-----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, I7SeEaqV9XI0XHU6lMpVlCP7ckfw4o2/LNykZbqvK1Qy3m0D7XYseaHN/dqVzfCO N9t4MH8NserjUkdz49peCw== 0000891618-96-002789.txt : 19961118 0000891618-96-002789.hdr.sgml : 19961118 ACCESSION NUMBER: 0000891618-96-002789 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INFOSEEK CORP CENTRAL INDEX KEY: 0000920729 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 770353450 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11797 FILM NUMBER: 96665416 BUSINESS ADDRESS: STREET 1: 2620 AUGUSTINE DR STREET 2: SUITE 250 CITY: SANTA CLARA STATE: CA ZIP: 95054 MAIL ADDRESS: STREET 1: 2620 AUGUSTINE DR SUITE 250 STREET 2: 2620 AUGUSTINE DR SUITE 250 CITY: SANTA CLARA STATE: CA ZIP: 95054 10-Q 1 FORM 10-Q 1 U.S SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES --- EXCHANGE ACT OF 1934 For the quarterly period ending September 30, 1996 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 33-4142 Infoseek Corporation (Exact name of registrant as specified in its charter) CALIFORNIA 77-0353450 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 2620 AUGUSTINE DRIVE, SUITE 250 SANTA CLARA, CA 95054 (Address of principal executive offices) 408-567-2700 (Registrant's telephone number, including area code) Check whether the registrant: (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No X --- --- As of November 4, 1996, there were 25,940,000 shares of the Registrant's common stock outstanding. 1 2 PAGE PART I FINANCIAL INFORMATION NUMBER ITEM 1: Financial Statements Condensed Balance Sheets as of September 30, 1996 and December 31, 1995 ............................. 3 Condensed Statements of Operations for the Three and Nine Months Ended September 30, 1996 and 1995.. 4 Condensed Statements of Cash Flows for the Nine Months Ended September 30, 1996 and 1995 .......... 5 Notes to Condensed Financial Statements .................... 6 ITEM 2: Management's Discussion and Analysis of Financial Conditions and Results of Operations .................................. 7 PART II OTHER INFORMATION ........................................... 15 Signatures ............................................................ 16 2 3 PART I: FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS INFOSEEK CORPORATION CONDENSED BALANCE SHEETS (IN THOUSANDS)
SEPTEMBER 30, 1996 DECEMBER 31, ASSETS (UNAUDITED) 1995 ----------- ----------- Current assets: Cash and cash equivalents $ 3,085 $ 1,128 Short-term investments 47,495 497 Accounts receivable, net 1,515 499 Other current assets 499 111 -------- ------- Total current assets 52,594 2,235 Property and equipment, net 6,385 2,813 Deposits and other assets 702 75 -------- ------- Total assets $ 59,681 $ 5,123 ======== ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,275 $ 1,222 Accrued payroll and payroll related expenses 1,083 71 Accrued royalties 347 36 Other accrued liabilities 1,086 576 Short-term obligations 488 238 -------- ------- Total current liabilities 4,279 2,143 Long-term obligations 2,639 837 Shareholders' equity: Preferred stock -- -- Convertible preferred stock -- 6,695 Common stock 74,306 2,411 Accumulated deficit (16,819) (4,833) Deferred compensation (4,127) (2,080) Notes receivable from shareholders (597) (50) -------- ------- Total shareholders' equity 52,763 2,143 -------- ------- Total liabilities and shareholders' equity $ 59,681 $ 5,123 ======== =======
See notes to condensed financial statements. 3 4 INFOSEEK CORPORATION CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------- ----------------------- 1996 1995 1996 1995 ------- ------- -------- ------- Total revenues $ 4,007 $ 278 $ 9,025 $ 337 Cost of revenues 827 179 2,211 371 ------- ------- -------- ------- Gross profit (loss) 3,180 99 6,814 (34) Operating expenses: Research and development 1,218 238 2,795 609 Sales and marketing 5,219 387 14,003 709 General and administrative 1,091 186 2,751 438 ------- ------- -------- ------- Total operating expenses 7,528 811 19,549 1,756 ------- ------- -------- ------- Operating loss (4,348) (712) (12,735) (1,790) Interest income, net 652 45 749 80 ------- ------- -------- ------- Net loss $(3,696) $ (667) $(11,986) $(1,710) ======= ======= ======== ======= Net loss per share $ (0.14) $ (0.03) $ (0.59) $ (0.07) Shares used in computing net loss per share 25,931 25,811 20,337 25,880
See notes to condensed financial statements. 4 5 INFOSEEK CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30, ------------------- 1996 1995 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(11,986) $(l,710) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,311 262 Amortization of unearned compensation related to stock options 1,085 -- Fair value assigned to services provided by Netscape -- 134 Changes in assets and liabilities: Accounts receivable (1,016) (142) Other current assets (388) (279) Accounts payable 53 60 Accrued payroll and payroll related expenses 1,012 25 Accrued royalties 311 35 Other accrued liabilities 510 (10) -------- - ---- Net cash used in operating activities $ (9,108) $ (1,625) INVESTING ACTIVITIES Purchase of short term investments (91,358) (2,811) Proceeds from sales and maturities of available- for-sale investments 44,360 223 Purchases of property and equipment (4,838) (205) -------- - ---- Net cash used in investing activities (51,836) (2,793) FINANCING ACTIVITIES Term loan 2,573 -- Repayments of term loan (521) (40) Payments of deposit on term loan (675) -- Proceeds from sale of common stock, net 61,524 4,827 -------- - ---- Net cash provided by financing activities 62,901 4,787 -------- - ---- Net increase in cash and cash equivalents 1,957 369 Cash and cash equivalents at beginning of period 1,128 568 -------- -------- Cash and cash equivalents at end of period $ 3,085 $ 937 ======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Unearned compensation related to stock options amounted to $3,102,000 for the nine months ended September 30, 1996. See notes to condensed financial statements. 5 6 INFOSEEK CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The financial information included herein, except for the December 31,1995 balance sheet, which was derived from audited financial statements, have been prepared by the Company in accordance with generally accepted accounting principles and reflect all adjustments, consisting only of normal recurring accruals which in the opinion of management are necessary to fairly state the Company's financial position, results of operations, and cash flows for the periods presented. These financial statements should be read in conjunction with the Company's audited financial statements included in the Company's Registration Statement on Form S-1 as declared effective by the Securities and Exchange Commission on June 11, 1996. The results of operations for the three and nine months ended September 30, 1996 are not necessarily indicative of the results to be expected for any future periods. 2. INITIAL PUBLIC OFFERING In June 1996, the Company completed its initial public offering and issued 3,972,675 shares of its common stock to the public at a price of $12.00 per share. The Company received proceeds from the offering of approximately $43.4 million net of underwriting discounts, commissions and other offering costs. Simultaneously upon the closing of the initial public offering, all outstanding shares of its redeemable convertible preferred and convertible preferred stock were automatically converted into shares of common stock. 3. NET LOSS PER SHARE Net loss per share is computed using the weighted average number of shares of common stock outstanding. Pursuant to the Securities and Exchange Commission Staff Accounting Bulletins, convertible preferred stock, redeemable convertible preferred stock, common stock and common equivalent shares (options and warrants) issued by the Company at prices below the assumed public offering price during the twelve-month period prior to the offering have been included in the calculation through March 31, 1996 as if they were outstanding for all periods presented regardless of whether they are antidilutive (using the treasury stock method at the public offering price). Pro forma net loss per share for the three and nine months ended September 30, 1995 also gives effect, even if antidilutive, to common equivalent shares from preferred stock that automatically converted upon the closing of the Company's initial public offering (using the as-if-converted method). Supplemental pro forma loss per share would have been $.48 for the nine months ended September 30, 1996, assuming the convertible preferred stock was converted at the beginning of the second quarter. 6 7 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Discussion and Analysis contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1993 and Section 21E of the Securities Exchange Act of 1934. Actual results and the timing of certain events could differ materially from those projected in the forward-looking statements as a result of the risk factors set forth in "Risk Factors That May Affect Future Results" and other factors discussed elsewhere in this Report. RESULTS OF OPERATIONS Total Revenues For the three months ended September 30, 1996 and 1995, total revenues were $4,007,000 and $278,000, respectively. For the nine months ended September 30, 1996 and 1995, total revenues were $9,025,000 and $337,000, respectively. For the three months ended September 30, 1996 and 1995, advertising revenues were $3,798,000 and $201,000, respectively, representing 95% and 73% of total revenues in such periods. For the nine months ended September 30, 1996 and 1995, advertising revenues were $8,508,000 and $217,000, respectively, representing 94% and 65% of total revenues in such periods. The balance of total revenues during these periods was derived from subscription fees for a premium service offered to business and professional users. Revenues from this service are recognized over the period the service is provided and have been insignificant to date. During the third quarter of 1996 the Company discontinued this service. During 1995 and for the first nine months of 1996, the Company derived its revenues substantially from the sale of advertisements on its Web pages. The Company expects to continue to derive substantially all of its revenues for the foreseeable future from selling advertising space on its Web sites. Advertising revenues are derived principally from short-term advertising contracts in which the Company guarantees a minimum number of impressions (displays of an advertisement to the user) for a fixed fee. Advertising revenues are recognized ratably over the term of the contract during which services are provided and are stated net of customer discounts. Also included in advertising revenues is the exchange by the Company of advertising space on the Company's Web sites for reciprocal advertising space in other media publications or other Web sites or receipt of applicable goods and services. Revenues from these exchange transactions are recorded as advertising revenues at the estimated fair value of the goods and services received and are recognized when both the Company's advertisements and reciprocal advertisements are run or applicable goods or services are received. Although such revenues have been insignificant to date, the Company believes these exchange transactions are of value, particularly in the marketing of the Infoseek brand, and expects to continue to engage in these transactions in the future. The Company's current business model to generate revenues through the sale of advertising on the Internet is unproven. There can be no assurance that current advertisers will continue to purchase advertising space and services from the Company or that the Company will be able to successfully attract additional advertisers. 7 8 In March 1996, the Company and NYNEX Information Technologies Company ("NYNEX") entered into a one year agreement, which provides for the Company's display of the BigYellow logo, which represents NYNEX's interactive shopping directory, as the exclusive comprehensive shopping directory within Infoseek Guide. In exchange for such exclusivity, NYNEX agreed to pay to the Company up to an aggregate of $4.6 million in monthly payments, which amount will be decreased proportionately if the number of impressions of the BigYellow logo is below a specified number. NYNEX may extend the term of the agreement for additional one year periods, with the fee to be determined based upon Infoseek's then current advertising rate structure. In addition, NYNEX has the right to cancel or renegotiate the agreement based upon certain relative traffic volumes on the BigYellow and Infoseek Guide sites. The Company recognized revenue of $672,000 and $992,000 in connection with this agreement during the three and nine months ended September 30, 1996, respectively. There can be no assurance that the NYNEX arrangement will prove to be mutually beneficial, that it will be continued after its initial term or that the Company will be able to produce the levels of traffic that NYNEX has negotiated. Cost of Revenues For the three months ended September 30, 1996 and 1995, cost of revenues were $827,000 and $179,000, respectively. For the nine months ended September 30, 1996 and 1995, cost of revenues were $2,211,000 and $371,000, respectively. Cost of revenues consist primarily of expenses associated with the enhancement, maintenance and support of the Company's Web sites, including telecommunications costs and equipment depreciation. Cost of revenues also includes expenses associated with the licensing of certain third-party technologies, consisting in 1995 and for the nine months ended September 30, 1996 primarily of amortization of the fee for the search engine technology licensed from Applied Computing Systems Institute of Massachusetts, Inc. ("ACSIOM"), as well as ongoing royalties based on usage of the product. The initial license fee was amortized at a rate of $37,000 per quarter, commencing with the first quarter of 1995 and ended in the second quarter of 1996. Royalty fees to ACSIOM were paid commencing in the first quarter of 1995 and will continue as long as the Company utilizes the technology. Operating Expenses The Company's operating expenses have increased in each quarter of 1995 and 1996, as the Company has transitioned from the product development stage to the marketing of its services and products and expansion its business. The Company expects operating expenses to continue to increase in dollar amount in the future as the Company continues to expand its business. The Company recorded aggregate deferred compensation of $5,226,000 during the fourth quarter of 1995 and first quarter of 1996 in connection with certain stock options granted during those periods. The amortization of such deferred compensation is being charged to operations over the vesting periods of the options, which are typically four years. For the three and nine months ended September 30, 1996, the Company amortized $301,000 and $1,030,000, respectively, related to stock options. The amortization of this deferred compensation will continue to have an adverse effect on the Company's results of operations. 8 9 Research and Development For the three months ended September 30, 1996 and 1995, research and development expenses were $1,218,000 and $238,000, respectively. For the nine months ended September 30, 1996 and 1995, research and development expenses were $2,795,000 and $609,000, respectively. Research and development expenses consist principally of personnel costs, consulting and equipment depreciation. Costs related to research, design and development of products and services have been charged to research and development expense as incurred. The increase in research and development expenses for the third quarter of 1996 and for the nine months ended September 30, 1996 over the corresponding periods of 1995 were primarily the result of continued product enhancements of the Infoseek Guide product and the development of the Company's next generation search engine, Ultraseek. The Company believes that a significant level of product development expenses is required to remain competitive. Accordingly, the Company anticipates that it will continue to devote substantial resources to product development and that these costs may substantially increase in dollar amount in future periods. Sales and Marketing For the three months ended September 30, 1996 and 1995, sales and marketing expenses were $5,219,000 and $387,000 respectively. For the nine months ended September 30, 1996 and 1995, sales and marketing expenses were $14,003,000 and $709,000, respectively. Sales and marketing expenses consist primarily of compensation of sales and marketing personnel, advertising and promotional expenses. Sales and marketing expenses for the three and nine months ended September 30, 1996 included payments made to Netscape Communications Corporation ("Netscape") pursuant to an arrangement for the listing of the Company's product on the Netscape Web page. This agreement with Netscape provides for payments of up to an aggregate of $5.0 million over the course of the one year term of the agreement. While the Company intends to renew the contract when it expires in March 1997, there can be no assurance that it will be renewed on commercially reasonable terms if at all. During the three and nine months ended September 30, 1996, the Company recognized $1.25 million and $2.5 million of the $5.0 million payment to Netscape as expense, respectively. In addition, the increase in sales and marketing expenses for the third quarter of 1996 and for the nine months ended 1996 over the corresponding periods of 1995 were also the result of hiring additional sales and marketing personnel and an increase in promotional and advertising activity. The Company expects to continue hiring additional sales and marketing personnel and to increase promotional and advertising expenses, and anticipates that these costs will continue to increase in dollar amount in future periods. General and Administrative For the three months ended September 30, 1996 and 1995, general and administrative expenses were $1,091,000 and $186,000 respectively. For the nine months ended September 30, 9 10 1996 and 1995, general and administrative expenses were $2,751,000 and $438,000 respectively. General and administrative expenses consist primarily of compensation of administrative and executive personnel, occupancy costs and fees for professional services. The increase in general and administrative expenses for the third quarter of 1996 and for the nine months ended 1996 over the corresponding periods of 1995 was the result of hiring additional administrative and executive staff and adding infrastructure to manage the expansion of the business. The Company anticipates that its general and administrative expenses will continue to increase in dollar amount as the Company continues to expand its administrative and executive staff, relocates to larger facilities, adds infrastructure and incurs additional costs related to being a public company, such as expenses related to directors' and officers' insurance, investor relations programs and increased professional fees. Income Taxes Due to the Company's loss position, there was no provision for income taxes for any of the periods presented. At December 31, 1995, the Company had federal and state net operating loss carryforwards of approximately $4.0 million and $600,000, respectively. The federal net operating loss carryforwards will expire beginning in 2008 through 2010, if not utilized, and the state net operating loss carryforwards will expire in the years 1998 through 2000. Certain future changes in the share ownership of the Company, as defined in the Tax Reform Act of 1986 and similar state provisions, may restrict the utilization of carryforwards. A valuation allowance has been recorded for the entire deferred tax asset as a result of uncertainties regarding the realization of the asset due to the lack of earnings history of the Company. Liquidity and Capital Resources From inception through April 1996, the Company financed its operations and met its capital expenditure requirements primarily through cash proceeds from private sales of stock totaling $23.9 million. In June 1996, the Company completed its initial public offering and received proceeds from the offering of approximately $43.4 million net of underwriting discounts, commissions and other offering costs. Concurrent with the closing of the initial public offering, all outstanding shares of its redeemable convertible preferred and convertible preferred stock were automatically converted into shares of common stock. For the first nine months of 1996 and 1995, operating activities used cash of $9.1 million and $1.6 million, respectively. The net cash used during these periods was primarily due to net losses and increases in accounts receivable and other current assets, partially offset by increases in accounts payable and accrued liabilities. For the first nine months of 1996 and 1995, investing activities used net cash of $51.8 million and $2.8 million, respectively, primarily associated with the purchase of net short-term investments and property and equipment. Financing activities generated cash of $62.9 million and $4.8 million in the first nine months of 1996 and 1995 and, respectively, primarily from preferred stock sales, the initial public offering in June 1996 and equipment loans. The Company expects to continue to incur significant capital expenditures to support expan- 10 11 sion of the Company's business. Furthermore, from time to time the Company expects to evaluate the acquisition of products, businesses and technologies that complement the Company's business. The Company does not, however, currently have any understandings, commitments or agreements with respect to any such acquisitions. The Company had $50.6 million in cash, cash equivalents and short-term investments at September 30, 1996. The Company believes that its existing funds will satisfy the Company's anticipated working capital and other cash requirements through at least the next 12 months. Thereafter, the Company may need to raise additional funds. The Company may need to raise additional funds sooner, however, in order to fund more rapid expansion, to develop new or enhance existing services or products, to respond to competitive pressures or to acquire complementary products, businesses or technologies. If additional funds are raised through the issuance of equity or convertible debt securities, the percentage ownership of the shareholders of the Company will be reduced, shareholders may experience additional dilution and such securities may have rights, preferences or privileges senior to those of the holders of the Company's Common Stock. There can be no assurance that additional financing will be available on terms favorable to the Company, or at all. If adequate funds are not available or are not available on acceptable terms, the Company's ability to fund expansion, take advantage of acquisition opportunities, develop or enhance services or products or respond to competitive pressures would be significantly limited. Such limitation could have a material adverse effect on the Company's business, results of operations and financial condition. Risk Factors That May Affect Future Results In addition to the other information contained in this Report, the following risk factors should be considered. Limited Operating History; Anticipation of Continued Losses. The Company has a limited operating history, which makes it difficult to manage future operations or predict future operating results. The Company was formed in August 1993, did not commence generating revenues until January 1995 and has generated limited revenues to date. The Company has incurred significant net losses since inception and expects to continue to incur significant losses on a quarterly and annual basis for the foreseeable future. As of September 30, 1996, the Company had an accumulated deficit of $16.8 million. The Company and its prospects must be considered in light of the risks, costs and difficulties frequently encountered by companies in their early stage of development, particularly companies in the new and rapidly evolving Internet market. The Company has achieved only limited revenues to date, and its ability to generate significant revenues is subject to substantial uncertainty. There can be no assurance that the Company will be able to address any of these challenges or will be able to sustain revenue growth or achieve profitability. Potential Fluctuations in Future Results. As a result of the Company's limited operating history as well as the very recent emergence of the market addressed by the Company, the Company has neither internal nor industry-based historical financial data for any significant period of time upon which to base planned operating expenses. The Company expects that its results of operations may also fluctuate significantly in the 11 12 future as a result of a variety of factors, including; the continued rate of growth, usage and acceptance of the Internet; the rate of acceptance of the Internet as an advertising medium; demand for the Company's products and services; the advertising budgeting cycles of individual advertisers; the introduction and acceptance of new or enhanced products or services by the Company or by its competitors; the Company's ability to anticipate and effectively adapt to a developing market and to rapidly changing technologies; the Company's ability to attract, retain and motivate qualified personnel; initiation, renewal or expiration of significant contracts with NYNEX or Netscape; pricing changes by the Company or its competitors; specific economic conditions in the Internet market; general economic conditions and other factors. In addition, the Company may elect from time to time to make certain pricing, service or marketing decisions or acquisitions that could have a short-term material adverse effect on the Company's business, results of operations and financial condition and may not generate the long-term benefits intended. Due to all of the foregoing factors, it is likely that in some future period, the Company's operating results may be below the expectations of public market analysts and investors. In such event, the price of the Company's Common Stock would likely be materially adversely affected. The Company's revenues are also dependent on it's relationship with Nynex. In March 1996, the Company and NYNEX entered into a one year agreement, which provides for the Company's display of the BigYellow logo, which represents NYNEX's interactive shopping directory, as the exclusive comprehensive shopping directory within Infoseek Guide. In exchange for such exclusivity, NYNEX agreed to pay to the Company up to an aggregate of $4.6 million in monthly payments, which amount will be decreased proportionately if the number of impressions of the BigYellow logo is below a specified number. NYNEX may extend the term of the agreement for additional one year periods, with the fee to be determined based upon Infoseek's then current advertising rate structure. In addition, NYNEX has the right to cancel or renegotiate the agreement based upon certain relative traffic volumes on the BigYellow and Infoseek Guide sites. There can be no assurance that the NYNEX arrangement will prove to be mutually beneficial, that it will be continued after its initial term or that the Company will be able to produce the levels of traffic that NYNEX has negotiated. Developing Market; Unproven Acceptance of Internet Advertising and of the Company's Products and Services. The market for the Company's products and services has only recently begun to develop, is rapidly evolving and is characterized by an increasing number of market entrants with products and services for use on the Internet. The Company's future success is highly dependent upon the increased use of the Internet for information publication, distribution and commerce. In particular, because the Company expects to derive substantially all of its revenues in the foreseeable future from sales of Internet advertising, the future success of the Company is highly dependent on the development of the Internet as an advertising medium. The Company is in a new and rapidly evolving industry, with demand for and market acceptance of recently introduced products and services being subject to a high level of uncertainty. Accordingly, it is difficult to predict its size, stability and the extent of its growth, if any. There can be no assurance that the market for the Company's products and services will develop or that demand for the Company's products or services by Internet users or by advertisers will emerge or become sustainable. If the market fails to develop, develops more slowly than expected or becomes saturated with competitors, or if the Company's products and services do not achieve 12 13 or sustain acceptance by the Internet users or advertisers, the Company's business, results of operations and financial condition will be materially adversely affected. Reliance on Advertising Revenues. The Company has derived substantially all of its revenues to date from the sale of advertisements, and expects such dependence of advertising revenue to continue. The Company's current business model to generate revenues through the sale of advertising on the Internet is unproven. In addition, the Company's advertising revenues to date have been derived from a limited number of advertising customers. There can be no assurance that current advertisers will continue to purchase advertising space and services from the Company or that sufficient impressions will be achieved or available, or that the Company will be able to successfully attract additional advertisers. Furthermore, there is intense competition among sellers of advertising space on the Internet, and a variety of pricing models offered by different vendors for a range of advertising services, making it difficult to project future levels of advertising revenues and pricing models that will be adopted by the industry or individual companies. Accordingly, there can be no assurance that the Company will be successful in generating significant future advertising revenues and failure to do so will have a material adverse effect on the Company's business, results of operations and financial condition. Change in Netscape Relationship. From March 1995 through March 1996, the Company's service was listed as the sole premier navigational service on the Netscape Web page accessible via the "Net Search" button. In March 1996, Infoseek entered into a new agreement with Netscape, which provides that Infoseek will be listed as a non-exclusive premier provider of navigational services on Netscape's Web page for the period April 10, 1996 to March 31, 1997. Currently, Netscape's Web page displays four additional premier providers. There can be no assurance that the Company will be able to maintain or increase its current level of traffic and any failure to do so could materially and adversely impact advertising revenues. In addition, the Company cannot anticipate the impact on Infoseek traffic of any changes Netscape may make to this service, to its Web page or its other services, or the effect on advertising revenues that may be generated from such traffic. Infoseek's agreement with Netscape provides for payments of up to an aggregate of $5.0 million to Netscape over the term of the agreement. While the Company intends to renew the contract when it expires in March 1997 there can be no assurance that it can be renewed on commercially reasonable terms if at all. Furthermore, if traffic is decreased significantly as a result of these or other changes in the Netscape relationship and the Company is unable to develop alternative viable distribution channels, advertising revenues would be adversely affected, while the remaining $2.5 million Netscape obligation would not be reduced, the result being that the Company's business, results of operations and financial condition would be materially and adversely affected. Technological Changes and New Products and Services. The market for Internet products and services is characterized by rapid technological change, changing customer needs, frequent new product introductions and evolving industry standards. These market characteristics are exacerbated by the emerging nature of this market and the fact that many companies are expected to introduce new Internet products and services in the near future. The Company's future success will depend in significant part on its ability to continually and on a timely basis introduce new products, services and technologies and to continue to improve the performance, features and reliability of the Company's products and services in response to both evolving demands of the mar- 13 14 ketplace and competitive product offerings. There can be no assurance that any new or proposed product or service will attain market acceptance. Failure of the Company to successfully design, develop, test, market and introduce new and enhanced technologies and services, in particular, Ultraseek or any enhancements of the Company's current search technology, or the failure of the Company's recently introduced products and services to achieve market acceptance could have a material adverse effect upon the Company's business, operating results and financial condition. There can be no assurance that the Company will not experience difficulties that could delay or prevent the successful development, introduction or marketing of new or enhanced technologies, products and services, or that the Company's new or recently introduced products and services will adequately meet the requirements of the marketplace and achieve significant market acceptance. Due to certain market characteristics, including technological change, changing customer needs, frequent new product and service introductions and evolving industry standards, timeliness of introduction of these new products and services is critical. Delays in the introduction of new products and services may result in customer dissatisfaction and may delay or cause a loss of advertising revenue. There can be no assurance that the Company will be successful in developing new products or services or improving existing products and services that respond to technological changes or evolving industry standards, that the Company will not experience difficulties that could delay or prevent the successful development, introduction and marketing of new or improved products and services, or that its new products and services will adequately meet the requirements of the marketplace and achieve market acceptance. In addition, new or enhanced products and services introduced by the Company may contain undetected errors that require significant design modifications. This could result in a loss of customer confidence and user support, thus adversely affecting the use of the Company's products and services, which in turn would have a material adverse effect upon the Company's business, results of operations or financial condition. If the Company is unable to develop and introduce new or improved products or services in a timely manner in response to changing market conditions or customer requirements, the Company's business, operating results and financial condition will be materially adversely affected. Intense Competition. The market for Internet products and services is highly competitive, with no substantial barriers to entry, and the Company expects that competition will continue to intensify. In addition, the market for the Company's products and services has only recently begun to develop, is rapidly evolving and is characterized by an increasing number of market entrants with competing products and services. The Company does not believe this market will support the increasing number of competitors and their products and services. Although the Company believes that the diverse segments of the Internet market may provide opportunities for more than one supplier of products and services similar to those of the Company, it is possible that a single supplier may dominate one or more market segments. Accordingly, any failure of the Company to provide product and service offerings that achieve success in the short-term could result in an insurmountable loss in market and brand acceptance, and could, therefore, have a material adverse and long-term effect upon the Company's business, results of operations and financial condition. 14 15 PART II: OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K a) Exhibits 10.1 Lease extension agreement dated September 11, 1996 and September 17, 1996 between Registrant and Spieker Properties, L.P. 10.2 Lease agreement dated September 11, 1996 and September 17, 1996 between Registrant and Spieker Properties, L.P. 11.1 Statement re: Computation of Earnings Per Share 27.1 Financial Data Schedule b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the quarter ended September 30, 1996. 15 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INFOSEEK CORPORATION BY /s/ Leonard LeBlanc Leonard LeBlanc Executive Vice President, Finance and Chief Financial Officer Dated: November 14, 1996 16 17 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10.1 Lease extension agreement dated September 11, 1996 and September 17, 1996 between Registrant and Spieker Properties, L.P. 10.2 Lease agreement dated September 11, 1996 and September 17, 1996 between Registrant and Spieker Properties, L.P. 11.1 Statement re: Computation of Earnings Per Share 27.1 Financial Data Schedule EX-10.1 2 EXTENSION AGREEMENT 1 EXHIBIT 10.1 EXTENSION AGREEMENT to be attached to and form a part of lease (which together with any amendments, modifications and extensions thereof is hereinafter called the Lease), made the 13th day of December 1993 Between Spieker Properties, L.P., a California limited partnership, as Landlord and Infoseek Corporation, a California corporation, as Tenant covering the premises known as 2620 Augustine Drive, Suite 250, Santa Clara, California Witnesseth that the Lease is hereby renewed and extended for a further term of seventeen (17) months to commence on the first day of April 1997, and to end on the thirty first day of August 1998, on condition that Landlord and Tenant comply with all the provisions of the covenants and agreements contained in the Lease, except: 1) PARAGRAPH #4 - RENT Rental for the premises shall be: $4,196.00 (Four Thousand One Hundred Ninety Six Dollars and no/100ths) per month plus basic operating costs and taxes per paragraph 29 of this Lease Agreement. Basic operating costs and taxes are estimated a year in advance and collected on a monthly basis. Any adjustment necessary (up or down) will be made at the end of the operating year. IN WITNESS WHEREOF, the parties hereto have signed and sealed this Extension Agreement. Landlord: Spieker Properties, L.P., a California limited partnership By: Spieker Properties, Inc., a Maryland corporation Its: General Partner By: /s/ John A. Foster Dated: 9/17/96 ------------------------- ---------------- John A. Foster (CW) Title: Senior Vice President --------------------- Tenant: Infoseek Corporation, a California corporation By: /s/ Andrew E. Newton Dated: 9/11/96 ------------------------- ----------------- Andrew E. Newton Title: Vice President --------------------- EX-10.2 3 OFFICE LEASE 1 EXHIBIT 10-2 BASIC LEASE INFORMATION OFFICE LEASE LEASE DATE: August 29, 1996 LANDLORD: Spieker Properties, L.P., a California limited partnership ADDRESS OF LANDLORD: 3333 Bowers Avenue, Suite 153 Santa Clara, CA 95054 TENANT: Infoseek Corporation, a California corporation ADDRESS OF TENANT: 2620 Augustine Drive, Suite 250 Santa Clara, CA 95054 CONTACT: Vickie J. Blakeslee TELEPHONE: (408) 982-4460 PARAGRAPH 1 PREMISES: Approximately 4,211 square feet of rentable area (which includes a portion of the common area) on the second floor of the building commonly known as 2620 Augustine Drive, Santa Clara, California. The demised Premises is approximately as shown outlined in red on the attached Exhibit "E" -- Suite 260. PARAGRAPH 2 PERMITTED USE: General office use. PARAGRAPH 2 OCCUPANCY DENSITY: 1/200 (One person per 200 square feet) PARAGRAPH 3 SCHEDULED TERM COMMENCEMENT DATE: April 1, 1997 PARAGRAPH 3 SCHEDULED LENGTH OF TERM: Seventeen (17) months PARAGRAPH 3 SCHEDULED TERM EXPIRATION DATE: August 31, 1998 PARAGRAPH 4 RENT: See Addendum 2 PARAGRAPH 15 SECURITY DEPOSIT: $8,000.00 PARAGRAPH 29 TENANT'S PROPORTIONATE SHARE: 9.0% The foregoing Basic Lease Information is incorporated into and made a part of this Lease. Each reference in this Lease to any of the Basic Lease information shall mean the respective information above set forth and shall be construed to incorporate all of the terms provided under the particular Lease paragraph pertaining to such information. In the event of any conflict between the Basic Lease Information and the Lease, the latter shall control. LANDLORD: TENANT: Spieker Properties, L.P. Infoseek Corporation, -------------------------------- --------------------------- a California limited partnership a California corporation BY Spieker Properties, Inc., BY /s/ Andrew E. Newton ------------------------------ --------------------------- a Maryland corporation Andrew E. Newton ITS General Partner ITS Vice President ----------------------------- -------------------- BY /s/ John A. Foster ----------------------------- John A. Foster ITS Senior Vice President ----------------------------- 2 LEASE TABLE OF CONTENTS PAGE ---- Basic Lease Information ....................................... 1 1. Premises ...................................................... 3 2. Occupancy ..................................................... 3 3. Term and Possession ........................................... 3 4. Rent .......................................................... 3 5. Restrictions On Use ........................................... 3 6. Compliance With Laws .......................................... 3 7. Alterations ................................................... 3 8. Repairs ....................................................... 3 9. Liens ......................................................... 4 10. Assignment And Subletting ..................................... 4 11. Insurance And Indemnification ................................. 4 12. Waiver Of Subrogation ......................................... 5 13. Service And Utilities ......................................... 5 14. Estoppel Certificate .......................................... 5 15. Security Deposit .............................................. 6 16. Substitution .................................................. 6 17. Holding Over .................................................. 6 18. Subordination ................................................. 6 19. Rules And Regulations ......................................... 6 20. Re-Entry By Landlord .......................................... 6 21. Default By Tenant ............................................. 6 22. Damage By Fire, Etc. .......................................... 7 23. Eminent Domain ................................................ 8 24. Sale By Landlord And Tenant's Remedies ........................ 8 25. Right Of Landlord To Perform .................................. 8 26. Surrender Of Premises ......................................... 8 27. Waiver ........................................................ 8 28. Notices ....................................................... 8 29. Rental Adjustments ............................................ 9 30. Taxes Payable By Tenant ....................................... 10 31. Successors And Assigns ........................................ 10 32. Attorneys' Fees ............................................... 10 33. Light And Air ................................................. 10 34. Public Transportation Information ............................. 10 35. Miscellaneous ................................................. 10 36. Lease Effective Date .......................................... 10 Signatures .................................................... 10 EXHIBIT "A" ......................................... Rules and Regulations EXHIBIT "B" ........................................... Outline of Premises EXHIBIT "D" .................................... Form of Tenant Certificate EXHIBIT "E" .................................................... Floor Plan EXHIBIT "F" ............................. Conditional Termination Agreement 3 LEASE THIS LEASE is made as of this 29th day of August, 1996, between Spieker Properties, L.P., a California limited partnership (hereinafter called "Landlord") and Infoseek Corporation, a California corporation (hereinafter called "Tenant"). PREMISES 1. Landlord leases to Tenant and Tenant leases from Landlord those premises (hereinafter called "Premises") outlined in red on Exhibit B attached hereto and made a * See Addendum 1 part hereof, specified in the Basic Lease Information attached hereto (the "Building").* OCCUPANCY 2. Tenant shall use the Premises for the Permitted Use and for no other use or purpose without the prior written consent of Landlord. No increase in occupant density of the Leased Premises shall be made which shall add to the burden of such use of the Building as determined by Landlord without the prior written consent of Landlord. TERM AND POSSESSION 3. (a) The parties project that the term shall commence on the Scheduled Term Commencement Date and, except as otherwise provided herein or in any exhibit or addendum hereto, shall continue in full force until the Term Expiration Date. RENT 4. Tenant shall pay to Landlord throughout the Term Rent as specified in the Basic Lease Information,** payable in monthly installments in advance on the first day of each calendar month during every year of the ** See Addendum 2 Term-in lawful money of the United States, without deduction or offset whatsoever, to Landlord at the address specified in the Basic Lease Information or to such other firm or to such other place as Landlord may from time to time designate in writing by notice given as herein provided. Rent for the first month of the Term shall be paid by Tenant upon execution of this Lease. If the obligation for payment of Rent commences on other than the first day of a month as provided in paragraph 3(a), then Rent provided for such partial month shall be prorated and the prorated installment shall be paid on the first day of the calendar month next succeeding the Term Commencement Date. If the Term terminates on other than the last day of a calendar month, then the Rent provided for such partial month shall be prorated and the prorated installment shall be paid on the first day of the calendar month next preceding the date of termination. RESTRICTIONS ON USE 5. Tenant shall not do or permit anything to be done in or about the Premises which will in any way obstruct or interfere with the rights of other tenants or occupants of the Building or injure or annoy them, nor use or allow the Premises to be used for any improper, immoral, unlawful or objectionable purpose, nor shall Tenant cause or maintain or permit any nuisance in, on or about the Premises. Tenant shall not commit or suffer the commission of any waste in, on or about the Premises. COMPLIANCE WITH LAWS 6. Tenant shall not use the Premises or permit anything to be done in or about the Premises which will in any way conflict with any law, statute, ordinance or governmental rule or regulation now in force or which may hereafter be enacted or promulgated. Tenant shall not do or permit anything to be done on or about the Premises or bring or keep anything therein which will in any way increase the rate of any insurance upon the Building or any of its contents or cause a cancellation of said insurance or otherwise affect said insurance in any manner, and Tenant shall at its sole cost and expense promptly comply with all laws, statutes, ordinances and governmental rules, regulations or requirements now in force or which may hereafter be in force and with the requirements of which Tenant has received notification of, of any board of fire underwriters or other similar body now or hereafter constituted relating to or affecting the condition, use or occupancy of the Premises, excluding structural changes not related to or affected by alterations or improvements made by or for Tenant or Tenant's acts. The judgment of any court of competent jurisdiction or the admission of Tenant in any actions against Tenant, whether Landlord be a party thereto or not, that Tenant *** See Addendum 3 has so violated any such law, statute, ordinance, rule, regulation or requirement, shall be conclusive of such violation as between Landlord and Tenant.*** ALTERATIONS 7. Tenant shall not make or suffer to be made any alterations, additions or improvements in, on or to the Premises or any part thereof without the prior written consent of Landlord; and any such alterations, additions or improvements in, on or to said Premises, except for Tenant's movable furniture and equipment, shall immediately become Landlord's property and, at the end of the Term, shall remain on the Premises without compensation to Tenant. In the event Landlord consents to the making of any such alteration, addition or improvement by Tenant, the same shall be made by Tenant, at Tenant's sole cost and expense, in accordance with plans and specifications approved by Landlord, and any contractor or person selected by Tenant to make the same must first be approved in writing by Landlord. Notwithstanding the foregoing, at Landlord's option, all or any portion of the alteration, addition or improvement work shall be performed by Landlord for Tenant's account and Tenant shall pay Landlord's estimate of the cost thereof (including a reasonable charge for Landlord's overhead and profit) prior to commencement of the work. Overhead and profit allowances shall total fifteen percent (15%). Upon the expiration or sooner termination of the Term, Tenant shall upon demand be Landlord, at Tenant's sole cost and expense, with all due diligence remove all those alterations, additions or improvements made by or for the account of Tenant, designated by Landlord to be removed, and Tenant shall with all due diligence, at its sole cost and expense, repair and restore the Premises to their original condition, normal wear and tear excepted. At Landlord's election and notwithstanding the foregoing, however, Tenant shall pay to Landlord the cost of removing any such alterations, additions or improvements and restoring the Premises to their original condition, normal wear and tear excepted, such cost to include a reasonable charge for Landlord's overhead and profit as provided above, and such amount may be deducted from the Security Deposit or any other sums or amounts held by Landlord under this Lease. REPAIRS 8. By taking possession of the Premises, Tenant accepts the Premises as being in the condition in which Landlord is obligated to deliver them and otherwise in good order, condition and repair. At all times during the -3- 4 Term Tenant shall, at Tenant's sole cost and expense, keep the Premises and every part thereof in good order, condition and repair, excepting damage thereto by fire, earthquake, act of God or the elements. Tenant waives all rights it may have under Section 1942 of the Civil Code of the State of California and any similar law, statute or ordinance now or hereafter in effect (to the full extent that such waiver may lawfully be given) authorizing or purporting to authorize Tenant to make repairs to or for the account of Landlord. Tenant shall upon the expiration or sooner termination of the Term hereof, unless Landlord demands otherwise pursuant to paragraph 7 hereof, surrender to Landlord the Premises and all repairs, changes, alterations, additions and improvements thereto in the same condition as when received or when first installed, damage by fire, earthquake, act of God or the elements excepted. Landlord has no obligation to alter, remodel, improve, repair, decorate or paint the Premises or any part thereof, except as specified in the Office Lease Improvement Agreement and no representations respecting the condition of the Premises or the Building have been made by Landlord to Tenant, except as specifically set forth herein or in the Office Lease Improvement Agreement. LIENS 9. Tenant shall keep the Premises free from liens arising out of or related to work performed, materials or supplies furnished or obligations incurred by Tenant or in connection with work made, suffered or done by Tenant in Premises or Building. In the event that Tenant shall not, within ten (10) days following the imposition of any such lien, cause the same to be released of record by payment or posting of a proper bond, Landlord shall have, in addition to all other remedies provided herein and by law, the right, but no obligation, to cause the same to be released by such means as it shall deem proper, including payment of the claim giving rise to such lien. Landlord shall have the right at all times to post and keep posted on the Premises any notices permitted or requited by law, or which Landlord shall deem proper, for the protection of landlord, the Premises, the Building and any other party having an interest therein, from mechanics' and materialmen's liens, and Tenant shall give Landlord not less than ten (10) business days prior written notice of the commencement of any work in the Building or Premises which could lawfully give rise to a claim for mechanics' or materialmen's lien. ASSIGNMENT AND 10. Tenant shall not sell, assign, encumber or SUBLETTING otherwise transfer this Lease or any interest therein (by operation of law or otherwise), sublet the Premises or any part thereof or suffer any other person to occupy or use the Premises or any portion thereof, nor shall Tenant permit any lien to be placed on Tenant's interest under this Lease by operation of law except in accordance with the provisions of this paragraph 10. For purposes hereof, sales, transfers or assignments of (i) a controlling interest in the stock of Tenant, if Tenant is a corporation, or of (ii) the general partnership interests sufficient to control management decisions if Tenant is a partnership or of (iii) the majority or controlling underlying beneficial interest, if Tenant is any other form of business entity, shall constitute an assignment subject to the terms of this paragraph 10****. **** See Addendum 4 (a) In the event that Tenant should desire to sublet the Premises or any part thereof, Tenant shall provide Landlord with written notice of such desire at least ninety (90) days in advance of the date on which Tenant desires to make such sublease. Landlord shall then have a period of thirty (30) days following receipt of such notice within which to notify Tenant in writing that Landlord elects either (i) to terminate this Lease as to the space so affected as of the date so specified by Tenant, in which event Tenant shall be relieved of all further obligations hereunder as to such space from and after that date, or (ii) to permit Tenant to sublet such space, subject, however, to the prior written approval of the proposed sublessee by Landlord which said consent shall not be unreasonably withheld. If Landlord should fail to notify Tenant in writing of its election within said thirty (30) day period, Landlord shall be deemed to have waived option (i) above, but written approval of the proposed sublessee shall still be required. Refusal by Landlord to approve a proposed sublessee shall not constitute a termination of this Lease. In exercising its right of consent to a sublessee it shall be reasonable for Landlord to withhold consent to any sublessee who (aa) does not agree to assume the obligations of the Lease with respect to the space to be so sublet, (bb) does not agree to utilize the space so sublet for the Permitted Use, (cc) is of unsound financial condition as determined by Landlord, or (dd) will, in Landlord's opinion increase the occupant density in the Leased Premises. If Tenant proposes to sublease less than all of the Premises, election by Landlord of termination of this Lease with respect to space to be so sublet shall leave this Lease in full force and effect with respect to the remainder of the space, the Rent and Tenant's Proportionate Share of Operating Expenses and taxes shall be adjusted on a pro rata basis to reflect the reduction in Net Rentable Area of the Premises as retained by Tenant. This Lease as so amended shall continue thereafter in full force and effect and references herein to the Premises shall mean that portion thereof as to which the Lease has not been terminated. (b) Tenant shall not enter into any other transaction subject to this paragraph 10 without Landlord's prior written consent which said consent shall not be unreasonably withheld. It shall be reasonable for Landlord to withhold consent to any proposed transaction described in this paragraph 10 on any of the grounds specified in paragraph 10 (a) with respect to sublessees or any other reasonable grounds. (c) Any rent or other consideration realized by Tenant under any such sublease or assignment to which Landlord has consented hereunder, in excess of the Rent payable hereunder, after amortization of the reasonable cost of the improvements over the remainder of the Term for which Tenant has paid and reasonable subletting and assignment costs, shall be divided and paid ninety percent (90%) to Landlord and ten percent (10%) to Tenant. (d) Any subletting hereunder by Tenant shall not result in Tenant being released or discharged from any liability under this lease. Any purported assignment, subletting or other transaction to which paragraph 10 applies, which occurs contrary to the provisions hereof, shall be void. Landlord's consent to any assignment, subletting or other transaction to which this paragraph 10 applies shall not release Tenant from any of Tenant's obligations hereunder or constitute a consent with respect to any subsequent transaction to which this paragraph applies. INSURANCE AND 11. (a) Landlord shall not be liable to Tenant and INDEMNIFICATION Tenant hereby waives all claims against Landlord for any injury or damage to any person or property in or about the Premises by or from any cause whatsoever, (other than Landlord's gross negligence or willful misconduct) and, without limiting the generality of the foregoing, whether caused by water leakage or any character from the roof, walls, basement or other portion of the Premises or the Building, or caused by gas, fire, oil or electricity in, on or about the Premises of the Building. (b) Except in the case of Landlord's negligence or misconduct, Tenant shall hold Landlord harmless from and defend Landlord against any and all claims or liability for any injury or damage to any person or property whatsoever: (i) occurring in, on or about the Premises or any part thereof, or (ii) occurring in, on or about any facilities (including, without prejudice to the generality of the term "facilities", elevators, stairways, lobbies, health clubs, passageways or hallways), the use of which Tenant may have in conjunction with other tenants of the Building, when such injury or damage shall be caused in part or in whole by the act, neglect, fault of or omission of any duty with respect to the same by tenant, its agents, servants, employees or invitees. Except in the case of Landlord's negligence or misconduct, Tenant shall further indemnify and save Landlord harmless against and from any and all claims by or on behalf of any person, firm or corporation arising from the conduct or management of any work or thing whatsoever done by Tenant in or about or from transactions of Tenant concerning the Premises, and will further indemnify and save Landlord harmless against and from any and all claims arising from any 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 or arising from any act or negligence of Tenant, or any of its agents, contractors, servants, employees or licensees, and from and against all costs, counsel fees, expenses and liabilities incurred in connection with any such claim or action or proceeding brought thereon. In case any action or proceeding is brought against Landlord by reason of any claims or liability within the limits of the foregoing indemnity. Tenant shall defend such action or proceeding at Tenant's sole expense by counsel reasonably satisfactory to Landlord. (c) Landlord shall hold Tenant harmless from and defend Tenant against any and all claims or liability for any injury or damage to any person or property occurring in or about any facilities (including, without prejudice to the generality of the term "facilities", elevators, stairways, passageways or hallways), the use of which Tenant may have in conjunction with other tenants of the building, when such injury or damage shall be caused in whole or in part by the act, neglect, fault of or omission of any duty with respect to the same by Landlord, its - 4 - 5 agents, servants, employees or invitees. Landlord shall further indemnify and save Tenant harmless against and from any and all claims by or on behalf of any person, firm or corporation arising from the conduct or management of any work or thing whatsoever done by Landlord in or about, or from transactions of Landlord concerning, the Premises where such work is not being done for the account of Tenant; and Landlord will further indemnify and save 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 or arising from any act or negligence of Landlord, or any of its agents, contractors, servants, employees or licensees, and from and against all costs, counsel fees, expenses and liabilities incurred in connection with any such claim or action or proceeding brought thereon. In case any action or proceeding is brought against Tenant by reason of any claims or liability within the limits of the foregoing indemnity, Landlord shall defend such action or proceeding at Landlord's sole expense by counsel reasonably satisfactory to Tenant. (d) The provisions of paragraph 11(b) and 11(c) shall survive the expiration or termination of this Lease with respect to any claims or liability occurring prior to such expiration or termination. (e) Tenant shall purchase at its own expense and keep in force during the Term of this Lease a policy or policies of workers' compensation and comprehensive liability insurance, including personal injury and property damage, in the amount of Five Hundred Thousand Dollars ($500,000.00) for property damage and Two Million Dollars ($2,000,000.00) per occurrence for personal injuries or deaths of persons occurring in or about the Premises. The foregoing limits shall be increased in proportion to increases during the Term in the United States Department of Labor, Bureau of Labor Statistics, Cost of Living Index, All Urban Consumers (1967 = 100) for the region in which the Leased Premises are located. Said policies shall: (i) name Landlord and any party holding an interest to which this Lease may be subordinated under paragraph 18 hereof, as additional insureds, and insure Landlord's contingent liability under this Lease; (ii) be issued by an insurance company acceptable to Landlord and licensed to do business in the State of California; and (iii) provide that said insurance shall not be cancelled unless ten (10) days prior written notice shall have been given to Landlord. Said policy or policies or certificates thereof shall be delivered to Landlord by Tenant upon commencement of the term of this Lease and upon each renewal of said insurance. WAIVER OF 12. To the extent permitted by law and without SUBROGATION affecting the coverage provided by insurance required to be maintained hereunder, Landlord and Tenant each waive any right to recover against the other (i) damages for injury to or death of persons, (ii) damages to property, (iii) damage to the Premises or any part thereof, (iv) damage to the Building or any part thereof, or (v) claims arising by reason of the foregoing, but only to the extent that any of the foregoing damages and/or claims referred to above are covered (and only to the extent of such coverage) by insurance actually carried by either Landlord or Tenant (other than acts such as intentional wrongdoing or criminal conduct, that are not waived in the standard waiver of subrogation provision in commercial property insurance at the time of the loss or damage). This provision is intended to waive fully, and for the benefit of each party, any rights and/or claims which might give rise to a right of subrogation on any insurance carrier. The coverage obtained by each party pursuant to this Lease shall include, but without limitation, a waiver of subrogation by the carrier which conforms to the provisions of this paragraph. SERVICES AND 13. (a) Landlord shall maintain the public and common UTILITIES areas of the Building, including lobbies, stairs, elevators, corridors and restrooms, the windows in the Building, the mechanical, plumbing and electrical equipment serving the Building, and the structure itself, in reasonably good order and condition except for damage occasioned by the act of Tenant, which damage shall be repaired by Landlord at Tenant's expense. (b) Provided Tenant shall not be in default hereunder, and subject to the provisions elsewhere herein contained and to the rules and regulations of the Building, Landlord shall furnish to the Premises during ordinary business hours of generally recognized business days, to be determined by Landlord (but exclusive, in any event, of Saturdays, Sundays and legal holidays), water and electricity suitable for the Permitted Uses of the Premises, heat and air conditioning required in Landlord's judgment for the comfortable use and occupation of the Premises for the Permitted Uses, janitorial services during the times and in the manner that such services are, in Landlord's judgment, customarily furnished in comparable office buildings in the immediate market area, and elevator service which shall mean service either by nonattended automatic elevators or elevators with attendants, or both, at the option of Landlord, Landlord shall have no obligation to provide additional or after-hours heating or air conditioning, but if Landlord elects to provide such services at Tenant's request. Tenant shall pay to Landlord a reasonable charge for such services as determined by Landlord. Tenant agrees to keep and cause to be kept closed all window covering when necessary because of the sun's position, and Tenant also agrees at all times to cooperate fully with Landlord and to abide by all the regulations and requirements which Landlord may prescribe for the proper functioning and protection of heating, ventilating and air conditioning systems. Wherever heat-generating machines, excess lighting or equipment are used in the Premises which affect the temperature otherwise maintained by the air conditioning system, Landlord reserves the right to install supplementary air conditioning units in the Premises, and the cost thereof, including the cost of installation and the cost of operation and maintenance thereof, shall be paid by Tenant to Landlord upon demand by Landlord. (c) Tenant shall not without the written consent of Landlord use any apparatus or device in the Premises, including without limitation, electronic data processing machines, punch card machines and machines using excess lighting or using current in excess of that which is determined by Landlord as reasonable and normal for the Permitted Use or which will in any way increase the amount of electricity or water usually furnished or supplied for the Permitted Uses of the Premises; nor connect with electric current, except through existing electrical outlets in the Premises or water pipes, any apparatus or device for the purposes of using electrical current or water. If Tenant shall require water or electric current or any other resource in excess of that usually furnished or supplied for the Permitted Uses of the Premises, Tenant shall first procure the consent of Landlord which Landlord shall not unreasonably refuse, to the use thereof, and Landlord may cause a special meter to be installed in the Premises so as to measure the amount of water, electric current or other resource consumed for any such other use. Tenant shall pay directly to Landlord as an addition to and separate from payment of Basic Operating Cost the cost of all such energy, utility service and meters (and of installation, maintenance and repair thereof). Landlord may add to the metered charge a recovery of additional expense incurred in keeping account of the water, electric current or other resource so consumed. Landlord shall not be liable for any damages directly or indirectly resulting from, nor shall the Rent herein reserved be abated by reason of (i) the installation, use or interruption of use of any equipment in connection with the furnishing of any of the foregoing utilities and services, (ii) failure to furnish or delay in furnishing any such utilities or services when such failure or delay is caused by acts of God or the elements, labor disturbances of any character, any other accidents or other conditions beyond the reasonable control of Landlord, or by the making of repairs or improvements to the Premises or to the Building, or (iii) the limitation, curtailment, rationing or restriction on use of water, electricity, gas or any other form of energy or any other service or utility whatsoever serving the Premises or the Building. Landlord shall be entitled to cooperate voluntarily and in a reasonable manner with the efforts of national, state or local governmental agencies or utility suppliers in reducing energy or other resource consumption. The obligation to make services available hereunder shall be subject to the limitations of any such voluntary, reasonable program. (d) Any sums payable under this paragraph 13 shall constitute Additional Rent hereunder. ESTOPPEL 14. Within ten (10) days following any written request CERTIFICATE which Landlord may make from time to time, Tenant shall execute and deliver to Landlord a certificate substantially in the form attached hereto as Exhibit D and made a part hereof, indicating thereon any exceptions thereto which may exist at that time. Failure by Tenant to execute and deliver such certificate shall constitute an acceptance of the Premises and acknowledgment by Tenant that the statements included in Exhibit D are true and correct without exception. Landlord and Tenant intend that any statement delivered pursuant to this paragraph may be relied upon by any mortgagee, beneficiary, purchaser or prospective purchaser of the Building or any interest therein. Landlord shall have the right to substitute for the attached Exhibit D a certificate in form required by Landlord's mortgagee or provider of financing. -5- 6 SECURITY 15. Concurrently with execution hereof, Tenant has paid DEPOSIT to Landlord the Security Deposit in the amount stated on the Basic Lease Information sheet as security for the full and faithful performance of Tenant's obligations under this Lease. Upon expiration of the Term or earlier termination hereof, the Security Deposit shall be returned to Tenant, reduced by such amounts as may be required by Landlord to remedy defaults on the part of Tenant in the payment of Rent, to repair damages to the Premises caused by Tenant and to clean the Premises. Landlord shall hold the Security Deposit for the foregoing purposes in accordance with the provisions of all applicable law. SUBSTITUTION 16. Paragraph not used. HOLDING OVER 17. If Tenant shall retain possession of the Premises or any part thereof without Landlord's consent following the expiration of the Term or sooner of this Lease for any reason, then Tenant shall pay to Landlord for each day of such retention triple the amount of the daily rental for the last period prior to the date of such expiration or termination. Tenant shall also indemnify and hold Landlord harmless from any loss or liability resulting from delay by Tenant in surrendering the Premises, including, without limitation, any claims made by any succeeding tenant founded on such delay. Alternatively, if Landlord gives notice to Tenant of Landlord's election thereof, such holding over shall constitute renewal of this Lease for a period from month to month or for one year, whichever shall be specified in such notice. Acceptance of Rent by Landlord following expiration or termination shall not constitute a renewal of this Lease, and nothing contained in this paragraph shall waive Landlord's right of reentry or any other right. Unless Landlord exercises the option hereby given to it, Tenant shall be only a Tenant at sufferance, whether or not Landlord accepts any Rent from Tenant while Tenant is holding over without Landlord's written consent. SUBORDINATION 18. Without the necessity of any additional document being executed by Tenant for the purpose of effecting a subordination, this Lease shall be subject and subordinate at all times to: (a) all ground leases or underlying leases which may now exist or hereafter be executed affecting the Building or the land upon which the Building is situated or both, and (b) the lien of any mortgage or deed of trust which may now exist or hereafter be executed in any amount for which said Building, land, ground leases or underlying leases, or landlord's interest or estate in any of said items, is specified as security. Notwithstanding the foregoing, Landlord shall have the right to subordinate or cause to be subordinated any such ground leases or underlying leases or any such liens to this Lease. In the event that any ground lease or underlying lease terminates for any reason or any mortgage or deed of trust is foreclosed or a conveyance in lieu of foreclosure is made for any reason, Tenant shall, notwithstanding any subordination, attorn to and become the Tenant of the successor in interest to Landlord at the option of such successor in interest. Tenant shall execute and deliver, upon demand by Landlord and in the form requested by Landlord, any additional documents evidencing the priority or subordination of this Lease with respect to any such ground leases or underlying leases or the lien of any such mortgage or deed of trust. Tenant hereby irrevocably appoints Landlord as attorney-in-fact of Tenant to execute, deliver and record any such documents in the name and on behalf of Tenant. At the request of Landlord, Tenant shall provide to Landlord its current financial statement or other information disclosing financial worth which Landlord shall use solely for purposes of this Lease and in connection with the ownership, management and disposition of the property subject hereto. RULES AND 19. Tenant shall faithfully observe and comply with the REGULATIONS rules and regulations printed on or annexed to this Lease and all reasonable modifications thereof and additions thereto from time to time put into effect by Landlord, provided such rules and regulations do not materially adversely affect Tenant's rights under this Lease and are applied to all Tenants of the Premises in an equal and non-discriminatory manner. Landlord shall not be responsible to Tenant for the non-compliance by any other tenant or occupant of the Building with any of the rules and regulations. RE-ENTRY 20. Landlord reserves and shall at all times have the BY LANDLORD right to reenter the Premises to inspect the same, to supply janitor service and any other service to be provided by Landlord to Tenant hereunder, upon not less than 24 hours notice to Tenant to show the Premises to prospective purchasers, mortgagees or tenants, to post notices of nonresponsibility and to alter, improve or repair the Premises and any portion of the Building, without abatement of Rent, and may for that purpose erect, use and maintain scaffolding, pipes, conduits and other necessary structures in and through the Premises where reasonably required by the character of the work to be performed; provided that entrance to the Premises shall not be blocked thereby, and further provided that the business of Tenant shall not be interfered with unreasonably. Except in the case of Landlord negligence or misconduct, Tenant waives any claim for damages for any injury or inconveniences to or interference with Tenant's business, any loss of occupancy or quiet enjoyment of the Premises, any other loss occasioned thereby. Landlord shall at all times have and retain a key with which to unlock all of the doors in, upon and about the Premises, excluding Tenant's vaults and safes or special security areas (designated in advance), and Landlord shall have the right to use any and all means which Landlord may deem necessary or proper to open said doors in an emergency, in order to obtain entry to any portion of the Premises, and any entry to the Premises or portions thereof obtained by Landlord by any of said means, or otherwise, shall not be construed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an eviction, actual or constructive, of Tenant from the Premises or any portions thereof. Landlord shall also have the right at any time, without the same constituting an actual or constructive eviction and without incurring any liability to Tenant therefore, to change the arrangement and/or location of entrances or passageways, doors and doorways, and corridors, elevators, stairs, toilets or other public parts of the Building and to change the name, number or designation by which the Building is commonly known. DEFAULT 21. (a) EVENTS OF DEFAULT: The occurrence of any of BY TENANT the following shall constitute an event of default on the part of Tenant: (1) ABANDONMENT. Vacation or abandonment of the Premises for a continuous period in excess of fifteen (15) days accompanied by nonpayment of rent. Tenant waives any right to notice Tenant may have under Section 1951.3 of the Civil Code of the State of California, the terms of this subsection (a) being deemed such notice to Tenant as required by said Section 1951.3; (2) NONPAYMENT OF RENT. Failure to pay any installment of Rent due and payable hereunder (or failure to pay any other amount required to be paid hereunder, all such obligations to be construed as the equivalent of obligations for payment of rent) upon the date when said payment is due, such failure continuing without cure by payment of the delinquent Rent and late charge for a period of five (5) business days after written notice and demand; provided, however, that except as expressly otherwise provided herein, Landlord shall not be required to provide such notice more than twice during the Term, the third such non-payment constituting default for all purposes hereof without requirement of notice. For purposes of subparagraph 21(e), such failure shall constitute a default without requirement of notice. The due dates for payment of installments of rent provided for herein shall be absolute and the existence of a cure period or notice period shall not be deemed to extend the said date for purposes of determining Tenant's compliance with its obligations hereunder. (3) OTHER OBLIGATIONS. Failure to perform any obligations, agreement or covenant under this Lease other than those matters specified in subparagraphs (1) and (2) of this subparagraph (a), such failure continuing for fifteen (15) business days after written notice of such failure (or such longer period as Landlord determines to be necessary to remedy such default, provided that Tenant shall continuously and diligently pursue such remedy at all times until such default is cured); (4) GENERAL ASSIGNMENT. A general assignment by Tenant for the Benefit of creditors; -6- 7 (5) BANKRUPTCY. The filing of any voluntary petition in bankruptcy by Tenant, or the filing of an involuntary petition by Tenant's creditors, which involuntary petition remains undischarged for a period of thirty (30) days. In the event that under applicable law the trustee in bankruptcy or Tenant has the right to affirm this Lease and continue to perform the obligations of Tenant hereunder, such trustee or Tenant shall, in such time period as may be permitted by the bankruptcy court having jurisdiction, cure all defaults of Tenant hereunder outstanding as of the date of the affirmance of this Lease and provide to Landlord such adequate assurances as may be necessary to ensure Landlord of the continued performance of Tenant's obligations under this Lease; (6) RECEIVERSHIP. The employment of a receiver to take possession of substantially all of Tenant's assets or the Premises, if such receivership remains undissolved for a period of ten (10) business days after creation thereof; (7) ATTACHMENT. The attachment, execution or other judicial seizure of all or substantially all of Tenant's assets or the Premises, if such attachment or other seizure remains undismissed or undischarged for a period of ten (10) business days after the levy thereof; (8) INSOLVENCY. The admission by Tenant in writing of its inability to pay its debts as they become due, the filing by Tenant of a petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, the filing by Tenant of an answer admitting or failing timely to contest a material allegation of a petition filed against Tenant in any such proceeding or, if within thirty (30) days after the commencement of any proceeding against Tenant seeking any reorganization or arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, such proceeding shall not have been dismissed. (b) REMEDIES UPON DEFAULT. (1) RENT. All failures to pay any monetary obligation to be paid by Tenant under this Lease shall be construed as obligations for payment of Rent. (2) TERMINATION. In the event of the occurrence of any event of default, Landlord shall have the right, with or without notice or demand, immediately to terminate this Lease, and at any time thereafter recover possession of the Premises or any part thereof and expel and remove therefrom Tenant and any other person occupying the same, by any lawful means, and again repossess and enjoy the Premises without prejudice to any of the remedies that Landlord may have under this Lease, or at law or equity by reason of Tenant's default or of such termination. (3) CONTINUATION AFTER DEFAULT. Even though Tenant has breached this Lease and/or abandoned the Premises, this Lease shall continue in effect for so long as Landlord does not terminate Tenant's right to possession, under paragraph 21(b)(2) hereof, and Landlord may enforce all its rights and remedies under this Lease, including (but without limitation) the right to recover Rent as it becomes due; and Landlord, without terminating this Lease, may exercise all of the rights and remedies of a landlord under Section 1951.4 of the Civil Code of the State of California or any successor code section. Acts of maintenance, preservation or efforts to lease the Premises or the appointment of a receiver upon application of Landlord to protect Landlord's interests under this Lease shall not constitute an election to terminate Tenant's right to possession. (c) DAMAGES UPON TERMINATION. Should Landlord terminate this Lease pursuant to the provisions of paragraph 21(b)(2) hereof, Landlord shall have all the rights and remedies of a landlord provided by Section 1951.2 of the Civil Code of the State of California, or successor code section. Upon such termination, in addition to any other rights and remedies to which Landlord may be entitled under applicable law, Landlord shall be entitled to recover from Tenant: (i) the worth at the time of award of the unpaid Rent and other amounts which had been earned at the time of termination; (ii) the worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such Rent loss that the Tenant proves could have been reasonably avoided; (iii) the worth at the time of award of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of such Rent loss that the Tenant proves could be reasonably avoided; and (iv) any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease or which, in the ordinary course of things, would be likely to result therefrom. The "worth at the time of award" of the amounts referred to in (i) and (ii) shall be computed with interest at the lesser of eighteen percent (18%) per annum or the maximum rate allowed by law. The "worth at the time of award" of the amount referred to in (iii) shall be computed by reference to competent appraisal evidence or the formula prescribed by and using the lowest discount rate permitted under applicable law. (d) COMPUTATION OF RENT FOR PURPOSES OF DEFAULT. For purposes of computing unpaid Rent, which would have accrued and become payable under this Lease pursuant to the provisions of paragraph 21(c) unpaid Rent shall consist of the sum of: (1) the total Basic Rent for the balance of the Term then remaining (with the amount of Basic Rent to be determined by reference to fair rental value being the subject of proof by competent evidence), plus (2) a computation of the excess of Gross Rent (the term "Gross Rent" meaning the sum of (i) rental adjustments payable pursuant to paragraph 29 and (ii) Basic Rent) over Basic Rent for the balance of the Term then remaining ("Excess Gross Rental"), the assumed excess Gross Rental for the calendar year of the default and each future calendar year in the Term to be equal to the Excess Gross Rental for the calendar year prior to the year in which default occurs compounded at a per annum rate equal to the mean average rate of inflation for the preceding five (5) calendar years as determined by the United States Department of Labor, Bureau of Labor Statistics Consumer Price Index (All Urban Consumers) for the Metropolitan Area or Region of which San Francisco, California is a part. (e) LATE CHARGE. In addition to its other remedies, Landlord shall have the right without notice or demand to add to the amount of any payment required to be made by Tenant hereunder, and which is not paid on or before the date the same is due, an amount equal to five percent (5%) of the delinquency for each month or portion thereof that the delinquency remains outstanding to compensate Landlord for the loss of the use of the amount not paid and the administrative costs caused by the delinquency, the parties agreeing that Landlord's damage by virtue of such delinquencies would be difficult to compute and the amount stated herein represents a reasonable estimate thereof. (f) REMEDIES CUMULATIVE. All rights, privileges and elections or remedies of the parties are cumulative and not alternative to the extent permitted by law and except as otherwise provided herein. DAMAGE BY 22. If the Premises or the building are damaged by fire or other FIRE, ETC. casualty, Landlord shall forthwith repair the same, provided such repairs can be made within one hundred eighty (180) days from the date of such damage under the laws and regulations of the federal, state and local governmental authorities having jurisdiction thereof. In such event, this Lease shall remain in full force and effect except that Tenant shall be entitled to a proportionate reduction of Rent while such repairs to be made hereunder by Landlord are being made. Said proportionate reduction shall be based upon the extent to which the making of such repairs to be made hereunder by Landlord shall interfere with the business carried on by Tenant in the Premises. Within See twenty (20) days from the date of such damage, Landlord shall Addendum 5 notify Tenant whether or not such repairs can be made within one hundred eighty (180) days from the date of such damage and Landlord's determination thereof shall be binding on Tenant. -7- 8 In either event, the Rent shall be reduced by a proportionate amount based upon the extent to which said damage interfered with the business carried on by Tenant in the Premises, and Tenant shall pay such reduced Rent up to the date of termination. Landlord agrees to refund to Tenant any Rent previously paid for any period of time subsequent to such date of termination. The repairs to be made hereunder by Landlord shall not include, and Landlord shall not be required to repair, any damage by fire or other cause to the property of Tenant or any repairs or replacements of any paneling, decorations, railings, floor coverings or any alterations, additions, fixtures or improvements installed on the premises by or at the expense of Tenant. The provisions of Section 1942, subdivision 2, and Section 1933, subdivision 4, of the Civil Code of California are superseded by the foregoing. EMINENT 23. If any part of the Premises shall be taken or appropriated DOMAIN under the power of eminent domain or conveyed in lieu thereof, which materially effects Tenant's occupancy of the Premises, either party shall have the right to terminate this Lease at its option. If any part of the Building shall be taken or appropriated under power of eminent domain or conveyed in lieu thereof, Landlord may terminate this Lease at its option. In either of such events, Landlord shall receive subject to the rights of Landlord's first mortgagee (and Tenant shall assign to Landlord upon demand from Landlord) any income, rent, award or any interest therein which may be paid in connection with the exercise of such power of eminent domain, and Tenant shall have no claim against Landlord for any part of the sums paid by virtue of such proceedings, whether or not attributable to the value of the unexpired Term. If a part of the Premises shall be so taken or appropriated or conveyed and neither party hereto shall elect to terminate this Lease and the Premises have been damaged as a consequence of such partial taking or appropriation or conveyance, Landlord shall restore the Premises continuing under this Lease at Landlord's cost and expense; provided, however, that Landlord shall not be required to repair or restore any injury or damage to the property of Tenant or to make any repairs or restoration of any alterations, additions, fixtures or improvements installed on the Premises by or at the expense of Tenant. Thereafter, the Rent for the remainder of the Term shall be proportionately reduced, such reduction to be based upon the extent to which the partial taking or appropriation or conveyance shall interfere with the business carried on by Tenant in the Premises. Notwithstanding anything to the contrary contained in this paragraph, if the temporary use or occupancy of any part of the Premises shall be taken or appropriated under power of eminent domain during the Term, this Lease shall be and remain unaffected by such taking or appropriation and Tenant shall continue to pay in full all Rent payable hereunder by Tenant during the Term; in the event of any such temporary appropriation or taking, Tenant shall be entitled to receive that portion of any award which represents compensation for the use or occupancy of the Premises during the Term, and Landlord shall be entitled to receive that portion of any award which represents the cost of restoration of the Premises and the use and occupancy of the Premises. SALE BY 24. In the event of a sale or conveyance by Landlord of the LANDLORD Building, the same shall operate to release Landlord from any AND TENANT'S future liability upon any of the covenants or conditions, REMEDIES express or implied, herein contained in favor of Tenant, and in such event Tenant agrees to look solely to the responsibility of the successor in interest of Landlord in and to this Lease. This Lease shall not be affected by any such sale and Tenant agrees to attorn to the purchaser or assignee. Tenant shall look solely to Landlord's interest in the Building for recovery of See Addendum 6 any judgment from Landlord. Landlord, or if Landlord is a partnership, its partners whether general or limited, or if Landlord is a corporation, its directors, officers or shareholders, shall never be personally liable for any such judgment. RIGHT OF 25. All covenants and agreements to be performed by Tenant under LANDLORD any of the terms of this Lease shall be performed by Tenant at TO PERFORM Tenant's sole cost and expense and without any abatement of Rent. If Tenant shall fail to pay any sum of money, other than Rent, required to be paid by it hereunder or shall fail to perform any other act on its part to be performed hereunder, and such failure shall continue for ten (10) days after receipt of notice thereof by Landlord, Landlord may, but shall not be obligated to do so, and without waiving or releasing Tenant from any obligations of the Tenant, make any such payment or perform any such act on the Tenant's part to be made or performed. All sums reasonably so paid by Landlord and all necessary reasonable incidental costs together with interest thereon at the rate of eighteen percent (18%) per annum or the maximum rate permitted by law, whichever is less per annum from the date of such payment by the Landlord shall be payable as Additional Rent to Landlord on demand, and Tenant covenants to pay such sums, and Landlord shall have, in addition to any other right or remedy of Landlord, the same right and remedies in the event of the nonpayment thereof by Tenant as in the case of default by Tenant in the payment of Rent. SURRENDER 26. (a) Tenant shall, at least ninety (90) days before the last OF PREMISES day of the Term, give to Landlord a written notice of intention to surrender the Premises on that date, but nothing contained herein shall be construed as an extension of the Term or as consent of Landlord to any holding over by Tenant. (b) At the end of the term or any renewal thereof or other sooner termination of this Lease, Tenant shall peaceable deliver up to Landlord possession of the Premises, together with all improvements, fixtures or additions thereto by whomsoever made, in the same condition as received, or first installed, damage by fire, earthquake, act of God, normal wear and tear or the elements alone excepted. Tenant may, upon the termination of this Lease, remove all movable furniture and equipment belonging to Tenant, at Tenant's sole cost, title to which shall be in Tenant until such termination, repairing any damage caused by such removal. Property not so removed shall be deemed abandoned by the Tenant, and title to the same shall thereupon pass to Landlord. (c) The voluntary or other surrender of this Lease by Tenant, or a mutual cancellation thereof, shall not work a merger and shall, at the option of Landlord, terminate all or any existing subleases or subtenancies or may, at the option of Landlord, operate as an assignment to it of any or all such subleases or subtenancies. WAIVER 27. If either Landlord or Tenant waives the performance of any term, covenant or condition contained in this Lease, such waiver shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant or condition contained herein. The acceptance of Rent by Landlord shall not constitute a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, regardless of Landlord's knowledge of such preceding breach at the time Landlord accepted such Rent. Failure by Landlord to enforce any of the terms, covenants or conditions of this Lease for any length of time shall not be deemed to waive or to decrease the right of Landlord to insist thereafter upon strict performance by Tenant. Waiver by Landlord of any term, covenant or condition contained in this lease may only be made by a written document signed by Landlord. NOTICES 28. All notices and demands which may or are required to be given by either party to the other hereunder shall be in writing. All notices and demands by Landlord to Tenant shall be sent by United States certified or registered mail, postage prepaid, addressed to Tenant at the Premises, or to such other place as Tenant may from time to time designate in a notice to Landlord. All notices and demands by Tenant to Landlord shall be sent by United States certified or registered mail, postage prepaid, addressed to Landlord at the address specified in the Basic Lease Information, or to such other firm or to such other place as Landlord may from time to time designate in a notice to Tenant. RENTAL 29. In addition to Basic Rent provided to be paid hereunder, ADJUSTMENT Tenant shall pay as Rent Tenant's Proportionate Share of Basic Operating Cost in the manner set forth below. (a) Definition: For purposes hereof, the terms used in this paragraph 29 shall have the following meanings: (1) "Basic Operating Cost" shall mean all expenses and costs of every kind and nature which Landlord shall pay or become obligated to pay because of or in connection with the ownership and operation of the Building and supporting facilities of the Building, and such additional facilities now and in subsequent years as may be determined by Landlord to be necessary to the Building, including, but not limited to the following: (i) Wages, salaries and related expenses and benefits of all on-site and off-site employees engaged directly in the operation, management, maintenance, engineering and security of the Building, and the costs of an office in the Building; provided, however, that Basic Operating Cost shall not include leasing commissions paid to any real estate broker, salesperson or agent. (ii) Supplies, materials and rental of equipment used in the operation, management and maintenance of the Building. -8- 9 (iii) Utilities, including water and power, heating, lighting, air conditioning and ventilating of the Building. (iv) All maintenance, janitorial and service agreements for the Building and the equipment therein, including, without limitation, alarm services, window cleaning and elevator maintenance. (v) A management cost recovery determined by Landlord equal to three percent (3%) of Gross Rent derived from the Building. (vi) Legal expenses and the cost of audits by certified public accountants; provided, however, that legal expenses chargeable as Basic Operating Cost shall not include the cost of negotiating leases, collecting rents, evicting tenants nor shall it include costs incurred in legal proceedings with or against any tenant or to enforce the provisions of any lease. (vii) All insurance premiums and costs, including but not limited to, the premiums and cost of fire, casualty and liability coverage and rental abatement and earthquake insurance (if Landlord elects to provide such coverage) applicable to the Building and Landlord's personal property used in connection therewith. (viii) Repairs, replacement and general maintenance (excluding repairs and general maintenance paid by proceeds of insurance or by Tenant or other third parties, and alterations attributable solely to tenants of the Building other than Tenant). (ix) All maintenance costs relating to public and service areas of the Building, including (but without limitation) sidewalks, landscaping, service areas, mechanical rooms and Building exteriors. (x) All taxes, service payments in lieu of taxes, annual or periodic license or use fees, fees, real estate taxes, impositions or charges imposed upon or levied in connection with use of the Building to raise funds for public transit, housing or other environmental, sociological or fiscal effects of the Building or land use, assessments whether general or special, ordinary and extraordinary, unforeseen as well as foreseen, of any kind which are assessed, levied, charged, confirmed or imposed by any public authority upon the Building, the land upon which it is located, Building operations or Rent payable under this Lease (or any portion or component thereof), excepting only inheritance or estate taxes imposed upon or assessed against the interest of any person in the Building or any part thereof or interest therein, and taxes computed upon the basis of the net income of the owners of the Building or any part thereof or interest therein. (xi) Amortization (together with reasonable financing charges) of capital improvement made to the Building subsequent to the Term Commencement Date which will improve the operating efficiency of the Building or which may be required to comply with laws, ordinances, rules or regulations promulgated, adopted or enforced after completion of the initial construction of the Building and improvements of the Premises pursuant to the Office Lease Improvement Agreement. Notwithstanding anything to the contrary herein contained, Basic Operating Cost shall not include (aa) the initial construction cost of the Building; (bb) depreciation on the initial construction of the Building; (cc) the cost of providing Tenant Improvements to tenant or any other tenant; (dd) debt service (including, but without limitation, interest, principal and any impound payments) required to be made on any mortgage or deed of trust recorded with respect to the Building and/or the real property on which the Building is located other than debt service and financing charges imposed pursuant to paragraph 29(a)(1)(xi) above; and (ee) the cost of special services, goods or materials provided to any tenant. In the event that the Building is not fully occupied during any fiscal year of the Term as determined by Landlord, and adjustment shall be made in computing the Basic Operating Cost for such year so that Basic Operating Cost shall be computed as though the Building had been one hundred percent (100%) occupied; provided, however, that in no event shall Landlord be entitled to collect in excess of one hundred percent (100%) of the total Basic Operating Cost from all of the tenants in the Building including Tenant. All costs and expenses shall be determined in accordance with generally accepted accounting principles which shall be consistently applied (with accruals appropriate to Landlord's business). Basic Operating Cost shall not include specific costs incurred for the account of, separately billed to and paid by specific tenants. (2) "Estimated Basic Operating Cost" for any particular year shall mean Landlord's estimate of the Basic Operating Cost for such fiscal year made prior to commencement of such fiscal year as hereinafter provided. Landlord shall have the right from time to time to revise its fiscal year and interim accounting periods so long as the periods as so revised are reconciled with prior periods in accordance with generally accepted accounting principles applied in a consistent manner. (3) "Basic Operating Cost Adjustment" shall mean the difference between Basic Operating Cost and Estimated Basic Operating Cost for any fiscal year determined as hereinafter provided. (b) PAYMENT OF ESTIMATED BASIC OPERATING COST. During June of each fiscal year during the Term, or as soon thereafter as practicable, Landlord shall give Tenant written notice of the Estimated Basic Operating Cost for the ensuing fiscal year. The Estimated Basic Operating Cost for the fiscal year in which the Scheduled Term Commencement Date falls is set forth in the Basic Lease Information sheet. Tenant shall pay Tenant's Proportionate Share of the Estimated Basic Operating Costs with installments of Basic Rent required to be paid pursuant to paragraph 3 above for the fiscal year to which the estimate applies in monthly installments on the first day of each calendar month during such year, in advance. Such payment shall be construed to be Rent for all purposes hereof. If at any time during the course of a fiscal year, Landlord determines that Basic Operating Cost will apparently vary from the then Estimated Basic Operating Cost by more than five percent (5%), Landlord may, by written notice to Tenant, revise the Estimated Basic Operating Cost for the balance of such fiscal year and Tenant shall pay Tenant's Proportionate Share of the Estimated Basic Operating Cost as so revised for the balance of the then current fiscal year on the first day of each calendar month thereafter, such revised installment amounts to be Rent for all purposes hereof. (c) COMPUTATION OF BASIC OPERATING COST ADJUSTMENT. Within one hundred twenty (120) days after the end of each fiscal year as determined by Landlord or as soon thereafter as practicable, Landlord shall deliver to Tenant a statement of Basic Operating Cost for the fiscal year just ended, accompanied by a computation of Basic Operating Cost Adjustment. If such statement shows that Tenant's payment based upon Estimated Basic Operating Cost is less than Tenant's Proportionate Share of Basic Operating Cost, then Tenant shall pay the difference within twenty (20) days after receipt of such statement, such payment to constitute additional rent hereunder. If such statement shows that Tenant's payments of Estimated Basic Operating Cost exceed Tenant's Proportionate Share of Basic Operating Costs, then (provided that Tenant is not in default under this Lease), Tenant shall receive a credit for the amount of such payment against Tenant's obligation for payment of Tenant's Proportionate Share of Estimated Basic Operating Cost next becoming due hereunder. If this Lease has been terminated or the Term hereof has expired prior to the date of such statement, then the Basic Operating Cost Adjustment shall be paid by the appropriate party within twenty (20) days after the date of delivery of the statement. (d) NET LEASE. This shall be a net lease and Base Rent shall be paid to Landlord absolutely net of all costs and expenses. The provisions for payment of Basic Operating Cost by means of periodic payments of Tenant's Proportionate Share of Estimated Basic Operating Cost and the Basic Operating Cost Adjustment are intended to pass on to Tenant and reimburse Landlord for all cost and expenses of the nature described in paragraph 29(a)(1) above incurred in connection with ownership and operation of the Building and such additional facilities now and in subsequent years as may be determined by Landlord to be necessary to the Building. (e) TENANT AUDIT. Tenant shall have the right, at Tenant's expense and upon not less than forty-eight (48) hours prior written notice to Landlord, to review at reasonable times Landlord's books and records for any fiscal year a portion of which falls within the Term for purposes of verifying Landlord's calculation of Basic Operating Costs and Basic Operating Cost Adjustment. In the event that Tenant shall dispute the amount set - 9 - 10 forth in any statement provided by Landlord under paragraph 29(c) above. Tenant shall have the right not later than twenty (20) days following the receipt of such statement, and upon condition that Tenant shall first deposit with Landlord the full amount in dispute, to cause Landlord's books and records with respect to such fiscal year to be audited by certified public accountants selected by Tenant subject to Landlord's reasonable right of approval. The Basic Operating Cost Adjustment shall be appropriately adjusted on the basis of such audit. If such audit discloses a liability for a refund or a credit by Landlord to Tenant in excess of ten percent (10%) of Tenant's Proportionate Share of the Basic Operating Cost Adjustment previously reported, the cost of such audit shall be borne by Landlord. Otherwise the cost of such audit shall be paid by Tenant. If Tenant shall not request an audit in accordance with the provisions of this paragraph 29(e) within twenty (20) days of receipt of Landlord's statement provided pursuant to paragraph 29(d), such statement shall be final and binding for all purposes hereof. TAXES 30. (a) Tenant shall pay before delinquency any and all taxes PAYABLE levied or assessed and which become payable by Landlord (or BY TENANT Tenant) during the Term of this Lease, whether or not now customary or within the contemplation of the parties hereto, which are based upon, measured by or otherwise calculated with respect to: (a) the value of Tenant's equipment, furniture, fixtures or other personal property located in the Premises; (b) the value of any leasehold improvements, alterations, or additions made in or to the Premises, regardless of whether title to such improvements, alterations or additions shall be in Tenant or Landlord; or (c) this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises. (b) In the event that it shall not be lawful for Tenant so to reimburse Landlord, the Rent shall be revised to net Landlord the same net rent after imposition of any such tax upon Landlord as would have been payable to Landlord prior to the imposition of any such tax. All taxes payable by Tenant under this Paragraph 30 shall be additional rental. SUCCESSORS 31. Subject to the provisions of paragraph 10 hereof, the AND ASSIGNS terms, covenants and conditions contained herein shall be binding upon and inure to the benefit of the heirs, successors, executors, administrators and assigns of the parties hereto. ATTORNEY'S 32. In the event that any action or proceeding is brought FEES to enforce any term, covenant or condition of this Lease on the part of Landlord or Tenant, the prevailing party in such litigation shall be entitled to reasonable attorneys' fees to be fixed by the court in such action or proceeding. LIGHT 33. No diminution of light, air or view by any structure AND AIR which may hereafter be erected (whether or not by Landlord) shall entitle Tenant to any reduction of Rent, result in any liability of Landlord to Tenant, or in any other way affect this Lease or Tenant's obligations hereunder. PUBLIC TRANS- 34. Tenant shall establish and maintain during the Term PORTATION hereof a program to encourage maximum use of public INFORMATION transportation by personnel of Tenant employed on the Premises, including without limitation the distribution to such employees of written materials explaining the convenience and availability of public transportation facilities adjacent or proximate to the Building, staggering working hours of employees, and encouraging use of such facilities, all at Tenant's sole reasonable cost and expense. MISCELLANEOUS 35. (a) The term "Premises" shall be deemed to include (except where such meaning would be clearly repugnant to the context) the office space demised and improvements now or at any time hereinafter comprising or built in the space hereby demised. (b) The paragraph headings herein are for convenience of reference and shall in no way define, increase, limit or describe the scope or intent of any provision of this Lease. (c) The term "Landlord" in these presents shall include the Landlord, its successors and assigns. In any case where this Lease is signed by more than one person, the obligations hereunder shall be joint and several. (d) The term "Tenant" or any pronoun used in place thereof shall indicate and include the masculine or feminine, the singular or plural number, individuals, firms or corporations, and their and each of their respective successors, executors, administrators and permitted assigns, according to the context hereof. (e) Time is of the essence of this Lease and all of its provisions. (f) This Lease shall in all respects be governed by the laws of the State of California. (g) This Lease, together with its exhibits, contains all the agreements of the parties hereto and supersedes any previous negotiations. (h) There have been no representations made by the Landlord or Tenant or understandings made between the parties other than those set forth in this Lease and its exhibits. (i) This Lease may not be modified except by a written instrument by the parties hereto. (j) If for any reason whatsoever any of the provisions hereof shall be unenforceable or ineffective, all of the other provisions shall be and remain in full force and effect. (k) Additional paragraphs 37 and 38 and addenda 1 through 6 attached hereto. LEASE 36. Submission of this instrument for examination or EFFECTIVE signature by Tenant does not constitute a reservation or DATE option for lease, and it is not effective as a lease or otherwise until execution and delivery by both Landlord and Tenant. IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and year first above written. "LANDLORD" Spieker Properties, L.P., a California limited partnership By: Spieker Properties, Inc. a Maryland corporation Date: 9/17/96 Its: General Partner By: /s/ JOHN A FOSTER -------------------------------- John A. Foster Its: Senior Vice President "TENANT" Infoseek Corporation, a California corporation Date: 9/11/96 By: /s/ ANDREW E. NEWTON -------------------------------- Andrew E. Newton Its: Vice President - 10 - 11 ADDITIONAL PARAGRAPHS ATTACHED TO AND MADE A PART OF THAT LEASE AGREEMENT BETWEEN SPIEKER PROPERTIES, L.P., A CALIFORNIA LIMITED PARTNERSHIP, AS LANDLORD, AND INFOSEEK CORPORATION, A CALIFORNIA CORPORATION, AS TENANT, DATED AUGUST 29, 1996, FOR THE PREMISES AT 2620 AUGUSTINE DRIVE, SUITE 260, SANTA CLARA, CALIFORNIA. 37. CONDITIONAL REQUIREMENTS OF LEASE. Tenant agrees that this entire Lease, and all provisions contained within, are subject to the complete execution of a Termination Agreement for the Premises between Innovative Information Systems, Inc. and Spieker Properties, L.P. Once completely executed by both parties, an original copy shall be attached to and become a part of this Lease, as Exhibit "F". 38. AFTER-HOURS BUILDING SERVICES AND AMENITIES. Landlord provides normal heating, ventilation and air conditioning (HVAC), electrical power and use of all other building services and amenities Monday through Friday, 6:00 AM to 6:00 PM, during generally recognized business days, as determined by Landlord. Tenant acknowledges and agrees that Tenant's use of the Premises outside of generally recognized business days and hours imposes an additional burden on the Building's janitorial service, florescent light tubes, HVAC, electrical services, and other common area amenities. Fees to operate the building's systems after normal business hours, including administrative fees, are currently estimated at fifteen dollars ($15.00) per hour. 12 ADDENDA ATTACHED TO AND MADE A PART OF THAT LEASE AGREEMENT BETWEEN SPIEKER PROPERTIES, L.P., A CALIFORNIA LIMITED PARTNERSHIP, AS LANDLORD, AND INFOSEEK CORPORATIONS, A CALIFORNIA CORPORATION, AS TENANT, DATED AUGUST 29, 1996, FOR THE PREMISES AT 2620 AUGUSTINE DRIVE, SUITE 260, SANTA CLARA, CALIFORNIA. ADDENDUM 1 - PARAGRAPH #1 - PREMISES - -------------------------------------- Tenant shall accept the Premises in "as is" condition. ADDENDUM 2 - PARAGRAPH #4 - RENT - ---------------------------------- April 1, 1997 through March 31, 1998: $5,938.00 (Five Thousand Nine Hundred Thirty Eight Dollars and no/100ths) per month plus basic operating costs and taxes per paragraph 29 of this Lease Agreement. Basic operating costs and taxes are estimated a year in advance and collected on a monthly basis. Any adjustment necessary (up and down) will be made at the end of the operating year. ADDENDUM 3 - PARAGRAPH #6 - COMPLIANCE WITH LAWS - ------------------------------------------------ Additionally, Tenant, at Tenant's expense shall comply with any and all provisions of the Americans with Disabilities Act of 1990 (the ("ADA") as enacted as of the effective date of this lease amendment, as the ADA imposes any duty upon Tenant with respect to the alteration, occupancy, and/or use of the Premises. Tenant shall hold Landlord harmless from and defend Landlord against any and all claims, damages or liabilities arising directly or indirectly from Tenant's failure to comply with the ADA. ADDENDUM 4 - PARAGRAPH #10 - ASSIGNMENT AND SUBLETTING - ------------------------------------------------------ Notwithstanding anything to the contrary contained in Paragraph 10, Tenant may make a general assignment of all or a substantial part of its business or may assign this Lease or sublet all or any portion of the leased Premises to any wholly owned subsidiary of Tenant or to any entity controlling, controlled by, or in common control with Infoseek, Inc., and none of the foregoing provisions of this paragraph shall apply to any such assignment or subletting by Tenant except that any such assignment or subletting shall not relieve Tenant of any obligation to be performed by Tenant under this Lease which occurred before or after such assignment or subletting and provided Tenant's use of the Premises remains consistent with Paragraph 10 of this Lease Agreement. ADDENDUM 5 - PARAGRAPH #22 - DAMAGE BY FIRE - ------------------------------------------- Either party shall have the right to cancel this Lease by giving the other party written notice within ten (10) days from the date of Landlord's notice that such repairs cannot be made within one hundred eighty (180) days or notice that Landlord has elected not to make such repairs. Said cancellation shall be effective thirty (30) days from the first day that either party gives notice to cancel. ADDENDUM 6 - PARAGRAPH #24 - SALE BY LANDLORD AND TENANT'S REMEDIES - ------------------------------------------------------------------- Landlord shall provide Tenant with an estoppel certificate at least 15 days prior to any sale for Tenant to itemize the obligations, if any, of Landlord to Tenant. Landlord shall remain responsible to Tenant for fulfillment of those items which cannot be fulfilled prior to sale. Any of the obligations as stated in the estoppel certificate with are outstanding shall survive the termination or the Lease except for any obligations which may be assumed by any successor to Landlord's interest in this Lease. 13 RULES AND REGULATIONS EXHIBIT A. 1. Sidewalks, halls, passages, exits, entrances, elevators, escalators and stairways shall not be obstructed by Tenants or used by them for any purpose other than for ingress to and egress from their respective premises. The halls, passages, exits, entrances, elevators and stairways are not for the use of the general public and Landlord shall in all cases retain the right to control and prevent access thereto by all persons whose presence, in the judgment of Landlord, shall be prejudicial to the safety, character, reputation and interests of the Building and its Tenants, provided that nothing herein contained shall be construed to prevent such access to persons with whom any Tenant normally deals in the ordinary course of such Tenant's business unless such persons are engaged in illegal activities. No Tenant, and no employees or invitees of any Tenant, shall go upon the roof of the Building, except as authorized by Landlord. 2. No sign, placard, picture, name, advertisement or notice, visible from the exterior of leased premises shall be inscribed, painted, affixed, installed or otherwise displayed by any Tenant either on its premises or any part of the Building without the prior written consent of Landlord, and Landlord shall have the right to remove any such sign, placard, picture, name, advertisement, or notice without notice to and at the expense of the Tenant. If Landlord shall have given such consent to any Tenant at any time, whether before or after the execution of the lease, such consent shall in no way operate as a waiver or release of any of the provisions hereof or of such lease, and shall be deemed to relate only to the particular sign, placard, picture, name, advertisement or notice so consented to by Landlord and shall not be construed as dispensing with the necessity of obtaining the specific written consent of Landlord with respect to any other such sign, placard, picture, name, advertisement or notice. All approved signs or lettering on doors and walls shall be printed, painted, affixed or inscribed at the expense of the Tenant by a person approved by Landlord. 3. The bulletin board or directory of the Building will be provided exclusively for the display of the name and location of Tenants only and Landlord reserves the right to exclude any other names therefrom. 4. No curtains, draperies, blinds, shutters, shades, screens or other coverings, awnings, hangings or decorations shall be attached to, hung or placed in, or used in connection with, any window or door on any premises without the prior written consent of Landlord. In any event with the prior written consent of Landlord, all such items shall be installed inboard of Landlord's standard window covering and shall in no way be visible from the exterior of the Building. No articles shall be placed or kept on the window sills so as to be visible from the exterior of the Building. No articles shall be placed against glass partitions or doors which might appear unsightly from outside Tenant's Premises. 5. Landlord reserves the right to exclude from the Building between the hours of 6 pm and 8 am and at all hours on Saturdays, Sundays and holidays all persons who are not Tenants or their accompanied guests in the Building. Each Tenant shall be responsible for all persons for whom it allows to enter the building and shall be liable to Landlord for all acts of such persons. Landlord shall in no case be liable for damages for error with regard to the admission to or exclusion from the Building of any person. During the continuance of any invasion, mob, riot, public excitement or other circumstance rendering such action advisable in Landlord's opinion, Landlord reserves the right to prevent access to the Building by closing the doors, or otherwise, for the safety of Tenants and protection of the Building and property in the Building. 6. No Tenant shall employ any person or persons other than the janitor of Landlord for the purpose of cleaning premises unless otherwise agreed to by Landlord in writing. Except with the written consent of Landlord no person or persons other than those approved by Landlord shall be permitted to enter the Building for the purpose of cleaning the same. No Tenant shall cause any unnecessary labor by reason of such Tenant's carelessness or indifference in the preservation of good order and cleanliness of the premises. Landlord shall in no way be responsible to any Tenant for any loss of property on the premises, however occurring, or for any damage done to the effects of any Tenant by the janitor or any other employee or any other person. 7. No Tenant shall obtain for use upon its premises ice, drinking water, food, beverage, towel or other similar services except through facilities provided by Landlord (and maintained by Tenant) and under regulations fixed by Landlord, or accept barbering or bootblacking services in its premises except from persons authorized by Landlord. 8. Each Tenant shall see that all doors of its premises are closed and securely locked and must observe strict care and caution that all water faucets or water apparatus are entirely shut off before the Tenant or its employees leave such premises, and that all utilities shall likewise be carefully shut off, so as to prevent waste or damage, and for any default or carelessness the Tenant shall make good all injuries sustained by other Tenants or occupants of the Building or Landlord. On multiple-tenancy floors, all Tenants shall keep the door or doors to the Building corridors closed at all times except for ingress or egress. 9. As more specifically provided in the Tenant's Lease of the Premises, Tenant shall not waste electricity, water or air-conditioning and agrees to cooperate fully with Landlord to assure the most effective operation of the Building's heating and air-conditioning, and shall refrain from attempting to adjust any controls other than room thermostats installed for Tenant's use. 10. No Tenant shall alter any lock or access device or install a new additional lock or access device or any bolt on any door of its premises without the prior written consent of Landlord. If Landlord shall give its consent, the Tenant shall in each case furnish Landlord with a key for any such lock. 11. No Tenant shall make or have made additional copies of any keys or access devices provided by Landlord. Each Tenant, upon the termination of the Tenancy, shall deliver to Landlord all the keys or access devises for the Building, offices, rooms and toilet rooms which shall have been furnished the Tenant or which the Tenant shall have had made. In the event of the loss of any keys or access devices so furnished by Landlord, Tenant shall pay Landlord therefor. 12. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein, and the expenses of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the Tenant who, or whose employees or invitees, shall have caused it. 13. No Tenant shall use or keep in its premises or the Building any kerosene, gasoline or inflammable or combustible fluid or material other than limited quantities necessary for the operation or maintenance of office or office equipment. No Tenant shall use any method of heating or air-conditioning other than that supplied by Landlord. 14. No Tenant shall use, keep or permit to be used or kept in its premises any foul or noxious gas or substance or permit of suffer such premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Building by reason of noise, odors and/or vibrations or interfere in any way with other Tenants or those having business therein, nor shall any animals or birds be brought or kept in or about any premises of the Building. 15. No cooking shall be done or permitted by any Tenant on its premises (except that use by the Tenant of Underwriters' Laboratory approved equipment for the preparation of coffee, tea, hot chocolate and similar beverages for Tenants and their employees shall be permitted, provided that such equipment and use is in accordance with all the applicable federal, state and city laws, codes, ordinances, rules and regulations), nor shall premises be used for lodging. EXHIBIT "A" Page 1 14 16. Except with the prior written consent of Landlord, no Tenant shall sell, or permit the sale, at retail, of newspapers, magazines, periodicals, theatre tickets or any other goods or merchandise in or on any premises, nor shall Tenant carry on, or permit or allow any employee or other person to carry on, the Business of stenography, typewriting or any similar business in or from any premises for the service or accommodation of occupants of any other portion of the Building, nor shall the premises of any Tenant be used for the storage of merchandise or for manufacturing of any kind, or the business of a public barber shop, beauty parlor, nor shall the premises of any Tenant be used for any improper, immoral or objectionable purpose, or any business or activity other than that specifically provided for in such Tenant's lease. 17. If Tenant requires telegraphic, telephonic, burglar alarm or similar services, it shall first obtain, and comply with, Landlord's instructions in their installation. 18. Landlord will direct electricians as to where and how telephone, telegraph and electrical wires are to be introduced or installed. No boring or cutting for wires will be allowed without the prior written consent of Landlord. The location of burglar alarms, telephones, call boxes and other office equipment affixed to all premises shall be subject to the written approval of Landlord. 19. No Tenant shall install any radio or television antenna, loudspeaker or any other device on the exterior walls or the roof of the Building. Tenant shall not interfere with radio or television broadcasting or reception from or in the Building or elsewhere. 20. No Tenant shall lay linoleum, tile, carpet or any other floor covering so that the same shall be affixed to the floor of its premises in any manner except as approved in writing by Landlord. The expense of repairing any damage resulting from a violation of this rule or the removal of any floor covering shall be borne by the Tenant by whom, or by whose contractors, employees or invitees, the damage shall have been caused. 21. No furniture, freight, equipment, materials, supplies, packages, merchandise or other property will be received in the Building or carried up or down the elevators except between such hours and in such elevators as shall be designated by Landlord. Landlord shall have the right to prescribe the weight, size and position of all safes, furniture or other heavy equipment brought into the Building. Safes or other heavy objects shall, if considered necessary by Landlord, stand on wood strips of such thickness as determined by Landlord to be necessary to properly distribute the weight thereof. Landlord will not be responsible for loss of or damage to any such safe, equipment or property from any cause, and all damage done to the Building by moving or maintaining any such safe, equipment or other property shall be repaired at the expense of Tenant. Business machines and mechanical equipment belonging to Tenant which cause noise or vibration that may be transmitted to the structure of the Building or to any space therein to such a degree as to be objectionable to Landlord or to any tenants in the Building shall be placed and maintained by Tenant, at Tenant's expense, on vibration eliminators or other devices sufficient to eliminate noise or vibration. The person employed to move such equipment in or out of the Building must be acceptable to Landlord. 22. No Tenant shall place a load upon any floor of the premises which exceeds the load per square foot which such floor was designed to carry and which is allowed by law. No Tenant shall mark, or drive nails, screw or drill into, the partitions, woodwork or plaster or in any way deface such premises or any part thereof. 23. No Tenant shall install, maintain or operate upon the Premises any vending machine without the written consent of Landlord. 24. There shall not be used in any space, or in the public areas of the Building, either by any Tenant or others, any hand trucks except those equipped with rubber tires and side guards or such other material-handling equipment as Landlord may approve. No other vehicles of any kind shall be brought by any Tenant into or kept in or about the premises. 25. Each Tenant shall store all its trash and garbage within the interior of its premises. No material shall be placed in the trash boxes or receptacles if such material is of such nature that it may not be disposed of in the ordinary and customary manner of removing and disposing of trash and garbage in the city without violation of any law or ordinance governing such disposal. All trash, garbage and refuse disposal shall be made only through entryways and elevators provided for such purposes and at such times as Landlord shall designate. 26. Canvassing, soliciting, distribution of handbills or any other written material, and peddling in the Building are prohibited and each Tenant shall cooperate to prevent the same. No Tenant shall make room-to-room solicitation of business from other tenants in the building. 27. Landlord shall have the right, exercisable without notice and without liability to any Tenant, to change the name and address of the Building. 28. Landlord reserves the right to exclude or expel from the Building any person who, in Landlord's judgment is intoxicated or under the influence of liquor or drugs or who is in violation of any of the rules and regulations of the Building. 29. Without the prior written consent of Landlord, Tenant shall not use the name of the Building in connection with or in promoting or advertising the business of Tenant except as Tenant's address. 30. Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governmental agency. 31. Tenant assumes any and all responsibility for protecting its Premises from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Premises closed. 32. The requirements of Tenants will be attended to only upon application at the office of the Building by an authorized individual. Employees of Landlord shall not perform any work or do anything outside of their regular duties unless under special instructions from Landlord, and no employees will admit any person (Tenant or otherwise) to any office without specific instructions from Landlord. 33. Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular Tenant or Tenants, but no such waiver by Landlord shall be construed as a wavier of such Rules and Regulations in favor of any other Tenant or Tenants, nor prevent Landlord from thereafter enforcing any such Rules and Regulations against any or all Tenants of the Building. 34. Landlord reserves the right to make such other and reasonable rules and regulations as in its judgment may from time to time be needed for safety and security, for care and cleanliness of the Building and for the preservation of good order therein. Tenant agrees to abide by all such Rules and Regulations hereinabove stated and any additional rules and regulations which are adopted. 35. Landlord reserves the right to designate the use of the parking spaces on the premises. 36. Tenant shall use carpet protectors under all desk chairs. 37. Tenant agrees to keep balcony doors closed at all times, except during ingress and egress. 38. Tenant or Tenant's guest shall park between designated parking lines only, and shall not occupy two parking spaces with one car. Vehicles in violation of the above shall be subject to tow-away, at vehicle owner's expense. 39. Vehicles parked on premises overnight without prior written consent of the Landlord shall be deemed abandoned and shall be subject to tow-away at vehicle owner's expense. 40. Tenant shall be responsible for the observance of all of the foregoing Rules and Regulations by Tenant's employees, agents, clients, customers, invitees and guests. 41. The Rules and Regulations are in addition to, and shall not be construed to in any way modify, alter or amend, in whole or in part, the terms, covenants, agreements and conditions of any Lease of Premises in the Building. The word "Building" as used herein means the building of which the premises are part. Page 2 15 EXHIBIT D FORM OF TENANT CERTIFICATE - ------------------------------------ - ------------------------------------ - ------------------------------------ - ------------------------------------ RE: Gentlemen: The undersigned, as Tenant under that certain lease (the ""Lease") dated ____________________ 19__, made with ____________________________________ as Landlord (the ""Landlord"), does hereby certify: 1. That the copy of the Lease attached hereto as Exhibit A is a true and complete copy of the Lease, and there are no amendments, modifications or extensions of or to the Lease and the Lease is now in full force and effect. 2. That its leased premises at the above location have been completed in accordance with the terms of the Lease, that it has accepted possession of said premises, and that it now occupies the same. 3. That it began paying rent on ______________ , 19__, and that, save only as may be required by the terms of the Lease, no rental has been paid in advance, nor has the undersigned deposited any sums with the Landlord as security. 4. That there exist no defenses or offsets to enforcement of the Lease by the Landlord and, so far as is known to the undersigned, the Landlord is not, as of the date hereof, in default in the performance of the Lease, nor has the Landlord committed any breach thereof, nor has any event occurred which, with the passage of time or the giving of notice, or both, would constitute a default or breach by the Landlord. The undersigned acknowledges that you are relying on the above representation of the undersigned in (advancing funds to purchase the existing first mortgage loan covering the building in which the leased premises are located) (in purchasing the building in which the leased premises are located) and does hereby warrant and affirm to and for your benefit, and that of your successors and assigns, that each of the foregoing representations is true, correct and complete as of the date hereof. Dated: _______________________________ By ___________________________________ Its _______________________________ EXHIBIT "D" EX-11.1 4 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE 1 Exhibit 11.1 INFOSEEK CORPORATION STATEMENT OF COMPUTATION OF NET LOSS PER SHARE (UNAUDITED) (In thousands, except per share amounts)
Three Months Ended Nine Months Ended September30, September 30, 1996 1995 1996 1995 ---------------------- ----------------------- Net Loss $(3,696) $ (667) $(11,986) $(1,710) Weighted average common shares outstanding during the period 25,931 3,628 11,642 3,697 Shares related to SAB No. 55,64 and 83 -- 12,483 4,161 12,483 Conversion of preferred stock not included in shares related to SAB No. 55, 64, and 83 -- 9,700 4,534 9,700 ------- ------- -------- ------- Total shares used in net loss per share 25,931 25,811 20,337 25,880 Net loss per share $ (0.14) $ (0.03) $ (0.59) $ (0.07)
EX-27.1 5 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1996 APR-01-1996 SEP-30-1996 3,085 47,495 1,765 (250) 0 52,594 8,093 (1,708) 59,681 4,279 0 0 0 74,306 (4,724) 59,681 0 4,007 827 7,528 (652) 0 0 (3,696) 0 (3,696) 0 0 0 (3,696) (0.14) 0.00
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