit (as required to insure the "gap" at closing) that there have been no changes in the condition of title from that shown in the title commitment delivered to Landlord and containing any statements needed for the Title Company to delete all standard exceptions in the title insurance policy to be delivered to Tenant. (e) Execute and deliver to Tenant a warranty bill of sale for any and all personal property being transferred to Tenant, which personal property shall be transferred in "AS IS" condition, but which shall be free and clear of all encumbrances; (f) Furnish all available keys to any door or lock on the Demised Premises; (g) Execute and deliver to Tenant an assignment of the Lease Agreement together with all guarantees thereof; (h) To the extent available, furnish an assignment of Landlord's warranties and guarantees obtained by Landlord from Landlord's architect, engineer, contractors and subcontractors and from other persons or entities supplying equipment or materials or performing work in connection with Landlord's construction of Landlord's Improvements; (i) Execute and deliver instruments satisfactory to Tenant and the Title Company reflecting the proper power, good standing and authorization for the sale of the Demised Premises from Landlord to Tenant hereunder, (j) Execute and deliver to Tenant and the Title Company a FIRPTA affidavit in form and substance acceptable to Tenant and the Title Company; and (k) Execute and deliver to Tenant and the title company all other documents as may be reasonably required by this Option to Purchase. Section 22.11 Tenant's Obligations at Closing. (a) Contemporaneously with the performance by Landlord of its obligations set forth in Section 22.8 at closing, Tenant shall deliver to Landlord a wire transfer to be received no later than 2:00 p.m. on the closing date for the Option to Purchase, the cash due at closing as set forth in Section 22.2 above. 50 (b) At the closing of the Option to Purchase, Tenant shall execute and deliver to Landlord an assumption by Tenant of all obligations of Landlord under the Lease Agreement. Such assumption shall include an indemnity indemnifying and agreeing to defend Landlord from and against all claims under the Lease Agreement accruing from and after closing or at the election of Tenant a termination of the Lease. Section 22.12 Closing Costs. (a) Landlord shall pay the following costs and expenses in connection with the closing on the Option to Purchase: (i) all documentary stamps in connection with the conveyance of the Demised Premises including a deed or conveyance tax;. (ii) the premium and all search fees payable for the owner's policy of title insurance; (iii) recording of fees in connection with those instruments necessary to render title acceptable to Tenant; (iv) survey costs; and (v) Landlord's cost of document preparation and attorneys' fees. (b) Tenant shall pay the following costs and expenses in connection with the closing: (i) recording fees in connection with the special warranty deed; and (ii) its cost of document preparation and its attorneys' fees. Section 22.13 Prorations. In light of Tenant's obligations under the Lease Agreement, the prorations to be made in connection with the Option to Purchase shall be limited to prorating those items of real estate taxes and operating expenses for the Demised Premises, if any, which are payable by Landlord in connection with the Demised Premises prior to the possession date as provided in the Lease Agreement, and prorating rents due under the Lease Agreement. Section 22.14 Option Not to be Separated from Lease. The Option to Purchase shall not be separable from the Lease Agreement, nor may the Option to Purchase be assigned by Tenant separate from the Lease Agreement. ARTICLE XXIII EXTRA TENANT IMPROVEMENTS Section 23.1 Extra Tenant Improvements. Tenant has requested Landlord to install certain extra improvements within the Demised Premises as more particularly described on Exhibit "E" incorporated by reference herein ("EXTRAS"). Landlord and Tenant have agreed that the price for the EXTRAS shall be $307,379.00 (the "Price of the EXTRAS"). Landlord 51 shall undertake to construct and install the EXTRAS as a portion of Landlord's Improvements. Tenant shall pay to Landlord the Price of the EXTRAS in full on or before January 31, 1997, together with interest thereon which shall accrue at the rate of 10% per annum from and after the Possession Date. The parties agree that Tenant's payment of the Price for the EXTRAS shall not be deemed to be rent or additional rent payable hereunder, but rather shall be payment to Landlord for amounts incurred by Landlord in connection with the construction and installation of the EXTRAS. Landlord shall not have the right to demand possession of the Demised Premises in the event Tenant should fail to timely pay the Price of the EXTRAS to Landlord; provided, however, Landlord shall have all other rights and remedies against Tenant as contained in this Lease Agreement or against any guarantor of this Lease Agreement. IN WITNESS WHEREOF, each of the parties hereto has caused this Lease Agreement to be duly executed as of the day and year first above written. Signed, sealed and delivered in the presence of OPUS SOUTH CORPORATION, a Florida corporation /s/ Sheryl L. Smith By: /s/ [Signature illegible] - ----------------------------------------------- ---------------------------------------- Name: Sheryl L. Smith Name: ______________________________________ ---------------------------------------- (Print or Type Name) Title: President & CEO ------------------------------------ /s/ [Signature illegible] - ----------------------------------------------- Name: [Signature illegible] (Corporate Seal) ---------------------------------------- (Print or Type Name) "Landlord" CUSTOMER COMMUNICATIONS CENTER, INC. a Minnesota corporation /s/ C. Ann Hyams By: /s/ Rachel M. O'Brien - ----------------------------------------------- --------------------------------------- Name: C. Ann Hyams Name: Rachel M. O'Brien ---------------------------------------- -------------------------------------- (Print or Type Name) Title: President ------------------------------------- /s/ June M. Nylin - ----------------------------------------------------- Name: June M. Nylin Attest: /s/ R. C. Kieffer ---------------------------------------------- ----------------------------------- (Print or Type Name) Name: R. C. Kieffer ----------------------------------- Title: Secretary ----------------------------------- (Secretary or Assistant Secretary) "Tenant"
52 EXHIBIT A --------- [Legal Description] PERMITTED ENCUMBRANCE 1. Taxes for the year 1996 and subsequent years. 2. Easement reserved in instruments recorded in Official Records Book 4709, at Page 1432, Official Records Book 5046, at Page 465 and Official Records Book 5246, at Page 34, of the Public Records of Hillsborough County, Florida. 3. Easement granted to Tampa Electric Company, a Florida corporation, recorded August 6, 1986, in Official Records Book 4880, at Page 663, of the Public Records of Hillsborough County, Florida (as to the easements only). 4. Terms and conditions of that certain Agreement for Access and Utility Easement recorded in Official Records Book 5246, at Page 40, of the Public Records of Hillsborough County, Florida. 5. Notice of Modification to Adopted Development Order recorded in Official Records Book 6026, Page 665 and Official Records Book 7589, at Page 1955, of the Public Records of Hillsborough County, Florida. 6. Notice of Commencement recorded February 16, 1996, in Official Records Book 8049, Page 1663, of the Public Records of Hillsborough County, Florida 7. Mortgage and Security Agreement by Opus South Corporation, a Florida corporation, dates April 2, 1996, recorded in Official Records Book 8100, at Page 0744, of the Public Records of Hillsborough County, Florida. 8. Notice of Commencement recorded in Official Records Book 8100, at Page 0766, of the Public Records of Hillsborough County, Florida. 53
"EXHIBIT E" EXTRAS - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- THE FOLLOWING LIST OF ITEMS HAVE BEEN DESCRIBED IN THE BASE BUILDING SPECIFICATIONS, BUT SHALL BE CONSIDERED EXTRAS - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- FINGERHUT @ UBC 48,840 SF - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL AS UNIT UNIT AGREED TO ON QTY UNIT PRICE TOTAL APR. 3, 1998 - ---------------------------------------------------------------------------------------------------------------------------------- SITE COSTS $0 - ---------------------------------------------------------------------------------------------------------------------------------- PAVING $0 - ---------------------------------------------------------------------------------------------------------------------------------- CURB $0 - ---------------------------------------------------------------------------------------------------------------------------------- STRIPING & TRAFFIC SIGNS $0 - ---------------------------------------------------------------------------------------------------------------------------------- CLEAR, STRIP, GRADE & CUT $0 - ---------------------------------------------------------------------------------------------------------------------------------- STORMWATER FOR 1.5 ACRES $0 - ---------------------------------------------------------------------------------------------------------------------------------- LANDSCAPE $0 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- MILLWORK $7,294 - ---------------------------------------------------------------------------------------------------------------------------------- DELETE RECEPTION DESK 1 ALW $0.00 $0 - ---------------------------------------------------------------------------------------------------------------------------------- SUPERVISOR PLATFORM 8'X13' 88 SF $57.18 $6,004 - ---------------------------------------------------------------------------------------------------------------------------------- PLAS, LAM, COUNTER IN APPLICANT WTG. RM. 26 LF $65.00 $1,690 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- OPERABLE PARTITIONS $21,360 - ---------------------------------------------------------------------------------------------------------------------------------- 1' 18' & 1' X 32' MODERNFOLD "PACESETTER" #202 50 LF $450.00 $22,500 - ---------------------------------------------------------------------------------------------------------------------------------- DELETE PARTITIONS WHERE OPER. PARTITIONS 50 LF ($23.00) ($1,150) - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
1
- ---------------------------------------------------------------------------------------------------------------------------------- TOTAL AS UNIT UNIT AGREED TO ON QTY UNIT PRICE TOTAL APR. 3, 1998 - ---------------------------------------------------------------------------------------------------------------------------------- PATIO FOR SMOKERS $6,761 - ---------------------------------------------------------------------------------------------------------------------------------- CONCRETE PAD 640 SF $3.00 $1,820 - ---------------------------------------------------------------------------------------------------------------------------------- ALUMINUM CANOPY 540 SF $9.15 $4,941 - ---------------------------------------------------------------------------------------------------------------------------------- WOOD PICNIC TABLES 2 EA $100.00 $200 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- AUTO DOORS $4,300 - ---------------------------------------------------------------------------------------------------------------------------------- DOORS W/PUSH BUTTON ACTIVATION 1 PR $4,300.00 $4,300 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- EXTRA CARD READER @ SERVICE DOOR 1 LS $1,500.00 $1,500 $1,500 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- SOUND INSULATION $0 - ---------------------------------------------------------------------------------------------------------------------------------- OPUS SHALL INSULATE ALL WALLS, INDICATED ON THE DRAWINGS TO RECEIVE INSULATION. THE WALLS SEPARATING THE CALL FLOOR FROM THE OFFICES ALONG WITH THOSE REQUIRED BY CODE SHALL BE BUILT TO THE DECK - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- POLYMIX PAINT $24,311 - ---------------------------------------------------------------------------------------------------------------------------------- POLY/VINYL/ROLLED PAINT COMBO 1 LS $38,261.00 $38,261 - ---------------------------------------------------------------------------------------------------------------------------------- ROLLED PAINT @ $.30/SF X 46600 SF 45,500 SF ($0.30) ($13,950) - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- CARPET ALLOWANCE $37,673 - ---------------------------------------------------------------------------------------------------------------------------------- $18.50/SY VS $11/SY 5,023 SY $7.50 $37,673 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- CEILING TILE $17,080 - ---------------------------------------------------------------------------------------------------------------------------------- $1,10/SF VS $.75/SF 48,800 SF $0.35 $17,080 - ----------------------------------------------------------------------------------------------------------------------------------
2
- ---------------------------------------------------------------------------------------------------------------------------------- TOTAL AS UNIT UNIT AGREED TO ON QTY UNIT PRICE TOTAL APR. 3, 1998 - ---------------------------------------------------------------------------------------------------------------------------------- CERAMIC TILE IN LOBBY $3,824 - ---------------------------------------------------------------------------------------------------------------------------------- $6/SF VS $1.22/SF 800 SF $4.78 $3,824 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- HVAC $81,994 - ---------------------------------------------------------------------------------------------------------------------------------- OLD LESS NEW - ---------------------------------------------------------------------------------------------------------------------------------- $260 [$187(RTU's + $25[LIEBERTS] 1 LS $48,000.00 $48,000 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- DELETE TON, PER NEW CRITERIA OF 518 OCC. LOAD 1 LS ($28,000.00) ($28,000) - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- ADD FOR INCREASED LIEBERT COMP, ROOM LOAD 15 TON $2,000.00 $30,000 - ---------------------------------------------------------------------------------------------------------------------------------- UPGRADE EMS TO TRACER SYSTEM 1 LS $7,500.00 $7,500 - ---------------------------------------------------------------------------------------------------------------------------------- CURBS FOR 2 UNITS 6' X 10' W/INSULATED CAP 2 EA $2,247.00 $4,494 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- PLUMBING $4,800 - ---------------------------------------------------------------------------------------------------------------------------------- 6 FIXTURES 6 EA $800.00 $4,800 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- FIRE PROTECTION $22,013 - ---------------------------------------------------------------------------------------------------------------------------------- FM 200 W/ 8 FOOT HIGH CLG 9,248 CF $2.11 $19,513 - ---------------------------------------------------------------------------------------------------------------------------------- DELETE VESDA E-70D 0 LS $0 - ---------------------------------------------------------------------------------------------------------------------------------- CELLUNOID VALVE 1 EA $2,500.00 $2,500 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- ELECTRICAL & SECURITY $74,050 - ---------------------------------------------------------------------------------------------------------------------------------- OLD BUDGET $364,730 - ---------------------------------------------------------------------------------------------------------------------------------- NEW BUDGET $660,620 - ----------------------------------------------------------------------------------------------------------------------------------
3
- ---------------------------------------------------------------------------------------------------------------------------------- TOTAL AS UNIT UNIT AGREED TO ON QTY UNIT PRICE TOTAL APR. 3, 1998 - ---------------------------------------------------------------------------------------------------------------------------------- DIFFERENCE (NEW-OLD) $295,890 $295,890 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- 1 DELETE 600 KW GENERATOR 1 ($131,900) $(131,900) - ---------------------------------------------------------------------------------------------------------------------------------- 2 DELETE UPS 1 ($89,940) ($89,940) - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- ELECTRICAL ADDS PER CONVERSATION ON 4/1/85 W/ B. PIANO & R. ZWILLING - ---------------------------------------------------------------------------------------------------------------------------------- 1. ALL ELECTRICAL SUBMITTALS, PRINTS SHALL BE IN 3-RING $0 BINDER - ---------------------------------------------------------------------------------------------------------------------------------- 2. ALL TRANSFORMERS SHALL BE RATED K20 OR HIGHER $4,830 - ---------------------------------------------------------------------------------------------------------------------------------- 3. SWITCHGEAR SHALL BE GENERAL ELECTRIC, NOT SIEMENS OR $0 SQUARE D - ---------------------------------------------------------------------------------------------------------------------------------- 4. THE ELECTRICAL SERVICE SHALL CONSIST OF A MAIN $0 FUSIBLE DISCONNECT SWITCH. IT SHALL WITHSTAND FULL AVAILABLE FAULT CURRENT W/OUT A SERIES RATING. IT SHALL HAVE A FULL SIZE, 100%, NEUTRAL BUS. - ---------------------------------------------------------------------------------------------------------------------------------- 5. FINGERHUT TO BUY CURRENT TECH. POWER SIFTER, OPUS TO $0 INSTALL - ---------------------------------------------------------------------------------------------------------------------------------- 6. INSTALL 20' OF 3/0 BARE COPPER WIRE IN THE BOTTOM OF $7,619 THE CONCRETE EVERY 200 FEET AROUND THE PERIMETER OF THE BUILDING AND ACROSS THE CENTER OF THE BUILDING. BOND CONDUCTORS TO THE - ----------------------------------------------------------------------------------------------------------------------------------
4
- ---------------------------------------------------------------------------------------------------------------------------------- TOTAL AS UNIT UNIT AGREED TO ON QTY UNIT PRICE TOTAL APR. 3, 1998 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- BUILDING GROUND SYSTEM. - ---------------------------------------------------------------------------------------------------------------------------------- 7. POWER PANELS SHALL HAVE 200 % NEUTRAL BAR AND MAIN $300 BREAKERS - ---------------------------------------------------------------------------------------------------------------------------------- 8. PROVIDE CABINET FOR SPARE FUSES. PROVIDE IN CABINET $0 3 SPARE FUSES OF EACH TYPE USED IN THE BUILD - ---------------------------------------------------------------------------------------------------------------------------------- 9. LOW PEAK FUSES SHALL BE USED THROUGHOUT THE PROJECT $0 - ---------------------------------------------------------------------------------------------------------------------------------- 10. ALL GROUND WIRES IN BRANCH CIRCUITS SHALL BE $0 PROVIDED PER LOCAL CODES - ---------------------------------------------------------------------------------------------------------------------------------- 11. NEUTRAL CONDUCTORS SHALL BE INSTALLED FOR EACH $7,680 SINGLE PHASE BRANCH CIRCUIT - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- GRAND TOTAL $307,379 - ---------------------------------------------------------------------------------------------------------------------------------- COST PER SF $6.29 - ----------------------------------------------------------------------------------------------------------------------------------
5 -----END PRIVACY-ENHANCED MESSAGE-----