10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2003
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from           to

Commission file number: 000-23709

DOUBLECLICK INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE	13-3870996
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)	(I.R.S. EMPLOYER IDENTIFICATION NUMBER)
450 WEST 33RD STREET, 16TH FLOOR NEW YORK, NEW YORK 10001 (212) 683-0001 (ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE OF REGISTRANT’S PRINCIPAL EXECUTIVE OFFICES)

      Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes þ          No o

      As of August 8, 2003 there were 137,358,474 outstanding shares of the registrant’s Common Stock.

TABLE OF CONTENTS

	PART 1: FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF CASH FLOWS
	NOTES TO THE FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures about Market Risk
AMENDED AND RESTATED 1997 STOCK INCENTIVE PLAN
AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN
THIRD AMENDMENT OF LEASE
FOURTH AMENDMENT OF LEASE
AGREEMENT OF LEASE
CERTIFICATION
CERTIFICATION
CERTIFICATION
CERTIFICATION

DOUBLECLICK INC.

INDEX TO FORM 10-Q

PART I: FINANCIAL INFORMATION
	Item  1:	Financial Statements (unaudited)
		Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002	2
		Consolidated Statements of Operations for the three months and six months ended June 30, 2003 and 2002	3
		Consolidated Statements of Cash Flows for the six months ended June 30, 2003 and 2002	4
		Notes to Consolidated Financial Statements	5
	Item  2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
	Item  3:	Quantitative and Qualitative Disclosures about Market Risk	38
	Item  4:	Controls and Procedures	53
PART II: OTHER INFORMATION
	Item  1:	Legal Proceedings	53
	Item  2:	Changes in Securities and Use of Proceeds	54
	Item  4:	Submission of Matters to a Vote of Security Holders	54
	Item  5:	Other Information	54
	Item  6:	Exhibits and Reports on Form 8-K	55

1

PART 1:     FINANCIAL INFORMATION

Item 1: Financial Statements (Unaudited)

DOUBLECLICK INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except share amounts)

		June 30,			December 31,
		2003			2002
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	316,965		$	123,671
Restricted cash			42,061			2,500
Investments in marketable securities			214,975			306,974
Accounts receivable, net of allowances of $9,028 and $13,704, respectively			47,503			48,850
Prepaid expenses and other current assets			20,467			24,324
	Total current assets		641,971			506,319
Restricted cash			13,841			22,591
Investment in marketable securities			285,312			294,249
Property and equipment, net			89,919			98,545
Goodwill			25,711			20,572
Intangible assets, net			8,499			13,378
Investment in affiliates			10,435			12,125
Other assets			11,531			9,128
	Total assets	$	1,087,219		$	976,907
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	4,706		$	7,218
Accrued expenses and other current liabilities			144,519			117,320
Current portion of capital lease obligations			3,135			6,163
Convertible subordinated notes — 4.75% Coupon, due 2006			154,800			—
Deferred revenue			10,609			6,245
	Total current liabilities		317,769			136,946
Convertible subordinated notes — Zero Coupon, due 2023			135,000			—
Convertible subordinated notes — 4.75% Coupon, due 2006			—			154,800
Long term portion of capital lease obligations			65			852
Other long term liabilities			11,316			73,747
STOCKHOLDERS’ EQUITY:
Preferred stock, par value $0.001; 5,000,000 shares authorized, none outstanding			—			—
Common stock, par value $0.001; 400,000,000 shares authorized, 138,861,683 and 137,854,385 shares issued, respectively			139			138
Treasury stock, 1,680,670 shares			(8,949	)		(8,949	)
Additional paid-in capital			1,284,631			1,281,244
Accumulated deficit			(659,704	)		(666,441	)
Other accumulated comprehensive income			6,952			4,570
	Total stockholders’ equity		623,069			610,562
	Total liabilities and stockholders’ equity	$	1,087,219		$	976,907

The accompanying notes are an integral part of these consolidated financial statements.

2

DOUBLECLICK INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share amounts)

				Three Months Ended						Six Months Ended
				June 30,						June 30,
				2003			2002			2003			2002
Revenue				$	63,556		$	75,651		$	123,610		$	159,307
Cost of revenue					22,448			27,866			44,395			59,865
	Gross profit				41,108			47,785			79,215			99,442
Operating expenses:
	Sales and marketing				20,852			25,639			40,508			55,460
	General and administrative				8,360			12,056			17,226			24,083
	Product development				8,528			10,418			16,573			21,320
	Amortization of other intangibles				1,240			3,010			3,319			6,154
	Restructuring (credits) charges				(6,871	)		7,318			(6,871	)		8,758
			Total operating expenses		32,109			58,441			70,755			115,775
Income (loss) from operations					8,999			(10,656	)		8,460			(16,333	)
Other income (expense)
	Equity in (losses) income of affiliates				(1,048	)		159			(2,313	)		219
	Gain on sale of businesses, net				—			11,881			—			10,509
	Interest and other, net				2,589			2,806			5,632			6,198
	Loss from early extinguishment of debt				(4,406	)		—			(4,406	)		—
		Total other income (expense)			(2,865	)		14,846			(1,087	)		16,926
Income before income taxes					6,134			4,190			7,373			593
Provision for income taxes					(303	)		(766	)		(636	)		(3,400	)
Income (loss) before minority interest					5,831			3,424			6,737			(2,807	)
Minority interest in results of consolidated subsidiaries					—			650			—			837
Net income (loss)				$	5,831		$	4,074		$	6,737		$	(1,970	)
Basic net income (loss) per share				$	0.04		$	0.03		$	0.05		$	(0.01	)
Weighted average shares used in basic net income (loss) per share					136,922			136,173			136,679			135,696
Diluted net income (loss) per share				$	0.04		$	0.03		$	0.05		$	(0.01	)
Weighted average shares used in diluted net income (loss) per share					140,434			139,323			139,597			135,696

The accompanying notes are an integral part of these consolidated financial statements.

3

DOUBLECLICK INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

				Six Months Ended
				June 30,
				2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES
	Net income (loss)			$	6,737		$	(1,970	)
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Depreciation and leasehold amortization			20,353			20,972
		Amortization of intangible assets			4,980			7,038
		Equity in losses (income) of affiliates			2,313			(219	)
		Gain on sale of businesses, net			—			(11,881	)
		Other non-cash items			5,608			4,591
		Provisions for bad debts and advertiser discounts			3,258			9,639
		Changes in operating assets and liabilities, net of the effect of acquisitions and dispositions:
		Accounts receivable			(71	)		8,991
		Prepaid expenses and other assets			3,892			2,071
		Accounts payable			(3,677	)		(9,921	)
		Lease termination payment			(14,400	)		—
		Accrued expenses and other liabilities			(28,829	)		(12,105	)
		Deferred revenue			4,184			675
			Net cash provided by operating activities		4,348			17,881
CASH FLOWS FROM INVESTING ACTIVITIES
	Purchases of investments in marketable securities				(236,195	)		(233,987	)
	Maturities of investments in marketable securities				335,139			225,329
	Restricted cash				(30,811	)		—
	Purchases of property and equipment				(11,227	)		(6,016	)
	Acquisition of businesses and intangible assets, net of cash acquired				(2,757	)		(5,178	)
	Proceeds from sale of businesses				—			13,960
	Proceeds from sale of investment in affiliates				656			—
	Proceeds from sale of intangible asset, net				900			—
			Net cash provided by (used in) investing activities		55,705			(5,892	)
CASH FLOWS FROM FINANCING ACTIVITIES
	Proceeds from the issuance of common stock				335			761
	Proceeds from the exercise of stock options				1,931			3,116
	Proceeds from issuance of convertible subordinated notes, net				131,963			—
	Payments under capital lease obligations				(3,681	)		(12,575	)
	Other				—			(1,000	)
			Net cash provided by (used in) financing activities		130,548			(9,698	)
Effect of exchange rate changes on cash and cash equivalents					2,693			5,294
Net increase in cash and cash equivalents					193,294			7,585
Cash and cash equivalents at beginning of period				$	123,671		$	99,511
Cash and cash equivalents at end of period				$	316,965		$	107,096

The accompanying notes are an integral part of these consolidated financial statements.

4

DOUBLECLICK INC.

NOTES TO THE FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Description of Business and Significant Accounting Policies

Description of business

      DoubleClick is a leading provider of products and services used by direct marketers, Web publishers and advertisers to plan, execute and analyze their marketing programs. Combining marketing technology and data expertise, DoubleClick’s products and services help its customers to optimize their advertising and marketing campaigns online and through direct mail. DoubleClick offers a broad array of marketing technology and data products and services to its customers to allow them to address a full range of the marketing process, from pre-campaign planning and testing, to execution, measurement and campaign refinements.

      DoubleClick derives its revenues from two business segments: Technology (or “TechSolutions”) and Data. DoubleClick TechSolutions includes its ad management products, consisting of the DART for Publishers Service, the DART Enterprise ad serving software product, the DART for Advertisers Service, a suite of email products based on DoubleClick’s DARTmail Service and campaign management and analytics products and services. DoubleClick Data includes its Abacus division, which utilizes the information contributed to the proprietary Abacus database by Abacus Alliance members to make direct marketing more effective for Abacus Alliance members and other clients. Going forward, the Data segment will include DoubleClick’s new Data Management division. This division was formed as a result of DoubleClick’s acquisition of Computer Strategy Coordinators, Inc., a data management company, which was completed on June 30, 2003.

      During 2002, through a series of transactions, DoubleClick divested of its media businesses and as a result no longer reports a DoubleClick Media segment.

Basis of presentation

      The accompanying consolidated financial statements include the accounts of DoubleClick, its wholly owned subsidiaries, and subsidiaries over which it exercises a controlling financial interest. All significant intercompany transactions and balances have been eliminated. Investments in entities in which DoubleClick does not have a controlling financial interest, but over which it has significant influence are accounted for using the equity method. Investments in which DoubleClick does not have the ability to exercise significant influence are accounted for using the cost method.

      The accompanying interim consolidated financial statements have been prepared in accordance with the rules and regulations of Securities and Exchange Commission. The accompanying interim consolidated financial statements are unaudited, but in the opinion of management, contain all the normal, recurring adjustments considered necessary to present fairly the financial position, the results of operations and cash flows for the periods presented in conformity with generally accepted accounting principles applicable to interim periods. Results of operations are not necessarily indicative of the results expected for the full fiscal year or for any future period.

      The consolidated balance sheet at December 31, 2002 has been derived from, but does not include all the disclosures contained in, the audited consolidated financial statements for the year ended December 31, 2002. The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements of DoubleClick for the year ended December 31, 2002.

Recent Developments

      On July 16, 2003, DoubleClick agreed to terminate the remaining portion of the lease for its New York headquarters. Total costs in connection with this termination and other exit costs are expected to be approximately $43.6, of which approximately $40.9 million was accrued for as of June 30, 2003. The majority

5

DOUBLECLICK INC.

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(Unaudited)

of the remaining $2.7 million of payments will be expensed in the third quarter of 2003 and will be offset by the reversal of a deferred rent liability of approximately $1.6 million. DoubleClick expects to render the $43.6 million of payments throughout the remainder of 2003. Prior to this agreement, DoubleClick had terminated a portion of this lease during the second quarter of 2003 and made a cash payment of approximately $14.4 million (such amount is not included in the previously mentioned $43.6 million of payments). DoubleClick plans to relocate to its new headquarters in December 2003. As a result of this relocation, DoubleClick has accelerated the amortization of its leasehold improvements and furniture and fixtures at its New York headquarters due to the change in useful life of these assets. As of June 30, 2003, DoubleClick had placed approximately $26.9 million of the $43.6 million in escrow pending the satisfaction of certain conditions.

      These funds are included as a component of “Restricted cash” within current assets on the Consolidated Balance Sheets.

Cash and cash equivalents, investments in marketable securities and restricted cash

      Cash and cash equivalents represent cash and highly liquid investments with a remaining contractual maturity at the date of purchase of three months or less.

      Marketable securities consist of government and corporate debt securities and are classified as current or non-current assets depending on their dates of maturity. As of June 30, 2003, all marketable securities included in non-current assets have maturities greater than one year.

      DoubleClick classifies its investments in marketable securities as available-for-sale. Accordingly, these investments are carried at fair value, with unrealized gains and losses reported as a separate component of stockholders’ equity. DoubleClick recognizes gains and losses when these securities are sold using the specific identification method. DoubleClick has not recognized any material gains or losses from the sale of its investments in marketable securities.

      Restricted cash primarily represents amounts placed in escrow relating to a lease termination agreement and funds to cover office lease security deposits and our automated clearinghouse payment function. As of June 30, 2003, approximately $26.9 million of the current portion of restricted cash relates to the lease termination agreement for the remaining portion of our New York headquarters.

Property and equipment

      Property and equipment is recorded at cost and depreciated using the straight-line method over the shorter of the estimated life of the asset or the lease term. As required by SOP 98-1, Accounting for Costs of Computer Software Developed or Obtained for Internal Use, DoubleClick capitalizes certain computer software developed or obtained for internal use. Capitalized software is depreciated using the straight-line method over the estimated life of the software, generally three to five years.

Goodwill and intangible assets

      DoubleClick records as goodwill the excess of purchase price over the fair value of the identifiable net assets acquired. Statements of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets,” prescribes a two-step process for impairment testing of goodwill, which is performed annually, as well as when an event triggering impairment may have occurred. The first step tests for impairment, while the second step, if necessary, measures the impairment. DoubleClick has elected to perform its annual analysis during the fourth quarter of each fiscal year as of October 1st. No indicators of impairment were identified during the first and second quarters of 2003.

6

DOUBLECLICK INC.

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(Unaudited)

      Intangible assets include patents, trademarks, customer lists and purchased technology. Such intangible assets are amortized on a straight-line basis over their estimated useful lives, which are generally two to five years.

Impairment of long-lived assets

      DoubleClick assesses the recoverability of long-lived assets, including intangible assets, held and used whenever events or changes in circumstances indicate that future cash flows, undiscounted and without interest charges, expected to be generated by an asset’s disposition or use may not be sufficient to support its carrying amount. If such undiscounted cash flows are not sufficient to support the recorded value of assets, an impairment loss is recognized to reduce the carrying value of long-lived assets to their estimated fair value.

Revenue recognition

      DoubleClick’s revenues are presented net of a provision for advertiser credits, which is estimated and established in the period in which services are provided. These credits are generally issued in the event that delivered advertisements do not meet contractual specifications. Actual results could differ from these estimates.

      Technology. Revenues include fees earned from the use of DART ad management products and services and email products and services. Revenues derived from these products and services are recognized in the period the advertising impressions or emails are delivered, provided collection of the resulting receivable is reasonably assured. DART Service activation fees are deferred and recognized ratably over the expected term of the customer relationship.

      For DoubleClick’s licensed ad serving and campaign management software solutions, revenues are recognized when product installation is complete, which generally occurs when customers begin utilizing the product, there is pervasive evidence of an arrangement, collection is reasonably assured, the fee is fixed or determinable and vendor-specific objective evidence exists to allocate the total fees to all elements of the arrangement. A portion of the initial ad serving software license fee is attributed to the customer’s right to receive, at no additional charge, software upgrades released during the subsequent twelve months. Revenues attributable to software upgrades are deferred and recognized ratably over the period covered by the software license agreement, which is generally one year.

      Revenues from consulting services are recognized as the services are performed and customer-support revenues are deferred and recognized ratably over the period covered by the customer support agreement, which is generally one year.

      Data. DoubleClick provides services to its clients that result in a deliverable product in the form of consumer and business prospect lists. DoubleClick recognizes revenues when the product is shipped to the client, provided collection of the resulting receivable is reasonably assured.

Product development

      Product development expenses consist primarily of compensation and related benefits, consulting fees and other operating expense associated with product development departments. The product development departments perform research and development, enhance and maintain existing products, and provide quality assurance. To date, all product development costs have been expensed as incurred. Software development costs are required to be capitalized when a product’s technological feasibility has been established by completion of a working model of the product and ending when a product is available for general release to customers. To date, completion of a working model of DoubleClick’s products and general release have substantially coincided. As a result, DoubleClick has not capitalized any software development costs.

7

DOUBLECLICK INC.

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Issuance of stock by affiliates

      Changes in DoubleClick’s interest in its affiliates arising as the result of their issuance of common stock are recorded as gains and losses in the consolidated statement of operations, except for any transactions that must be recorded directly to equity in accordance with the provisions of SAB No. 51.

Income taxes

      DoubleClick uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and to operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if, based on the weight of the available evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

Foreign currency

      The functional currencies of DoubleClick’s foreign subsidiaries are their respective local currencies. The financial statements maintained in local currencies are translated to United States dollars using period-end rates of exchange for assets and liabilities and average rates during the period for revenues, cost of revenues and expenses. Translation gains and losses are accumulated as a separate component of stockholders’ equity. Net gains and losses from foreign currency transactions are included in the consolidated statements of operations and were not significant during the periods presented.

Equity-based compensation

      DoubleClick accounts for its employee stock option plans under the intrinsic value method, in accordance with the provisions of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations. Under APB 25, generally no compensation expense is recorded when the terms of the award are fixed and the exercise price of the employee stock option equals/or exceeds the fair value of the underlying stock on the date of the grant. DoubleClick has adopted the disclosure-only requirements of SFAS No. 123, “Accounting for Stock-Based Compensation” which allows entities to continue to apply the provisions of APB No. 25 for transactions with employees and provide pro forma net income and pro forma earnings per share disclosures for employee stock grants made as if the fair value based method of accounting in SFAS No. 123 had been applied to these transactions.

      In December 2002, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure” which amends SFAS No. 123, “Accounting for Stock-Based Compensation.” See “New accounting pronouncements.”

      Had DoubleClick determined compensation expense of employee stock options based on the estimated fair value of the stock options at the grant date, consistent with the guidelines of SFAS No. 123,

8

DOUBLECLICK INC.

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(Unaudited)

DoubleClick’s net income would have decreased and net loss would have increased to the pro forma amounts indicated below:

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2003			2002			2003			2002
		(In thousands, except per share amounts)
Net loss
	As reported	$	5,831		$	4,074		$	6,737		$	(1,970	)
	Pro forma per FAS 123	$	(21,361	)	$	(24,402	)	$	(44,602	)	$	(54,356	)
Basic net income (loss) per share
	As reported	$	0.04		$	0.03		$	0.05		$	(0.01	)
	Pro forma per FAS 123	$	(0.16	)	$	(0.18	)	$	(0.33	)	$	(0.40	)
Diluted net income (loss) per share
	As reported	$	0.04		$	0.03		$	0.05		$	(0.01	)
	Pro forma per FAS 123	$	(0.15	)	$	(0.18	)	$	(0.32	)	$	(0.40	)

      The per share weighted average fair value of options granted for the three and six months ended June 30, 2003 was $4.04 and $3.98, respectively, and the per share weighted average fair value of options granted for the three and six months ended June 30, 2002 was $4.41 and $4.71, respectively, on the grant date with the following weighted average assumptions:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2003		2002		2003		2002
Expected dividend yield		0%		0%		0%		0%
Risk-free interest rate		2.53%		4.44%		2.74%		4.45%
Expected life		4.5 years		4.5 years		4.5 years		4.5 years
Volatility		55%		68%		58%		70%

      The pro forma impact of options on the net income (loss) for the six months ended June 30, 2003 and 2002, is not representative of the effects on net income (loss) for future years, as future years will include the effects of additional years stock option grants.

Basic and diluted net income (loss) per share

      Basic net income (loss) per common share excludes the effect of potentially dilutive securities and is computed by dividing the net income (loss) available to common shareholders by the weighted-average number of common shares outstanding for the reporting period. Diluted net income (loss) per share adjusts this calculation to reflect the impact of outstanding convertible securities and stock options to the extent that their inclusion would have a dilutive effect on net income (loss) per share for the reporting period.

9

DOUBLECLICK INC.

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2003		2002		2003		2002
	(In thousands, except per share amounts)
Net income (loss)	$	5,831	$	4,074	$	6,737	$	(1,970	)
Weighted average basic common shares outstanding		136,922		136,173		136,679		135,696
Effect of dilutive securities: stock options and warrants		3,512		3,150		2,918		—
Weighted average diluted common shares outstanding		140,434		139,323		139,597		135,696
Net income (loss) per common share — basic	$	0.04	$	0.03	$	0.05	$	(0.01	)
Net income (loss) per common share — diluted	$	0.04	$	0.03	$	0.05	$	(0.01	)

      At June 30, 2003 and 2002, outstanding options of approximately 15.1 million and 18.0 million, respectively, to purchase shares of common stock were not included in the computation of diluted net income (loss) per share because to do so would have had an antidilutive effect for the periods presented. Similarly, the computation of diluted net income (loss) per share at June 30, 2003 and 2002 excludes the effect of 14.0 million shares and 5.3 million shares, respectively, issuable upon conversion of the Zero Coupon Convertible Subordinated Notes due 2023 and the 4.75% Convertible Subordinated Notes due 2006, respectively, since their inclusion would also have had an antidilutive effect.

Use of estimates

      The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

      Certain reclassifications have been made to prior years’ financial statements to conform to current year presentation.

New accounting pronouncements

      In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 nullifies EITF No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity including Certain Costs Incurred in a Restructuring.” The principal difference between SFAS No. 146 and EITF 94-3 relates to the recognition of a liability for a cost associated with an exit or disposal activity. SFAS No. 146 requires that a liability be recognized for those costs only when the liability is incurred, that is, when it meets the definition of a liability in the FASB’s conceptual framework. In contrast, EITF 94-3 required recognition of a liability for an exit cost when management committed to an exit plan. SFAS No. 146 also establishes fair value as the objective for initial measurement of liabilities related to exit or disposal activities. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002 and has no effect on exit or disposal activities begun prior to this date.

      In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure.” SFAS No. 148 amends SFAS No. 123, “Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-

10

DOUBLECLICK INC.

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(Unaudited)

based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. DoubleClick will continue to account for stock-based compensation in accordance with APB No. 25. DoubleClick has adopted the disclosure only provision of SFAS No. 148, which has been incorporated into these financial statements in the accompanying footnotes.

Change in Accounting Estimate

      Effective June 15, 2003, DoubleClick changed its estimate of the useful lives of its furniture and fixtures and leasehold improvements located at its New York headquarters. The average remaining useful life for these assets was reduced from approximately 2 and 12 years for furniture and fixtures and leasehold improvements, respectively, to 6  1/2 months for both asset types in order to recognize depreciation expense over the remaining time that the assets are expected to remain in service. The change was due to the planned relocation of DoubleClick’s New York headquarters in December 2003. As a result of this change, net income was reduced by approximately $0.8 million, or $0.01 per basic and diluted share, for the three and six months ended June 30, 2003. The amortization of these assets is allocated over headcount and therefore impacts cost of revenue, sales and marketing, general and administrative and product development expenses.

Note 2 — Business Transactions

Acquisitions

2003

Computer Strategy Coordinators, Inc.

      On June 30, 2003, DoubleClick completed its acquisition of Computer Strategy Coordinators, Inc. (“CSC”), a data management company based in Schaumburg, Illinois. In the transaction, DoubleClick acquired all of the outstanding shares of CSC in exchange for approximately $2.8 million in cash, inclusive of $0.4 million of direct acquisition costs.

      The purchase price has been preliminarily allocated to the assets acquired and the liabilities assumed according to their fair value at the date of acquisition as follows (in millions):

Current assets	$	2.0
Property and equipment		1.1
Goodwill		6.4
Total assets acquired	$	9.5
Total liabilities assumed	$	(6.7	)
Net assets acquired	$	2.8

      Approximately $6.4 million of the purchase price has been preliminarily allocated to goodwill, which represents the excess of the purchase price over the fair value of the net assets acquired. This goodwill is not tax deductible, and in accordance with SFAS No. 142, will be periodically tested for impairment. DoubleClick is awaiting the results of appraisals and certain information regarding assets and liabilities we acquired. Any potential adjustment to goodwill, with respect to any acquired intangible assets, will be recorded during the three months ending September 30, 2003.

      The results of operations of CSC will be included in DoubleClick’s Consolidated Statement of Operations beginning in the third quarter of 2003.

11

DOUBLECLICK INC.

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(Unaudited)

2002

MessageMedia

      On January 18, 2002 DoubleClick completed its acquisition of MessageMedia, Inc. (“MessageMedia”), a provider of permission-based email marketing and messaging solutions. The acquisition of MessageMedia allowed DoubleClick to expand its suite of email product and service offerings as well as broaden its client base.

      DoubleClick acquired all the outstanding shares, options, and warrants of MessageMedia in exchange for approximately one million shares of DoubleClick common stock valued at approximately $7.5 million, and stock options and warrants to acquire DoubleClick common stock valued at approximately $0.2 million. In connection with the acquisition, DoubleClick loaned $2.0 million to MessageMedia to satisfy MessageMedia’s operating requirements. The loan was extinguished upon the closing of the acquisition and included as a component of the purchase price. The purchase price, inclusive of approximately $1.6 million of direct acquisitions costs, was approximately $11.3 million.

Abacus Direct Europe

      On June 26, 2002, DoubleClick acquired the remaining 50% of the Abacus Direct Europe B.V. (“Abacus Direct Europe”) joint venture that it did not previously own from VNU Marketing Information Europe and Asia B.V., an affiliate of Claritas (UK) Limited. The joint venture was formed in November 1998 and provides database-marketing services to the direct marketing industry, primarily in the United Kingdom. DoubleClick’s investment in the joint venture was previously accounted for under the equity method of accounting. DoubleClick acquired all the outstanding shares of Abacus Direct Europe held by VNU in exchange for approximately $3.7 million in cash and direct acquisition costs.

Protagona

      On November 4, 2002, DoubleClick completed its acquisition of Protagona plc (“Protagona”), a campaign management software company based in the United Kingdom. In the transaction, DoubleClick acquired all the outstanding shares of Protagona in exchange for approximately $13.6 million in cash and approximately $0.2 million in direct acquisition costs.

Divestitures

European Media Business

      On January 28, 2002, DoubleClick completed the sale of its European Media business to AdLINK Internet Media AG (“AdLINK”), a German provider of Internet advertising solutions, in exchange for $26.3 million and the assumption by AdLINK of liabilities associated with DoubleClick’s European Media business. Intercompany liabilities in an amount equal to $4.3 million were settled through a cash payment by AdLINK to DoubleClick at the closing of the transaction. Following the closing of the transaction described above, United Internet AG (“United Internet”), AdLINK’s largest shareholder, exercised its right to sell to DoubleClick 15% of the outstanding common shares of AdLINK in exchange for $30.6 million. Pursuant to its agreement with United Internet, the exercise of this right caused DoubleClick’s option to acquire an additional 21% of AdLINK common shares for United Internet to vest. This option is only exercisable if AdLINK has achieved EBITDA-positive results for two out of three consecutive fiscal quarters before December 2003. However, if AdLINK should achieve EBITDA-positive results in the third or fourth quarters of 2003 then the option extends to the first quarter of 2004. EBITDA, as defined in the option agreement, is earnings before interest, taxes, depreciation, amortization, and one-time charges, such as restructuring costs, mergers and acquisition related costs, and other extraordinary items, determined in accordance with generally

12

DOUBLECLICK INC.

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(Unaudited)

accepted accounting principles in the United States. Should AdLINK fail to achieve these results, the option will expire unexercisable in December 2003 or March 2004, as applicable. AdLINK achieved EBITDA-positive results in the fourth quarter of 2002 but failed to achieve EBITDA-positive results for the three months ended March 31, 2003. AdLINK’s results for three months ended June 30, 2003, were not publicly available as of the date of this filing.

      As a result of the transactions described above, DoubleClick sold its European Media business and received a 15% interest in AdLINK, which represented approximately 3.9 million shares valued at approximately $8.3 million. DoubleClick’s option to acquire an additional 21% of the outstanding common shares of AdLINK for United Internet also vested. DoubleClick was partially reimbursed $2.0 million for its cash outlays related to the acquisitions of, and payments with respect to, the minority interests in certain of its European subsidiaries pursuant to its agreement to sell its European Media business. DoubleClick’s investment in AdLINK is included in “Investments in affiliates” in the Consolidated Balance Sheets.

      Revenue recognized from sales to AdLINK was approximately $0.7 million and $1.3 million during the three and six months ended June 30, 2003, respectively, and approximately $0.5 million and $0.9 million during the three and six months ended June 30, 2002, respectively.

North America Media Business

      On July 10, 2002, DoubleClick sold its North American Media business to L90, Inc. Upon completion of the transaction L90, Inc. was renamed MaxWorldwide, Inc. (“MaxWorldwide”). In exchange for the North American Media business, DoubleClick received 4.8 million shares in MaxWorldwide and $5.0 million in cash. The 4.8 million shares represented 16.1% of outstanding MaxWorldwide common stock and were valued at approximately $3.1 million. DoubleClick may also receive an additional $6.0 million if, during the three-year period subsequent to consummation of the transaction, MaxWorldwide has achieved EBITDA-positive results, for two out of three consecutive quarters. EBITDA, as defined in the merger agreement, is earnings before interest, taxes, depreciation and amortization, excluding certain non-recurring items. During the three months ended September 30, 2002, December 31, 2002 and March 31, 2003, MaxWorldwide did not achieve EBITDA-positive results. MaxWorldwide’s results for the three months ended June 30, 2003 were not publicly available as of the date of this filing.

      On August 13, 2002, MaxWorldwide repurchased 5,596,972 shares of its common stock. As a result of this repurchase, DoubleClick’s ownership percentage increased to 19.8%.

      DoubleClick accounts for this investment under the equity method of accounting and reports its share of MaxWorldwide’s results on a 90-day lag. The investment is included in “Investment in affiliates” in the Consolidated Balance Sheets.

      On August 1, 2003, MaxWorldwide announced that it had completed the sale of its MaxOnline division to Focus Interactive, Inc. for approximately $3.0 million in cash paid at closing, $2.0 million in cash to be paid upon the first anniversary of the closing, or six months thereafter plus additional amounts contingent upon the satisfaction of specified conditions. DoubleClick is evaluating the effect of this transaction on its right to receive the $6.0 million in contingent cash consideration from the sale of DoubleClick’s North American Media business to MaxWorldwide in July 2002 discussed above. At its Annual Meeting of Stockholders held on July 22, 2003, MaxWorldwide sought stockholder approval for a plan of liquidation and dissolution pursuant to which it would liquidate and dissolve MaxWorldwide and its subsidiaries upon consummation of the sale of its MaxOnline division. As of the date of the filing of this quarterly report, neither the results of the MaxWorldwide stockholder meeting nor the status of MaxWorldwide’s plan of liquidation were publicly available.

      DoubleClick recognized revenue of approximately $0.6 million and $1.4 million during the three and six months ended June 30, 2003 relating to services provided to MaxWorldwide.

13

DOUBLECLICK INC.

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(Unaudited)

@plan

      On May 6, 2002, DoubleClick sold its @plan research product line to NetRatings, Inc. (“NetRatings”), a provider of technology-driven Internet audience information solutions for media and commerce, in exchange for $12.0 million in cash and 505,739 shares of NetRatings common stock valued at approximately $6.1 million. DoubleClick sold the NetRatings shares in the fourth quarter of 2002 and the first quarter of 2003.

DoubleClick Japan

      On December 26, 2002, DoubleClick sold 45,049 shares of common stock in DoubleClick Japan and received proceeds of $14.3 million, reducing its ownership interest from 38.2% to 15.6%. As a result of this transaction, DoubleClick accounts for its remaining 31,271 shares in DoubleClick Japan under the equity method of accounting. DoubleClick also retains one seat on DoubleClick Japan’s board of directors. DoubleClick’s investment in DoubleClick Japan is included in “Investment in affiliates” in the Consolidated Balance Sheets.

      Revenue recognized through services provided to DoubleClick Japan was approximately $0.8 million and $1.6 million during the three and six months ended June 30, 2003, respectively.

      The following unaudited pro forma results of operations have been prepared assuming that the acquisitions of CSC, Protagona, Abacus Direct Europe and MessageMedia, consummated during 2003 and 2002, and the dispositions of the European and North American Media businesses, @plan research product line, and a portion of our interest in DoubleClick Japan completed during 2002, occurred at the beginning of the respective periods presented. This pro forma financial information should not be considered indicative of the actual results that would have been achieved had the acquisitions and dispositions been completed on the dates indicated and does not purport to indicate results of operations as of any future date or any future period.

	Six Months Ended
	June 30,
	2003		2002
	(In thousands, except per
	share amounts)
Revenues	$	128,860	$	131,390
Net income (loss)	$	6,373	$	(3,878	)
Net income (loss) per basic and diluted share	$	0.05	$	(0.03	)

Note 3 — Investment in Affiliates

      DoubleClick’s investments in affiliates at June 30, 2003 and December 31, 2002 consist of the following:

	June 30,		December 31,
	2003		2002
	(In thousands)
AdLINK Internet Media AG	$	4,187	$	2,818
NetRatings, Inc.		—		746
MaxWorldwide, Inc.		67		1,994
DoubleClick Japan		6,015		6,401
Other		166		166
	$	10,435	$	12,125

14

DOUBLECLICK INC.

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(Unaudited)

      During the first quarter of 2003, DoubleClick sold its remaining investment in NetRatings, Inc. and received proceeds of approximately $0.6 million. The gain recognized on the sale of this investment was not material.

      DoubleClick’s investment in AdLINK Internet Media AG represents an investment in a publicly traded company, which is accounted for as available-for-sale marketable securities. Accordingly this investment is carried at fair value with changes in fair value being reported as a component of other comprehensive income. At June 30, 2003 and December 31, 2002, DoubleClick’s cost basis in this investment was approximately $1.9 million.

      As of June 30, 2003, DoubleClick’s investment in MaxWorldwide, Inc. and DoubleClick Japan represent investments in publicly traded companies, which are accounted under the equity method of accounting. At June 30, 2003 and December 31, 2002 the fair value of these investments were as follows:

	June 30,		December 31,
	2003		2002
	(In thousands)
MaxWorldwide, Inc.	$	3,456	$	2,880
DoubleClick Japan	$	6,417	$	6,332

Note 4 — Goodwill

      The changes in the carrying amount of goodwill for the six months ended June 30, 2003 are as follows:

	Technology			Data		Total
	(In thousands)
Balance at December 31, 2002	$	20,572		$	—	$	20,572
Acquisition of CSC (See Note 2)		—			6,442		6,442
Tax adjustment relating to the acquisition of FloNetwork		(403	)		—		(403	)
Other		(900	)		—		(900	)
Balance at June 30, 2003	$	19,269		$	6,442	$	25,711

Note 5 — Intangible Assets

      Intangible assets consist of the following:

				June 30, 2003
		Weighted									December 31,
		Average		Gross							2002
		Amortization		Carrying		Accumulated
		Period		Amount		Amortization			Net		Net
		(In thousands)
Intangible assets:
	Patents and trademarks		36 months	$	2,084	$	(2,074	)	$	10	$	322
	Customer lists		27 months		21,710		(18,637	)		3,073		5,983
	Purchased technology and other		32 months		10,715		(5,299	)		5,416		7,073
			31 months	$	34,509	$	(26,010	)	$	8,499	$	13,378

      Amortization expense was $2.0 million and $5.0 million for the three and six months ended June 30, 2003, respectively, and $3.5 million and $7.0 million for the three and six months ended June 30, 2002, respectively. For the three and six months ended June 30, 2003, $0.8 million and $1.7 million, respectively, of amortization expense relating to purchased technology has been included as a component of cost of revenue in

15

DOUBLECLICK INC.

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(Unaudited)

the Consolidated Statements of Operations. For the three and six months ended June 30, 2002, $0.5 million and $0.9 million, respectively, of amortization expense relating to purchased technology has been included as a component of cost of revenue in the Consolidated Statements of Operations.

      Based on the balance of intangible assets at June 30, 2003, the annual amortization expense for each of the succeeding four fiscal years is estimated to be $2.6 million, $0.8 million, $0.8 million and $0.4 million in 2004, 2005, 2006 and 2007, respectively. Amortization expense for the remaining balance of fiscal 2003 is estimated to be $3.9 million.

Note 6 — Restructuring Charges

      Throughout 2002, management took additional steps to realign its sales, development and administrative organization and reduce corporate overhead to position DoubleClick for profitable growth in the future consistent with management’s long-term objectives. This involved the involuntary termination of approximately 250 employees, primarily from DoubleClick’s TechSolutions division, as well as charges for excess real estate space and closure of several offices. During fiscal 2002, DoubleClick recorded restructuring charges of approximately $98.4 million of which $1.4 million and $7.3 million were recorded during the first and second quarter of 2002, respectively.

      DoubleClick did not record any restructuring charges during the first quarter of 2003. In the second quarter of 2003, DoubleClick recorded a net restructuring credit of $6.9 million. This credit resulted from a $14.3 million reversal of its real estate reserve for its New York headquarters, partially offset by $7.4 million in additional restructuring charges primarily relating to DoubleClick’s facilities in San Francisco and London. The reversal of DoubleClick’s restructuring reserve was the result of lease terminations with respect to our New York headquarters for which our reserve was in excess of our expected payments. A portion of DoubleClick’s New York lease was terminated during the second quarter of 2003 and required a cash payment of approximately $14.4 million. DoubleClick agreed to terminate the remainder of this lease on July 16, 2003. Total costs in connection with this termination and other exit costs are expected to be approximately $43.6, of which approximately $40.9 million was accrued for as of June 30, 2003. The majority of the remaining $2.7 million of payments will be expensed in the third quarter of 2003 and will be offset by the reversal of a deferred rent liability of approximately $1.6 million. These payments are expected to be made in the third and fourth quarters of 2003.

      In determining the restructuring charge associated with its future lease commitments, DoubleClick engaged a third party real estate firm to provide estimates of the expected future sublease income for its excess and idle space, which also includes an estimate of the time period required to identify new sublessees. This analysis was performed based on the current real estate market conditions in the local markets where DoubleClick’s facilities are located. This real estate firm also provided estimates of lease termination and buyout fees landlords may charge to terminate existing leases rather than subleasing idle and excess space. DoubleClick’s restructuring charge relating to future lease commitments is based on its review of this information. Should market conditions or other circumstances change, this information may be updated and additional charges may be required.

16

DOUBLECLICK INC.

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(Unaudited)

      The following table sets forth a summary of the costs and related charges for DoubleClick’s restructuring charges and the balance of the restructuring reserves established (in thousands):

				Future Lease
	Severance			Costs			Total
Balance at December 31, 2002	$	356		$	106,758		$	107,114
Cash expenditures		(356	)		(17,471	)		(17,827	)
Restructuring charges		—			7,444			7,444
Restructuring credits		—			(14,315	)		(14,315	)
Balance at June 30, 2003	$	—		$	82,416		$	82,416

      As of June 30, 2003, approximately $71.8 million and $10.6 million remains accrued in “Accrued expenses and other current liabilities” and “Other long-term liabilities”, respectively.

Note 7 — Convertible Subordinated Debt

      On June 23, 2003 DoubleClick issued $135.0 million aggregate principal amount of Zero Coupon Convertible Subordinated Notes due 2023 (the “Zero Coupon Notes”) in a private offering. The Zero Coupon Notes do not bear interest and have a zero yield to maturity. The Zero Coupon Notes are convertible under certain circumstances into DoubleClick Inc. common stock at a conversion price of approximately $13.12 per share, which would result in an aggregate of approximately 10.3 million shares, subject to adjustment upon the occurrence of specified events. Each $1,000 principal amount of the Zero Coupon Notes will initially be convertible into 76.2311 shares of DoubleClick common stock prior to July 15, 2023 if the sale price of our common stock issuable upon conversion of the Zero Coupon Notes reaches a specified threshold for a defined period of time, if specified corporate transactions have occurred or if DoubleClick calls the Zero Coupon Notes for redemption. The specified thresholds for conversion prior to the maturity date are (a) during any calendar quarter after the quarter ending September 30, 2003, the last reported sale price of DoubleClick’s common stock for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the previous calendar quarter is greater than or equal to 120% of the applicable conversion price on that 30th trading day and (b) subject to certain exceptions, during the five business day period following any five consecutive trading day period, the trading price per $1,000 principal amount of Zero Coupon Notes for each of the five consecutive trading days is less than 98% of the product of the last reported sale price of DoubleClick’s common stock and the conversion rate (initially 76.2311) on each such day.

      The Zero Coupon Notes are DoubleClick’s general unsecured obligations and are subordinated in right of payment to all of its existing and future senior debt. DoubleClick may not redeem the Zero Coupon Notes prior to July 15, 2008. DoubleClick may be required to repurchase any or all of the Zero Coupon Notes upon a change of control or a termination of trading. DoubleClick may redeem for cash some or all of the Zero Coupon Notes at any time or after July 15, 2008. Holders of the Zero Coupon Notes also have the right to require DoubleClick to purchase some or all of their notes for cash on July 15, 2008, July 15, 2013 and July 15, 2018, at a price equal to 100% of the principal amount of the Zero Coupon Notes being redeemed plus accrued and unpaid liquidated damages, if any.

      DoubleClick received net proceeds of approximately $131.5 million and incurred issuance costs of approximately $3.5 million. The issuance costs will be amortized over the maturity of the Zero Coupon Notes and are included as a component of “Other assets” on the Consolidated Balance Sheet.

      DoubleClick is obligated to file by September 19, 2003, a shelf registration statement covering resales of the Zero Coupon Notes and the common stock issuable upon conversion of the Zero Coupon Notes.

17

DOUBLECLICK INC.

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(Unaudited)

      The Zero Coupon Notes contain an embedded derivative, the value of which as of June 30, 2003 has been determined by a third party valuation to be immaterial to our consolidated financial position. For financial accounting purposes, the ability of the holder to convert upon the satisfaction of a trading price condition constitutes an embedded derivative. Any changes in its value will be reflected in our future income statements, in accordance with Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities.”

      On June 24, 2003, DoubleClick called for redemption its entire $154.8 million outstanding aggregate principal amount of 4.75% Convertible Subordinated Notes due 2006. On July 24, 2003, DoubleClick redeemed these notes at a redemption price equal to 102.036% of the aggregate principal plus accrued and unpaid interest. The proceeds from the sale of the Zero Coupon Convertible Subordinated Notes due 2023, together with existing cash, were used towards this redemption. As a result of the redemption, DoubleClick recorded a loss of approximately $4.4 million associated with the redemption premium and write-off of deferred issuance costs during the second quarter of 2003.

Note 8 — Contingencies

      In April 2002, a consolidated amended class action complaint alleging violation of the federal securities laws in connection with DoubleClick’s follow-on offerings was filed in the United States District Court for the Southern District of New York naming as defendants DoubleClick, some of its officers and directors and certain underwriters of DoubleClick’s follow-on offerings. In October 2002, the action was dismissed against the named officers and directors without prejudice. However, claims against DoubleClick remain. In July 2002, DoubleClick and the other issuers in the consolidated cases filed motions to dismiss the amended complaint for failure to state a claim, which was denied as to DoubleClick in February 2003.

      In June 2003, DoubleClick’s Board of Directors conditionally approved a proposed partial settlement with the plaintiffs in this matter. The settlement would provide, among other things, a release of DoubleClick and of the individual defendants for the conduct alleged in the action to be wrongful in the amended complaint. DoubleClick would agree to undertake other responsibilities under the partial settlement, including agreeing to assign away, not assert, or release certain potential claims it may have against its underwriters. The Board agreed to approve the settlement subject to a number of conditions, including the participation of a substantial number of other issuer defendants in the proposed settlement, the consent of our insurers to the settlement, and the completion of acceptable final settlement documentation. Furthermore, the settlement is subject to a hearing on fairness and approval by the Court overseeing the IPO litigations. If this settlement is not finalized, DoubleClick intends to dispute these allegations and defend this lawsuit vigorously.

      DoubleClick is currently defending an arbitration claim in Sweden brought by a former shareholder of DoubleClick Scandinavia AB. The shareholder claims that DoubleClick breached its obligation to issue and register shares of DoubleClick’s Common Stock, which the shareholder claims caused it to incur damages. The arbitration hearing is currently scheduled for November 2003. If the shareholder is successful, other former shareholders of DoubleClick Scandinavia AB may make similar claims for damages. DoubleClick disputes these allegations and intends to defend this arbitration vigorously.

18

DOUBLECLICK INC.

NOTES TO THE FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Note 9 — Segment Reporting

      DoubleClick is organized into two segments: Technology (or “TechSolutions”) and Data. During 2002, through a series of transactions, DoubleClick divested of its media businesses and no longer reports a DoubleClick Media segment. Revenues and gross profit by segment are as follows (in thousands):

	Three Months Ended June 30, 2003						Three Months Ended June 30, 2002
	Technology		Data		Total		Technology			Data			Media		Total
Revenue	$	43,469	$	20,087	$	63,556	$	48,010		$	17,892		$	10,783	$	76,685
Intersegment elimination		—		—		—		(932	)		(102	)		—		(1,034	)
Revenue from external customers	$	43,469	$	20,087	$	63,556	$	47,078		$	17,790		$	10,783	$	75,651
Segment gross profit	$	26,906	$	14,202	$	41,108	$	31,256		$	12,730		$	3,902	$	47,888
Data commission fee						—										(103	)
Consolidated gross profit					$	41,108									$	47,785

	Six Months Ended June 30, 2003						Six Months Ended June 30, 2002
	Technology		Data		Total		Technology			Data			Media		Total
Revenue	$	84,997	$	38,613	$	123,610	$	98,436		$	36,110		$	27,120	$	161,666
Intersegment elimination		—		—		—		(2,194	)		(165	)		—		(2,359	)
Revenue from external customers	$	84,997	$	38,613	$	123,610	$	96,242		$	35,945		$	27,120	$	159,307
Segment gross profit	$	52,349	$	26,866	$	79,215	$	65,615		$	25,413		$	8,571	$	99,599
Data commission fee						—										(157	)
Consolidated gross profit					$	79,215									$	99,442

Note 10 — Comprehensive Income

      Comprehensive income consists of net income (loss), unrealized gains and losses on marketable securities and foreign currency translation adjustments. Comprehensive income was $10.3 million and $9.1 million for the three and six months ended June 30, 2003, respectively. Comprehensive income was $12.1 million and $8.4 million for the three and six months ended June 30, 2002, respectively.

19

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

DOUBLECLICK INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Forward Looking Statements

      THIS QUARTERLY REPORT ON FORM 10-Q AND, IN PARTICULAR, THIS MANAGEMENT DISCUSSION AND ANALYSIS CONTAIN OR INCORPORATE A NUMBER OF FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON CURRENT EXPECTATIONS, ESTIMATES, FORECASTS AND PROJECTIONS ABOUT THE INDUSTRY AND MARKETS IN WHICH WE OPERATE AND MANAGEMENT’S BELIEFS AND ASSUMPTIONS. ANY STATEMENTS CONTAINED HEREIN, INCLUDING WITHOUT LIMITATION STATEMENTS TO THE EFFECT THAT DOUBLECLICK OR ITS MANAGEMENT “BELIEVES”, “EXPECTS”, “ANTICIPATES”, “PLANS” AND SIMILAR EXPRESSIONS, THAT ARE NOT STATEMENTS OF HISTORICAL FACT SHOULD BE CONSIDERED FORWARD-LOOKING STATEMENTS AND SHOULD BE READ IN CONJUNCTION WITH OUR CONSOLIDATED FINANCIAL STATEMENTS AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THIS REPORT. THESE STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS THAT ARE DIFFICULT TO PREDICT. THERE ARE A NUMBER OF IMPORTANT FACTORS THAT COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS. THESE FACTORS INCLUDE, WITHOUT LIMITATION, THOSE SET FORTH BELOW UNDER THE HEADING “RISK FACTORS.” WE MAY NOT UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

Overview

      DoubleClick provides marketing technology and data products and services that direct marketers, Web publishers and advertisers use to optimize their marketing programs and efficiently reach their customers. These technologies have become leading tools for online advertising, email delivery, offline database marketing, campaign management and marketing analytics. Our products and services are designed to improve the performance and simplify the complexities of marketing.

      We derive revenues from two business segments:

•  DoubleClick Technology Solutions, which we refer to as our Technology or TechSolutions segment; and

•  DoubleClick Data, which we refer to as our Data segment.

      During 2002, through a series of transactions, we divested of our media businesses and as a result we no longer report a DoubleClick Media segment.

      DoubleClick TechSolutions. DoubleClick TechSolutions includes our ad management products and services, advertiser products, email technology products and campaign management and analytics products and services. Our ad management products enable Web sites to generate advertising revenue with a choice between our DART for Publishers Service, a Web-based application, and DART Enterprise, our licensed ad serving software product. Our advertiser products include DART for Advertisers, a Web hosted advertising management and serving solution that helps marketers reach their online goals efficiently and effectively, and MediaVisor, a hosted, Web-based media planning, buying and campaign management workflow solution.

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      Our suite of email technology products includes both the DARTmail Service, which is a Web-based application, and Unitymail, a licensed software product. These products and services allow direct marketers and Web publishers to manage and deliver their email marketing campaigns. Following the acquisition of Protagona plc in November 2002, we began to offer DoubleClick Ensemble, a campaign management software product and other related products and services. We also offer SiteAdvance, a hosted Web site measurement and analysis solution that was designed specifically for online merchants.

      DoubleClick Data. DoubleClick Data consists of our Abacus division, which provides products and services to direct marketers. Abacus maintains the Abacus Alliance database, which is the largest proprietary database of consumer transactions used for target marketing purposes. Abacus combines the power of this shared data with advanced statistical modeling to Alliance participants to help improve profitability and increase market share. Abacus’ key products and services include prospecting, housefile modeling and direct third party list optimization. DoubleClick also maintains an Alliance database in the United Kingdom. In the United States, Abacus also offers a Business-to-Business Alliance and ChannelView, an analytics tool that tracks multi-channel sales so marketers can effectively measure their promotion and campaign results. Going forward, the Data segment will include DoubleClick’s new Data Management division. This division was formed as a result of DoubleClick’s acquisition of Computer Strategy Coordinators, Inc., a data management company, which was completed on June 30, 2003.

Recent Developments

      On July 16, 2003, DoubleClick agreed to terminate the remaining portion of the lease for its New York headquarters. Total costs in connection with this termination and other exit costs are expected to be approximately $43.6, of which approximately $40.9 million was accrued for as of June 30, 2003. The majority of the remaining $2.7 million of payments will be expensed in the third quarter of 2003 and will be offset by the reversal of a deferred rent liability of approximately $1.6 million. DoubleClick expects to render the $43.6 million of payments throughout the remainder of 2003. Prior to this agreement, DoubleClick had terminated a portion of this lease during the second quarter of 2003 and made a cash payment of approximately $14.4 million (such amount is not included in the previously mentioned $43.6 million of payments). DoubleClick anticipates average annual cash rent savings of approximately $10.5 million, during the period commencing January 2004 and extending through January 2015 as a result of the New York lease termination and planned relocation.

      DoubleClick plans to relocate to its new headquarters in December 2003. As a result of this relocation, DoubleClick has accelerated the amortization of its leasehold improvements and furniture and fixtures at its New York headquarters due to the change in useful life of these assets. As a result of this change, net income was reduced by approximately $0.8 million, or $0.01 per basic and diluted share, for the three and six months ended June 30, 2003. In addition, DoubleClick expects net income to be reduced by approximately $5.3 million or $0.04 per basic and diluted share in each of the third and fourth quarters of 2003. The amortization of these assets is allocated over headcount and therefore impacts cost of revenue, sales and marketing, general and administrative and product development expenses.

      As of June 30, 2003, DoubleClick had placed approximately $26.9 million of the $43.6 million in escrow pending the satisfaction of certain conditions. These funds are included as a component of “Restricted cash” within current assets on the Consolidated Balance Sheets.

Critical Accounting Policies

      DoubleClick’s discussion and analysis of its financial condition and results of operations are based upon DoubleClick’s consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles. The preparation of these consolidated financial statements requires DoubleClick to make estimates, judgments, and assumptions, which are believed to be reasonable, based on the information available. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. A variance in the estimates or assumptions used could yield a materially different accounting result. Described below are the areas where we

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believe that the estimates, judgments or assumptions that we have made, if different, would have yielded the most significant differences in our financial statements.

Restructuring Estimates

      DoubleClick’s restructuring reserves are primarily related to our facilities in New York, San Francisco and London. In determining the restructuring charge associated with our future lease commitments, DoubleClick engaged a third party real estate firm to provide it with estimates of the future sublease income for its excess and idle space, which also includes an estimate of the time period required to identify sublessees. This analysis was performed based on the current real estate market conditions in the local markets where DoubleClick’s facilities are located. This real estate firm also provided estimates of lease termination and buyout fees landlords may charge to terminate existing leases rather than subleasing idle and excess space. DoubleClick’s restructuring charge relating to future lease commitments is based on its review of this information. Should market conditions change, this information may be updated and additional charges may be required.

Advertiser Credits and Bad Debt

      DoubleClick records reductions to revenue for the estimated future credits issuable to its customers in the event that delivered advertisements do not meet contractual specifications. DoubleClick follows this method since reasonably dependable estimates of such credits can be made based on historical experience. Should the actual amount of customer credits differ from DoubleClick’s estimates, revisions to the associated allowance may be required. DoubleClick maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of DoubleClick’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required in subsequent periods.

Valuation of Investments in Affiliates

      DoubleClick invests in other companies, that are within its strategic focus, some of which have highly volatile fair values and uncertain profit potentials. DoubleClick evaluates its investments for impairment on a periodic basis and reduces the carrying values of such assets to their estimated fair value when it believes an investment has experienced a decline in value that is other than temporary. Future adverse changes in market conditions or poor operating results of strategic investments could indicate an inability to recover the carrying value of the investments, thereby possibly requiring impairment charges in the future.

      When it is determined that the carrying value of investments may not be recoverable, management measures impairment based on projected discounted cash flows, revenue projections, recent transactions involving similar businesses and price/ revenue multiples at which they were bought and sold, price/ revenue multiples of competitors, and the closing market price for investments that are publicly traded.

Valuation of Goodwill and Long-lived Assets Including Intangible Assets

      DoubleClick evaluates its goodwill for impairment annually, as well as when an event triggering impairment may have occurred. DoubleClick has elected to perform its annual analysis during the fourth quarter of each fiscal year as of October 1st. In accordance with Statements of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets”, DoubleClick utilizes a two-step process for impairment. Management tests for impairment based on projected discounted cash flows, revenue projections, recent transactions involving similar businesses and price/ revenue multiples at which they were bought and sold and price/ revenue multiples of competitors.

      DoubleClick assesses the recoverability of long-lived assets, including intangible assets held and used whenever events or changes in circumstances indicate that future cash flows, undiscounted and without interest charges, expected to be generated by an asset’s disposition or use may not be sufficient to support its

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carrying value. If such undiscounted cash flows are not sufficient to support the recorded value of assets, an impairment loss is recognized to reduce the carrying value of long-lived assets to their estimated fair value.

Deferred Tax Assets

      Pursuant to SFAS 109, DoubleClick records a valuation allowance to the extent its deferred tax assets are not more likely than not to be realized. For the three months ended June 30, 2003 and 2002, DoubleClick has recorded a full valuation allowance against its net deferred tax assets since management believes that after considering all the available objective evidence, both positive and negative, historical and prospective, with greater weight given to historical evidence, it is not more likely that not that these assets will be realized. In the event that DoubleClick were to determine that it would be able to realize some or all of its deferred tax assets, an adjustment to the net deferred tax asset would increase income and/or adjust additional paid-in capital and/or adjust goodwill or other intangible assets, in the period such determination was made.

Property and Equipment

      Property and equipment is stated at cost and depreciated using the straight-line method over the shorter of the estimated life of the asset or the lease term. DoubleClick periodically reviews the useful lives of its assets for appropriateness. In the event that it is determined that the estimated useful life of its assets needs to be adjusted to reflect depreciation expense over the remaining time that the assets are expected to remain in service, future income or losses will be impacted in the subsequent periods after such a determination is made.

Recent Accounting Pronouncements

      In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”. SFAS No. 146 nullifies EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity including Certain Costs Incurred in a Restructuring”. The principal difference between SFAS No. 146 and EITF 94-3 relates to the recognition of a liability for a cost associated with an exit or disposal activity. SFAS No. 146 requires that a liability be recognized for those costs only when the liability is incurred, that is, when it meets the definition of a liability in the FASB’s conceptual framework. In contrast, EITF 94-3 required recognition of a liability for an exit cost when management committed to an exit plan. SFAS No. 146 also establishes fair value as the objective for initial measurement of liabilities related to exit or disposal activities. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002 and has no effect on exit or disposal activities begun prior to this date.

      In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure.” SFAS No. 148 amends SFAS No. 123, “Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The disclosure provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002 and have been incorporated into these financial statements and accompanying footnotes.

Business Transactions

Acquisitions

2003

CSC

      On June 30, 2003, DoubleClick completed its acquisition of Computer Strategy Coordinators, Inc. (“CSC”), a data management company based in Schaumburg, Illinois. In the transaction, DoubleClick acquired all of the outstanding shares of CSC in exchange for approximately $2.8 million in cash, inclusive of $0.4 million of direct acquisition costs.

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2002

MessageMedia

      On January 18, 2002, DoubleClick completed its acquisition of MessageMedia, Inc., a provider of permission-based, email marketing and messaging solutions. DoubleClick acquired all the outstanding shares, options and warrants of MessageMedia in exchange for approximately one million shares of DoubleClick common stock valued at approximately $7.5 million, and stock options and warrants to acquire DoubleClick common stock valued at approximately $0.2 million. In connection with the acquisition, DoubleClick loaned $2.0 million to MessageMedia to satisfy MessageMedia’s operating requirements. The loan was extinguished upon the closing of the acquisition and included as a component of the purchase price. The purchase price, inclusive of approximately $1.6 million of direct acquisition costs, was approximately $11.3 million.

Abacus Direct Europe

      On June 26, 2002, DoubleClick acquired the remaining 50% of the Abacus Direct Europe B.V. joint venture that it did not previously own from VNU Marketing Information Europe & Asia B.V, an affiliate of Claritas (UK) Limited. The joint venture was formed in November 1998 and provides database-marketing services to the direct marketing industry, primarily in the United Kingdom. DoubleClick’s investment in the joint venture was previously accounted for under the equity method of accounting. DoubleClick acquired all the outstanding shares of Abacus Direct Europe held by VNU in exchange for approximately $3.7 million in cash and direct acquisition costs.

Protagona

      On November 4, 2002, DoubleClick completed its acquisition of Protagona plc, a campaign management software company based in the United Kingdom. In the transaction, DoubleClick acquired all the outstanding shares of Protagona in exchange for approximately $13.6 million in cash.

Divestitures

European Media Business

      On January 28, 2002, DoubleClick completed the sale of its European Media business to AdLINK Internet Media AG, a German provider of Internet advertising solutions, in exchange for $26.3 million and the assumption by AdLINK of liabilities associated with DoubleClick’s European Media business. Intercompany liabilities in an amount equal to $4.3 million were settled through a cash payment by AdLINK to DoubleClick at the closing of the transaction. Following the closing of the transaction described above, United Internet AG AdLINK’s largest shareholder, exercised its right to sell to DoubleClick 15% of the outstanding common shares of AdLINK in exchange for $30.6 million. Pursuant to its agreement with United Internet, the exercise of this right caused DoubleClick’s option to acquire an additional 21% of AdLINK common shares from United Internet to vest. This option is only exercisable if AdLINK has achieved EBITDA-positive results for two out of three consecutive fiscal quarters before December 2003. However, if AdLINK should achieve EBITDA-positive results in the third or fourth quarters of 2003 then the option extends to the first quarter of 2004. EBITDA, as defined in the option agreement, is earnings before interest, taxes, depreciation, amortization, and one-time charges such as restructuring costs, mergers and acquisition related costs, and other extraordinary items, determined in accordance with generally accepted accounting principles in the United States. Should AdLINK fail to achieve these results, the option will expire unexercisable in December 2003 or March 2004, as applicable. AdLINK achieved EBITDA-positive results in the fourth quarter of 2002 but failed to achieve EBITDA-positive results for the three months ended March 31, 2003. AdLINK’s results for three months ended June 30, 2003 were not publicly available as of the date of this filing.

      As the result of the transactions described above, DoubleClick sold its European Media business and received a 15% interest in AdLINK, which represented approximately 3.9 million shares valued at

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approximately $8.3 million. DoubleClick’s option to acquire an additional 21% of the outstanding common shares of AdLINK from United Internet also vested. DoubleClick was partially reimbursed $2.0 million for its cash outlays related to the acquisitions of, and payments with respect to, the minority interests in certain of its European subsidiaries pursuant to its agreement to sell its European Media business. As a result of this transaction, DoubleClick recognized a loss of approximately $1.4 million, which has been included in “Gain on sale of businesses, net” in the Consolidated Statements of Operations.

North America Media Business

      On July 10, 2002, DoubleClick sold its North American Media business to L90, Inc. Upon completion of the transaction, L90, Inc. was renamed MaxWorldwide, Inc. In exchange for the North American Media business, DoubleClick received 4.8 million shares in MaxWorldwide and $5.0 million in cash. The 4.8 million shares represented 16.1% of outstanding MaxWorldwide common stock and were valued at approximately $3.1 million. DoubleClick may also receive an additional $6.0 million if, during the three-year period subsequent to consummation of the transaction, MaxWorldwide has achieved EBITDA-positive results, for two out of three consecutive quarters. EBITDA, as defined in the merger agreement, is earnings before interest, taxes, depreciation and amortization, excluding certain non-recurring items. During the three months ended September 30, 2002, December 31, 2002 and March 31, 2003, MaxWorldwide did not achieve EBITDA-positive results. MaxWorldwide’s results for the three months ended June 30, 2003 were not publicly available as of the date of this filing.

      On August 1, 2003, MaxWorldwide announced that it had completed the sale of its MaxOnline division to Focus Interactive, Inc. for approximately $3.0 million in cash paid at closing, $2.0 million in cash to be paid upon the first anniversary of the closing or six months thereafter plus additional amounts contingent upon the satisfaction of specified conditions. DoubleClick is evaluating the effect of this transaction on its right to receive the $6.0 million in contingent cash consideration from the sale of DoubleClick’s North American Media business to MaxWorldwide in July 2002 discussed above. At its Annual Meeting of Stockholders held on July 22, 2003, MaxWorldwide sought stockholder approval for a plan of liquidation and dissolution pursuant to which it would liquidate and dissolve MaxWorldwide and its subsidiaries upon consummation of the sale of its MaxOnline division. As of the date of the filing of this quarterly report, neither the results of the MaxWorldwide stockholder meeting nor the status of MaxWorldwide’s plan of liquidation were publicly available.

@plan

      On May 6, 2002, DoubleClick sold its @plan research product line to NetRatings, Inc., a provider of technology-driven Internet audience information solutions for media and commerce, in exchange for $12.0 million in cash and 505,739 shares of NetRatings common stock valued at approximately $6.1 million. DoubleClick sold these shares in the fourth quarter of 2002 and the first quarter 2003.

DoubleClick Japan

      On December 26, 2002, DoubleClick sold 45,049 shares of common stock in DoubleClick Japan and received proceeds of $14.3 million, reducing its ownership interest to 15.6%. As a result of this transaction, DoubleClick accounts for its remaining 31,271 shares in DoubleClick Japan under the equity method of accounting. DoubleClick also retains one seat on DoubleClick Japan’s board of directors.

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Three Months Ended June 30, 2003 Compared to the Three Months Ended June 30, 2002

Results of Operations

      Revenues and gross profit by segment are as follows (in thousands):

	Three Months Ended June 30, 2003						Three Months Ended June 30, 2002
	Technology		Data		Total		Technology			Data			Media		Total
Revenue	$	43,469	$	20,087	$	63,556	$	48,010		$	17,892		$	10,783	$	76,685
Intersegment elimination		—		—		—		(932	)		(102	)		—		(1,034	)
Revenue from external customers	$	43,469	$	20,087	$	63,556	$	47,078		$	17,790		$	10,783	$	75,651
Segment gross profit	$	26,906	$	14,202	$	41,108	$	31,256		$	12,730		$	3,902	$	47,888
Data commission fee						—										(103	)
Consolidated gross profit					$	41,108									$	47,785

DoubleClick TechSolutions

      DoubleClick TechSolutions revenue is derived primarily from the sales of our ad management products, which consist of our DART for Publishers and DART for Advertisers services as well as the DART Enterprise ad serving software product. TechSolutions revenue is also generated through sales of our suite of email products, based on DoubleClick’s DARTmail service, and DoubleClick Ensemble, our campaign management software product. TechSolutions cost of revenue consists of expenses associated with the delivery of advertisements and emails, including Internet access costs, depreciation of our ad and email delivery systems, the amortization of purchased technology, and facility- and personnel-related costs incurred to operate and support our ad management, email and campaign management products.

      TechSolutions revenue decreased 9.5% to $43.5 million for the three months ended June 30, 2003 from $48.0 million for the three months ended June 30, 2002. The decrease in TechSolutions revenue was primarily attributable to volume and pricing declines in our ad management products, partially offset by acquisition-related revenue growth from our Ensemble product offering. Ad management revenue decreased 14.5% to $32.6 million for the three months ended June 30, 2003 from $38.1 million for the three months ended June 30, 2002. Effective pricing for our ad management products decreased approximately 5% while volume dropped approximately 10.1%. A portion of these declines was caused by a reduction in volume-based technology support fees from our North American Media business, which was sold to MaxWorldwide in the summer of 2002. DARTmail revenues decreased 6.8% to $9.2 million for the three months ended June 30, 2003 from $9.9 million for the three months ended June 30, 2002. DARTmail volumes were flat while effective pricing declined approximately 5% from the three months ended June 30, 2002.

      DoubleClick TechSolutions gross margin was 61.9% for the three months ended June 30, 2003, compared to 65.1% for the three months ended June 30, 2002. The decrease in gross margin was primarily attributable to the decline in revenues and an increase in headcount-related costs and purchased technology amortization related to our acquisition of Protagona in November 2002. These amounts were partially offset by productivity gains in our ad management and email products and reductions in Internet access costs. The decline in Internet access costs was due to the favorable renegotiation of many of our contracts with Internet service providers.

      We anticipate slight increases in the absolute dollar amount of TechSolutions quarterly revenues in the second half of the year, resulting primarily from our product integration initiatives and seasonal volume growth. However, we expect a decrease in gross margin in the second half of 2003 due to the accelerated amortization of leasehold improvements and furniture and fixtures associated with the change in useful life of these assets relating to the planned relocation of our New York headquarters in December 2003. We believe that our TechSolutions business is tied to the relative health of the economy. Significant changes within the economy may materially impact these results.

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DoubleClick Data

      DoubleClick Data revenue has historically been derived primarily from its Abacus division, which provides products and services such as prospecting, housefile modeling and list optimization to direct marketers and merchants in the Abacus member alliances. Following the acquisition of @plan.inc in February 2001, we created a separate research division within DoubleClick Data designed to offer market research analysis tools that provide advertisers, brand marketers and e-businesses with analyses of online advertising campaigns, consumer behavior and purchasing patterns. Research revenue was derived primarily from the sale of annual subscriptions to its market research systems. DoubleClick Data cost of revenue includes expenses associated with maintaining and updating the Abacus and Research databases, the technical infrastructure to produce our products and services, facility and personnel-related expenses to operate and support our production equipment, the amortization of purchased intangible assets, and subscriptions to third party providers of lifestyle and demographic data that is used to supplement our transactions based database.

      On May 6, 2002, DoubleClick sold its @plan research product line to NetRatings, Inc., a provider of technology-driven Internet audience information solutions for media and commerce, in exchange for $12.0 million in cash and 505,739 shares of NetRatings common stock, valued at approximately $6.1 million. Revenue and gross profits recognized by the @plan research product line were approximately $0.8 million and $0.5 million, respectively, for the three months ended June 30, 2002.

      On June 26, 2002, DoubleClick acquired the remaining 50% of the Abacus Direct Europe B.V. joint venture that it did not previously own from VNU Marketing Information Europe & Asia B.V., an affiliate of Claritas (UK) Limited. The joint venture was formed in November 1998 and provides database-marketing services to the direct marketing catalog industry, primarily in the United Kingdom. The results of operations for Abacus Direct Europe have been included in DoubleClick’s Consolidated Statements of Operations from the date of acquisition. Revenues and gross profits recognized for Abacus Direct Europe were approximately $1.5 million and $0.5 million, respectively, for the three months ended June 30, 2003. Revenues for Abacus Direct Europe were primarily related to prospecting services provided to Abacus Alliance members in the United Kingdom.

      DoubleClick Data revenue increased 12.3% to $20.1 million for the three months ended June 30, 2003 from $17.9 million for the three months ended June 30, 2002. Gross margin decreased to 70.7% for the three months ended June 30, 2003 from 71.1% for the three months ended June 30, 2002.

      Overall, DoubleClick Data revenue for the three months ended June 30, 2003 represents an increase over the prior year period in revenues generated from the Abacus US business of $1.6 million and revenues generated from Abacus Direct Europe of $1.5 million, offset by the impact of the sale of the @plan research product line in May 2002. The growth in revenues from the Abacus US business was split equally between its Business-to-Business and Business-to-Consumer segments for the three months ended June 30, 2002. This growth is related primarily to increases in prospecting and housefile modeling services provided to Abacus Alliance and Business-to-Business Alliance members as direct marketers began to focus on client acquisitions.

      The decrease in gross margin for the three months ended June 30, 2003 compared to the prior year period was primarily attributable to the increase in costs associated with the acquisition of the 50% of Abacus Direct Europe we did not previously own. The costs included additional facility- and personnel-related costs as well as the amortization of purchased intangible assets.

      We anticipate revenues and gross profits of DoubleClick Data to increase throughout the remainder of 2003 in comparison to the year ago periods as a result of our acquisition of CSC, as well as continued growth in our US and UK Business-to-Consumer and US Business-to-Business Alliances. However, we expect DoubleClick Data gross margins to decline due to the lower margin business of CSC.

DoubleClick Media

      DoubleClick Media revenue was derived primarily from the sale and delivery of advertising impressions through third-party Web sites comprising the DoubleClick Media network. DoubleClick Media cost of

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revenue consisted primarily of service fees paid to Web publishers for impressions delivered on our network, and the costs of ad delivery and technology support provided by DoubleClick TechSolutions.

      During 2002, through a series of transactions, DoubleClick divested of its media businesses. Revenue for DoubleClick Media was $10.8 million for the three months ended June 30, 2002. On January 28, 2002, DoubleClick completed the sale of the European Media business to AdLINK. On July 10, 2002, DoubleClick completed the sale of the North American Media business to L90, which was renamed MaxWorldwide. On December 26, 2002, DoubleClick sold 45,049 shares of common stock in DoubleClick Japan and reduced its ownership interest to 15.6%. As a result of this transaction, DoubleClick accounts for its remaining 31,271 shares in DoubleClick Japan under the equity method of accounting and no longer consolidates its results of operations. For the three months ended June 30, 2002, revenues derived by the North American and DoubleClick Japan Media businesses were $8.0 million and $2.8 million, respectively.

      DoubleClick Media’s gross margin was 36.2% for the three months ended June 30, 2002. Gross profits recognized by the North American and DoubleClick Japan Media businesses were approximately $3.2 million and $0.7 million, respectively, for the three months ended June 30, 2002.

Operating Expenses

Sales and Marketing

      Sales and marketing expenses consist primarily of compensation and related benefits, sales commissions, general marketing costs, advertising, bad debt expense and other operating expenses associated with the sales and marketing departments. Sales and marketing expenses were $20.9 million, or 32.8% of revenue, for the three months ended June 30, 2003, and $25.6 million, or 33.9% of revenue, for the three months ended June 30, 2002. The $4.8 million decrease in sales and marketing expense was primarily attributable to reductions in bad debt expense of $1.9 million and personnel-related costs of $1.2 million, as well as reductions in rent and utilities of $0.9 million. The reduction in bad debt expense reflects the adequacy of our receivable reserves and our improved collection efforts. The decrease in personnel related costs and rent and utilities are based on headcount reductions associated with our restructuring activities and other cost savings initiatives. We expect sales and marketing expenses to increase in absolute dollars due to the accelerated amortization of leasehold improvements and furniture and fixtures associated with the change in useful life of these assets relating to the planned relocation of our New York headquarters in December 2003, but to remain flat as a percentage of revenues for the remainder of 2003 due to anticipated higher revenues as compared to the second quarter of 2003.

General and Administrative

      General and administrative expenses consist primarily of compensation and related benefits, professional services, and other operating expenses associated with our executive, finance, human resources, legal, facilities and administrative departments. General and administrative expenses were $8.4 million, or 13.2% of revenue, for the three months ended June 30, 2003, and $12.1 million, or 15.9% of revenue, for the three months ended June 30, 2002. The $3.7 million decrease in general and administrative expense was primarily the result of reductions in personnel-related costs of $1.5 million, professional and outside services of $1.2 million, and rent and utilities of $0.4 million. Personnel-related costs declined as the result of headcount reductions associated with our restructuring activities. The reduction in professional and outside service fees was the result in management cost savings initiatives. We expect the absolute dollar amount of general and administrative expenses to increase due to the accelerated amortization of leasehold improvements and furniture and fixtures associated with the change in useful life of these assets relating to the planned relocation of our New York headquarters in December 2003, but to remain flat as a percentage of revenues for the remainder of 2003 due to anticipated higher revenues as compared to the second quarter of 2003.

Product Development

      Product development expenses consist primarily of compensation and related benefits, consulting fees and other operating expenses associated with the product development departments. The product development

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departments perform research and development, enhance and maintain existing products, and provide quality assurance. Product development expenses were $8.5 million, or 13.4% of revenue, for the three months ended June 30, 2003, and $10.4 million, or 13.8% of revenues, for the three months ended June 30, 2002. The $1.9 million decrease in product development expenses was primarily the result of reductions in personnel-related costs of $0.3 million, rent and utilities of $0.4 million and depreciation and related hardware maintenance of $0.8 million. Personnel-related costs declined as the result of headcount reductions associated with our restructuring activities. The reduction in rent and utilities and depreciation expense was a result of headcount reductions as well as office closures and consolidations. Although we will continue to concentrate on the efficient allocation of our resources, we believe that on-going investment in product development is critical to the attainment of our strategic objectives. We expect product development expenses to increase in absolute dollars and as a percentage of revenues during the remainder of 2003 due to the accelerated amortization of leasehold improvements and furniture and fixtures associated with the change in useful life of these assets relating to the planned relocation of our New York headquarters in December 2003.

Amortization of Other Intangibles

      Amortization of intangible assets consists primarily of the amortization of customer lists and patents. Amortization expense was $1.2 million for the three months ended June 30, 2003 and $3.0 million for the three months ended June 30, 2002. The decrease was primarily the result of intangible assets becoming fully amortized and impairment charges recorded during 2002.

Restructuring Charges

      We did not record any restructuring charges during the first quarter of 2003. In the second quarter of 2003, DoubleClick recorded a net restructuring credit of $6.9 million. This credit resulted from a $14.3 million reversal of the real estate reserve for our New York headquarters, partially offset by $7.4 million in additional restructuring charges relating to our facilities, primarily San Francisco and London. The reversal of our restructuring reserve was a result of lease terminations with respect to our New York headquarters for which our reserve was in excess of our expected payments. A portion of our New York lease was terminated during the second quarter of 2003 and required a cash payment of approximately $14.4 million. We agreed to terminate the remainder of this lease on July 16, 2003. Total costs in connection with this termination and other exit costs are expected to be approximately $43.6, of which approximately $40.9 million was accrued for as of June 30, 2003. The majority of the remaining $2.7 million of payments will be expensed in the third quarter of 2003 and will be offset by the reversal of a deferred rent liability of approximately $1.6 million. DoubleClick expects to make the $43.6 million of payments in the third and fourth quarters of 2003. DoubleClick anticipates average annual cash rent savings of approximately $10.5 million during the period, commencing January 2004 and extending through January 2015 as a result of the New York lease termination and planned relocation.

      Of the remaining $82.4 million in cash outlays relating to our restructuring activities, we estimate that we will pay approximately $71.8 million in 2003, and approximately $10.6 million in 2004 and the following years. We anticipate that these outlays will be funded from available sources of liquidity.

      DoubleClick is continuing to review its operational performance and may incur additional restructuring credits or charges in 2003, principally related to changes in estimates and assumptions surrounding excess real estate.

      During the three months ended June 30, 2002, our management took certain actions to further increase operational efficiencies and to bring costs in line with revenues. As a result, DoubleClick recorded a restructuring charge totaling approximately $7.3 million. This charge included estimated costs of approximately $6.5 million for the write-off of fixed assets, accrual of future lease costs, net of estimated sublease income and deferred rent, as well as approximately $0.8 million in additional severance charges related to the involuntary termination of approximately 72 employees.

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Income (Loss) from Operations

      DoubleClick’s operating income was $9.0 million for the three months ended June 30, 2003, compared to an operating loss of $10.7 million for the three months ended June 30, 2002. The increase in its operating income of $19.7 million is primarily attributable to a decrease in sales and marketing expenses of $4.8 million, a decrease in general and administrative expenses of $3.7 million, a decrease in product development costs of $1.9 million, a decrease in intangible amortization of $1.8 million and the decrease in restructuring charges of $14.2 million. This was partially offset by a decrease in gross profits of approximately $6.7 million. DoubleClick continues to manage its operations with a focus on productivity and profitability, but due to the general economic and industry trends it may incur future losses from operations.

Equity in (Losses) Income of Affiliates

      For the three months ended June 30, 2003, DoubleClick recognized equity losses of $1.0 relating to its 15.6% interest in DoubleClick Japan and 19.8% investment in MaxWorldwide. For the three months ended June 30, 2002, DoubleClick recognized equity income of $0.2 million relating to its 50% interest in Abacus Direct Europe. Since the June 26, 2002 acquisition of the remaining 50% interest of Abacus Direct Europe that DoubleClick did not previously own, the results from operations of Abacus Direct Europe have been consolidated into DoubleClick’s operations.

Gain on Sale of Businesses, Net

      DoubleClick’s gain on sale of business was $11.9 million for the three months ended June 30, 2002. The amount represents a gain received from the sale of our @plan research product line to NetRatings, Inc. in May 2002.

      We recognized no such gains during the three months ended June 30, 2003.

Interest and Other, Net

      Interest and other, net was $2.6 million for the three months ended June 30, 2003 and $2.8 million for the three months ended June 30, 2002. Interest and other, net included $4.1 million of interest income for the three months ended June 30, 2003, partially offset by $2.2 million in interest expense. For the three months ended June 30, 2002, Interest and other, net included $6.5 million of interest income, partially offset by $3.1 million in interest expense. The decrease in interest income was attributable to the decrease in average investment yields due to declines in interest rates. The decrease in interest expense is directly associated with the repurchase of a portion of the 4.75% Convertible Subordinated Notes due 2006 during 2002. Interest and other, net in future periods may fluctuate in correlation with the average cash and investment balances we maintain and as a result of changes in the market rates of our investments.

Loss from Early Extinguishment of Debt

      On June 24, 2003, DoubleClick called for redemption its entire $154.8 million outstanding aggregate principal amount of 4.75% Convertible Subordinated Notes due 2006. On July 24, 2003, DoubleClick redeemed these notes at a redemption price equal to 102.036% of the aggregate principal plus accrued and unpaid interest. The proceeds from the sale of the Zero Coupon Convertible Subordinated Notes due 2023, together with existing cash, were used towards this redemption. As a result of the redemption, DoubleClick recorded a loss of approximately $4.4 million associated with the redemption premium and write-off of deferred issuance costs during the second quarter of 2003. As a result of the redemption, DoubleClick’s interest expense will be reduced by approximately $7.4 million on an annual basis.

Provision for Income Taxes

      The provision for income taxes recorded for the three months ended June 30, 2003 of $0.3 million consists principally of income taxes of $0.6 million on the earnings of some of DoubleClick’s foreign subsidiaries offset by a $0.3 million benefit related to a reduction of federal alternative minimum tax and state

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income taxes recorded in the period ended March 31, 2003, and resolution of certain prior year state tax matters. The provision for income taxes recorded for the three months ended June 30, 2002 of $0.8 million consists principally of income taxes of $0.9 million on the earnings of certain of DoubleClick’s foreign subsidiaries, reduced by a benefit of approximately $0.1 million for state and local tax refunds. The provision for income taxes for the three months ended June 30, 2003 and 2002 does not reflect tax benefits attributable to DoubleClick’s net operating loss and other tax carryforwards due to limitations and uncertainty surrounding DoubleClick’s prospective realization of such benefit.

Minority Interest in Results of Consolidated Subsidiaries

      Minority interest in results of consolidated subsidiaries was $0.7 million for the three months ended June 30, 2002. This amount consists wholly of our consolidated subsidiary, DoubleClick Japan, of which DoubleClick held a 38.2% ownership interest. On December 26, 2002, DoubleClick sold 45,049 shares of common stock in DoubleClick Japan, reducing its ownership interest to 15.6%. DoubleClick accounts for its remaining 31,271 shares in DoubleClick Japan under the equity method of accounting. As a result, we no longer record minority interest.

Six Months Ended June 30, 2003 Compared to the Six Months Ended June 30, 2002

Results of Operations

      Revenues and gross profit by segment are as follows (in thousands):

	Six Months Ended June 30, 2003						Six Months Ended June 30, 2002
	Technology		Data		Total		Technology			Data			Media		Total
Revenue	$	84,997	$	38,613	$	123,610	$	98,436		$	36,110		$	27,120	$	161,666
Intersegment elimination		—		—		—		(2,194	)		(165	)		—		(2,359	)
Revenue from external customers	$	84,997	$	38,613	$	123,610	$	96,242		$	35,945		$	27,120	$	159,307
Segment gross profit	$	52,349	$	26,866	$	79,215	$	65,615		$	25,413		$	8,571	$	99,599
Data commission fee						—										(157	)
Consolidated gross profit					$	79,215									$	99,442

DoubleClick TechSolutions

      TechSolutions revenue decreased 13.7% to $85.0 million for the six months ended June 30, 2003 from $98.4 million for the six months ended June 30, 2002. The decrease in TechSolutions revenue was primarily attributable to declines in our ad management products, partially offset by acquisition-related growth from our Ensemble product offering. Ad management revenue decreased 19.3% to $63.7 million for the six months ended June 30, 2003 from $78.9 million for the six months ended June 30, 2002. Effective pricing for our ad management products decreased approximately 5.2% while volume dropped approximately 14.9%. In addition to increased levels of price competition, a portion of these declines were caused by a reduction in volume-based technology support fees from our North American Media business, which was sold to MaxWorldwide in the summer of 2002. DARTmail revenue decreased 3.6% to $18.8 million for the six months ended June 30, 2003 from $19.5 million for the six months ended June 30, 2002. DARTmail volumes were flat while effective pricing declined approximately 4.9% as compared to the six months ended June 30, 2002.

      DoubleClick TechSolutions gross margin was 61.6% for the six months ended June 30, 2003, compared to 66.7% for the six months ended June 30, 2002. The decrease in gross margin was primarily attributable to the decline in revenues and an increase in headcount-related costs and purchased technology amortization related to our acquisition of Protagona in November 2002. These amounts were partially offset by productivity gains in our ad management and email products and reductions in Internet access costs. The decline in Internet access costs was due to the renegotiation of many of our contracts with our Internet service providers.

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      We anticipate slight increases in the absolute dollar amount of TechSolutions quarterly revenues in the second half of the year, resulting primarily from our product integration initiatives and seasonal volume growth. However, we expect a decrease in gross margin in the second half of 2003 due to the accelerated amortization of leasehold improvements and furniture and fixtures associated with the change in useful life of these assets relating to the planned relocation of our New York headquarters in December 2003. We believe that our TechSolutions business is tied to the relative health of the economy. Significant changes within the economy may materially impact these results.

DoubleClick Data

      DoubleClick Data revenue increased 6.9% to $38.6 million for the six months ended June 30, 2003 from $36.1 million for the six months ended June 30, 2002. Gross margin decreased to 69.6% for the six months ended June 30, 2003 from 70.4% for the six months ended June 30, 2002.

      On May 6, 2002, DoubleClick sold its @plan research product line to NetRatings, Inc., a provider of technology-driven Internet audience information solutions for media and commerce, in exchange for $12.0 million in cash and 505,739 shares of NetRatings common stock, valued at approximately $6.1 million. Revenue and gross profits recognized by the @plan research product line were approximately $3.1 million and $1.9 million, respectively, for the six months ended June 30, 2002.

      On June 26, 2002, DoubleClick acquired the remaining 50% of the Abacus Direct Europe B.V. joint venture that it did not previously own from VNU Marketing Information Europe & Asia B.V., an affiliate of Claritas (UK) Limited. The joint venture was formed in November 1998 and provides database-marketing services to the direct marketing catalog industry, primarily in the United Kingdom. The results of operations for Abacus Direct Europe have been included in DoubleClick’s Consolidated Statements of Operations from the date of acquisition. Revenues and gross profits recognized for Abacus Direct Europe were approximately $3.0 million and $1.1 million, respectively, for the six months ended June 30, 2003. Revenues for Abacus Direct Europe were primarily related to prospecting services provided to Abacus Alliance members in the United Kingdom.

      Overall, DoubleClick Data revenue for the six months ended June 30, 2003 represents an increase in revenues over the prior year period generated from the Abacus US business of $2.6 million and revenues generated from Abacus Direct Europe of $3.0 million, offset by the impact of the sale of the @plan research product line in May 2002. The growth in revenues from the Abacus US business related primarily to increases in prospecting and housefile modeling services provided to Abacus Alliance and Business-to-Business Alliance members as direct marketers began to focus on client acquisitions.

      The decrease in gross margin for the six months ended June 30, 2003 compared to the prior year period was primarily attributable to the increase in costs associated with acquisition of the 50% of Abacus Direct Europe we did not previously own. The costs included additional facility- and personnel-related costs as well as the amortization of purchased intangible assets.

      We anticipate revenues and gross profits of DoubleClick Data to increase throughout the remainder of 2003 in comparison to the year ago periods as a result of our acquisition of CSC, as well as continued growth in our US and UK Business-to-Consumer and US Business-to-Business Alliances. However, we expect DoubleClick Data gross margins to decline due to the lower margin business of CSC.

DoubleClick Media

      During 2002, through a series of transactions, DoubleClick divested of its Media businesses. Revenue for DoubleClick Media was $27.1 million for the six months ended June 30, 2002. On January 28, 2002, DoubleClick completed the sale of the European Media business to AdLINK. On July 10, 2002, DoubleClick completed the sale of the North American Media business to L90, which was renamed MaxWorldwide. On December 26, 2002, DoubleClick sold 45,049 shares of common stock in DoubleClick Japan and reduced its ownership interest to 15.6%. As a result of this transaction, DoubleClick accounts for its remaining

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31,271 shares in DoubleClick Japan under the equity method of accounting and no longer consolidates its results of operations. For the six months ended June 30, 2002, revenues derived by the European, North American and DoubleClick Japan Media businesses were $1.1 million, $19.9 million and $6.1 million, respectively.

      DoubleClick Media’s gross margin was 31.6% for the six months ended June 30, 2002. Gross profits recognized by the European, North American and DoubleClick Japan Media businesses were approximately $0.4 million, $6.8 million and $1.4 million, respectively, for the six months ended June 30, 2002.

Operating Expenses

Sales and Marketing

      Sales and marketing expenses consist primarily of compensation and related benefits, sales commissions, general marketing costs, advertising, bad debt expense and other operating expenses associated with the sales and marketing departments. Sales and marketing expenses were $40.5 million, or 32.8% of revenue, for the six months ended June 30, 2003, and $55.5 million, or 34.8% of revenue, for the six months ended June 30, 2002. The $15.0 million decrease in sales and marketing expense was primarily attributable to reductions in personnel-related costs of $6.4 million, as well as reductions in bad debt expense of $3.9 million, rent and utilities of $1.8 million and marketing expenses of $0.5 million. The decrease in personnel-related costs and rent and utilities is based on headcount reductions associated with our restructuring activities and other cost savings initiatives. The reduction in bad debt expense reflects the adequacy of our receivable reserves and our improved collection efforts. We expect sales and marketing expenses to increase in absolute dollars due to the accelerated amortization of leasehold improvements and furniture and fixtures associated with the change in useful life of these assets relating to the planned relocation of our New York headquarters in December 2003, but to remain flat as a percentage of revenues for the remainder of 2003 due to anticipated higher revenues as compared to the second quarter of 2003.

General and administrative

      General and administrative expenses consist primarily of compensation and related benefits, professional services, and other operating expenses associated with our executive, finance, human resources, legal, facilities, and administrative departments. General and administrative expenses were $17.2 million, or 13.9% of revenue, for the six months ended June 30, 2003, and $24.1 million, or 15.1% of revenue, for the six months ended June 30, 2002. The $6.9 million decrease in general and administrative expense was primarily the result of reductions in personnel-related costs of $3.0 million, professional and outside services of $1.1 million, rent and utilities of $1.0 million and depreciation expense of $0.6 million. Personnel-related costs declined as the result of headcount reductions associated with our restructuring activities. The reduction in professional and outside service fees was the result of management cost savings initiatives. We expect the absolute dollar amount of general and administrative expenses to increase due to the accelerated amortization of leasehold improvements and furniture and fixtures associated with the change in useful life of these assets relating to the planned relocation of our New York headquarters in December 2003, but to remain flat as a percentage of revenues for the remainder of 2003 due to anticipated higher revenues as compared to the second quarter of 2003.

Product Development

      Product development expenses consist primarily of compensation and related benefits, consulting fees and other operating expenses associated with the product development departments. The product development departments perform research and development, enhance and maintain existing products, and provide quality assurance. Product development expenses were $16.6 million, or 13.4% of revenue, for the six months ended June 30, 2003, and $21.3 million, or 13.4% of revenues, for the six months ended June 30, 2002. The $4.7 million decrease in product development expenses were primarily the result of reductions in personnel-related costs of $1.6 million, rent and utilities of $0.9 million and depreciation and related hardware maintenance of $1.6 million. Personnel-related costs declined as the result of headcount reductions associated

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with our restructuring activities. The reduction in rent and utilities and depreciation expense was a result of headcount reductions as well as office closures and consolidations. Although we will continue to concentrate on the efficient allocation of our resources, we believe that on-going investment in product development is critical to the attainment of our strategic objectives. We expect product development expenses to increase in absolute dollars and as a percentage of revenues during the remainder of 2003 due to the accelerated amortization of leasehold improvements and furniture and fixtures associated with the change in useful life of these assets relating to the planned relocation of our New York headquarters in December 2003.

Amortization of Other Intangibles

      Amortization of intangible assets consists primarily of the amortization of customer lists and patents. Amortization expense was $3.3 million for the six months ended June 30, 2003 and $6.2 million for the six months ended June 30, 2002. The decrease was primarily the result of intangible assets becoming fully amortized and impairment charges recorded during 2002.

Restructuring Charges

      We did not record any restructuring charges during the first quarter of 2003. In the second quarter of 2003, DoubleClick recorded a net restructuring credit of $6.9 million. This credit resulted from a $14.3 million reversal of the real estate reserve for our New York headquarters, partially offset by $7.4 million in additional restructuring charges relating to our facilities, primarily San Francisco and London. The reversal of our restructuring reserve was a result of lease terminations with respect to our New York headquarters for which our reserve was in excess of our expected payments. A portion of our New York lease was terminated during the second quarter of 2003 and required a cash payment of approximately $14.4 million. We agreed to terminate the remainder of this lease on July 16, 2003. Total costs in connection with this termination and other exit costs are expected to be approximately $43.6, of which approximately $40.9 million was accrued for as of June 30, 2003. The majority of the remaining $2.7 million of payments will be expensed in the third quarter of 2003 and will be offset by the reversal of a deferred rent liability of approximately $1.6 million. DoubleClick expects to make the $43.6 million of payments in the third and fourth quarters of 2003. DoubleClick anticipates average annual cash rent savings of approximately $10.5 million, for the period commencing January 2004 and extending through January 2015 as a result of the New York lease termination and planned relocation.

      Of the remaining $82.4 million in cash outlays relating to our restructuring activities, we estimate that we will pay approximately $71.8 million in 2003, and approximately $10.6 million in 2004 and the following years. We anticipate that these outlays will be funded from available sources of liquidity. However, there can be no assurance that such cost reductions can be sustained or that estimated costs of such actions would not change.

      DoubleClick is continuing to review its operational performance and may incur additional restructuring charges in 2003, principally related to changes in estimates and assumptions surrounding excess real estate.

      During the six months ended June 30, 2002, management took certain actions to further increase operational efficiencies and to bring costs in line with revenues. These measures included the involuntary terminations of approximately 132 employees, primarily from our Media and TechSolutions operations, as well as the consolidation of some of our leased office space and the closure of several of our offices. As a consequence, we recorded $8.8 million to operations during the six months ended June 30, 2002. This charge included approximately $2.1 for severance-related payments to terminated employees, and approximately $6.7 for the write-off of fixed assets, the accrual of future lease costs (net of estimated sublease income and deferred rent liabilities previously recorded) and other exit charges.

Income (Loss) from Operations

      DoubleClick’s operating income was $8.5 million for the six months ended June 30, 2003, compared to an operating loss of $16.3 million for the six months ended June 30, 2002. The increase in its operating income of $24.8 million is primarily attributable to the decrease in our sales and marketing expenses of $15.0 million, a decrease in general and administrative expenses of $6.9 million, a decrease in product development costs of

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$4.7 million, a decrease in intangible amortization of $2.8 million and the decrease in restructuring charges of $15.6 million. This was partially offset by a decrease in gross profits of approximately $20.2 million. DoubleClick continues to manage its operations with a focus on productivity and manage its headcount accordingly, but due to the general economic and industry trends it may incur future losses from operations.

Equity in (Losses) Income of Affiliates

      For the six months ended June 30, 2003, DoubleClick recognized equity losses of $2.3 relating to its 15.6% interest in DoubleClick Japan and 19.8% investment in MaxWorldwide. For the six months ended June 30, 2003, DoubleClick recognized equity income of $0.2 million relating to its 50% interest in Abacus Direct Europe. Since the June 26, 2002 acquisition of the remaining 50% interest of Abacus Direct Europe that DoubleClick did not previously own, the results from operations of Abacus Direct Europe have been consolidated into DoubleClick’s operations.

Gain on Sale of Businesses, Net

      DoubleClick’s net gain on sale of businesses was $10.5 million for the six months ended June 30, 2002. The amount represents a gain incurred on the sale of our @plan research product line in May 2002 offset by a loss on the sale of our European Media operations in January 2002.

      We recognized no such losses during the six months ended June 30, 2003.

Interest and Other, Net

      Interest and other, net was $5.6 million for the six months ended June 30, 2003 and $6.2 million for the six months ended June 30, 2002. Interest and other, net included $9.1 million of interest income for the six months ended June 30, 2003, partially offset by $4.3 million in interest expense. For the six months ended June 30, 2002, Interest and other, net included $14.1 million of interest income, partially offset by $6.0 million in interest expense. The decrease in interest income was attributable to the decrease in average investment yields due to declines in interest rates. The decrease in interest expense is directly associated with the repurchase of a portion of the 4.75% Convertible Subordinated Notes due 2006 during 2002. Interest and other, net in future periods may fluctuate in correlation with the average cash and investment balances we maintain and as a result of changes in the market rates of our investments.

Loss from Early Extinguishment of Debt

      On June 24, 2003, DoubleClick called for redemption its entire $154.8 million outstanding aggregate principal amount of 4.75% Convertible Subordinated Notes due 2006. On July 24, 2003, DoubleClick redeemed these notes at a redemption price equal to 102.036% of the aggregate principal plus accrued and unpaid interest. The proceeds from the sale of the Zero Coupon Convertible Subordinated Notes due 2023, together with existing cash, were used towards this redemption. As a result of the redemption, DoubleClick recorded a loss of approximately $4.4 million associated with the redemption premium and write-off of deferred issuance costs during the second quarter of 2003. As a result of the redemption, DoubleClick’s interest expense will be reduced by approximately $7.4 million on an annual basis.

Provision for Income Taxes

      The provision for income taxes of $0.6 million recorded for the six months ended June 30, 2003 consists principally of income taxes of $1.1 million on the earnings of some of DoubleClick’s foreign subsidiaries reduced by a benefit of approximately $0.5 million of state and local taxes related to state and local tax refunds received during the first quarter and settlement of certain state tax matters. The provision for income taxes recorded for the six months ended June 30, 2002 of $3.4 million consists principally of income taxes of $2.9 million on the earnings of certain of DoubleClick’s foreign subsidiaries and gain on the sale of DoubleClick’s European Media business, and state and local taxes of $0.5 million. The provision for income taxes for the six months ended June 30, 2003 and 2002 does not reflect tax benefits attributable to

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DoubleClick’s net operating loss and other tax carryforwards due to limitations and uncertainty surrounding DoubleClick’s prospective realization of such benefit.

Minority Interest in Results of Consolidated Subsidiaries

      Minority interest in results of consolidated subsidiaries was $0.8 million for the six months ended June 30, 2002. This amount consists wholly of our consolidated subsidiary, DoubleClick Japan, of which DoubleClick held a 38.2% ownership interest. On December 26, 2002, DoubleClick sold 45,049 shares of common stock in DoubleClick Japan, reducing its ownership interest to 15.6%. DoubleClick accounts for its remaining 31,271 shares in DoubleClick Japan under the equity method of accounting. As a result, we recognized no such income during the six months ended June 30, 2003.

Liquidity and Capital Resources

      Since inception, we have financed our operations primarily through private placements of equity securities, and public offerings of our common stock and Convertible Subordinated Notes.

      Operating activities generated $4.3 million for the six months ended June 30, 2003 and $17.9 million for the six months ended June 30, 2002. Cash provided by operating activities for the six months ended June 30, 2003 resulted primarily from our net income, excluding non-cash items, decreases in prepaid and other assets and an increase in deferred revenue, offset by the cash payment of approximately $14.4 relating to the termination of a portion of our New York lease and decreases in accrued expenses and other liabilities. Cash provided by operating activities for the six months ended 2002 resulted from our net loss, excluding non-cash items, and decreases in accounts payable and accrued expenses, partially offset by a decrease in accounts receivable. Cash flow from operating activities will be impacted during the remainder of the year due to restructuring payments associated with lease termination fees for our New York headquarters. DoubleClick expects to pay approximately $43.6 in the third and fourth quarters of 2003 relating to the termination of this lease.

      Investing activities provided $55.7 million for the six months ended June 30, 2003 and used $5.9 million the six months ended June 30, 2002. Cash provided by investing activities for the six months ended June 30, 2003 resulted primarily from the maturities of our investments in marketable securities, offset by the purchases of equipment, the increase in the amounts held in restricted cash relating to our New York lease termination agreement and the net outlay of cash for the acquisition of businesses. Cash provided by investing activities for the six months ended June 30, 2002 resulted principally from the sale of businesses, offset by the purchase of equipment and the net cash outlays for the acquisition of businesses and intangible assets. Capital expenditures are expected to remain constant throughout 2003 due to the relocation of our New York headquarters and the replacement of furniture and fixtures and necessary leasehold improvements. Restricted cash is expected to decrease as the required funds are released from the escrow accounts for the New York lease termination.

      Financing activities provided $130.5 million and used $9.7 million for the six months ended June 30, 2003 and June 30, 2002, respectively. Cash provided by financing activities for the six months ended June 30, 2003 resulted primarily from the issuance of the Zero Coupon Convertible Subordinated Notes offset by payments under capital lease obligations. Cash used in financing activities for the six months ended June 30, 2002 resulted primarily from payments under capital lease obligations offset by proceeds from the exercise of stock options. Cash flow from financing activities in the third quarter 2003 will reflect our redemption of our 4.75% Convertible Subordinated Notes due 2006 on July 24, 2003.

      As of June 30, 2003, we had $317.0 million of cash and cash equivalents, $500.3 million in investments in marketable securities consisting of government and corporate debt securities and $55.9 million in restricted cash. As of June 30, 2003, our principal commitments consisted of $154.8 million principal amount of our 4.75% Convertible Subordinated Notes due 2006, $135 million of our Zero Coupon Convertible Subordinated Notes due 2023 and our obligations under operating and capital leases. On June 24, 2003, DoubleClick called for redemption its entire $154.8 million outstanding aggregate principal amount of 4.75% Convertible Subordinated Notes due 2006. On July 24, 2003, DoubleClick redeemed these notes at a redemption price equal to

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102.036% of the aggregate principal plus accrued and unpaid interest. The proceeds from the sale of the Zero Coupon Convertible Subordinated Notes due 2023, together with existing cash, were used towards this redemption.

      Although we have no material commitments for capital expenditures, we continue to anticipate that our capital expenditures and lease commitments will be a material use of our cash resources consistent with the levels of our operations, infrastructure and personnel.

      We believe that our existing cash and cash equivalents and investments in marketable securities will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months.

Related Party Transactions

      DoubleClick maintains a 15% interest in AdLINK Internet Media AG. This interest was acquired in January 2002 as a result of the sale of DoubleClick’s European Media business. DoubleClick recognized revenue of approximately $1.3 during the six months ended June 30, 2003 relating to services provided to AdLINK. Revenue recognized during the six months ended June 30, 2002 was not material.

      In addition, DoubleClick holds a 19.8% interest in MaxWorldwide, Inc. This interest was acquired in July 2002 as a result of the sale of DoubleClick’s North American Media business. DoubleClick recognized revenue of approximately $1.4 million during the six months ended June 30, 2003 relating to services provided to MaxWorldwide.

      Additionally, DoubleClick maintains a minority interest in DoubleClick Japan. On December 26, 2002, DoubleClick sold 45,049 shares of common stock in DoubleClick Japan and reduced its ownership interest to 15.6%. As a result of this transaction, DoubleClick accounts for its remaining 31,271 shares in DoubleClick Japan under the equity method of accounting. DoubleClick also retains one seat on DoubleClick Japan’s board of directors. DoubleClick Japan will continue to sell DoubleClick’s suite of DART technology products as part of a long-term technology reseller agreement. DoubleClick recognized revenue through sales to DoubleClick Japan of approximately $1.6 million during the six months ended June 30, 2003.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

      The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we maintain our portfolio of cash equivalents and marketable securities in a variety of government and corporate obligations and money market funds. As of June 30, 2003, our investments in marketable securities had a weighted average time to maturity of 256 days.

      The following table presents the amounts of our financial instruments that are subject to interest rate risk by expected maturity and average interest rates as of June 30, 2003. This table excludes the $154.8 million in 4.75% Convertible Subordinated Notes due in 2006, which were redeemed in July 2003. The fair value of the 4.75% Convertible Subordinated Notes was approximately $158.5 million as of June 30, 2003.

	Time to Maturity
	One Year			One to			Two to
	or Less			Two Years			Four Years			Fair Value
	(In thousands)
Assets:
Cash and cash equivalents	$	316,965			—			—		$	316,965
Average interest rate		0.84	%
Fixed-rate investments in marketable securities	$	214,975		$	274,200		$	11,112		$	500,287
Average interest rate		3.13	%		2.04	%		1.39	%
Liabilities:
Convertible Subordinated Notes — Zero Coupon		—			—		$	135,000		$	129,938
Average interest rate								0.00	%

      As of June 30, 2003, the current portion of restricted cash was $42.1 million and the average interest rate associated with this cash was 0.52% and the non-current portion of restricted cash was $13.8 million with an average interest rate of 2.15%. Restricted cash primarily represents amounts placed in escrow relating to a lease termination agreement and funds to cover office lease security deposits and our automated clearinghouse payment function. As of June 30, 2003, approximately $26.9 million of the current portion of restricted cash related to the lease termination agreement of our New York headquarters.

      The Zero Coupon Convertible Subordinated Notes due 2023 contain an embedded derivative, the value of which as of June 30, 2003 has been determined to be immaterial to our consolidated financial position. For financial accounting purposes, the ability of the holder to convert upon the satisfaction of a trading price condition constitutes an embedded derivative. Any changes in its value will be reflected in our future income statements, in accordance with Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities.” As of June 30, 2003, we did not hold any other derivative financial instruments.

Foreign Currency Risk

      We transact business in various foreign countries and are thus subject to exposure from adverse movements in foreign currency exchange rates. This exposure is primarily related to revenue and operating expenses denominated in European and Asian currencies, as well as cash balances held in currencies other than the functional currency of DoubleClick and its subsidiaries. The effect of foreign exchange rate fluctuations on operations was not material for the six months ended June 30, 2003 and June 30, 2002, respectively.

      To date we have not used financial instruments to hedge operating activities denominated in foreign currencies. We assess the need to utilize financial instruments to hedge currency exposures on an ongoing basis. As of June 30, 2003, we had $47.1 million in cash and cash equivalents denominated in foreign currencies.

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      Our international business is subject to risks typical of an international business, including, but not limited to, differing economic conditions, changes in political climate, differing tax structures, other regulations and restrictions and foreign exchange rate volatility. Accordingly, our future results could be materially and adversely affected by changes in these or other factors.

Equity Risk

      We hold investments in equity instruments of public companies received as a result of certain business transactions, including shares held in DoubleClick Japan, AdLINK and MaxWorldwide. These investments, which are in the Internet industry, are subject to significant fluctuations in fair market value due to the volatility of the stock market. On August 1, 2003, MaxWorldwide announced that it had sold its MaxOnline division to Focus Interactive, Inc. for approximately $3.0 million in cash paid at closing, $2.0 million in cash to be paid upon the first anniversary of the closing or six months thereafter plus additional amounts contingent upon the satisfaction of specified conditions. At its Annual Meeting of Stockholders held on July 22, 2003, MaxWorldwide sought stockholder approval for a plan of liquidation and dissolution pursuant to which it would liquidate and dissolve MaxWorldwide and its subsidiaries upon consummation of the sale of its MaxOnline division. As of the date of the filing of this quarterly report, neither the results of the MaxWorldwide stockholder meeting nor the status of MaxWorldwide’s plan of liquidation were publicly available. The potential liquidation of MaxWorldwide may impact DoubleClick’s results in future periods. The following represents the cost basis and fair market value of these investments, which is included in as “Investment in affiliates” on the accompanying Consolidated Balance Sheets.

	As of June 30, 2003
			Fair Market
	Cost Basis		Value
	(In thousands)
DoubleClick Japan	$	6,015	$	6,417
AdLINK Internet Media AG	$	1,855	$	4,187
MaxWorldwide Inc.	$	67	$	3,456

      Some of DoubleClick’s investments have suffered a decrease in value in the past as a result of market volatility. As a consequence, DoubleClick wrote-down these investments to their estimated fair value in 2002. We will continue to evaluate our investments in marketable securities for impairment due to declines in market value considered to be other than temporary. That evaluation includes, in addition to persistent, declining stock prices, general economic and company-specific assessments. In the event of a determination that a further decline in market value is other than temporary, a charge to earnings will be recorded for all or a portion of the unrealized loss and a new cost basis in the investment will be established.

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RISK FACTORS

      The following important factors, among others, could cause our actual operating results to differ materially from those indicated or suggested by forward-looking statements made in this Form 10-Q or presented elsewhere by management from time to time.

Risks Relating to Our Company and Our Business

We have a limited operating history and our future financial results may fluctuate, which may cause our stock price to decline.

      We have a limited operating history. An investor in our common stock must consider the risks and difficulties frequently encountered by companies in new and rapidly evolving industries, including companies that provide marketing technology and data products and services. Our risks include:

•  ability to achieve anticipated revenue growth rates;

•  ability to manage our operations;

•  competition;

•  attracting, retaining and motivating qualified personnel;

•  maintaining our current, and developing, new relationships with direct marketers, Web publishers, advertisers and advertising agencies;

•  ability to anticipate and adapt to changing industry conditions; and

•  ability to develop and introduce new products and services and continue to develop, upgrade and integrate technology.

      We also depend on the use of the Internet for advertising and as a communications medium, the demand for advertising services in general, and on general economic and industry conditions. We cannot assure you that our business strategy will be successful or that we will successfully address these risks. If we are unsuccessful in addressing these risks, our revenues may decline or may not grow in accordance with our business model and may fall short of expectations of market analysts and investors, which could negatively affect the price of our stock.

We have a history of losses and anticipate continued losses at times in the future.

      We have incurred net losses each year since inception, including net losses of $117.9 million, $265.8 million and $156.0 million for the years ended December 31, 2002, 2001 and 2000, respectively. We earned net income of approximately $5.8 million for the three months ended June 30, 2003 and as of June 30, 2003 our accumulated deficit was $659.7 million. We have not achieved profitability on an annual basis and expect to incur operating losses at times in the future. We expect to continue to incur significant operating and capital expenditures. We also have lease obligations for facilities that currently constitute excess or idle facilities. Periodically, we evaluate the expenses likely to be incurred for these facilities, and where appropriate, have taken restructuring charges with respect to these expenses. We cannot assure you that there will not be additional restructuring charges recognized with respect to our excess or idle facilities. As a result of these factors, we will need to generate significant revenue to achieve and maintain profitability. We cannot assure you that we will generate sufficient revenue to achieve or sustain profitability. Even if we do achieve profitability, we cannot assure you that we can sustain or increase profitability on a quarterly or annual basis in the future. If revenue does not meet our expectations, or if operating expenses exceed what we anticipate or cannot be reduced accordingly, our business, results of operations and financial condition will be materially and adversely affected.

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We derive a significant portion of our revenue from advertising services. A continued decrease in expenditures by direct marketers and advertisers or a continued downturn in the economy could cause our revenues to decline significantly in any given period.

      We derive, and expect to continue to derive for the foreseeable future, a large portion of our revenue from products and services we provide to direct marketers, Web publishers, advertisers and advertising agencies. Expenditures by direct marketers and advertisers tend to be cyclical, reflecting overall economic conditions as well as budgeting and buying patterns. The overall market for advertising, including online advertising, has been characterized in the last couple of years by increasing softness of demand, lower prices for advertisements, the reduction or cancellation of advertising contracts, an increased risk of uncollectible receivables from customers and the reduction of marketing and advertising budgets, especially for online advertising. As a result of these reductions, advertising spending across traditional media, as well as the Internet, has decreased. We cannot assure you that further reductions will not occur.

      The revenue outlook for DoubleClick TechSolutions is adversely affected by an environment where the supply of advertising inventory exceeds advertisers’ demand. Under these circumstances, Web publishers tend to remove ad space from their Web sites in an effort to correct the supply-demand imbalance; other Web publishers may cut back on their Web presence or go out of business. Faced with smaller budgets, advertisers and advertising agencies purchase less advertising inventory and tend not to invest as much in online advertising. Consequently, the number of ad impressions delivered by DoubleClick TechSolutions have in the past declined and may in the future decline or fail to grow or the price that we can charge for our services may decline, which in either case would adversely affect our revenues. A decline in the economic prospects of direct marketers or the economy in general would also adversely impact the revenue outlook for our email business.

      DoubleClick Data, which provides products and services to direct marketers, may face similar pressures. Some direct marketers may respond to economic downturns by reducing the number of catalogs mailed, thereby possibly reducing the demand for DoubleClick Data’s services. If direct marketing activities fail to grow or decline, our revenues could be adversely affected.

      We cannot assure you that further reductions in marketing spending will not occur. We also cannot assure you that if economic conditions improve, marketing budgets and advertising spending will increase, or not decrease, from current levels. A continued decline in the economic prospects of marketers or the economy in general could alter current or prospective marketers’ spending priorities or increase the time it takes to close a sale with a customer. As a result, our revenues from marketing and advertising services may decline significantly in any given period.

We do not often maintain long-term agreements with our customers and may be unable to retain customers, attract new customers or replace departing customers with customers that can provide comparable revenues.

      Many of our contracts with our customers are short-term. We cannot assure you that our customers will continue to use our products and services or that we will be able to replace, in a timely or effective manner, departing customers with new customers that generate comparable revenues. Further, we cannot assure you that our customers will continue to generate consistent amounts of revenues over time. Our failure to develop and sustain long-term relationships with our customers would materially and adversely affect our results of operations.

Many of our customers continue to experience business conditions that could adversely affect our business.

      Some of our customers have experienced, and may continue to experience, difficulty raising capital and supporting their current operations and implementing their business plans, or may be anticipating such difficulties and, therefore, may elect to scale back the resources they devote to marketing in general and our offerings in particular. These customers may not be able to discharge their payment and other obligations to us. The non-payment or late payment of amounts due to us from our customers could negatively impact our

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financial condition. If the current business environment for our customers does not improve, our business, results of operations and financial condition could be materially adversely affected. In addition, failure of our customers to comply with federal, state or local laws or our policies could damage our reputation and adversely affect our business, results of operations or financial condition.

Industry shifts, continuing expansion of our products and services and other changes may strain our managerial, operational, financial and information system resources.

      In recent years, we have had to respond to significant changes in our industry. As a result, we have experienced industry shifts, continuing expansion of product and service offerings and other changes that have increased the complexity of our business and placed considerable demands on our managerial, operational and financial resources. We continue to increase and change the scope of our product and service offerings both domestically and internationally and to deploy our resources in accordance with changing business conditions and opportunities. To continue to successfully implement our business plan in our changing industry requires effective planning and management processes. We expect that we will need to continue to improve our financial and managerial controls and reporting systems and procedures and will need to continue to train and manage our workforce. We cannot assure you that management will be effective in attracting and retaining qualified personnel, integrating acquired businesses or otherwise responding to new business conditions. We also cannot assure you that our information systems, procedures or policies will be adequate to support our operations or that our management will be able to achieve the execution necessary to offer our products and services and implement our business plan successfully. Our inability to effectively respond to these challenges could materially and adversely affect our business, financial condition and results of operations.

We may not be able to generate profits from many of our products and services.

      A significant part of our business model involves generating revenue by providing marketing technology and data products and services to direct marketers, Web publishers and advertisers. The long term profit potential for our business model has not yet been proven, and we have not yet achieved full-year profitability. The profitability of our business model is subject to external and internal factors. Any single factor or combination of factors could limit the profit potential, long-term and short-term, of our business model.

      Like other businesses in the marketing and advertising sectors, our revenue outlook is sensitive to downturns in the economy, including declines in advertising and marketing budgets. The profit potential of our business model is also subject to the acceptance of our products and services by direct marketers, Web publishers and advertisers. Intensive marketing and sales efforts may be necessary to educate prospective customers regarding the uses and benefits of, and to generate demand for, our products and services. Enterprises may be reluctant or slow to adopt a new approach that may replace existing techniques, or may feel that our offerings fall short of their needs. If these outcomes occur, it would have an adverse effect on the profit potential of our business model.

      Internal factors also influence the profit potential of our business model. In order to be profitable, our revenue must exceed the expense incurred by us to run our technology infrastructure, research and development, sales and marketing and all other operations. Our failure to achieve these results would adversely affect the profit potential of our business model.

Misappropriation of confidential information could cause us to lose customers.

      We currently retain highly confidential information of our customers in secure database servers. Although we observe security measures throughout our operations, we cannot assure you that we will be able to prevent unauthorized individuals from gaining access to these database servers. Any unauthorized access to our servers, or abuse by our employees, could result in the theft of confidential customer information. If confidential customer information is compromised, we could lose customers or become subject to liability or litigation and our reputation could be harmed, any of which could materially and adversely affect our business and results of operations.

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Direct marketing, online advertising and related products and services are competitive markets and we may not be able to compete successfully.

      The market for marketing technology and data products and services is very competitive. We expect this competition to continue because there are low barriers to entry for several of our businesses. Also, industry consolidation may lead to stronger, better capitalized entities against which we must compete. We expect that we will encounter additional competition from new sources as we expand our product and service offerings.

      We believe that our ability to compete depends on many factors both within and beyond our control, including the following:

•  the features, performance, price and reliability of products and services offered either by us or our competitors;

•  the launch timing and market success of products and services developed either by us or our competitors;

•  our ability to adapt and scale our products and services, and to develop and introduce new products and services that respond to market needs;

•  our ability to adapt to evolving technology and industry standards;

•  our customer service and support efforts;

•  our sales and marketing efforts; and

•  the relative impact of general economic and industry conditions on either us or our competitors.

      Our divisions face competition from a variety of sources. DoubleClick TechSolutions competes with providers of software and service bureau solutions for the delivery of Web ads and email for direct marketers, Web publishers and advertisers as well as with inhouse solutions. We also compete with providers of email delivery and inhouse solutions, including providers of email delivery software and related services.

      DoubleClick Data competes with data aggregation companies, providers of database marketing services and providers of information products and marketing research services to the direct marketing industry. We also compete indirectly with others, such as providers of customer relationship management services, companies engaged in providing analytic services and other companies that facilitate marketing automation.

      Many of our existing and potential competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than do we. These factors could allow them to compete more effectively than we can, including devoting greater resources to the development, promotion and sale of their products and services, engaging in more extensive research and development, undertaking more far-reaching marketing campaigns, adopting more aggressive pricing policies and making more attractive offers to existing and potential employees, strategic partners, direct marketers, Web publishers and advertisers. We cannot assure you that our competitors will not develop products or services that are equal or superior to our products and services or that achieve greater acceptance than our products and services. In addition, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to increase the ability of their products or services to address the needs of our prospective direct marketer, Web publisher, advertising and ad agency customers. As a result, it is possible that new competitors may emerge and rapidly acquire significant market share. Increased competition may result in price reductions, reduced gross profits and loss of market share. We cannot assure you that we will be able to compete successfully or that competitive pressures will not materially and adversely affect our business, results of operations or financial condition.

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Our quarterly operating results are subject to significant fluctuations and you should not rely on them as an indication of future operating performance.

      Our revenue and results of operations may fluctuate significantly in the future as a result of a variety of factors, many of which are beyond our control. These factors include:

•  direct marketer, Web publisher and advertiser demand for our products and services;

•  Internet user traffic levels;

•  number and size of ad units per page on our customers’ Web sites;

•  downward pricing pressures from current and potential customers for our products and services;

•  the introduction of new products or services by us or our competitors;

•  variations in the levels of capital, operating expenditures and other costs relating to our operations;

•  the size and timing of significant pre-tax charges, including for goodwill impairment and the write-down of assets and restructuring charges, such as costs for severance and idle or excess facilities;

•  costs related to any acquisitions or dispositions of technologies or businesses;

•  general seasonal and cyclical fluctuations; and

•  general economic and industry conditions.

      We may not be able to adjust spending quickly enough to offset any unexpected revenue shortfall. Our expenses include upgrading and enhancing our ad management and email delivery technology, expanding our product and service offerings, marketing and supporting our products and services and supporting our sales and marketing operations. If we have a shortfall in revenue in relation to our expenses, or if our expenses exceed revenue, then our business, results of operations and financial condition could be materially and adversely affected. These results would likely affect the market price of our common stock in a manner that may be unrelated to our long-term operating performance.

      Our business is subject to seasonal fluctuations. Advertisers generally place fewer advertisements during the first and third calendar quarters of each year, which directly affects the DoubleClick TechSolutions business. Further, Internet user traffic typically drops during the summer months, which reduces the amount of online advertising. The direct marketing industry generally uses our data services more in the third calendar quarter based on plans for holiday season mailings, which directly affects the DoubleClick Data business. The email technology business may experience seasonal patterns similar to the traditional direct marketing industry, which typically generates lower revenues earlier in the calendar year and higher revenues during the calendar year-end months.

      Our quarterly operating results are also affected by changes that we make to our restructuring reserves. We have set up reserves to cover future real estate-related expenses for our idle and excess space. In order to be released from future lease obligations for this space, we may be required to make cash payments to third parties to terminate these leases. If these leases are terminated we will be required to reduce the useful life of our leasehold improvements associated with the space to reflect depreciation expense over the remaining time that the assets are expected to remain in service. Therefore, future income or losses may be impacted in subsequent periods.

      As a result, we believe that period-to-period comparisons of our results of operations may not be indicators of future performance. It is possible that in some future periods our results of operations may be below the expectations of public market analysts and investors. In this event, the price of our common stock may fall.

We may not be able to continue to grow through acquisitions of or investments in other companies.

      Our business has expanded rapidly in part as a result of acquisitions or investments in other companies, including the acquisitions of Abacus Direct, NetGravity, FloNetwork, MessageMedia, Protagona and

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Computer Strategy Coordinators, Inc. We may continue to acquire or make investments in other complementary businesses, products, services or technologies as a means to grow our business. From time to time we have had discussions with other companies regarding our acquiring, or investing in, their businesses, products, services or technologies. We cannot assure you that we will be able to identify other suitable acquisition or investment candidates. Even if we do identify suitable candidates, we cannot assure you that we will be able to make other acquisitions or investments on commercially acceptable terms, if at all. Even if we agree to buy a company, technology or other assets, we cannot assure you that we will be successful in consummating the purchase. If we are unable to continue to expand through acquisitions, our revenue may decline or fail to grow.

      We are also minority investors in a few technology companies, including AdLINK, MaxWorldwide and DoubleClick Japan. Our investments have decreased in value in the past, and may decrease in the future, as a result of market volatility, and periodically, we have recorded charges to earnings for all or a portion of the unrealized loss due to declines in market value considered to be other than temporary. The market value of these investments may decline in future periods due to the continued volatility in the stock market in general or the market prices of securities of technology companies in particular and we may be required to record further charges to earnings as a result. Further, we cannot assure you that we will be able to sell these securities at or above our cost basis. We have recorded goodwill in connection with a number of our acquired businesses, including MessageMedia and FloNetwork. As a result of significantly lower than-expected revenues generated to date and considerably reduced estimates of future performance, we have in the past recognized impairment charges with respect to the goodwill of some acquired businesses. If market conditions require, we may in the future record additional impairments in the value of our acquired businesses.

We may not manage the integration of acquired companies successfully or achieve desired results.

      As a part of our business strategy, we have in the past entered into, and could in the future enter into, a number of business combinations and acquisitions. Acquisitions are accompanied by a number of risks, including:

•  the difficulty of assimilating the operations and personnel of the acquired companies;

•  the potential disruption of the ongoing businesses and distraction of our management and the management of acquired companies;

•  the difficulty of incorporating acquired technology and rights into our products and services;

•  unanticipated expenses related to technology and other integration;

•  difficulties in disposing of the excess or idle facilities of an acquired company or business;

•  difficulties in maintaining uniform standards, controls, procedures and policies;

•  the impairment of relationships with employees and customers as a result of the integration of new management personnel;

•  the inability to develop new products and services that combine our knowledge and resources and our acquired businesses or the failure for a demand to develop for the combined companies’ new products and services;

•  potential failure to achieve additional sales and enhance our customer base through cross-marketing of the combined company’s products to new and existing customers;

•  potential litigation resulting from our business combinatons or acquisition activities; and

•  potential unknown liabilities associated with acquired businesses.

      We may not succeed in addressing these risks or other problems encountered in connection with these business combinations and acquisitions. If so, these risks and problems could disrupt our ongoing business, distract our management and employees, increase our expenses and adversely affect our results of operations. Furthermore, we may incur debt or issue equity securities to pay for any future acquisitions. The issuance of equity securities could be dilutive to our existing stockholders.

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Disruption of our services due to unanticipated problems or failures could harm our business.

      Our DART ad management and DARTmail technologies reside in our data centers in multiple locations in the United States and abroad. Continuing and uninterrupted performance of our technology is critical to our success. Customers may become dissatisfied by any system failure that interrupts our ability to provide our services to them, including failures affecting our ability to deliver advertisements without significant delay to the viewer or our ability to deliver a customer’s online marketing campaign. Sustained or repeated system failures would reduce the attractiveness of our products and services to our customers and could result in contract terminations or fee rebates or credits, thereby reducing revenue. Slower response time or system failures may also result from straining the capacity of our technology due to an increase in the volume of advertising delivered through our servers. To the extent that we do not effectively address any capacity constraints or system failures, our business, results of operations and financial condition could be materially and adversely affected.

      Our operations are dependent on our ability to protect our computer systems against damage from natural disasters, fire, power loss, water damage, telecommunications failures, vandalism and other malicious acts, and similar unexpected adverse events. In addition, interruptions in our products or services could result from the failure of our telecommunications providers to provide the necessary data communications capacity in the time frame we require. Unanticipated problems affecting our systems have from time to time in the past caused, and in the future could cause, interruptions in the delivery of our products and services. Our business, results of operations and financial condition could be materially and adversely affected by any damage or failure that interrupts, delays or destroys our operations. Some of our data centers are located at facilities provided by a third party and if these parties are unable to adequately protect our data centers, our business, results of operations and financial conditions could be materially and adversely affected.

We depend on third-party Internet and telecommunications providers, over whom we have no control, to operate our services. Interruptions in our services caused by one of these providers could have an adverse effect on revenue and securing alternate sources of these services could significantly increase expenses.

      We depend heavily on several third-party providers of Internet and related telecommunication services, including hosting and co-location facilities, in delivering our products and services. These companies may not continue to provide services to us without disruptions in service, at the current cost or at all. The costs associated with any transition to a new service provider could be substantial, requiring us to reengineer our computer systems and telecommunications infrastructure to accommodate a new service provider. This process could be both expensive and time consuming. In addition, failure of our Internet and related telecommunications providers to provide the data communications capacity in the time frame we require could cause interruptions in the services we provide. Unanticipated problems affecting our computer and telecommunications systems in the future could cause interruptions in the delivery of our services, causing a loss of revenue and potential loss of customers.

We are dependent on key personnel and on key employee retention and recruiting for our future success.

      Our future success depends to a significant extent on the continued service of our key technical, sales and senior management personnel. We do not have employment agreements with most of these executives and do not maintain key person life insurance on any of these executives. The loss of the services of one or more of our key employees could significantly delay or prevent the achievement of our product development and other business objectives and could harm our business. Our future success also depends on our continuing ability to attract, retain and motivate highly skilled employees for key positions. There is competition for qualified employees in our industry. We may not be able to retain our key employees or attract, assimilate and retain other highly qualified employees in the future.

      We have from time to time in the past experienced, and we expect to continue to experience in the future, difficulty in hiring and retaining highly skilled employees with appropriate qualifications for certain positions.

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If we fail to adequately protect our intellectual property, we could lose our intellectual property rights.

      Our success and ability to effectively compete are substantially dependent on the protection of our proprietary technologies, patents, trademarks, service marks, copyrights and trade secrets, which we protect through a combination of patent, trademark, copyright, trade secret, unfair competition and contract law. We cannot assure you that any of our intellectual property rights will be viable or of value in the future.

      In September 1999, the U.S. Patent and Trademark Office issued to us a patent that covers our DART ad management technology. We are currently seeking reissue of this patent, which would limit the scope of the existing patent, and this reissue proceeding is pending before the U.S. Patent and Trademark Office. The patent examiner has raised some objections to our reissue application. Although we are contesting these objections, we cannot assure you that this patent will be reissued. We own other patents, and have patent applications pending for some of our other technology. We cannot assure you that the patent applications that we have filed in the United States and internationally will be issued or that patents issued or acquired by us now or in the future will be valid and enforceable or provide us with any meaningful protection.

      We also have rights in the trademarks and service marks that we use to market our products and services. These marks include DOUBLECLICK®, DART®, DARTMAIL®, ABACUS™, DOUBLECLICK ENSEMBLE™, SITEADVANCE™ and CHANNELVIEW®. We have applied to register certain of our trademarks and service marks in the United States and internationally. We cannot assure you that any of these current or future applications will be approved. Even if these marks are registered, these marks may be invalidated or successfully challenged by others. If our trademarks or service marks are not registered because third parties own these marks, our use of these marks will be restricted unless we are able to enter into arrangements with these parties, which may not be available on commercially reasonable terms, if at all.

      We also enter into confidentiality, assignments of proprietary rights and license agreements, as appropriate, with our employees, consultants and business and technology partners, and generally control access to and distribution of our technologies, documentation and other proprietary information. Despite these efforts, we cannot be certain that the steps we take to prevent unauthorized use of our intellectual property rights are sufficient to prevent misappropriation of our products and services or technologies, particularly in foreign countries where laws or law enforcement practices may not protect our intellectual property rights as fully as in the United States. In addition, we cannot assure you that we will be able to adequately enforce the contractual arrangements that we have entered into to protect our proprietary technologies and intellectual property. If we lose our intellectual property rights, this could have a material and adverse impact on our business, financial condition and results of operations.

If we face a claim of intellectual property infringement, we may be liable for damages and be required to make changes to our technology or business.

      Infringement claims may be asserted against us, which could adversely affect our reputation and the value of our intellectual property rights. From time to time we have been, and we expect to continue to be, subject to claims or notices in the ordinary course of our business, including assertions of alleged infringement of the patents, trademarks and other intellectual property rights of third parties by us or our customers. We do not conduct exhaustive patent searches to determine whether our technology infringes patents held by others. In addition, the protection of proprietary rights in Internet related industries is inherently uncertain due to the rapidly evolving technological environment. As such, there may be numerous patent applications pending, many of which are confidential during a large part of their prosecution, that provide for technologies similar to ours.

      Third party infringement claims and any resultant litigation, should it occur, could subject us to significant liability for damages, restrict us from using our technology or operating our business generally, or require changes to be made to our technology. Even if we prevail, litigation is time consuming and expensive to defend and would result in the diversion of management’s time and attention. Claims from third parties may also result in limitations on our ability to use the intellectual property subject to these claims unless we are able to enter into royalty, licensing or other similar agreements with the third parties asserting these claims.

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      Such agreements, if required, may not be available on terms acceptable to us, or at all. If we are unable to enter into these types of agreements, we would be required to either cease using the subject product or change the technology underlying the applicable product. If a successful claim of infringement is brought against us and we fail to develop non-infringing technology as an alternative or to license the infringed or similar technology on a timely basis, it could materially adversely affect our business, financial condition and results of operations.

Our business may be materially adversely affected by lawsuits related to privacy, data protection and our business practices.

      We have been a defendant in several lawsuits alleging, among other things, that we unlawfully obtain and use Internet users’ personal information and that our use of cookies violates various laws. We have also been the subject of inquiries involving the Federal Trade Commission and the attorneys general of several states relating to our practices in the collection, maintenance and use of information about, and our disclosure of these information practices to, Internet users. Although the last of these particular matters was resolved in 2002, we may in the future be subject to additional claims or regulatory inquiries with respect to our business practices. Class action litigation and regulatory inquiries of these types are often expensive and time consuming and their outcome may be uncertain.

      Any additional claims or regulatory inquiries, whether successful or not, could require us to devote significant amounts of monetary or human resources to defend ourselves and could harm our reputation. We may need to spend significant amounts on our legal defense, senior management may be required to divert their attention from other portions of our business, new product launches may be deferred or canceled as a result of any proceedings, and we may be required to make changes to our present and planned products or services, any of which could materially and adversely affect our business, financial condition and results of operations. If, as a result of any proceedings, a judgment is rendered or a decree is entered against us, it may materially and adversely affect our business, financial condition and results of operations and harm our reputation.

      We may be held liable to third parties for the content in the advertising and emails we deliver on behalf of our customers. We may be held liable to third parties for content in the advertising we serve if the music, artwork, text or other content involved violates the copyright, trademark or other intellectual property rights of such third parties or if the content is defamatory. Any claims or counterclaims could be time consuming, result in costly litigation or divert management’s attention.

Our business depends in part on successful adaptation of our business to international markets, in which we have limited experience. Failure to successfully manage the risks of international operations, including sales and marketing efforts, would harm our results of operations and financial condition.

      We have operations in a number of countries and have limited experience in developing localized versions of our products and services and in marketing, selling and distributing our products and services internationally. We sell our technology products and services through our directly and indirectly owned subsidiaries primarily located in Australia, Canada, France, Germany, Spain, Ireland, the United Kingdom and Hong Kong. In Japan, we sell our technology products and services through DoubleClick Japan, of which we own approximately 15%. We also operate the DoubleClick Data business in the United Kingdom and Japan.

      Our international operations are subject to other inherent risks, including:

•  the high cost of maintaining international operations;

•  uncertain demand for our products and services;

•  the impact of recessions in economies outside the United States;

•  changes in regulatory requirements;

•  more restrictive data protection regulation;

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•  reduced protection for intellectual property rights in some countries;

•  potentially adverse tax consequences;

•  difficulties and costs of staffing and managing foreign operations;

•  cultural differences in the conduct of business;

•  political and economic instability;

•  fluctuations in currency exchange rates; and

•  seasonal fluctuations in Internet usage and marketing and advertising spending.

      These risks may have a material and adverse impact on the business, results of operations and financial condition of our operations in a particular country and could result in a decision by us to reduce or discontinue operations in that country. The combined impact of these risks in each country may also materially and adversely affect our business, results of operations and financial condition as a whole.

Anti-takeover provisions in our charter, by-laws and Delaware law may make it difficult for a third party to acquire us.

      Some of the provisions of our amended and restated certificate of incorporation, our amended and restated by-laws and Delaware law could, together or separately:

•  discourage potential acquisition proposals;

•  delay or prevent a change in control; or

•  impede the ability of our stockholders to change the composition of our board of directors in any one year.

      As a result, it could be more difficult for third parties to acquire us, even if doing so might be beneficial to our stockholders. Difficulty in acquiring us could, in turn, limit the price that investors might be willing to pay for shares of our common stock.

Our stock price may experience extreme price and volume fluctuations, and this volatility could result in us becoming subject to securities litigation, which is expensive and could result in a diversion of resources.

      The market price of our common stock has fluctuated in the past and is likely to continue to be highly volatile and subject to wide fluctuations. In addition, the stock market has experienced extreme price and volume fluctuations. Investors may be unable to resell their shares of our common stock at or above their purchase price.

      Additionally, in the past, following periods of volatility in the market price of a particular company’s securities, securities class action litigation has often been brought against that company. Many companies in our industry have been subject to this type of litigation in the past. We may also become involved in this type of litigation. Litigation is often expensive and diverts management’s attention and resources, which could materially and adversely affect our business, financial condition and results of operations.

Future sales of our common stock may affect the market price of our common stock.

      As of June 30, 2003, we had 137,181,013 shares of common stock outstanding, excluding 18,552,108 shares subject to options outstanding as of such date under our stock option plans that are exercisable at prices ranging from $0.01 to $1,134.80 per share. We cannot predict the effect, if any, that future sales of common stock or the availability of shares of common stock for future sale will have on the market price of our common stock prevailing from time to time. Sales of substantial amounts of common stock, including shares issued upon the exercise of stock options, or the perception that such sales could occur, may materially reduce prevailing market prices for our common stock.

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Risks Related to Our Industry

Direct marketers and advertisers may be reluctant to devote a portion of their budgets to marketing technology and data products and services or online advertising.

      Companies doing business on the Internet, including DoubleClick, must compete with traditional advertising media, including television, radio, cable and print, for a share of advertisers’ total marketing budgets. Potential customers may be reluctant to devote a significant portion of their marketing budget to online advertising or marketing technology and data products and services if they perceive the Internet or direct marketing to be a limited or ineffective marketing medium. Any shift in marketing budgets away from marketing technology and data products or services or online advertising spending could materially and adversely affect our business, results of operations or financial condition. In addition, advertising on the Internet could lose its appeal to those direct marketers and advertisers using the Internet as a result of excessive numbers of banner advertisements on the Web, Internet users installing “filter” software programs that allow them to block advertisements, and the limitations of the contents of advertisements on the Internet compared to other forms of media.

The lack of appropriate advertising measurement standards or tools may cause us to lose customers or prevent us from charging a sufficient amount for our products and services.

      Because online marketing technology and data products and services remain relatively new disciplines, there are currently no generally accepted methods or tools for measuring the efficacy of online marketing and advertising as there are for advertising in television, radio, cable and print. Many traditional advertisers may be reluctant to spend sizable portions of their budget on online marketing and advertising until there exist widely accepted methods and tools that measure the efficacy of their campaigns.

      We could lose customers or fail to gain customers if our products and services do not utilize the measuring methods and tools that may become generally accepted. Further, new measurement standards and tools could require us to change our business and the means used to charge our customers, which could result in a loss of customer revenues.

If the delivery of Internet advertising on the Web, or the delivery of our email messages, is limited or blocked, demand for our products and services may decline.

      Our business may be adversely affected by the adoption by computer users of technologies that harm the performance of our products and services. For example, computer users may use software designed to filter or prevent the delivery of Internet advertising or Internet browsers set to block the use of cookies. We cannot assure you that the number of computer users who employ these or other similar technologies will not increase, thereby diminishing the efficacy of our products and services. In the case that one or more of these technologies becomes widely adopted by computer users, demand for our products and services would decline.

      We also depend on our ability to deliver emails over the Internet through Internet service providers and private networks. Internet service providers are able to block messages from reaching their users and we do not have, nor are we required to have, agreements with any Internet service providers to deliver emails to their customers. As a result, we could experience periodic temporary blockages of our delivery of emails to their customers, which would limit the effectiveness of our email marketing. Some Internet service providers also use proprietary technologies to handle and deliver email. If Internet service providers or private networks materially limit or block the delivery of our emails, or if our technology fails to be compatible with their email technologies, then our business, results of operations or financial condition could be materially and adversely affected. In addition, the effectiveness of email marketing may decrease as a result of increased consumer resistance to email marketing in general.

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New laws or regulation in the United States and internationally, and uncertainties regarding the application or interpretation of existing laws and regulations, could harm our business.

      Laws applicable to Internet communications, e-commerce, Internet advertising, privacy and data protection, direct marketing and email marketing are becoming more prevalent in the United States and worldwide. For example, various U.S., state and foreign governments may attempt to regulate our ad delivery or levy sales or other taxes on our activities, and several states and foreign countries have enacted or proposed legislation regulating the sending of unsolicited emails.

      In addition, many areas of the law affecting the Internet remain largely unsettled, even in areas where there has been some legislative action. It is difficult to determine whether and how existing laws, such as those governing intellectual property, privacy and data protection, libel, data security and taxation apply to the Internet, online marketing and advertising and our businesses.

      The growth and development of Internet commerce has prompted calls for more stringent consumer protection laws, both in the United States and abroad. These proposals may seek to impose additional burdens on companies conducting business over the Internet and may be considered through legislative action or ballot initiatives. Potential limitations on the collection and use of information relating to Internet users, particularly relating to email marketing, are being considered by legislatures and regulatory agencies and in the United States and internationally. We are unable to predict whether any particular proposal will pass, or the nature of the limitations that may be imposed. In addition, it is possible that changes to existing law, including both amendments to existing laws and new interpretations of existing law, could have a material and adverse impact on our business, financial condition and results of operations.

      The following are examples of legislation enacted or currently being considered in the United States and internationally:

•  Legislation has been enacted in some countries and proposed in the United States to regulate the use of cookie technology. Our technology uses cookies for ad targeting and reporting, among other things. The changes required for us to comply with newly imposed requirements may be commercially unfeasible, or simply unattainable. We may, therefore, be required to discontinue the relevant business practice.

•  Data protection officials in some European countries have asserted that Internet protocol addresses and cookies are intrinsically personally identifiable information thereby subject to privacy standards that may be more stringent than those in the U.S. We cannot assure you that our current policies and procedures would meet these more restrictive standards. The cost of such compliance could be material and we may not be able to comply with the applicable national regulations in a timely or cost-effective manner.

•  Legislation has been enacted by some foreign governments and many states in the U.S. to prohibit or restrict the sending of “unsolicited commercial email” and similar U.S. federal legislation has been proposed several times in recent years. Although our email delivery is consent-based, it is possible that existing or future legislation in some jurisdictions may require us to change our current practices or may subject us to increased liabilities.

•  The impending expiration of a provision of the federal Fair Credit Reporting Act, or FCRA, may lead to a wave of new restrictions on the collection, use and disclosure of information about consumers. The FCRA currently prohibits states in the U.S. and localities from enacting new laws affecting certain uses and disclosures of consumer information. This provision is presently set to expire on January 1, 2004. If the provision is not extended, state and local governments may be permitted to enact new restrictions that could increase the costs of marketing and offering credit to consumers. Such restrictions could depress advertising spending and the overall demand for our products and services and could adversely affect our business, results of operations and financial condition, in particular the DoubleClick Data business.

      Any legislation enacted or regulation issued could dampen the growth and acceptance of our industry in general and of our offerings in particular. Our business could be negatively impacted by new laws or

51

regulations applicable to direct marketing or the Internet, the application or interpretation of existing laws and regulations to direct marketing or the Internet or the application or interpretation of new laws and regulations to our business. In response to evolving legal requirements, we may be compelled to change or discontinue an existing offering, business or business model, or to cancel a proposed offering or new business. Any of these circumstances could have a material and adverse impact on our business, financial condition and results of operations. These changes could also require us to incur significant expenses or subject us to liability, and we may not find ourselves able to replace the revenue lost as a consequence of the changes.

      We are a member of the Network Advertising Initiative, including its Email Service Provider Coalition, and the Direct Marketing Association, both industry self-regulatory organizations. We cannot assure you that these organizations or similar organizations will not adopt additional, more burdensome guidelines, compliance with which could materially and adversely affect our business, financial condition and results of operations.

Our business may suffer if the Web infrastructure is unable to effectively support the growth in demand placed on us.

      Our success will depend, in large part, upon the maintenance of the Web infrastructure, such as a reliable network backbone with the necessary speed, data capacity and security and timely development of enabling products, such as high speed modems, for providing reliable Web access and services and improved content. We cannot assure you that the Web infrastructure will continue to effectively support the demands placed on us as the Web continues to experience increased numbers of users, frequency of use or increased bandwidth requirements of users. Even if the necessary infrastructure or technologies are developed, we may have to spend considerable amounts to adapt our products and services accordingly. Furthermore, the Web has experienced a variety of outages and other delays due to damage to portions of its infrastructure. These outages and delays could impact the direct marketers, Web publishers and advertisers using our products and services.

DoubleClick Data is dependent on the success of the direct marketing industry for our future success.

      The future success of DoubleClick Data is dependent in large part on the continued demand for our services from the direct marketing industry, including the catalog industry, as well as the continued willingness of catalog operators to contribute their data to us. Most of our Abacus customers are large consumer merchandise catalog operators in the United States, with a number of operators in the United Kingdom. A significant downturn in the direct marketing industry generally, including the catalog industry, or withdrawal by a substantial number of catalog operators from the Abacus Alliance, would have a material adverse effect on our business, financial condition and results of operations. If email marketing or electronic commerce, including the purchase of merchandise and the exchange of information via the Internet or other media, increases significantly in the future, companies that now rely on catalogs or other direct marketing avenues to market their products may reallocate resources toward these new direct marketing channels and away from catalog-related marketing or other direct marketing avenues, which could adversely affect demand for some DoubleClick Data services. In addition, the effectiveness of direct mail as a marketing tool may decrease as a result of consumer saturation and increased consumer resistance to direct mail in general.

Increases in postal rates and paper prices could harm DoubleClick Data.

      The direct marketing activities of our Abacus Alliance customers are adversely affected by postal rate increases, especially increases that are imposed without sufficient advance notice to allow adjustments to be made to marketing budgets. Higher postal rates may result in fewer mailings of direct marketing materials, with a corresponding decline in the need for some of the direct marketing services offered by us. Increased postal rates can also lead to pressure from our customers to reduce our prices for our services in order to offset any postal rate increase. Higher paper prices may also cause catalog companies to conduct fewer or smaller mailings which could cause a corresponding decline in the need for our products and services. Our customers may aggressively seek price reductions for our products and services to offset any increased materials cost.

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Item 4. Controls and Procedures.

      DoubleClick’s management, with the participation of DoubleClick’s chief executive officer and chief financial officer, evaluated the effectiveness of DoubleClick’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2003. Based on this evaluation, DoubleClick’s chief executive officer and chief financial officer concluded that, as of June 30, 2003, DoubleClick’s disclosure controls and procedures were (1) designed to ensure that material information relating to DoubleClick, including its consolidated subsidiaries, is made known to DoubleClick’s chief executive officer and chief financial officer by others within those entities, particularly during the period in which this report was being prepared and (2) effective, in that they provide reasonable assurance that information required to be disclosed by DoubleClick in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

      No change in DoubleClick’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended June 30, 2003 that has materially affected, or is reasonably likely to materially affect, DoubleClick’s internal control over financial reporting.

PART II: OTHER INFORMATION

Item 1. Legal Proceedings

      In April 2002, a consolidated amended class action complaint alleging violations of the federal securities laws in connection with our follow-on offerings was filed in the United States District Court for the Southern District of New York naming us, some of our officers and directors and certain underwriters of our follow on offerings as defendants. We and some of our officers and directors are named in the suit pursuant to Section 11 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 on the basis of the alleged failure to disclose the underwriters’ alleged compensation and manipulative practices. This action seeks, among other things, unspecified damages and costs, including attorneys’ fees. In October 2002, the action was dismissed against our officers and directors without prejudice. However, claims against us remain. In July 2002, we and the other issuers in the consolidated cases filed motions to dismiss the amended complaint for failure to state a claim, which was denied as to us in February 2003.

      In June 2003, our Board of Directors conditionally approved a proposed partial settlement with the plaintiffs in this matter. The settlement would provide, among other things, a release of us and of the individual defendants for the conduct alleged in the action to be wrongful in the amended complaint. We would agree to undertake other responsibilities under the partial settlement, including agreeing to assign away, not assert, or release certain potential claims we may have against our underwriters. Our Board agreed to approve the settlement subject to a number of conditions, including the participation of a substantial number of other issuer defendants in the proposed settlement, the consent of our insurers to the settlement, and the completion of acceptable final settlement documentation. Furthermore, the settlement is subject to a hearing on fairness and approval by the Court overseeing the IPO litigations. If the settlement is not finalized, we believe that the claims asserted by these lawsuits are without merit, and intend to defend these actions vigorously. However, due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of the litigation. An unfavorable outcome in litigation could materially and adversely affect our business, financial condition and results of operations.

      We are currently defending an arbitration claim in Sweden brought by a former shareholder of DoubleClick Scandanavia AB. The shareholder claims that we breached our obligation to issue and register shares of our Common Stock, which the shareholder claims caused it to incur damages. The arbitration hearing is currently scheduled for November 2003. If the shareholder is successful, other former shareholders of DoubleClick Scandanavia AB may make similar claims for damages. Due to the inherent uncertainties of litigation, we cannot predict the outcome of this matter. An unfavorable outcome in this arbitration would not

53

have a material adverse effect on our business, but could materially and adversely affect our results of operations and cash flows during the period in which we were required to make any payments.

Item 2. Changes in Securities and Use of Proceeds

      (c) Recent Sales of Unregistered Securities.

      Rule 144A Private Placement

      On June 23, 2003, DoubleClick, Inc., completed a private placement of $135,000,000 principal amount of its Zero Coupon Convertible Subordinated Notes due 2023. Pursuant to the offering, DoubleClick issued and sold the Zero Coupon Notes to certain institutional buyers pursuant to Rules 144A and Regulation S promulgated under the Securities Act of 1933, as amended. The Zero Coupon Notes mature on July 15, 2023. The Zero Coupon Notes do not bear interest and have a zero yield to maturity. The Zero Coupon Notes are convertible under specified circumstances into DoubleClick Inc. common stock at a conversion price of approximately $13.12 per share, subject to adjustment. Citigroup Global Markets Inc., Credit Suisse First Boston LLC and Lehman Brothers Inc. were initial purchasers in the offering.

      DoubleClick also initiated a call for redemption of all of its $154.8 million outstanding aggregate principal amount of 4.75% Convertible Subordinated Notes due 2006. The net proceeds received by DoubleClick from the Zero Coupon Note offering, together with existing cash, were used towards this redemption.

Item 4. Submission of Matters to a Vote of Security Holders

      We held our 2003 Annual Meeting of Stockholders on May 28, 2003. At that meeting, our stockholders (1) approved the election of W. Grant Gregory and Don Peppers as Class III directors whose term expires in 2006 and (2) approved the ratification of PricewaterhouseCoopers LLP as our independent auditors for the fiscal year ending December 31, 2003. In addition to the directors listed above who were elected at our 2003 Annual Meeting of Stockholders, the terms of the following directors continued after our 2003 Annual Meeting: Kevin P. Ryan, Dwight A. Merriman, David N. Strohm, Thomas S. Murphy, Mark E. Nunnelly and Kevin J. O’Connor.

      There were 120,163,649 votes cast for and 2,977,504 votes withheld in connection with the election of W. Grant Gregory as a director. There were 121,788,815 votes cast for and 1,352,338 votes withheld in connection with the election of Don Peppers as a director.

      There were 121,601,385 votes cast for, 1,494,037 votes cast against and 45,731 abstentions in connection with the ratification of PricewaterhouseCoopers LLP as independent auditors.

Item 5. Other Information

      On May 16, 2003, we entered into the Third Amendment to the lease for our principal office in New York, New York (the “New York Lease”), pursuant to which we agreed to surrender a portion of our leased space and terminate the related lease obligations. In connection with this lease termination, we made a cash payment of $14.4 million during the second quarter of 2003. On July 16, 2003, we entered into the Fourth Amendment to our New York Lease pursuant to which we agreed to surrender all of our remaining space under this lease and terminate the related lease obligations. Total costs in connection with this termination and other exit costs are expected to be approximately $43.6 million, which payments are expected to be made throughout the remainder of 2003. On July 1, 2003, we entered into a lease for our new headquarters in New York, New York. The lease is for approximately 76,000 square feet and expires in June 2018. We expect to move to our new headquarters in December 2003.

54

Item 6. Exhibits and Reports on Form 8-K

      (a) Exhibits

Number		Description
	4.1	Indenture, dated as of June 23, 2003, between DoubleClick Inc. and The Bank of New York, as Trustee (Incorporated by reference to DoubleClick Inc.’s Current Report on Form 8-K dated June 24, 2003).
	4.2	Registration Rights Agreement, dated as of June 23, 2003, between DoubleClick Inc. and Citigroup Global Markets Inc. (Incorporated by reference to DoubleClick Inc.’s Current Report on Form 8-K dated June 24, 2003).
	10.1	Amended and Restated 1997 Stock Incentive Plan.
	10.2	Amended and Restated 1999 Employee Stock Purchase Plan.
	10.3	Third Amendment of Lease and Partial Surrender Agreement, dated as of May 16, 2003, by and between 450 Westside Partners, L.L.C. (as successor-in-interest to John Hancock Mutual Life Insurance Company) and DoubleClick Inc.
	10.4	Fourth Amendment of Lease and Surrender Agreement, dated as of July 16, 2003, by and between 450 Westside Partners, L.L.C. (as successor-in-interest to John Hancock Mutual Life Insurance Company) and DoubleClick Inc.
	10.5	Agreement of Lease, dated as of July 1, 2003, between 111 Chelsea LLC and DoubleClick Inc.
	31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

      (b) Reports on Form 8-K

      On April 15, 2003, we furnished a Current Report on Form 8-K under Item 9, containing a copy of our earnings release for the period ended March 31, 2003 (including financial statements) pursuant to Item 12.

      On June 17, 2003, we filed a Current Report on Form 8-K, under Items 5, 7 and 9, attaching (1) a press release announcing that we intended to offer $135 million aggregate principal amount of Zero Coupon Convertible Subordinated Notes due 2023 pursuant to Rule 144A under the Securities Act of 1933, as amended, and Regulation S thereunder and (2) furnishing a copy of our earnings release for the period ended June 30, 2003 (including financial statements) pursuant to Item 12.

      On June 18, 2003, we filed a Current Report on Form 8-K, under Items 5 and 7, attaching a press release announcing the pricing of an aggregate of $135 million of Zero Coupon Convertible Subordinated Notes due 2023, to be sold by DoubleClick pursuant to Rule 144A under the Securities Act of 1933, as amended, and Regulation S thereunder.

      On June 24, 2003, we filed a Current Report on Form 8-K, under Items 5 and 7, attaching a press release announcing that we completed the sale of $135 million aggregate principal amount of Zero Coupon Convertible Subordinated Notes due 2023 in a private offering, and that we had initiated a call for redemption of all of our 4.75% Convertible Subordinated Notes due 2006.

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SIGNATURE

      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.

DOUBLECLICK INC.

By:  /s/ CORY A. DOUGLAS

Cory A. Douglas

Vice President, Finance and Corporate Controller

(Chief Accounting Officer and

Duly Authorized Officer)

Date: August 11, 2003

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INDEX TO EXHIBITS

Exhibit No.		Description of Exhibit
	4.1	Indenture, dated as of June 23, 2003, between DoubleClick Inc. and The Bank of New York, as Trustee (Incorporated by reference to DoubleClick Inc.’s Current Report on Form 8-K dated June 24, 2003).
	4.2	Registration Rights Agreement, dated as of June 23, 2003, between DoubleClick Inc. and Citigroup Global Markets Inc. (Incorporated by reference to DoubleClick Inc.’s Current Report on Form 8-K dated June 24, 2003).
	10.1	Amended and Restated 1997 Stock Incentive Plan.
	10.2	Amended and Restated 1999 Employee Stock Purchase Plan.
	10.3	Third Amendment of Lease and Partial Surrender Agreement, dated as of May 16, 2003, by and between 450 Westside Partners, L.L.C. (as successor-in-interest to John Hancock Mutual Life Insurance Company) and DoubleClick Inc.
	10.4	Fourth Amendment of Lease and Surrender Agreement, dated as of July 16, 2003, by and between 450 Westside Partners, L.L.C. (as successor-in-interest to John Hancock Mutual Life Insurance Company) and DoubleClick Inc.
	10.5	Agreement of Lease, dated as of July 1, 2003, between 111 Chelsea LLC and DoubleClick Inc.
	31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Statement of Differences

The trademark symbol shall be expressed as	“TM”
The registered trademark symbol shall be expressed as	“r”
The section symbol shall be expressed as	“SS”

EX-10.1

                                                                    Exhibit 10.1

                                 DOUBLECLICK INC
                            1997 STOCK INCENTIVE PLAN
                           --------------------------

            (As Amended and Restated Effective as of April 16, 2003)

                                  ARTICLE One

                               GENERAL PROVISIONS
                               ------------------

  I.    PURPOSE OF THE PLAN

        This 1997 Stock Incentive Plan is intended to promote the interests of
DoubleClick Inc., a Delaware corporation, by providing eligible persons with the
opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Corporation as an incentive for them to remain in
the service of the Corporation.

        Capitalized terms shall have the meanings assigned to such terms in the
attached Appendix.

        All share numbers in this document reflect both 2-for-1 stock splits
effected by the Company on April 5, 1999 and January 10, 2000.

  II.   STRUCTURE OF THE PLAN

        A.  The Plan shall be divided into three separate equity programs:

            (i)   the Discretionary Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be granted options to
purchase shares of Common Stock,

            (ii)  the Stock Issuance Program under which eligible persons may,
at the discretion of the Plan Administrator, be issued shares of Common Stock
directly, either through the immediate purchase of such shares or as a bonus for
services rendered the Corporation (or any Parent or Subsidiary), and

            (iii) the Automatic Option Grant Program under which eligible
non-employee Board members shall automatically receive option grants at periodic
intervals to purchase shares of Common Stock.

        B.  The provisions of Articles One and Five shall apply to all equity
programs under the Plan and shall govern the interests of all persons under the
Plan.


  III.  ADMINISTRATION OF THE PLAN

        A.  Prior to the Section 12 Registration Date, the Discretionary Option
Grant and Stock Issuance Programs shall be administered by the Board. Beginning
with the Section 12 Registration Date, the Primary Committee shall have sole and
exclusive authority to administer the Discretionary Option Grant and Stock
Issuance Programs with respect to Section 16 Insiders.

        B.  Administration of the Discretionary Option Grant and Stock Issuance
Programs with respect to all other persons eligible to participate in those
programs may, at the Board's discretion, be vested in the Primary Committee or a
Secondary Committee, or the Board may retain the power to administer those
programs with respect to all such persons.

        C.  Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions of
any Secondary Committee and reassume all powers and authority previously
delegated to such committee.

        D.  Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of such programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or
any option grants or stock issuance thereunder.

        E.  Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.

        F.  Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to any
option grants or stock issuances made under that program.

  IV.   ELIGIBILITY

        A.  The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:

            (i)   Employees,

            (ii)  non-employee members of the Board or the board of directors
of any Parent or Subsidiary, and


                                       2





            (iii)   consultants and other  independent  advisors who provide
services to the Corporation (or any Parent or Subsidiary).

        B.  Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time or times
when such option grants are to be made, the number of shares to be covered by
each such grant, the status of the granted option as either an Incentive Option
or a Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
for such shares.

        C.  The Plan Administrator shall have the absolute discretion either to
grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.

        D.  The individuals who shall be eligible to participate in the
Automatic Option Grant Program shall be limited to (i) those individuals serving
as non-employee Board members on the Underwriting Date, (ii) those individuals
who first become non-employee Board members after the Underwriting Date, whether
through appointment by the Board or election by the Corporation's stockholders,
and (iii) those individuals who continue to serve as non-employee Board members
at one or more Annual Stockholder Meetings held in calendar years following the
calendar year of the Underwriting Date. A non-employee Board member who has
previously been in the employ of the Corporation (or any Parent or Subsidiary)
shall not be eligible to receive an option grant under the Automatic Option
Grant Program at the time he or she first becomes a non-employee Board member,
but shall be eligible to receive periodic option grants under the Automatic
Option Grant Program while he or she continues to serve as a non-employee Board
member.

    V.  STOCK SUBJECT TO THE PLAN

        A.  The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
reserved for issuance as of April 16, 2003 over the term of the Plan shall not
exceed 39,948,152 shares, subject to the automatic share increases described in
Paragraph V.B. below.


                                       3





        B.  The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on the first trading day of each calendar
year during the term of the Plan by an amount equal to (i) three percent (3%) of
the shares of Common Stock outstanding on the last trading day of the
immediately preceding calendar year or (ii) effective April 16, 2003, such
lesser amount as may be determined by the Board, provided that, no such increase
will exceed 2,400,000 shares. No Incentive Options may be granted on the basis
of the additional shares of Common Stock resulting from such annual increases.

        C.  No one person participating in the Plan may receive options and
direct stock issuances for more than 1,500,000 shares of Common Stock in the
aggregate per calendar year.

        D.  Shares of Common Stock subject to outstanding options (including
options incorporated into this Plan from the Predecessor Plan) shall be
available for subsequent issuance under the Plan to the extent (i) those options
expire or terminate for any reason prior to exercise in full or (ii) the options
are cancelled in accordance with cancellation-regrant provisions of Article Two,
unless otherwise determined by the Board, at any time from time to time after
January 1, 2003, with respect to options that expire or terminate or are
cancelled under (i) or (ii) of this Section V.D after January 1, 2003. Unvested
shares issued under the Plan and subsequently cancelled or repurchased by the
Corporation at the original exercise or issue price paid per share, pursuant to
the Corporation's repurchase rights under the Plan shall be added back to the
number of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants or direct stock issuances under the Plan unless otherwise determined by
the Board, at any time and from time to time after January 1, 2003, with respect
to any such cancellation of repurchase occuring after that date. However,
should the exercise price of an option under the Plan be paid with shares of
Common Stock or should shares of Common Stock otherwise issuable under the Plan
be withheld by the Corporation in satisfaction of the withholding taxes
incurred in connection with the exercise of an option or the vesting of a stock
issuance under the Plan, then the number of shares of Common Stock available
for issuance under the Plan shall be reduced by the gross number of shares for
which the option is exercised or which vest under the stock issuance, and not
by the net number of shares of Common Stock issued to the holder of such option
or stock issuance.

        E.  If any change is made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the maximum number and/or class of securities available for issuance
under the Plan is to increase automatically each year, (iii) the number and/or
class of securities for which any one person may be granted stock options and
direct stock issuances under this Plan per calendar year, (iv) the number and/or
class of securities for which grants are subsequently to be made under the
Automatic Option Grant Program to new and continuing non-employee Board members,
(v) the number and/or class of securities and the exercise price per share in
effect under each outstanding option under the Plan and (vi) the number and/or
class of securities and price per share in effect under each outstanding option
incorporated into this Plan from the Predecessor Plan. Such adjustments to the
outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.


                                       4




                                  ARTICLE TWO

                       DISCRETIONARY OPTION GRANT PROGRAM
                       ----------------------------------

  I.  OPTION TERMS

        Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.

        A.  Exercise Price.

            1.  The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five  percent (85%) of the Fair
Market Value per share of Common Stock on the option grant date.

            2.  The exercise price shall become immediately due upon exercise of
the option and shall, subject to the provisions of Section I of Article Five and
the documents evidencing the option, be payable in one or more of the following:

                (i)   cash,

                (ii)  check made payable to the Corporation,

                (iii) shares of Common Stock held for the requisite period
    necessary to avoid a charge to the Corporation's earnings for financial
    reporting purposes and valued at Fair Market Value on the Exercise Date, or

                (iv)  to the extent the option is exercised for vested shares,
    through a special sale and remittance procedure pursuant to which the
    Optionee shall concurrently provide irrevocable instructions (A) to a
    Corporation-designated brokerage firm to effect the immediate sale of the
    purchased shares and remit to the Corporation, out of the sale proceeds
    available on the settlement date, sufficient funds to cover the aggregate
    exercise price payable for the purchased shares plus all applicable Federal,
    state and local income and employment taxes required to be withheld by the
    Corporation by reason of such exercise and (B) to the Corporation to deliver
    the certificates for the purchased shares directly to such brokerage firm in
    order to complete the sale.

        Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.

        B.  Exercise and Term of Options. Each option shall be exercisable at
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.

                                       5


 C.   Effect of Termination of Service.

            1.  The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:

                (i)  Any option outstanding at the time of the Optionee's
    cessation of Service for any reason shall remain exercisable for such period
    of time thereafter as shall be determined by the Plan Administrator and set
    forth in the documents evidencing the option, but no such option shall be
    exercisable after the expiration of the option term.

                (ii)  Any option  exercisable in whole or in part by the
    Optionee at the time of death may be subsequently exercised by the personal
    representative of the Optionee's estate or by the person or persons to whom
    the option is transferred pursuant to the Optionee's will or in accordance
    with the laws of descent and distribution.

                (iii) Should the Optionee's Service be terminated for
    Misconduct, then all outstanding options held by the Optionee shall
    terminate immediately and cease to be outstanding.

                (iv)  During the applicable post-Service exercise period, the
    option may not be exercised in the aggregate for more than the number of
    vested shares for which the option is exercisable on the date of the
    Optionee's cessation of Service. Upon the expiration of the applicable
    exercise period or (if earlier) upon the expiration of the option term, the
    option shall terminate and cease to be outstanding for any vested shares for
    which the option has not been exercised. However, the option shall,
    immediately upon the Optionee's cessation of Service, terminate and cease to
    be outstanding to the extent the option is not otherwise at that time
    exercisable for vested shares.

            2.  The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:

                (i)  extend the period of time for which the option is to remain
    exercisable following the Optionee's cessation of Service from the limited
    exercise period otherwise in effect for that option to such greater period
    of time as the Plan Administrator shall deem appropriate, but in no event
    beyond the expiration of the option term, and/or

                (ii)  permit the option to be exercised, during the applicable
    post-Service exercise period, not only with respect to the number of vested
    shares of Common Stock for which such option is exercisable at the time of
    the Optionee's cessation  of Service but also with respect to one or more
    additional installments in which the Optionee would have vested had the
    Optionee continued in Service.


                                       6

        D.  Stockholder Rights. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.

        E.  Repurchase Rights. The Plan Administrator shall have the discretion
to grant options which are exercisable for unvested shares of Common Stock.
Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right. Prior to the Section 12 Registration Date, the Plan
Administrator may not impose a vesting schedule upon any option grant or the
shares of Common Stock subject to that option which is more restrictive than
twenty percent (20%) per year vesting, with the initial vesting to occur not
later than one (1) year after the option grant date. However, such limitation
shall not be applicable to any option grants made to individuals who are
officers of the Corporation, non-employee Board members or independent
consultants.

        F.  Limited Transferability of Options. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, a Non-Statutory Option
may, in connection with the Optionee's estate plan, be assigned in whole or in
part during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.

  II.  INCENTIVE OPTIONS

        The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
Articles One, Two and Five shall be applicable to Incentive Options. Options
which are specifically designated as Non-Statutory Options when issued under the
Plan shall not be subject to the terms of this Section II.

        A.  Eligibility. Incentive Options may only be granted to Employees.

        B.  Exercise Price. The exercise price per share shall not be less than
the Fair Market Value per share of Common Stock on the option grant date.

        C.  Dollar Limitation. The aggregate Fair Market Value of the shares of
Common Stock (determined as of the respective date or dates of grant) for which
one or more options granted to any Employee under the Plan (or any other option
plan of the Corporation or any Parent or Subsidiary) may for the first time
become exercisable as Incentive Options during any one calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000).


                                       7




To the extent the Employee holds two (2) or more such options which become
exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.

        D.  10% Stockholder. If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.

  III.  CHANGE IN CONTROL

        A.  Each option outstanding at the time of a Change in Control but not
otherwise fully exercisable shall automatically accelerate so that each such
option shall, immediately prior to the effective date of the Change in Control,
become exercisable for all of the shares of Common Stock at the time subject to
that option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, an outstanding option shall not become
exercisable on such an accelerated basis if and to the extent: (i) such option
is, in connection with the Change in Control, to be assumed or otherwise
continued in full force or effect by the successor corporation (or parent
thereof) pursuant to the terms of the Change in Control transaction, (ii) such
option is to be replaced with a cash incentive program of the successor
corporation which preserves the spread existing at the time of the Corporate
Transaction on the shares of Common Stock for which the option is not otherwise
at that time exercisable and provides for subsequent payout in accordance with
the same vesting schedule applicable to those option shares or (iii) the
acceleration of such option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant.

        B.  All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Change in Control, except to
the extent: (i) those repurchase rights are to be assigned to the successor
corporation (or parent thereof) or (ii) such accelerated vesting is precluded by
other limitations imposed by the Plan Administrator at the time the repurchase
right is issued.

        C.  Immediately following the consummation of the Change in Control, all
outstanding options shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation (or parent thereof) or otherwise
expressly continued in full force and effect pursuant to the terms of the Change
in Control transaction.

        D.  Each option which is assumed (or is otherwise to continue in effect)
in connection with a Change in Control shall be appropriately adjusted,
immediately after such Change in Control, to apply to the number and class of
securities which would have been issuable to the Optionee in consummation of
such Change in Control had the option been exercised immediately prior to such
Change in Control. Appropriate adjustments to reflect such Change in Control
shall also be made to (i) the exercise price payable per share under each
outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same, (ii) the maximum number and/or class of
securities available for issuance over the

                                       8



remaining term of the Plan and (iii) the maximum number and/or class of
securities for which any one person may be granted stock options and direct
stock issuances under the Plan per calendar year.

        E.  The Plan Administrator shall have full power and authority
exercisable, either at the time the option is granted or at any time while the
option remains outstanding, to provide for the accelerated vesting, in whole or
in part, of one or more outstanding options under the Discretionary Option Grant
Program automatically upon the occurrence of a Change in Control, whether or not
those options are to be assumed or otherwise continued in full force and effect
pursuant to the express terms of the Change in Control transaction. In addition,
the Plan Administrator may structure one or more of the Corporation's repurchase
rights under the Discretionary Option Grant Program so that those rights shall
immediately terminate, in whole or in part, at the time of a Change in Control
and shall not be assignable to the successor corporation (or parent thereof),
and the shares subject to those terminated repurchase rights shall accordingly
vest in full at the time of such Change in Control.

        F.  The Plan Administrator shall have full power and authority
exercisable, either at the time the option is granted or at any time while the
option remains outstanding, to provide for the accelerated vesting, in whole or
in part, of one or more outstanding options under the Discretionary Option Grant
Program upon the Involuntary Termination of the Optionee's Service within a
designated period (not to exceed twelve (12) months) following the effective
date of any Change in Control in which those options do not otherwise
accelerate. In addition, the Plan Administrator may structure one or more of the
Corporation's repurchase rights under the Discretionary Option Grant Program so
that those rights will immediately terminate at the time of such Involuntary
Termination, and the shares subject to those terminated repurchase rights shall
accordingly vest in full at that time.

        G.  The portion of any Incentive Option accelerated in connection with a
Change in Control shall remain exercisable as an Incentive Option only to the
extent the applicable One Hundred Thousand Dollar limitation is not exceeded. To
the extent such dollar limitation is exceeded, the accelerated portion of such
option shall be exercisable as a Non-Statutory Option under the Federal tax
laws.

        H.  The outstanding options shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.

  IV.   CANCELLATION AND REGRANT OF OPTIONS

        The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program (including outstanding options incorporated from the Predecessor
Plan) and to grant in substitution new options covering the same or different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new grant date.


                                       9




                                 ARTICLE THREE

                             STOCK ISSUANCE PROGRAM
                             ----------------------

  I.    STOCK ISSUANCE TERMS

        Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below. Shares of Common Stock may also be
issued under the Stock Issuance Program pursuant to share right awards which
entitle the recipients to receive those shares upon the attainment of designated
performance goals.

        A.  Purchase Price.

            1.  The purchase price per share of Common Stock subject to direct
issuance shall be fixed by the Plan Administrator, but shall not be less than
one hundred percent (100%) of the Fair Market Value per share of Common Stock on
the issuance date.

            2.  Shares of Common Stock may be issued under the Stock Issuance
Program for any of the following items of consideration which the Plan
Administrator may deem appropriate in each individual instance:

                (i)    cash or check made payable to the Corporation, or

                (ii)    past services rendered to the Corporation (or any Parent
    or Subsidiary).

        B.  Vesting/Issuance Provisions.

            1.  The Plan Administrator may issue shares of Common Stock under
the Stock Issuance Program which are fully and immediately vested upon issuance
or which are to vest in one or more installments over the Participant's period
of Service or upon attainment of specified performance objectives.
Alternatively, the Plan Administrator may issue share right awards under the
Stock Issuance Program which shall entitle the recipient to receive a specified
number of shares of Common Stock upon the attainment of one or more performance
goals established by the Plan Administrator. Upon the attainment of such
performance goals, fully-vested shares of Common Stock shall be issued in
satisfaction of those share right awards. However, prior to the Section 12
Registration Date, the Plan Administrator may not impose a vesting schedule upon
any stock issuance or share rights award effected under the Stock Issuance
Program which is more restrictive than twenty percent (20%) per year vesting,
with initial vesting to occur not later than one (1) year after the issuance
date. Such limitation shall not apply to any Common Stock issuances made to the
officers of the Corporation, non-employee Board members or independent
consultants.

                                       10





            2.  Any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to his or her unvested
shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.

            3.  The Participant shall have full stockholder rights with respect
to any shares of Common Stock issued to the Participant under the Stock Issuance
Program, whether or not the Participant's interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares.

            4.  Should the Participant cease to remain in Service while holding
one or more unvested shares of Common Stock issued under the Stock Issuance
Program or should the performance objectives not be attained with respect to one
or more such unvested shares of Common Stock, then those shares shall be
immediately surrendered to the Corporation for cancellation, and the Participant
shall have no further stockholder rights with respect to those shares. To the
extent the surrendered shares were previously issued to the Participant for
consideration paid in cash or cash equivalent (including the Participant's
purchase-money indebtedness), the Corporation shall repay to the Participant the
cash consideration paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase-money note of the Participant
attributable to the surrendered shares.

            5.  The Plan Administrator may in its discretion waive the surrender
and cancellation of one or more unvested shares of Common Stock (or other assets
attributable thereto) which would otherwise occur upon the cessation of the
Participant's Service or the non-attainment of the performance objectives
applicable to those shares. Such waiver shall result in the immediate vesting of
the Participant's interest in the shares of Common Stock as to which the waiver
applies. Such waiver may be effected at any time, whether before or after the
Participant's cessation of Service or the attainment or non-attainment of the
applicable performance objectives.

            6.  Outstanding share right awards under the Stock Issuance Program
shall automatically terminate, and no shares of Common Stock shall actually be
issued in satisfaction of those awards, if the performance goals established for
such awards are not attained. The Plan Administrator, however, shall have the
discretionary authority to issue shares of Common Stock in satisfaction of one
or more outstanding share right awards as to which the designated performance
goals are not attained.

  II.   CHANGE IN CONTROL

        A.  All of the Corporation's outstanding repurchase rights under the
Stock Issuance Program shall terminate automatically, and all the shares of
Common Stock subject to those terminated rights shall immediately vest in full,
in the event of any Change in Control,

                                       11



except to the extent (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) or are otherwise to continue in full
force and effect pursuant to the express terms of the Change in Control
transaction or (ii) such accelerated vesting is precluded by other limitations
imposed in the Stock Issuance Agreement.

        B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights remain outstanding under the Stock Issuance
Program, to provide that those rights shall automatically terminate in whole or
in part upon the occurrence of a Change in Control and shall not be assignable
to the successor corporation (or parent thereof), and the shares of Common Stock
subject to those terminated rights shall immediately vest at the time of such
Change in Control.

        C. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights remain outstanding under the Stock Issuance
Program, to provide that those rights shall automatically terminate in whole or
in part, and the shares of Common Stock subject to those terminated rights shall
immediately vest upon the Involuntary Termination of the Participant's Service
within a designated period (not to exceed twelve (12) months) following the
effective date of any Change in Control in which those repurchase rights are
assigned to the successor corporation (or parent thereof),

  III.  SHARE ESCROW/LEGENDS

        Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.

                                       12



                                  ARTICLE FOUR

                         AUTOMATIC OPTION GRANT PROGRAM
                         ------------------------------

I.  OPTION TERMS

    A.  Grant Dates. Option grants shall be made on the dates
        specified below:


        1.  Each individual serving as a non-employee Board member on the
Underwriting Date shall automatically be granted at that time a Non-Statutory
Option to purchase 20,000 shares of Common Stock.

        2.  Each individual who is first elected or appointed as a non-employee
Board member at any time after the Underwriting Date shall automatically be
granted, on the date of such initial election or appointment, a Non-Statutory
Option to purchase 100,000 shares of Common Stock, provided that individual has
not previously been in the employ of the Corporation or any Parent or
Subsidiary.

        3.  On the date of each Annual Stockholders Meeting, beginning with the
Annual Meeting held in the first calendar year after the calendar year of the
Underwriting Date, each individual who is to continue to serve as an Eligible
Director, whether or not that individual is standing for re-election to the
Board at that particular Annual Meeting, shall automatically be granted a
Non-Statutory Option to purchase 20,000 shares of Common Stock, provided such
individual has served as a non-employee Board member for at least six (6)
months. There shall be no limit on the number of such 20,000-share option grants
any one Eligible Director may receive over his or her period of Board service,
and non-employee Board members who have previously been in the employ of the
Corporation (or any Parent or Subsidiary) shall be eligible to receive one or
more such annual option grants over their period of continued Board service.

    B.  Exercise Price.

        1.  The exercise price per share shall be equal to one hundred percent
(100%) of the Fair Market Value per share of Common Stock on the option grant
date.

        2.  The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.

    C.  Option Term. Each option shall have a term of ten (10) years measured
from the option grant date.

    D.  Exercise and Vesting of Options. Each option shall be immediately
exercisable for any or all of the option shares. However, any shares purchased
under the option shall be subject to repurchase by the Corporation, at the
exercise price paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares. Each initial 100,000-share grant shall vest,
and the Corporation's repurchase right shall lapse, in a series of four (4)


                                       13



successive equal annual installments upon the Optionee's completion of each year
of Board service over the four (4)-year period measured from the option grant
date. Each annual 10,000-share grant shall vest, and the Corporation's
repurchase right shall lapse, upon the Optionee's completion of one (1) year of
Board service measured from the automatic grant date.

           E. Termination of Board Service. The following provisions shall
govern the exercise of any options held by the Optionee at the time the
Optionee ceases to serve as a Board member:

                (i)  The period of exercising the option shall be limited to a
    twelve (11)-month period measured from the date of the Optionee's cessation
    of Board service.

                (ii)  During the twelve (11)-month exercise period, the option
    may not be exercised in the aggregate for more than the number of shares of
    Common Stock in which the Optionee is vested at time of his or her cessation
    of Board service.

                (iii)  Should the Optionee cease to serve as a Board member by
    reason of death or Permanent Disability, then all shares at the time subject
    to the option shall immediately vest so that such option may, during the
    twelve (11)-month exercise period following such cessation of Board service,
    be exercised for all or any portion of those shares as fully-vested shares
    of Common Stock.

                (iv)   In no event shall the option remain exercisable after the
    expiration of the option term.

                (v)   Upon the expiration of the twelve (11)-month exercise
    period or (if earlier) upon the expiration of the option term, the option
    shall terminate and cease to be outstanding for any vested shares for which
    the option has not been exercised. However, the option shall, immediately
    upon the Optionee's cessation of Board service for any reason other than
    death or Permanent Disability, terminate and cease to be outstanding for any
    and all option shares in which the Optionee is not otherwise at that time
    vested.

   II.  CHANGE IN CONTROL

        A.  The shares of Common Stock at the time subject to each option
outstanding at the time of a Change in Control but not otherwise vested shall
automatically vest in full so that each such option shall, immediately prior to
the effective date of the Change in Control, become fully exercisable for all of
the shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of those shares as fully-vested shares of
Common Stock. Immediately following the consummation of the Change in Control,
each automatic option grant shall terminate and cease to be outstanding, except
to the extent assumed by the successor corporation (or parent thereof).



                                       14


       B.  Each option which is assumed in connection with a Change in Control
shall be appropriately adjusted, immediately after such Change in Control, to
apply to the number and class of securities which would have been issuable to
the Optionee in consummation of such Change in Control had the option been
exercised immediately prior to such Change in Control. Appropriate adjustments
shall also be made to the exercise price payable per share under each
outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same.

       C.  The grant of options under the Automatic Option Grant Program shall
in no way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

 III.  REMAINING TERMS

       The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.




                                       15



                                  ARTICLE FIVE

                                 MISCELLANEOUS
                                 -------------

   I.  FINANCING

       The Plan Administrator may permit any Optionee or Participant to pay the
option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest rate
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares (less the par value of
those shares) plus (ii) any Federal, state and local income and employment tax
liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.

  II.  TAX WITHHOLDING

       A.  The Corporation's obligation to deliver shares of Common Stock upon
the exercise of options or the issuance or vesting of such shares under the Plan
shall be subject to the satisfaction of all applicable Federal, state and local
income and employment tax withholding requirements.

       B.  The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan with the right to use shares of Common Stock in satisfaction of all or part
of the Taxes incurred by such holders in connection with the exercise of their
options or the vesting of their shares. Such right may be provided to any such
holder in either or both of the following formats:

           Stock Withholding: The election to have the Corporation withhold,
from the shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.

           Stock Delivery: The election to deliver to the Corporation, at the
time the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Taxes) with
an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.

 III.  EFFECTIVE DATE AND TERM OF THE PLAN

       A.  The Discretionary Option Grant and Stock Issuance Programs became
effective immediately upon the Plan Effective Date. However, the Automatic
Option Grant Program became effective on the Underwriting Date.


                                       16



       B.  The Plan was amended by the Board on April 9, 1999 and approved by
the stockholders at the 1999 Annual Meeting, in order to increase the share
reserve under the Plan by an additional Sixteen Million (16,000,000) shares and
to limit the annual automatic share increase to 2,400,000 shares annually.

       C.  The Plan serves as the successor to the Predecessor Plan, and no
further option grants or direct stock issuances shall be made under the
Predecessor Plan after the Plan Effective Date. All options outstanding under
the Predecessor Plan on the Plan Effective Date shall be incorporated into the
Plan at that time and shall be treated as outstanding options under the Plan.
However, each outstanding option so incorporated shall continue to be governed
solely by the terms of the documents evidencing such option, and no provision of
the Plan shall be deemed to affect or otherwise modify the rights or obligations
of the holders of such incorporated options with respect to their acquisition of
shares of Common Stock.

       D.  One or more provisions of the Plan, including (without limitation)
the option/vesting acceleration provisions of Article Two relating to Changes in
Control, may, in the Plan Administrator's discretion, be extended to one or more
options incorporated from the Predecessor Plan which do not otherwise contain
such provisions.

       E.  The Plan shall terminate upon the earliest of (i) November 6, 2007,
(ii) the date on which all shares available for issuance under the Plan shall
have been issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with a Change in Control. Upon such plan
termination, all outstanding option grants and unvested stock issuances shall
thereafter continue to have force and effect in accordance with the provisions
of the documents evidencing such grants or issuances.

  IV.  AMENDMENT OF THE PLAN

       A.  The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
stock options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws or regulations.

       B.  Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant Program and shares of Common Stock may be issued
under the Stock Issuance Program that are in each instance in excess of the
number of shares then available for issuance under the Plan, provided any excess
shares actually issued under those programs shall be held in escrow until there
is obtained stockholder approval of an amendment sufficiently increasing the
number of shares of Common Stock available for issuance under the Plan. If such
stockholder approval is not obtained within twelve (12) months after the date
the first such excess issuances are made, then (i) any unexercised options
granted on the basis of such excess shares shall terminate and cease to be
outstanding and (ii) the Corporation shall promptly refund to the Optionees and
the Participants the exercise or purchase price paid for any excess shares


                                       17


issued under the Plan and held in escrow, together with interest (at the
applicable Short Term Federal Rate) for the period the shares were held in
escrow, and such shares shall thereupon be automatically cancelled and cease to
be outstanding.

   V.  USE OF PROCEEDS

       Any cash proceeds received by the Corporation from the sale of shares of
Common Stock under the Plan shall be used for general corporate purposes.

  VI.  REGULATORY APPROVALS

       A.  The implementation of the Plan, the granting of any stock option
under the Plan and the issuance of any shares of Common Stock (i) upon the
exercise of any granted option or (ii) under the Stock Issuance Program shall be
subject to the Corporation's procurement of all approvals and permits required
by regulatory authorities having jurisdiction over the Plan, the stock options
granted under it and the shares of Common Stock issued pursuant to it.

       B.  No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.

 VII.  NO EMPLOYMENT/SERVICE RIGHTS

       Nothing in the Plan shall confer upon the Optionee or the Participant any
right to continue in Service for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Corporation (or any
Parent or Subsidiary employing or retaining such person) or of the Optionee or
the Participant, which rights are hereby expressly reserved by each, to
terminate such person's Service at any time for any reason, with or without
cause.


                                       18




                                    APPENDIX

       The following definitions shall be in effect under the Plan:

   A.  Automatic Option Grant Program shall mean the automatic option grant
program in effect under the Plan.


   B.  Board shall mean the Corporation's Board of Directors.


   C.  Change in Control shall mean any of the following transactions:

          (i) a merger or consolidation approved by the Corporation's
   stockholders in which securities possessing more than fifty percent (50%) of
   the total combined voting power of the Corporation's outstanding securities
   are transferred to a person or persons different from the persons holding
   those securities immediately prior to such transaction,

          (ii) any stockholder-approved sale, transfer or other disposition of
   all or substantially all of the Corporation's assets in complete liquidation
   or dissolution of the Corporation, or

          (iii) the acquisition, directly or indirectly by any person or related
   group of persons (other than the Corporation or a person that directly or
   indirectly controls, is controlled by, or is under common control with, the
   Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of
   the 1934 Act) of securities possessing more than fifty percent (50%) of  the
   total combined voting power of the Corporation's outstanding securities
   pursuant to a tender or exchange offer made directly to the Corporation's
   stockholders.

       In no event shall any of the following transactions be deemed to
constitute a Change in Control:

          -  the initial public offering of the Common Stock or any secondary
   offerings of the Common Stock in the open market; or

          -  any other direct  issuance of securities by the Corporation
   effected primarily for the purpose of raising additional capital or funding
   for the business operations of the Corporation or any Parent or Subsidiary.

   D.  Code shall mean the Internal Revenue Code of 1986, as amended.


   E.  Common Stock shall mean the Corporation's common stock.


   F.  Corporation shall mean DoubleClick Inc., a Delaware corporation, and its
successors.


   G.  Discretionary Option Grant Program shall mean the discretionary option
grant program in effect under the Plan.


                                      A-1



   H.  Eligible Director shall mean a non-employee Board member eligible to
participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Article One.

   I.  Employee shall mean an individual who is in the employ of the Corporation
(or any Parent or Subsidiary), subject to the control and direction of the
employer entity as to both the work to be performed and the manner and method of
performance.

   J.  Exercise Date shall mean the date on which the Corporation shall have
received written notice of the option exercise.

   K.  Fair Market Value per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:

          (i) If the Common Stock is at the time traded on the Nasdaq National
   Market, then the Fair Market Value shall be deemed equal to the closing
   selling price per share of Common Stock on the date in question, as such
   price is reported on the Nasdaq National Market or any successor system. If
   there is no closing selling price for the Common Stock on the date in
   question, then the Fair Market Value shall be the closing selling price on
   the last preceding date for which such quotation exists.

          (ii) If the Common Stock is at the time listed on any Stock Exchange,
   then the Fair Market Value shall be deemed equal to the closing selling price
   per share of Common Stock on the date in question on the Stock Exchange
   determined by the Plan Administrator to be the primary market for the Common
   Stock, as such price is officially quoted in the composite tape of
   transactions on such exchange. If there is no closing selling price for the
   Common Stock on the date in question, then the Fair Market Value shall be the
   closing selling price on the last preceding date for which such quotation
   exists.

          (iii) For purposes of any option grants made on the Underwriting Date,
   the Fair Market Value shall be deemed to be equal to the price per share at
   which the Common Stock is to be sold in the initial public offering pursuant
   to the Underwriting Agreement.

          (iv) For purposes of any option grants made prior to the Underwriting
   Date, the Fair Market Value shall be determined by the Plan Administrator,
   after taking into account such factors as it deems appropriate.

   L.  Incentive Option shall mean an option which satisfies the requirements of
Code Section 422.

   M.  Involuntary Termination shall mean the termination of the Service of any
individual which occurs by reason of:

          (i) such individual's involuntary dismissal or discharge by the
   Corporation for reasons other than Misconduct, or


                                      A-2


          (ii) such individual's voluntary resignation following (A) a change in
   his or her position with the Corporation which materially reduces his or her
   duties and responsibilities or the level of management to which he or she
   reports, (B) a reduction in his or her level of compensation (including base
   salary, fringe benefits and target bonus under any performance based bonus or
   incentive programs) by more than fifteen percent (15%) or (C) a relocation of
   such individual's place of employment by more than fifty (50) miles, provided
   and only if such change, reduction or relocation is effected by the
   Corporation without the individual's consent.

   N.  Misconduct shall mean the commission of any act of fraud, embezzlement or
dishonesty by the Optionee or Participant, any unauthorized use or disclosure by
such person of confidential information or trade secrets of the Corporation (or
any Parent or Subsidiary), or any other intentional misconduct by such person
adversely affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
any Optionee, Participant or other person in the Service of the Corporation (or
any Parent or Subsidiary).

   O.  1934 Act shall mean the Securities Exchange Act of 1934, as amended.


   P.  Non-Statutory Option shall mean an option not intended to satisfy the
requirements of Code Section 422.

   Q.  Optionee shall mean any person to whom an option is granted under the
Discretionary Option Grant and Automatic Option Grant Program.

   R.  Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

   S.  Participant shall mean any person who is issued shares of Common Stock
under the Stock Issuance Program.


   T.  Permanent Disability or Permanently Disabled shall mean the inability of
the Optionee or the Participant to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.
However, solely for purposes of the Automatic Option Grant Program, Permanent
Disability or Permanently Disabled shall mean the inability of the non-employee
Board member to perform his or her usual duties as a Board member by reason of
any medically determinable physical or mental impairment expected to result in
death or to be of continuous duration of twelve (12) months or more.

   U.  Plan shall mean the Corporation's 1997 Stock Incentive Plan, as set forth
in this document.


                                      A-3



   V.  Plan Administrator shall mean the particular entity, whether the Primary
Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.

   W.  Plan Effective Date shall mean November 7, 1997, the date on which the
Plan was adopted by the Board.

   X.  Predecessor Plan shall mean the Corporation's pre-existing 1996 Stock
Option Plan in effect immediately prior to the Plan Effective Date hereunder.

   Y.  Primary Committee shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders.

   Z.  Secondary Committee shall mean a committee of one (1) or more Board
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.

   AA.  Section 12 Registration Date shall mean February 19, 1998, which was the
date on which the Common Stock was first registered under Section 12 of the 1934
Act.

   BB.  Section 16 Insider shall mean an officer or director of the Corporation
subject to the short-swing profit liabilities of Section 16 of the 1934 Act.

   CC.  Service shall mean the performance of services for the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.

   DD.  Stock Exchange shall mean either the American Stock Exchange or the New
York Stock Exchange.

   EE.  Stock Issuance Agreement shall mean the agreement entered into by the
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.

   FF.  Stock Issuance Program shall mean the stock issuance program in effect
under the Plan.

   GG.  Subsidiary shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

                                      A-4


   HH.  Taxes shall mean the Federal, state and local income and employment tax
liabilities incurred by the holder of Non-Statutory Options or unvested shares
of Common Stock in connection with the exercise of those options or the vesting
of those shares.

   II.  10% Stockholder shall mean the owner of stock (as determined under Code
Section 424(d)) possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation (or any Parent or
Subsidiary).

   JJ.  Underwriting Agreement shall mean the agreement between the Corporation
and the underwriter or underwriters managing the initial public offering of the
Common Stock.

   KK.  Underwriting Date shall mean February 19, 1998, which was the date on
which the Underwriting Agreement was executed and priced in connection with an
initial public offering of the Common Stock.


                                      A-5

EX-10.2

Exhibit 10.2

DOUBLECLICK INC.
1999 EMPLOYEE STOCK PURCHASE PLAN

(As Amended and Restated Effective as of April 16, 2003)

     I.     PURPOSE OF THE PLAN

          This Employee Stock Purchase Plan is intended to promote the interests of DoubleClick Inc., a Delaware corporation, by providing eligible employees with the opportunity to acquire a proprietary interest in the Corporation through participation in a payroll-deduction based employee stock purchase plan designed to qualify under Section 423 of the Code.

          Capitalized terms herein shall have the meanings assigned to such terms in the attached Appendix.

     II.     ADMINISTRATION OF THE PLAN

          The Plan Administrator shall have full authority to interpret and construe any provision of the Plan and to adopt such rules and regulations for administering the Plan as it may deem necessary in order to comply with the requirements of Code Section 423. Decisions of the Plan Administrator shall be final and binding on all parties having an interest in the Plan.

     III. STOCK SUBJECT TO PLAN

          A. The stock purchasable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares of Common Stock purchased on the open market. The number of shares of Common Stock initially reserved for issuance over the term of the Plan shall initially be limited to 1,000,000¹ shares.

          B. The number of shares of Common Stock available for issuance under the Plan shall automatically increase on the first trading day of January each calendar year during the term of the Plan by an amount equal to (i) one percent (1%) of the total number of shares of Common Stock outstanding on the last trading day in December of the immediately preceding calendar year or (ii) effective April 16, 2003, such lesser amount as may be determined by the Board, but in no event shall any such annual increase exceed 900,000 shares.

          C. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, appropriate adjustments shall be made to (i) the maximum number and class of

     ¹ All numbers within this document reflect the two(2)-for-one(1) stock split which occurred on January 10, 2000.

securities issuable under the Plan, (ii) the maximum number and class of securities purchasable per Participant on any one Purchase Date, (iii) the maximum number and class of securities purchasable by all Participants in the aggregate on any one Purchase Date, (iv) the maximum number and/or class of securities by which the share reserve is to increase automatically each calendar year pursuant to the provisions of Section III.B, and (v) the number and class of securities and the price per share in effect under each outstanding purchase right in order to prevent the dilution or enlargement of benefits thereunder.

     IV.     OFFERING PERIODS

          A. Shares of Common Stock shall be offered for purchase under the Plan through a series of successive offering periods until such time as (i) the maximum number of shares of Common Stock available for issuance under the Plan shall have been purchased or (ii) the Plan shall have been sooner terminated.

          B. Each offering period shall be of such duration not to exceed twenty-four (24) months as determined by the Plan Administrator prior to the start date of such offering period. The initial offering period shall commence on the Effective Date and terminate as designated by the Plan Administrator.

          C. Each offering period shall be comprised of a series of one or more successive Purchase Periods. The length of each Purchase Period during an offering period shall be determined by the Plan Administrator prior to the commencement of that offering period. The first Purchase Period shall commence on the Effective Date.

          D. Should the Fair Market Value per share of Common Stock on any Purchase Date within an offering period be less than the Fair Market Value per share of Common Stock on the start date of that offering period, then that offering period shall automatically terminate immediately after the purchase of shares of Common Stock on such Purchase Date, and a new offering period shall commence on the next business day following such Purchase Date. The duration of the new offering period shall be established by the Plan Administrator (not to exceed twenty (24) months) within five (5) business days following the start date of that offering period.

     V.     ELIGIBILITY

          A. Each individual who is an Eligible Employee on the start date of any offering period under the Plan may enter that offering period on such start date or on any subsequent Entry Date within that offering period, provided he or she remains an Eligible Employee.

          B. Each individual who first becomes an Eligible Employee after the start date of an offering period may enter that offering period on any subsequent Entry Date within that offering period on which he or she is an Eligible Employee.

          C. The date an individual enters an offering period shall be designated his or her Entry Date for purposes of that offering period.

2.

          D. To participate in the Plan for a particular offering period, the Eligible Employee must complete the enrollment forms prescribed by the Plan Administrator (including a stock purchase agreement and a payroll deduction authorization) and file such forms with the Plan Administrator (or its designate) on or before his or her scheduled Entry Date.

     VI.     PAYROLL DEDUCTIONS

          A. The payroll deduction authorized by the Participant for purposes of acquiring shares of Common Stock during an offering period may be any multiple of one percent (1%) of the Cash Compensation paid to the Participant during each Purchase Period within that offering period. The maximum amount of payroll deduction authorized for purchases during any calendar year under the Purchase Plan and any other employee stock purchase plan maintained by the Corporation or any Corporate Affiliate (including the NetGravity, Inc. 1998 Employee Stock Purchase Plan assumed by the Corporation) may not to exceed ten percent (10%) of the Participant’s Cash Compensation for each year. The Plan Administrator shall have the discretionary authority, exercisable prior to the start of any offering period to provide that the payroll deductions shall be based on the Base Salary paid to the Participant and to designate the maximum payroll deduction in effect (not to exceed ten percent (10%)) for that offering period.

          B. The deduction rate authorized by the Participant shall continue in effect throughout the offering period, except to the extent such rate is changed in accordance with the following guidelines:

     (i) The Participant may, at any time during the offering period, reduce his or her rate of payroll deduction to become effective as soon as possible after filing the appropriate form with the Plan Administrator. The Participant may not, however, effect more than one (1) such reduction per Purchase Period.

     (ii) The Participant may, prior to the commencement of any new Purchase Period within the offering period, increase the rate of his or her payroll deduction by filing the appropriate form with the Plan Administrator. The new rate (which may not exceed the ten percent (10%) maximum (or such other maximum designated by the Plan Administrator) shall become effective on the start date of the first Purchase Period following the filing of such form.

          B. Payroll deductions shall begin on the first pay day administratively feasible following the Participant’s Entry Date into the offering period and shall (unless sooner terminated by the Participant) continue through the pay day ending with or immediately prior to the last day of that offering period. The amounts so collected shall be credited to the Participant’s book account under the Plan, but no interest shall be paid on the balance from time to time outstanding in such account. The amounts collected from the Participant shall not be required to be held in any segregated account or trust fund and may be commingled with the general assets of the Corporation and used for general corporate purposes.

          C. Payroll deductions shall automatically cease upon the termination of the Participant’s purchase right in accordance with the provisions of the Plan.

3.

          D. The Participant’s acquisition of Common Stock under the Plan on any Purchase Date shall neither limit nor require the Participant’s acquisition of Common Stock on any subsequent Purchase Date, whether within the same or a different offering period.

     VII. PURCHASE RIGHTS

          A. Grant of Purchase Right. A Participant shall be granted a separate purchase right for each offering period in which he or she participates. The purchase right shall be granted on the Participant’s Entry Date into the offering period and shall provide the Participant with the right to purchase shares of Common Stock, in a series of successive installments over the remainder of such offering period, upon the terms set forth below. The Participant shall execute a stock purchase agreement embodying such terms and such other provisions (not inconsistent with the Plan) as the Plan Administrator may deem advisable.

          Under no circumstances shall purchase rights be granted under the Plan to any Eligible Employee if such individual would, immediately after the grant, own (within the meaning of Code Section 424(d)) or hold outstanding options or other rights to purchase, stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Corporation or any Corporate Affiliate.

          B. Exercise of the Purchase Right. Each purchase right shall be automatically exercised in installments on each successive Purchase Date within the offering period, and shares of Common Stock shall accordingly be purchased on behalf of each Participant on each such Purchase Date. The purchase shall be effected by applying the Participant’s payroll deductions for the Purchase Period ending on such Purchase Date to the purchase of whole shares of Common Stock at the purchase price in effect for the Participant for that Purchase Date.

          C. Purchase Price. The purchase price per share at which Common Stock will be purchased on the Participant’s behalf on each Purchase Date within the offering period shall be equal to eighty-five percent (85%) of the lower of (i) the Fair Market Value per share of Common Stock on the Participant’s Entry Date into that offering period or (ii) the Fair Market Value per share of Common Stock on that Purchase Date.

          D. Number of Purchasable Shares. The number of shares of Common Stock purchasable by a Participant on each Purchase Date during the offering period shall be the number of whole shares obtained by dividing the amount collected from the Participant through payroll deductions during the Purchase Period ending with that Purchase Date by the purchase price in effect for the Participant for that Purchase Date. However, the maximum number of shares of Common Stock purchasable per Participant on any one Purchase Date shall not exceed 500 shares, subject to periodic adjustments in the event of certain changes in the Corporation’s capitalization. In addition, the maximum aggregate number of shares of Common Stock purchasable by all Participants on any one Purchase Date shall not exceed 250,000 shares, subject to periodic adjustments in the event of certain changes in the Corporation’s capitalization. The Plan Administrator shall have the discretionary authority, exercisable prior to the start of any offering period under the Plan, to increase or decrease the limitations to be in

4.

effect for the number of shares purchasable per Participant and in the aggregate by all Participants on each Purchase Date during that offering period.

          E. Excess Payroll Deductions. Any payroll deductions not applied to the purchase of shares of Common Stock on any Purchase Date because they are not sufficient to purchase a whole share of Common Stock shall be held for the purchase of Common Stock on the next Purchase Date. However, any payroll deductions not applied to the purchase of Common Stock by reason of the limitation on the maximum number of shares purchasable per Participant or in the aggregate on the Purchase Date shall be promptly refunded.

          F. Termination of Purchase Right. The following provisions shall govern the termination of outstanding purchase rights:

     (i) A Participant may, at any time prior to the next scheduled Purchase Date in the offering period, terminate his or her outstanding purchase right by filing the appropriate form with the Plan Administrator (or its designate), and no further payroll deductions shall be collected from the Participant with respect to the terminated purchase right. Any payroll deductions collected during the Purchase Period in which such termination occurs shall, at the Participant’s election, be immediately refunded or held for the purchase of shares on the next Purchase Date. If no such election is made at the time such purchase right is terminated, then the payroll deductions collected with respect to the terminated right shall be refunded as soon as possible.

     (ii) The termination of such purchase right shall be irrevocable, and the Participant may not subsequently rejoin the Purchase Period for which the terminated purchase right was granted. In order to resume participation in any subsequent Purchase Period, such individual must re-enroll in the Plan (by making timely filing of the prescribed enrollment forms) on or before the start date of the new Purchase Period.

     (iii) Should the Participant cease to remain an Eligible Employee for any reason (including death, disability or change in status) while his or her purchase right remains outstanding, then that purchase right shall immediately terminate, and all of the Participant’s payroll deductions for the Purchase Period in which the purchase right so terminates shall be immediately refunded. However, should the Participant cease to remain in active service by reason of an approved unpaid leave of absence, then the Participant shall have the right, exercisable up until the last business day of the Purchase Period in which such leave commences, to (a) withdraw all the payroll deductions collected to date on his or her behalf for that Purchase Period or (b) have such funds held for the purchase of shares on his or her behalf on the next scheduled Purchase Date. In no event, however, shall any further payroll deductions be collected on the Participant’s behalf during such leave. Upon the Participant’s return to active service (x) within ninety (90) days following the commencement of such leave or (y) prior to the expiration of any longer period for which such Participant’s right to reemployment with the Corporation is guaranteed by statute or contract, his or

5.

her payroll deductions under the Plan shall automatically resume at the rate in effect at the time the leave began, unless the Participant withdraws from the Plan prior to his or her return. An individual who returns to active employment following a leave of absence which exceeds in duration the applicable (x) or (y) time period shall be treated as a new Employee for purposes of subsequent participation in the Plan and must accordingly re-enroll in the Plan (by making a timely filing of the prescribed enrollment forms) on or before his or her scheduled Entry Date into the offering period.

          G. Change in Control. Each outstanding purchase right shall automatically be exercised, immediately prior to the effective date of any Change in Control, by applying the payroll deductions of each Participant for the Purchase Period in which such Change in Control occurs to the purchase of whole shares of Common Stock at a purchase price per share equal to eighty-five percent (85%) of the lower of (i) the Fair Market Value per share of Common Stock on the Participant’s Entry Date into the offering period in which such Change in Control occurs or (ii) the Fair Market Value per share of Common Stock immediately prior to the effective date of such Change in Control. However, the applicable limitation on the number of shares of Common Stock purchasable per Participant shall continue to apply to any such purchase, but not the limitation applicable to the maximum number of shares of Common Stock purchasable in the aggregate.

          The Corporation shall use its best efforts to provide at least ten (10)-days prior written notice of the occurrence of any Change in Control, and Participants shall, following the receipt of such notice, have the right to terminate their outstanding purchase rights prior to the effective date of the Change in Control.

          H. Proration of Purchase Rights. Should the total number of shares of Common Stock to be purchased pursuant to outstanding purchase rights on any particular date exceed the number of shares then available for issuance under the Plan, the Plan Administrator shall make a pro-rata allocation of the available shares on a uniform and nondiscriminatory basis, and the payroll deductions of each Participant, to the extent in excess of the aggregate purchase price payable for the Common Stock pro-rated to such individual, shall be refunded.

          I. Assignability. The purchase right shall be exercisable only by the Participant and shall not be assignable or transferable by the Participant.

          J. Stockholder Rights. A Participant shall have no stockholder rights with respect to the shares subject to his or her outstanding purchase right until the shares are purchased on the Participant’s behalf in accordance with the provisions of the Plan and the Participant has become a holder of record of the purchased shares.

     VIII. ACCRUAL LIMITATIONS

          A. No Participant shall be entitled to accrue rights to acquire Common Stock pursuant to any purchase right outstanding under this Plan if and to the extent such accrual, when aggregated with (i) rights to purchase Common Stock accrued under any other purchase right granted under this Plan and (ii) similar rights accrued under other employee stock purchase plans

6.

(within the meaning of Code Section 423) of the Corporation or any Corporate Affiliate, would otherwise permit such Participant to purchase more than Twenty-Five Thousand Dollars ($25,000.00) worth of stock of the Corporation or any Corporate Affiliate (determined on the basis of the Fair Market Value per share on the date or dates such rights are granted) for each calendar year such rights are at any time outstanding.

          B. For purposes of applying such accrual limitations to the purchase rights granted under the Plan, the following provisions shall be in effect:

     (i) The right to acquire Common Stock under each outstanding purchase right shall accrue in a series of installments on each successive Purchase Date during the offering period on which such right remains outstanding.

     (ii) No right to acquire Common Stock under any outstanding purchase right shall accrue to the extent the Participant has already accrued in the same calendar year the right to acquire Common Stock under one or more other purchase rights at a rate equal to Twenty-Five Thousand Dollars ($25,000.00) worth of Common Stock (determined on the basis of the Fair Market Value per share on the date or dates of grant) for each calendar year such rights were at any time outstanding.

          C. If by reason of such accrual limitations, any purchase right of a Participant does not accrue for a particular Purchase Period, then the payroll deductions which the Participant made during that Purchase Period with respect to such purchase right shall be promptly refunded.

          D. In the event there is any conflict between the provisions of this Article and one or more provisions of the Plan or any instrument issued thereunder, the provisions of this Article shall be controlling.

     IX.     EFFECTIVE DATE AND TERM OF THE PLAN

          A. The Plan was adopted by the Board on November 30, 1999 and shall become effective at the Effective Time, provided no purchase rights granted under the Plan shall be exercised, and no shares of Common Stock shall be issued hereunder, until (i) the Plan shall have been approved by the stockholders of the Corporation and (ii) the Corporation shall have complied with all applicable requirements of the 1933 Act (including the registration of the shares of Common Stock issuable under the Plan on a Form S-8 registration statement filed with the Securities and Exchange Commission), all applicable listing requirements of any stock exchange (or the Nasdaq National Market, if applicable) on which the Common Stock is listed for trading and all other applicable requirements established by law or regulation. In the event such stockholder approval is not obtained, or such compliance is not effected, within twelve (12) months after the date on which the Plan is adopted by the Board, the Plan shall terminate and have no further force or effect.

7.

          B. Unless sooner terminated by the Board, the Plan shall terminate upon the earliest of (i) the last business day in January 2010, (ii) the date on which all shares available for issuance under the Plan shall have been sold pursuant to purchase rights exercised under the Plan or (iii) the date on which all purchase rights are exercised in connection with a Corporate Transaction. No further purchase rights shall be granted or exercised, and no further payroll deductions shall be collected, under the Plan following such termination.

     X.     AMENDMENT OF THE PLAN

          A. The Board may alter, amend, suspend or terminate the Plan at any time to become effective immediately following the close of any Purchase Period. However, the Plan may be amended or terminated immediately upon Board action, if and to the extent necessary to assure that the Corporation will not recognize, for financial reporting purposes, any compensation expense in connection with the shares of Common Stock offered for purchase under the Plan, should the financial accounting rules applicable to the Plan at the Effective Time be subsequently revised so as to require the recognition of compensation expense in the absence of such amendment or termination.

          B. In no event may the Board effect any of the following amendments or revisions to the Plan without the approval of the Corporation’s stockholders: (i) increase the number of shares of Common Stock issuable under the Plan, except for permissible adjustments in the event of certain changes in the Corporation’s capitalization, (ii) alter the purchase price formula so as to reduce the purchase price payable for the shares of Common Stock purchasable under the Plan or (iii) modify the eligibility requirements for participation in the Plan.

     XI.     GENERAL PROVISIONS

          A. All costs and expenses incurred in the administration of the Plan shall be paid by the Corporation; however, each Plan Participant shall bear all costs and expenses incurred by such individual in the sale or other disposition of any shares purchased under the Plan.

          B. Nothing in the Plan shall confer upon the Participant any right to continue in the employ of the Corporation or any Corporate Affiliate for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Corporate Affiliate employing such person) or of the Participant, which rights are hereby expressly reserved by each, to terminate such person’s employment at any time for any reason, with or without cause.

          C. The provisions of the Plan shall be governed by the laws of the State of New York without resort to that State’s conflict-of-laws rules.

8.

Schedule A

Corporations Participating in
1999 Employee Stock Purchase Plan
As of the Effective Date

DoubleClick Inc.

APPENDIX

          The following definitions shall be in effect under the Plan:

          A. Board shall mean the Corporation’s Board of Directors.

          B. Base Salary shall mean the regular base salary paid to a Participant by one or more Participating Companies during such individual’s period of participating in the Plan, plus any pre-tax contributions made by the Participant to any Code Section 401(k) salary deferral plan or any Code Section 125 cafeteria benefit program now or hereafter established by the Corporation or any Corporate Affiliate.

          C. Cash Earnings shall mean the (i) regular base salary paid to a Participant by one or more Participating Companies during such individual’s period of participation in one or more offering periods under the Plan plus (ii) all overtime payments, bonuses, commissions, profit-sharing distributions and other incentive-type payments received during such period. Such Cash Earnings shall be calculated before deduction of (A) any income or employment tax withholdings or (B) any and all contributions made by the Participant to any Code Section 401(k) salary deferral plan or Code Section 125 cafeteria benefit program now or hereafter established by the Corporation or any Corporate Affiliate. However, Cash Earnings shall not include any contributions made on the Participant’s behalf by the Corporation or any Corporate Affiliate to any employee benefit or welfare plan now or hereafter established (other than Code Section 401(k) or Code Section 125 contributions deducted from such Cash Earnings).

          D. Change in Control shall mean a change in ownership of the Corporation pursuant to any of the following transactions:

     (i) a merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction, or

     (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Corporation in complete liquidation or dissolution of the Corporation, or

     (iii) the acquisition, directly or indirectly by an person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by or is under common control with the Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities pursuant to a tender or exchange offer made directly to the Corporation’s stockholders.

          E. Code shall mean the Internal Revenue Code of 1986, as amended.

A-1.

          F. Common Stock shall mean the Corporation’s common stock.

          G. Corporate Affiliate shall mean any parent or subsidiary corporation of the Corporation (as determined in accordance with Code Section 424), whether now existing or subsequently established.

          H. Corporation shall mean DoubleClick Inc., a Delaware corporation, and any corporate successor to all or substantially all of the assets or voting stock of DoubleClick Inc., which shall by appropriate action adopt the Plan.

          I. Effective Date shall mean April 1, 2000. Any Corporate Affiliate which becomes a Participating Corporation after such Effective Date shall designate a subsequent Effective Date with respect to its employee-Participants.

          J. Eligible Employee shall mean any person who is employed by a Participating Corporation on a basis under which he or she is regularly expected to render more than twenty (20) hours of service per week for more than five (5) months per calendar year for earnings considered wages under Code Section 3401(a).

          K. Entry Date shall mean the date an Eligible Employee first commences participation in the offering period in effect under the Plan. The earliest Entry Date under the Plan shall be the Effective Date.

          L. Fair Market Value per share of Common Stock on any relevant date shall be determined in accordance with the following provisions:

     (i)     If the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question, as such price is reported by the National Association of Securities Dealers on the Nasdaq National Market. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

     (ii)     If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

          M. 1933 Act shall mean the Securities Act of 1933, as amended.

          N. Participant shall mean any Eligible Employee of a Participating Corporation who is actively participating in the Plan.

A-2.

          O. Participating Corporation shall mean the Corporation and such Corporate Affiliate or Affiliates as may be authorized from time to time by the Board to extend the benefits of the Plan to their Eligible Employees. The Participating Corporations in the Plan are listed in attached Schedule A.

          P. Plan shall mean the Corporation’s 1999 Employee Stock Purchase Plan, as set forth in this document.

          Q. Plan Administrator shall mean the committee of two (2) or more Board members appointed by the Board to administer the Plan.

          R. Purchase Date shall mean the last business day of each Purchase Period.

          S. Purchase Period shall mean each successive period within the offering period at the end of which there shall be purchased shares of Common Stock on behalf of each Participant.

          T. Stock Exchange shall mean either the American Stock Exchange or the New York Stock Exchange.

A-3. EX-10.3 5 y89015exv10w3.htm THIRD AMENDMENT OF LEASE

Exhibit 10.3

THIRD AMENDMENT OF LEASE
AND PARTIAL SURRENDER AGREEMENT

          THIS THIRD AMENDMENT OF LEASE AND PARTIAL SURRENDER AGREEMENT (hereinafter referred to as the “Agreement”) made as of the 16th day of May, 2003 by and between 450 WESTSIDE PARTNERS, L.L.C., a Delaware limited liability company having an office c/o Max Capital Management Corp., 230 Park Avenue, New York, New York 10169 (hereinafter referred to as “Landlord”) and DOUBLECLICK, INC., a Delaware corporation having an office at 450 West 33rd Street, New York, New York 10001 (hereinafter referred to as “Tenant”).

Statement of Facts

          Pursuant to that certain Agreement of Lease dated as of January 26, 1999 (hereinafter referred to as the “Original Lease”) between John Hancock Mutual Insurance Company (hereinafter referred to as “Hancock”), Landlord’s predecessor in interest, and Tenant, as amended by that certain Amendment of Lease made as of January 26, 1999 (hereinafter referred to as the “Amendment”) and letter agreement, made as of January 26, 1999, as further modified by letter agreement dated June 8, 1999, letters dated June 18, 1999, June 29, 1999 and July 12, 1999, and as further amended by a Second Amendment to Lease dated as of December 28, 1999 (hereinafter referred to as the “Second Amendment”) between Landlord and Tenant (the Original Lease, as amended, is hereinafter collectively referred to as the “Lease”), Tenant is the tenant of certain premises consisting of space on the sixteenth (16^th) floor, loading bay #21 and freight elevator #F-8, the mezzanine and the area on the east and west sides of the rooftop/setback outside the windowed portions of the 16^th floor (hereinafter collectively referred to as the “16^th Premises”), the twelfth (12^th) floor, loading bay #18 and freight elevator #F-13 (hereinafter collectively referred to as the “12^th Premises”), the fourteenth (14^th) floor and freight elevator #F-4 (hereinafter collectively referred to as the “14^th Premises”), and the fifteenth (15^th) floor, loading bay #22 and freight elevator #F-7 (hereinafter collectively referred to as the “15^th Premises”) in the building located at 450 West 33rd Street, New York, New York

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(hereinafter referred to as the “Building”) upon terms and conditions more fully set forth in the Lease. The 16^th Premises, the 12^th Premises, the 14^th Premises and the 15^th Premises are hereinafter collectively referred to as the “Original Premises”. Tenant desires to surrender to Landlord a portion of the Original Premises and to otherwise amend the Lease as more fully hereinafter set forth. Unless otherwise specifically indicated, all capitalized terms used herein shall have the meanings ascribed to them in the Lease.

          NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, it is agreed as follows:

TERMS

          1. (a) Effective at 11:59 p.m. on July 31, 2003 (hereinafter referred to as the “Effective Date”), with respect only to a portion of the Original Premises consisting of the 12^th Premises (hereinafter referred to as the “Surrender Space”), the Lease, except as otherwise expressly provided below, and the leasehold estate created thereby with respect to the Surrender Space shall be deemed terminated and expired as if the Effective Date were set forth in the Lease as the expiration date thereof with respect only to the Surrender Space in accordance with, and subject to the provisions of this Agreement. Notwithstanding anything contained herein to the contrary, the Lease shall continue in full force and effect with respect to the 16^th Premises, the 14^th Premises and the 15^th Premises (hereinafter collectively referred to as the “Remaining Space”) in accordance with the terms of the Lease, which Remaining Space shall then constitute the demised premises (as such term is defined in the Lease).

               (b) Except as otherwise expressly provided in this Agreement, wherever in the Lease reference is made to the “demised premises”, “leased premises” or a similar phrase, from and after the Effective Date, such phrases shall be deemed to exclude the Surrender Space.

          2. (a) Except as expressly set forth in this Agreement and subject to the further provisions of this Paragraph 2 and Paragraph 3, Tenant shall remain obligated to comply

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with all of the terms, covenants and conditions of the Lease on Tenant’s part to observe, perform and comply with respect to the Surrender Space (including, without limitation, Tenant’s obligation to pay fixed rent and additional rent (as such terms are defined in the Lease)) through and including the later of the Effective Date and the date (hereinafter referred to as the “Surrender Date”) on which Tenant quits and surrenders the Surrender Space in the manner set forth in Paragraphs 3 and 4 below, and all of Tenant’s obligations and liabilities under the Lease and this Agreement with respect to the Surrender Space, which accrue or arise or relate to matters occurring on or before the later of the Effective Date and the Surrender Date shall survive the Effective Date and the Surrender Date including, without limitation, Tenant’s obligation under the Lease with respect to the Surrender Space, Tenant’s obligation to pay Operating Expenses (which Tenant acknowledges and agrees that neither Landlord has billed Tenant nor has Tenant paid the same to Landlord with respect to the 2002 calendar year) and the outstanding electricity charges in the amount of $411,000.00 (which covers all charges prior to March 1, 2003), and the curing of all violations, if any, and the closing out of all open applications and delinquency notices, if any, (except as otherwise provided in Paragraph 2(b) below) relating to Tenant’s use and occupancy of the Surrender Space and Tenant’s obligation under the Lease with respect to the Surrender Space (and any liability resulting from Tenant’s failure to perform such obligation) to indemnify, defend and hold Landlord harmless under the Lease for all liabilities, obligations, suits, claims, fines, damages, penalties, costs, charges and expenses (hereinafter collectively referred to as “Damages”) (including, without limitation, attorneys’ fees and disbursements) which may be imposed upon, incurred or paid by, or asserted against Landlord under the Lease with respect to the Surrender Space, or for which Landlord may become, or is, liable, that are imposed by, or incurred or paid to, or asserted by, third

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parties, including, without limitation, Damages resulting from (i) injuries to persons occurring at the Surrender Space on or prior to the later of the Effective Date and the Surrender Date; and (ii) Tenant’s failure to have paid for any work performed at, or materials or supplies installed at or furnished to, the Surrender Space on or prior to the later of the Effective Date and the Surrender Date, at the request of, or for the benefit of, Tenant or any person or entity claiming by, through or under Tenant.

               (b) Notwithstanding the provisions of subparagraph (a) above, Tenant shall have no obligation to cure any violations, to close out any open applications or to discharge any delinquency notices as set forth above, (x) if the violation was not caused by the act or omission of Tenant or any person or entity claiming by, through or under Tenant, or (y) if the application was not opened by Tenant or any person or entity claiming by, under or through Tenant, or (z) if the issue surrounding the delinquency notice was not caused by, as the case may be, the act or omission of Tenant or any person or entity claiming by, through or under Tenant, including, but not limited to, Tenant’s contractors and consultants. To the extent such violation, open application and/or delinquency notice is attributable to Tenant’s acts or omissions, then Tenant shall be liable for, and shall pay as additional rent in accordance with the terms of the Lease, as amended, its proportionate share of the cost and expense incurred by Landlord to cure or close out the same, except that Landlord shall be responsible for any further costs payable to Fire Quench and for any further work to be performed by Fire Quench from and after the date of this Agreement solely with respect to the Surrender Space or elsewhere in the Building so as to make the Surrender Space compliant with all applicable laws, rules, regulations and codes of any and all governmental and/or quasi-governmental agency or entity having jurisdiction with respect thereto. Tenant represents and warrants to Landlord that as of the date hereof (i) no

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money is due and owing from Tenant to Fire Quench for work performed by Fire Quench on behalf of, or at the request of, Tenant with respect to the Surrender Space or any other portion(s) of the Original Premises and (ii) no further work has been contracted for between Tenant and Fire Quench to be performed from and after the date of this Agreement with respect to the Surrender Space or any other portions(s) of the Original Premises. The parties hereto acknowledge and agree that if at any time after the date of this Agreement Tenant contracts with Fire Quench or any other person or entity to cure any violation or close out any open application with respect to the Surrender Space, Tenant shall be responsible for the costs and expenses incurred in connection therewith.

               (c) Subject to the provisions of Paragraph 5(d) below, nothing contained in this Agreement shall be deemed to extend the Effective Date or otherwise permit Tenant to hold over its occupancy or possession of any portion of the Surrender Space beyond December 31, 2003.

          3. (a) Subject to the other provisions of this Agreement, on or before the Effective Date, Tenant shall quit and surrender the Surrender Space broom clean, in good order and condition, ordinary wear and tear excepted, free of all tenants, subtenants and other occupants and Tenant shall (i) substantially perform and complete the items of work described on Exhibit B annexed hereto, at its expense, as “Tenant’s Work”, (ii) except as otherwise set forth in this Paragraph 3(a), remove all of Tenant’s trade equipment, trade fixtures and personal property therefrom, including, without limitation, any signage located in the elevator lobby on the twelfth (12^th) floor of the Building, (iii) surrender the Surrender Space with all mechanical, electrical and plumbing fixtures, equipment and systems (hereinafter collectively referred to as the “Systems”) in working order and condition (but, in any event, only to the extent the

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preservation of the Systems is not Landlord’s obligation under the Lease), including, without limitation, the two (2) perimeter heating units located in the mechanical room on the twelfth (12^th) floor, the four (4) 100 ton air-conditioning, ventilation and heating units on the twelfth (12^th) floor and the Generator (including the transfer switch), the Fuel Tank (as such terms are defined in the Lease), and the conduit as shown on the plan annexed hereto as Exhibit C (which Tenant represents and warrants is free of asbestos), (iv) repair any damage (other than minor scratches, stains and other mere cosmetic, immaterial damage) to the Surrender Space resulting from Tenant’s removal of any of its trade equipment, trade fixtures and personal property therefrom, and (v) in all other respects, except as otherwise set forth in this Paragraph 3(a), surrender the Surrender Space to Landlord in accordance with the applicable provisions of the Lease, as if the Effective Date were the expiration date thereof with respect to the Surrender Space subject to Tenant’s obligations under the Lease as set forth in Paragraph 2 above and this Paragraph 3. As of the later to occur of the Effective Date and the Surrender Date, Tenant shall abandon and not remove the furniture and telephone headsets (hereinafter referred to as the “FF&E”) existing in the Surrender Space as of the date hereof, as more particularly set forth on Exhibit A annexed hereto and made a part hereof and shall leave the FF&E in the Surrender Space in the condition same are in as of the date hereof, reasonable wear and tear excepted. The obligations of Tenant with respect to the surrender of the Surrender Space (including the performance of Tenant’s Work) as set forth in this Paragraph 3(a) are hereinafter collectively referred to as the “Delivery Conditions”.

               (b) Tenant hereby agrees that Landlord shall not have any accountability with respect to the FF&E and Tenant agrees to indemnify, defend and hold Landlord harmless for all Damages which may be imposed upon, incurred or paid by or asserted

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against Landlord, or for which Landlord may become, or is, liable with respect to the FF&E for any period prior to the later to occur of the Effective Date and the Surrender Date, except for any Damages resulting from Landlord’s gross negligence or willful misconduct. No part of the Termination Fee (as defined in Paragraph 8 hereof) is in respect of, or is being allocated to, the FF&E, and Tenant shall cooperate with Landlord in substantiating the same. If prior to the later to occur of the Effective Date and the Surrender Date any of the items constituting the FF&E have been removed from the Surrender Space or there occurs damage to the FF&E causing the same not to be in its present condition as of the date hereof, reasonable wear and tear excepted, then Tenant shall promptly make such repairs to the FF&E and/or return any items of the FF&E to the Surrender Space, as applicable, and such obligation(s) shall survive the later to occur of the Effective Date and the Surrender Date. During the period commencing on the date hereof through the later to occur of the Effective Date and the Surrender Date, Tenant shall use the FF&E and the Systems solely for the conduct of its business and in a careful and proper manner. On or before the Surrender Date, Tenant shall deliver to Saint Vincents (as hereinafter defined) any warranties in its possession in effect for the FF&E and a copy of same to Landlord. Upon reasonable advance notice at any time prior to the Effective Date or the Surrender Date, if later, Landlord shall have the right to enter upon the Surrender Space (in accordance with the terms of the Lease) to inspect the FF&E and the Systems. Tenant shall not hereinafter take any action which will result in any liens or encumbrances on the FF&E. Tenant represents that it is the sole owner of the FF&E and has good title to the same and, as of the Surrender Date, there will be no liens or encumbrances on the FF&E and none of the same will be subject to any conditional sale, lease, judgment, or financing arrangement.

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               (c) Tenant’s Work shall be performed in accordance with all applicable provisions of the Lease, including, without limitation, Articles 3 and 45 thereof, as if a “change” or a “Tenant’s Change” (as such terms are defined in Article 45 of the Lease). If Landlord unreasonably delays in responding to Tenant’s submission of any plans required to be submitted in connection with Tenant’s performance of Tenant’s Work, then the Effective Date shall be postponed by one (1) day for each day beyond the expiration of the time period required for Landlord to respond to any Tenant’s plans set forth in the Lease that Landlord has failed to respond to such Tenant’s plans. For the purposes of this Agreement only, references to “ten (10) business days” in subsections 45(a)(v) and (vii) of the Lease shall be deemed to be references to five (5) business days”.

               (d) Tenant shall send to Landlord, Landlord’s attorneys, Saint Vincents and Saint Vincents’ attorneys a notice (hereinafter referred to as the “Completion Notice”) specifying the date (hereinafter referred to as the “Substantial Completion Date”) on which Tenant’s Work is substantially complete and the other Delivery Conditions are satisfied (it being agreed that the Completion Notice may be sent by telecopier (with written confirmation of delivery) to Landlord, Landlord’s attorneys, Saint Vincents and Saint Vincents’ attorneys at the addresses and telecopier numbers provided in Paragraph 16 below). For purposes hereof, Tenant’s Work shall be deemed substantially complete notwithstanding the fact that minor or insubstantial details of construction, mechanical adjustment or decoration remain to be performed, the noncompletion of which does not materially interfere with Saint Vincents’ use of the Surrender Space and does not result in Landlord being liable to Saint Vincents for any Delay Payment (as hereinafter defined). The Substantial Completion Date set forth in the Completion Notice shall be conclusive and binding upon Landlord unless, solely by giving Tenant notice

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(hereinafter referred to as the “Dispute Notice”) within twelve (12) business days after the later of (i) the date on which Tenant gives the Completion Notice to Landlord, and (ii) the Substantial Completion Date set forth in the Completion Notice, Landlord disputes the fact that on or before the Substantial Completion Date set forth in the Completion Notice the Substantial Completion Date actually occurred, which Dispute Notice shall provide the particular items of Tenant’s Work (in as much detail as reasonably possible) that are not substantially complete and which Delivery Conditions have not been satisfied. The notice sent by Tenant shall not be effective as a Completion Notice unless it notifies Landlord that if Landlord does not send the Dispute Notice within such twelve (12) business day period, the Substantial Completion Date set forth in the Completion Notice shall be conclusive and binding upon Landlord. If any items of Tenant’s Work are not disputed in said Dispute Notice, such non-disputed items shall be deemed substantially completed. Pending the resolution of a dispute over the Substantial Completion Date, for all purposes under this Agreement, the Substantial Completion Date shall be deemed to be the date set forth in the Completion Notice. If Landlord and Tenant cannot resolve such dispute within ten (10) days after Landlord sends the Dispute Notice to Tenant, such dispute shall be resolved by arbitration in accordance with subsection (I)(2) of Article Fourth of the Second Amendment. If the dispute (whether by agreement or arbitration is resolved in Landlord’s favor, then the Substantial Completion Date shall be as determined by such agreement or arbitration and any payments based on the occurrence of the Substantial Completion Date made by Tenant under this Agreement shall be adjusted accordingly. If such dispute shall be resolved by arbitration, and it is determined that on or before the Substantial Completion set forth in the Completion Notice, the Substantial Completion Date did not actually occur, then the arbitration shall also determine whether the Substantial Completion Date

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nevertheless occurred after the date set forth in the Completion Notice. If the arbitration determines that the Substantial Completion Date did, in fact occur, then the date thereof so determined shall be the Substantial Completion Date without any requirement that Landlord be given another Completion Notice. If Tenant agrees with all or any portion of Landlord’s Dispute Notice, Tenant shall provide Landlord with an additional notice advising Landlord that such initially incomplete portions of Tenant’s Work are substantially completed and Landlord shall have three (3) business days to dispute said substantial completion, otherwise same shall be deemed substantially completed.

          4. (a) Tenant hereby covenants, represents and warrants to Landlord that: (i) Tenant has not committed, permitted or suffered any act or deed whereby the Surrender Space (or any portion(s) thereof), or the security deposited under the Lease, if any, have been, or may be, pledged, hypothecated, encumbered, assigned, conveyed or otherwise transferred other than in accordance with Section 56N of the Lease, (ii) Tenant has not sublet, underlet or otherwise transferred, in any manner whatsoever, any present or future possession, use or occupancy right in or to all or any portions of the Surrender Space other than in accordance with Section 56N of the Lease, (iii) as of the Surrender Date, the Surrender Space shall be free of all tenants, subtenants and other occupants and all leases and subleases, and there shall be no other persons or entities claiming, or who or which may claim, any rights of possession, occupancy or use of the Surrender Space or any portions thereof, (iv) Tenant shall not commit, permit or suffer any such act or deed referred to in clause “(i)” above, and shall not so further sublet, underlet or otherwise transfer any such present or future possession, use or occupancy right, (v) freight elevator #F-13 is, and will be on the Effective Date, in working order and condition, and (vi) loading bay #18 will, on the Surrender Date, be in broom clean condition

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               (b) Tenant shall terminate any sublease or other agreement entered into between Tenant and the New York City Industrial Development Agency (hereinafter referred to as the “NYCIDA”) with respect to the Surrender Space and/or Tenant’s improvements to the Surrender Space and any sub-sublease or other agreement entered into between the NYCIDA and Tenant with respect to the Surrender Space and/or such Tenant’s improvements to the Surrender Space, the effective date of such termination shall be on or before the day immediately preceding the Surrender Date. On or prior to the Surrender Date, Tenant shall deliver to Landlord fully executed copies of such termination letters or agreements or other evidence reasonably acceptable to Landlord that the Surrender Space and/or such Tenants improvements are no longer subject to any such sublease, sub-sublease or other agreement.

          5. (a) (i) In the event Tenant shall not surrender possession of the Surrender Space to Landlord in the manner set forth in Paragraphs 3 and 4 above on or before the Effective Date, the parties hereby agree that Tenant’s occupancy of the Surrender Space after the expiration of the Effective Date shall be under a holdover occupancy arrangement commencing on the first day after the Effective Date, which arrangement shall be upon all of the terms set forth in the Lease, including, without limitation, the payment of fixed rent and additional rent through the Surrender Date (without regard to Article 50 thereof).

                    (ii) Landlord and Tenant acknowledge that Saint Vincents Catholic Medical Centers of New York (hereinafter referred to as “Saint Vincents”) has entered into a lease (hereinafter referred to as the “Saint Vincents Lease”) with Landlord covering the Surrender Space. Pursuant to the terms of the Saint Vincents Lease, (A) Landlord is obligated to deliver possession of the Surrender Space to Saint Vincents on August 1, 2003, and (B) if Landlord fails to deliver possession of the Surrender Space to Saint Vincents by (1) January 1,

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2004, Saint Vincents is entitled to an abatement of fixed rent in the amount of $7,987.38 for each day from and after January 1, 2004 through January 31, 2004 that Landlord fails to deliver the Surrender Space to Saint Vincents (such amount being herein referred to as the “First Delay Payment”), (2) February 1, 2004, Saint Vincents is entitled to an abatement of fixed rent in the amount of $11,981.07 for each day from and after February 1, 2004 through March 31, 2004 that Landlord fails to deliver the Surrender Space to Saint Vincents (such amount being herein referred to as the “Second Delay Payment”) and (3) April 1, 2004, Saint Vincents is entitled to an abatement of fixed rent in the amount of $15,974.76 for each day from and after April 1, 2004 that Landlord fails to deliver the Surrender Space to Saint Vincents (such amount being herein referred to as the “Third Delay Payment”) (the First Delay Payment, the Second Delay Payment and the Third Delay Payment being herein collectively referred to as the “Delay Payment”). In accordance with the foregoing and notwithstanding anything contained in this Agreement to the contrary, if Tenant fails to deliver the Surrender Space to Landlord by December 31, 2003 in accordance with the terms and provisions of this Agreement with all Tenant’s Work substantially complete, then, in addition to Tenant’s obligations set forth in subparagraph (a)(i) above, Tenant shall be liable to Landlord, as Landlord’s sole remedy and as liquidated damages, in the amount of the applicable Delay Payment, but Tenant shall only be liable for so much of the applicable Delay Payment as is caused by Tenant’s failure to so deliver the Surrender Space and substantially complete Tenant’s Work (the payments required to be made by Tenant under subparagraph 5(a)(i) above and this subparagraph 5(a)(ii) are referred to as the “Holdover Charges”).

                    (iii) Landlord and Tenant acknowledge that Landlord is holding a letter of credit (hereinafter referred to as the “L/C”) in the amount of $11,000,000.00 and that

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according to the terms of the L/C, the final expiration date thereof is January 26, 2010. In addition to Landlord’s rights under the Lease to draw down upon the L/C, Tenant acknowledges and agrees that Landlord has the right to draw down upon the L/C from time to time, or to retain the proceeds thereof (if Landlord has theretofore drawn down upon the L/C) in accordance with the terms of the Lease, if Tenant has not delivered the Surrender Space to Landlord with the Delivery Conditions satisfied and Tenant’s Work substantially complete by December 31, 2003, and receive the applicable Delay Payment. Tenant further acknowledges and agrees that Landlord shall be entitled to draw down on the L/C in accordance with the terms thereof in the event that the issuing bank of the L/C sends to Landlord or Tenant (and in such case Tenant shall immediately send a copy of same to Landlord) a notice that it elects not to renew or extend the L/C and Landlord will hold the proceeds thereof in accordance with the provisions of the Lease. Tenant agrees to cooperate with Landlord and execute any document requested by Landlord in connection with Landlord’s use of the proceeds of the L/C and its presentment of such L/C to the issuing bank for payment in accordance with the terms of the Lease and this Agreement.

               (b) Notwithstanding anything to the contrary contained in this Agreement, the acceptance of any Holdover Charges paid by Tenant pursuant to subparagraph 5(a)(i) above shall not preclude Landlord from commencing and prosecuting a holdover or summary eviction proceeding at any time after December 31, 2003 but before Saint Vincents terminates its lease as provided in Paragraph 5(d) below, and the preceding sentence shall be deemed to be an “agreement expressly providing otherwise” within the meaning of Section 232-c of the Real Property Law of the State of New York.

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               (c) All damages to Landlord as expressly set forth in this Agreement by reason of the holding over by Tenant may be the subject of a separate action and need not be asserted by Landlord in any summary proceedings against Tenant.

               (d) Landlord has advised Tenant that Saint Vincent has the right to terminate the Saint Vincents Lease if Tenant fails to surrender possession of the Surrender Space and, as a result, Landlord is unable to deliver possession of the Surrender Space to Saint Vincent by July 31, 2004, as such date may be postponed, due to force majeure, up to May 1, 2005. In the event Saint Vincents terminates the Saint Vincents Lease as a result of Tenant’s failure to surrender possession of the Surrender Space by July 31, 2004 (as such date may be postponed) then, except as otherwise provided herein, this Agreement shall automatically terminate and be deemed null and void and of no further force and effect, neither party shall have any further rights or obligations hereunder (except for Landlord’s obligation to pay the commission due the Broker and Studley (as hereinafter defined) out of the $3,305,589.00 portion of the Termination Fee held back by Landlord as described below, as more particularly, and in the manner, set forth in Paragraph 12 hereof and subparagraph 5A(iii) above, which shall survive the Effective Date and the Surrender Date (or any termination of this Agreement as provided herein) and Landlord shall return to Tenant the Termination Fee (less the sum of $3,305,589.00, and less any amounts paid on account of the Delay Payments and less Landlord’s legal fees to the extent not previously paid by Tenant (as set forth in Paragraph 8(b) below)) within thirty (30) days following such termination, and all of Tenant’s right, title and interest in and to the Surrender Space shall be reinstated retroactive to the Effective Date and Tenant shall have no remedy against Landlord resulting from such termination and Tenant shall remain in occupancy of the Surrender Space (or

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have the right to reoccupy the Surrender Space) pursuant to the terms of the Lease as if this Agreement had not been executed.

          6. Effective on the Surrender Date, the Lease shall be deemed further amended or certain of the terms thereof restated, as the case may be, as follows:

               (a) Sections I, J, N, and O of Article Second of the Amendment and Sections (A)(5) and (A)(6) of Article Third of the Second Amendment shall be deemed deleted from the Lease.

               (b) Deleted prior to execution.

               (c) The provisions of Section 52(I) of the Lease shall not be applicable to the Surrender Space.

               (d) The addresses for copies of notices to Landlord set forth in Article Fifteenth of the Amendment is hereby deleted and the following shall be substituted in lieu thereof:

“a copy to Greenberg Traurig, LLP, 200 Park Avenue,
New York, New York 10166, Attention: Barry E. Shimkin, Esq.”

               (e) (i) Landlord and Tenant mutually acknowledge that Landlord granted to Tenant a license to install, and Tenant installed, a Generator, a Fuel Tank and a transfer switch (as such terms are defined in Section 39H of the Lease) solely for service with respect to the 12^th Premises. Except as otherwise provided in subparagraph (ii) below, effective as of the Surrender Date, Tenant’s license to use the Generator installed by Tenant, the Fuel Tank and the transfer switch and Tenant’s license for access to the Tank Area and the Switch Area shall terminate, all of which shall remain in their location existing as of the date hereof. Tenant represents and warrants that the Generator, the Fuel Tank and the transfer switch are in good working order and condition, and, on or before the Effective Date, Tenant shall deliver all

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warranties, permits and maintenance contracts, in its possession, in connection with the Fuel Tank, the Generator and the transfer switch to Landlord.

                    (ii) From and after the Surrender Date, Landlord shall provide to Tenant (hereinafter referred to as the “Generator Service”) 1250 kw of power from the Generator, at Tenant’s cost and expense (as herein provided) for the sole purpose of providing emergency electrical service to the Demised Premises. Landlord agrees that it shall not, at any time during the term of the Lease, sell or provide more than 2500 kw, in the aggregate, of generator service to the tenant(s) and/or occupant(s) of the Building. If at any time during the term of the Lease one (1) of the two (2) Generators fails to operate, then Landlord and Tenant agree that Landlord’s obligation to provide Generator Service to Tenant shall be subordinate to Landlord’s obligation to provide Generator Service to Saint Vincents. Landlord agrees to supply fuel to the Generator and to maintain, repair, use and operate the Generator, the Fuel Tank and the transfer switch in good working order and Tenant shall pay its proportionate share for the cost and expense of such fuel consumption (hereinafter referred to as the “Fuel Cost and Expense”). Tenant’s proportionate share of the Fuel Cost and Expense shall be computed on the basis of a fraction, the numerator of which is the capacity allocated to Tenant (i.e., 1250 kw of power) and the denominator of which is the total power of generator service provided to all tenants or occupants of the Building (including Tenant) at the time the Generator Service is provided to Tenant. Notwithstanding the foregoing, if any party (other than Tenant) permitted to use the Generator uses the Generator for purposes other than emergency back-up power, the Fuel Cost and Expense payable by Tenant shall be equitably adjusted to approximate emergency power usage only. Landlord shall, at all times during the term of the Lease (except if Tenant elects to discontinue its use of the Generator as provided more fully below), maintain a

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maintenance contract for the Generator, the Fuel Tank and the transfer switch. Landlord agrees that any such maintenance contracts entered into by Landlord in connection with the Generator, the Fuel Tank and the transfer switch shall be competitive so that the costs associated with such maintenance contracts shall be reasonable and Tenant shall pay to Landlord its proportionate share of the cost and expense incurred by Landlord with respect to such maintenance contracts (hereinafter referred to as the “Maintenance Cost and Expense”). Tenant’s proportionate share of the Maintenance Cost and Expense shall mean 50%, which has been computed on the basis of a fraction, the numerator of which is the Generator Service (i.e., 1250 kw of power) and the denominator of which is the total power of the Generator (i.e., 2500 kw of power). Tenant shall pay to Landlord Tenant’s respective proportionate shares of each of the Fuel Cost and Expense and the Maintenance Cost and Expense as additional rent in accordance with the terms of the Lease. Notwithstanding the foregoing, Tenant shall have the right to discontinue its use of the Generator, the Fuel Tank and the transfer switch upon notice to Landlord and, from and after the date of such discontinuance, Tenant shall thereafter have no further obligations with respect to the Generator, the Fuel Tank and the transfer switch, except that Tenant shall remain obligated to pay the Fuel Cost and Expense and the Maintenance Cost and Expense incurred prior to the date Tenant has discontinued use of the Generator, the Fuel Tank and the transfer switch.

                    (iii) Deleted prior to execution.

                    (iv) Landlord reserves the right, by giving reasonable advance notice to Tenant, to temporarily suspend service of the Generator, the Fuel Tank and/or any systems, services or utilities serving the Generator and/or the Fuel Tank whenever and for so long as may become necessary (A) in order to allow the making of any and all repairs, replacements, changes, modifications, improvements, or substitutions (hereinafter collectively

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referred to as “Generator Repairs”) to the Generator, the Fuel Tank, the Generator Area, the Fuel Tank Area or any other portion of the Building, which Landlord, in Landlord’s discretion, deems necessary, or which Landlord is otherwise obligated to make or perform, (B) if the whole or any portion of the Generator Area, the Fuel Tank Area or the Building shall be damaged or destroyed by fire or other casualty, or acquired or condemned for any public or quasi-public use or purpose, or (C) if Landlord is prohibited, prevented or limited from using the Generator Area and/or the Fuel Tank Area on account of any laws and/or requirements of public authorities or requirements of insurance bodies, or by reason of strikes, labor troubles, accidents, emergencies, inability to obtain insurance at commercially reasonable rates (unless Tenant agrees to pay, and actually pays, fifty (50%) percent of any additional insurance premiums charged for such use of the Generator Area and/or the Fuel Tank Area), or any other similar cause beyond Landlord’s reasonable control. If Landlord temporarily suspends service of the Generator, the Fuel Tank and/or any systems, services or utilities serving the Generator and/or the Fuel Tank pursuant to, and in accordance with, this subparagraph, the period for which such service is suspended shall be reasonable with respect to the particular reason for such temporary suspension of service and, except as may otherwise be expressly provided in the Lease with respect to any suspension of services provided to Tenant, Landlord shall not be subject to any liability nor shall Tenant be entitled to any compensation or abatement of the fixed rent or additional rent under the Lease with respect to the temporary suspension of service set forth in this subparagraph (iv) nor shall such revocation be deemed a constructive or actual eviction from any portion of the Demised Premises. Landlord agrees to use commercially reasonable efforts to resume the service of the Generator, the Fuel Tank and/or the systems, services or utilities serving the Generator and/or the Fuel Tank as soon as possible. Tenant is hereby authorized to enter the Generator Area from

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time to time (but not more often than four (4) times a year), upon prior written notice to Landlord, to arrange for the visual inspection and performance of preventative maintenance tests or emergency power tests (a/k/a pull the plug test) by licensed technicians consistent with Tenant’s practices as of the date of this Agreement, provided that no such inspection or test shall be performed by Tenant without the presence of Landlord’s agent, employee or other representative.

                    (v) If Landlord does temporarily suspend service of the Generator, the Fuel Tank and/or any systems, services or utilities serving the Generator and/or the Fuel Tank in accordance with subparagraph (iv) above, then Tenant shall have the right, at its sole cost and expense and upon prior written notice to Landlord, to install, operate, maintain and use a back-up generator together with a fuel oil storage tank and related equipment (including a transfer switch), mountings, supports and risers (herein collectively referred to as the “Temporary Generator”) to receive not more than 1250 kw of power and for use only during the period that Landlord temporarily suspends the service of the Generator, the Fuel Tank and/or any systems, services or utilities serving the Generator and/or Fuel Tank until the date that Landlord resumes such service. The size and capacity of the Temporary Generator and the location of same shall be designated by Landlord, in its sole discretion (which space designated shall be feasible for such Temporary Generator installation) or Tenant may use as a Temporary Generator an outdoor truck mounted portable generator. Only Tenant and authorized licensed electrical engineers and electrical contractors approved in advance by Landlord pursuant to Articles 3 and 45 of the Lease will be permitted to have access to the area in which the Temporary Generator is installed. Landlord shall provide reasonably sufficient space in the shafts of the Building, the approximate location of which shall be reasonably acceptable to

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Landlord and Tenant, to allow Tenant, at Tenant’s sole cost and expense, to run electrical wiring from the Temporary Generator to the Demised Premises. The installation of the Temporary Generator shall constitute a Tenant’s Change and shall be performed at Tenant’s sole cost and expense in accordance with, and subject to, the provisions of the Lease, including, without limitation, Articles 3 and 45 thereof and notwithstanding anything contained in the Lease to the contrary, Tenant’s right to install the Temporary Generator shall be subject to the prior approval by Landlord of plans and specifications for the Temporary Generator and the manner in which the Temporary Generator is installed in each case in accordance with the terms of the Lease. All of the applicable provisions of the Lease shall apply to the installation, use, operation and maintenance of the Temporary Generator, including, without limitation, provisions relating to compliance with laws, insurance, indemnity, Hazardous Materials, repairs and maintenance.

                    (vi) Tenant shall install, maintain, operate, repair and use the Temporary Generator, all at its sole cost and expense, only during the period provided in subparagraph (v) above and in such a manner so as not to cause any unreasonable interference to other tenants, occupants, licensees of the Building or to Landlord or damage to or interference with the operation of the Building or any Building systems.

                    (vii) Landlord may, at its option, at any time during the period in which Tenant is entitled to maintain the Temporary Generator, after reasonable prior notice to Tenant (except in the event of an emergency when no notice shall be required) relocate the Temporary Generator to another area of the Building, provided that such relocation does not cause the electrical service provided by the Temporary Generator to be interrupted or impaired and such relocation shall be performed at Landlord’s sole cost and expense.

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                    (viii) Except to the extent caused by Landlord’s gross negligence or willful misconduct, Landlord shall not have any obligations with respect to the Temporary Generator or compliance with any laws or requirements of public authorities relating thereto (including, without limitation, the obtaining of any required permits or licenses, or the maintenance thereof), nor shall Landlord be responsible for any damage that may be caused to the Temporary Generator by any other tenant or occupant of the Building. Landlord makes no representation with respect to the installation of a Temporary Generator or its ability to provide back-up electrical service and Tenant agrees that, except to the extent caused by Landlord’s gross negligence or willful misconduct, Landlord shall not be liable to Tenant therefor. Any electrical service required for Tenant’s use of the Temporary Generator shall be provided by Landlord and paid for by Tenant.

                    (ix) During the period of Tenant’s use of the Temporary Generator, Tenant shall (A), subject to the other provisions of the Lease, be solely responsible for any damage caused to Landlord or any other entity, person or property as a result of the installation, maintenance or use of the Temporary Generator, (B) promptly pay any tax, license, permit or other fees or charges imposed pursuant to any laws and/or requirements of public authorities relating to the installation, maintenance or use of the Temporary Generator, (C) promptly comply with all reasonable precautions and safeguards recommended by Landlord’s insurance company and all federal, state or municipal governmental authorities or agencies, and (D), at its sole cost and expense, (1) perform, or cause to be performed, all necessary repairs or replacements to, or maintenance of, the Temporary Generator, (2) promptly repair, or cause to be repaired, any and all damage to the area of the Building in which the Temporary Generator is

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installed and to any other part of the Building caused by or resulting from the installation, maintenance, repair, operation or removal of the Temporary Generator.

                    (x) Tenant acknowledges and agrees that the privileges granted Tenant under subparagraph (v) shall merely constitute a license and shall not, now or at any time after the installation of the Temporary Generator, be deemed to grant Tenant a leasehold or other real property interest in the Building or any portion thereof. The license granted to Tenant herein shall automatically terminate and expire upon the date that is ten (10) business days after Landlord provides notice to Tenant that it has resumed the service of the Generator, the Fuel Tank and/or the systems, services or utilities serving the Generator and/or the Fuel Tank or upon Tenant’s sooner election to terminate said license by notice to Landlord and the termination of such license shall be self-operative and no further instrument shall be required to effect such termination and Tenant shall, at its sole cost and expense, remove the Temporary Generator from the Building within five (5) days following the termination of such license as set forth in the preceding sentence and repair any damage to the Building resulting from such removal so as to place such area of the Building, as closely as possible, in the same condition as existed prior to the installation of the Temporary Generator. This obligation shall survive the expiration or sooner termination of the Lease.

               (f) The amount of the Letter of Credit shall be reduced to $6,000,000.00. Landlord agrees to execute an amendment to the Letter of Credit or otherwise direct the Issuer of the Letter of Credit, as necessary, to facilitate the reduction of the Letter of Credit.

          7. Landlord agrees to include in the Saint Vincents Lease an obligation on the part of Saint Vincents, its successors and assigns to: (a) maintain the electrical distribution

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system existing as of the date hereof in the Surrender Space as it relates to the DCK Service (as hereinafter defined) in its condition as of the date hereof; (b) permit Tenant, its successors and assigns to have access from time to time to the Surrender Space to gain access to the electrical riser (the “DCK Riser”) in the Surrender Space that currently provides the 1200 amp high voltage power (the “DCK Service”) to the rooftop air-conditioners (upon reasonable advance notice from Tenant, its successors or assigns to Saint Vincents, its successors or assigns), the use of which DCK Riser and DCK Service are being retained exclusively by Tenant, and (c) permit Tenant, its successors or assigns to tap into such DCK Riser from time to time during the term of, and in accordance with, the terms of the Lease, as amended by this Agreement, and Tenant agrees that any such access into the Surrender Space and tap in into the DCK Riser shall be accomplished in a manner which minimizes any interference with Saint Vincents’ use and occupancy of the Surrender Space and does not reduce the usable space therein. Landlord shall have no obligations or liabilities whatsoever with respect to Saint Vincents’ maintenance of the electrical distribution system, failure to maintain the same, or failure to provide access to the Surrender Space to gain access to the DCK Riser or Tenant’s ability to tap into the DCK Riser as set forth in the preceding sentence. Tenant acknowledges that neither Landlord, nor Landlord’s agent, has made any representations or promises in regards to Saint Vincents’ compliance with the obligations set forth in this Paragraph 7. Notwithstanding the foregoing, Landlord agrees to provide in the Saint Vincents Lease that Tenant is a third party beneficiary of the foregoing provisions set forth in this Paragraph 7 with the right to commence a direct action against Saint Vincents to compel performance with respect thereto.

          8. (a) In consideration of Landlord’s agreement to permit the termination of the Lease with respect to the Surrender Space, Tenant shall pay to Landlord the sum of

23

$13,682,723.00 (hereinafter referred to as the “Termination Fee”). Tenant shall deliver to Landlord, together with its execution and delivery of this Agreement, a check in the amount of the Termination Fee.

               (b) In further consideration of Landlord agreeing to enter into this Agreement with Tenant, Tenant agrees to pay to Landlord the sum of $19,603.31, representing the reimbursement to Landlord for Landlord’s actual legal fees incurred in connection with the drafting, preparation, negotiation and execution of this Agreement, plus all out-of-pocket third party costs and expenses incurred by Landlord in connection therewith.

               (c) In the event the Surrender Date is later than the Effective Date and provided that Tenant is not then in default of its obligation to pay fixed rent and additional rent under the Lease, then the Termination Fee shall be adjusted in accordance with the schedule annexed hereto as Exhibit D and Landlord agrees to return the difference between the Termination Fee and the adjusted Termination Fee within thirty (30) days of the later to occur of the Effective Date and the Surrender Date.

          9.   This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof, and all understandings and agreements heretofore or simultaneously had between the parties are merged in and are contained in this Agreement.

          10. Landlord and Tenant each represent and warrant to the other that it has not relied upon any representation or warranty, express or implied, in entering into this Agreement, except those which are set forth herein.

          11. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in that State.

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          12. Landlord and Tenant covenant, warrant and represent that there was no broker or finder instrumental in consummating this Agreement other than Newmark & Company Real Estate, Inc. (hereinafter referred to as the “Broker”) and Julien J. Studley, Inc. (hereinafter referred to as “Studley”) and that no conversations or negotiations were had with any broker or finder other than the Broker and Studley. Landlord and Tenant agree to indemnify and to hold each other harmless from and against any claims or suits for a brokerage commission or finder’s fee arising out of any conversations or negotiations had by Tenant or Landlord with respect to the surrender of the Surrender Space and this Agreement with any broker or finder other than the Broker and Studley. Landlord agrees to pay the Broker and Studley a brokerage commission in connection with the surrender of the Surrender Space and the terms of this Agreement pursuant to separate agreements between Landlord and the Broker and Landlord and Studley.

          13. All notices, consents and approvals required or permitted to be given hereunder shall be (unless otherwise expressly provided herein) in writing and shall be given by registered or certified mail, return receipt requested, or by nationally recognized overnight courier service providing for receipted delivery to the addresses set forth on the first page hereof, attention: General Counsel unless the other party hereto shall be notified of another address in writing. Copies of all notices to Tenant in connection with this Agreement shall be sent, in the same manner to Loeb & Loeb LLP, 345 Park Avenue. New York, New York 10154, attention: Scott I. Schneider, Esq. All notices, consents, approvals payments and statements shall be deemed to have been given three (3) days after same is mailed if mailed as aforesaid or upon receipt or rejection if sent by overnight courier service as aforesaid.

          14. This Agreement may not be changed orally, and shall be binding upon and inure to the benefit of the parties to it, their respective heirs, successors and, as permitted, their

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assigns. If any provision of this Agreement, or its application to any situation, shall be invalid or unenforceable to any extent, the remainder of this Agreement, or the application thereof to situations other than that as to which it is invalid or unenforceable, shall not be affected thereby, and every provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

          15. Tenant hereby covenants to pay (and comply with all laws in respect of) any and all federal, state and local taxes which may be due and otherwise payable with respect to the transactions contemplated by this Agreement (which taxes shall include, but not be limited to, the New York City Real Property Transfer Tax and the New York State Real Property Transfer Gains Tax) and to prepare and file all instruments, applications and other documentation in connection therewith. Tenant hereby indemnifies Landlord from any and all liabilities, loss, obligations, damages, penalties, claims, costs and expenses, including reasonable attorneys’ fees, which Landlord may incur in the event Tenant fails to pay promptly when due any of such taxes or comply with any laws in respect thereof.

          16. Notices to be provided by Tenant pursuant to this Agreement to Landlord, Landlord attorneys, Saint Vincents, Saint Vincents’ attorney’s should be sent to the respective parties at the following addresses:

If to Landlord:

450 Westside Partners L.L.C.
c/o Max Capital Management Corp.
230 Park Avenue
New York, New York 10169
Attention: Anthony Westreich
Telecopier No.: (212) 949-6413

If to Landlord’s attorneys:

Greenberg Traurig, LLP
200 Park Avenue
New York, New York 10166

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Attention: Barry E. Shimkin, Esq.
Telecopier No.: (212) 801-6400

If to Saint Vincents:

Saint Vincents Catholic Medical Centers of New York
130 West 12^th Street
New York, New York 10001
Attention: Amy Grabino, Esq.
Telecopier No.: (212) 604-3285

If Saint Vincents’ attorneys:

Davis & Gilbert, LLP
1740 Broadway
New York, New York 10019
Attention: Gerald R. Uram, Esq.
Telecopier No.: (212) 974-7024

          17. Except as otherwise expressly provided in this Agreement, the Lease shall remain and continue unmodified and in full force and effect in accordance with its terms with respect to the Remaining Space.

[signatures follow on next page]

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

LANDLORD:
450 WESTSIDE PARTNERS, L.L.C.,
a Delaware Limited Liability Company
By:	Max/FW Management, L.L.C.
	By:	Max Capital Management Corp.,
		Manager
		By:	/s/ Anthony Westreich
			Title: President
TENANT:
DOUBLECLICK, INC.
By:	/s/ Bruce Dalziel
	Title: Chief Financial Officer

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Exhibit D

Termination Payment Schedule

EFFECTIVE DATE	TERMINATION FEE
8/1/03	$	13,682,723.00
9/1/03	$	13,649,181.00
10/1/03	$	13,615,889.00
11/1/03	$	13,582,845.00
12/1/03	$	13,550,047.00
1/1/04	$	13,517,492.00
2/1/04	$	13,485,180.00
3/1/04	$	13,453,109.00
4/1/04	$	13,421,277.00
5/1/04	$	13,389,681.00
6/1/04	$	13,358,321.00
7/1/04	$	13,327,194.00
8/1/04	$	13,296,298.00
9/1/04	$	13,265,633.00
10/1/04	$	13,235,196.00
11/1/04	$	13,204,986.00
12/1/04	$	13,175,000.00
1/1/05	$	13,145,238.00

29 EX-10.4 6 y89015exv10w4.htm FOURTH AMENDMENT OF LEASE

Exhibit 10.4

FOURTH AMENDMENT OF LEASE
AND SURRENDER AGREEMENT

     THIS FOURTH AMENDMENT OF LEASE AND SURRENDER AGREEMENT (hereinafter referred to as the “Agreement”) made as of the 16th day of July, 2003 by and between 450 WESTSIDE PARTNERS, L.L.C., a Delaware limited liability company having an office c/o Max Capital Management Corp., 230 Park Avenue, New York, New York 10169 (hereinafter referred to as “Landlord”) and DOUBLECLICK INC., a Delaware corporation having an office at 450 West 33rd Street, New York, New York 10001 (hereinafter referred to as “Tenant”).

Statement of Facts

     Pursuant to that certain Agreement of Lease dated as of January 26, 1999 (hereinafter referred to as the “Original Lease”) between John Hancock Mutual Insurance Company (hereinafter referred to as “Hancock”), Landlord’s predecessor in interest, and Tenant, as amended by that certain Amendment of Lease made as of January 26, 1999 (hereinafter referred to as the “Amendment”) and letter agreement made as of January 26, 1999, as further modified by letter agreement dated June 8, 1999, letters dated June 18, 1999, June 29, 1999 and July 12, 1999, as further amended by Second Amendment to Lease dated as of December 28, 1999 (hereinafter referred to as the “Second Amendment”), and as further amended by Third Amendment of Lease and Partial Surrender Agreement dated as of May 16, 2003 (hereinafter referred to as the “Third Amendment”) between Landlord and Tenant (the Original Lease, as amended, is hereinafter collectively referred to as the “Lease”), Tenant is the tenant of certain premises consisting of space on the sixteenth (16^th) floor, loading bay #21 and freight elevator # F-8, the mezzanine and the area on the east and west sides of the rooftop/setback outside the windowed portions of the 16^th floor (hereinafter collectively referred to as the “16^th Premises”), the twelfth (12^th) floor, loading bay #18 and freight elevator #F-13 (hereinafter collectively referred to as the “12^th Premises”), the fourteenth (14^th) floor and elevator #F-4 (hereinafter collectively referred to as the “14^th Premises”), and the fifteenth (15^th) floor, loading bay #22 and freight elevator #F-6 (although the Lease referred to same as #F-7) (hereinafter collectively referred to as the “15^th Premises”) in the building located at 450 West 33^rd Street, New York,

1

New York (hereinafter referred to as the “Building”) upon terms and conditions more fully set forth in the Lease. The 16^th Premises, the 12^th Premises, the 14^th Premises and the 15^th Premises are hereinafter collectively referred to as the “Original Premises”. Pursuant to the Third Amendment, Tenant is obligated to surrender possession of a portion of the Original Premises consisting of the 12^th Premises on or before July 31, 2003 in accordance with the terms of the Third Amendment. For purposes of this Agreement, but subject to the provisions of the Third Amendment, the 14^th Premises, the 15^th Premises and the 16^th Premises are hereinafter collectively referred to as the “Existing Premises.” Tenant desires to surrender to Landlord the Existing Premises (other than the 12^th Premises in the event the Third Amendment is terminated) and to otherwise amend the Lease as more fully hereinafter set forth. Unless otherwise specifically indicated, all capitalized terms used herein shall have the meanings ascribed to them in the Lease.

     NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, it is agreed as follows:

TERMS

          1. (a) Effective at 11:59 p.m. on (i) October 31, 2003 (hereinafter referred to as the “First Effective Date”), with respect only to a portion of the Existing Premises consisting of the entire 15^th Premises (hereinafter referred to as the “First Surrender Space”), (ii) October 31, 2003 (hereinafter referred to as the “Second Effective Date”) with respect only to a portion of the Existing Premises consisting of the entire 16^th Premises (hereinafter referred to as the “Second Surrender Space”) and (iii) November 30, 2003 (hereinafter referred to as the “Third Effective Date”), with respect to the balance of the Existing Premises, but subject to the provisions of the Third Amendment, consisting of the entire 14^th Premises (hereinafter referred to as the “Third Surrender Space”) (the First Surrender Space, the Second Surrender Space and the Third Surrender Space are hereinafter sometimes referred to individually or collectively as the “Surrender Space” and the First Effective Date, the Second Effective Date and the Third Effective Date are sometimes hereinafter referred to individually or collectively as the “Effective Date”), the Lease, except as otherwise expressly provided below, and the leasehold estate created thereby with respect to the First Surrender Space, the Second Surrender Space and the

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Third Surrender Space, as the case may be, shall be deemed terminated and expired as if the First Effective Date, the Second Effective Date and the Third Effective Date, as applicable, were set forth in the Lease as the expiration dates thereof with respect only to the First Surrender Space, the Second Surrender Space and the Third Surrender Space, respectively, in accordance with, and subject to, the provisions of this Agreement. Nothing contained herein shall be deemed to affect Tenant’s obligations with respect to the surrender of the 12th Premises in accordance with the terms of the Third Amendment.

               (b) Except as otherwise expressly provided in this Agreement, wherever in the Lease reference is made to the “demised premises”, “leased premises” or a similar phrase from and after each of the First Effective Date, the Second Effective Date and the Third Effective Date, such phrases shall be deemed to exclude each of the First Surrender Space, the Second Surrender Space and the Third Surrender Space, respectively. To the extent that the Third Amendment is terminated in accordance with its terms, wherever in the Lease reference is made to the “demised premises”, “leased premises” or a similar phrase from and after the date of termination of the Third Amendment, such phrases shall be deemed to be only the 12^th Premises.

          2. (a) Except as expressly set forth in this Agreement and subject to the further provisions of this Paragraph 2 and Paragraph 3, Tenant shall remain obligated to comply with all of the terms, covenants and conditions of the Lease on Tenant’s part to observe, perform and comply with respect to the First Surrender Space, the Second Surrender Space and the Third Surrender Space through and including the later of the First Effective Date, the Second Effective Date and the Third Effective Date, respectively and the date(s) (hereinafter referred to as the “First Surrender Date” with respect to the First Surrender Space, the “Second Surrender Date” with respect to the Second Surrender Space and the “Third Surrender Date” with respect to the

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Third Surrender Space (the First Surrender Date, the Second Surrender Date and the Third Surrender Date are sometimes hereinafter collectively referred to as the “Surrender Date”)) on which Tenant quits and surrenders each of the First Surrender Space, the Second Surrender Space and the Third Surrender Space, as applicable, in the manner set forth in Paragraphs 3 and 4 below, and all of Tenant’s obligations and liabilities under the Lease and this Agreement with respect to each of the First Surrender Space, the Second Surrender Space and the Third Surrender Space, as the case may be, which accrue or arise or relate to matters occurring on or before the later of the First Effective Date and the First Surrender Date with respect to the First Surrender Space, the Second Effective Date and the Second Surrender Date with respect to the Second Surrender Space and the Third Effective Date and the Third Surrender Date with respect to the Third Surrender Space shall survive the First Effective Date, the Second Effective Date and the Third Effective Date, as applicable, and the First Surrender Date, the Second Surrender Date and the Third Surrender Date, as applicable, including, without limitation, Tenant’s obligation under the Lease with respect to the First Surrender Space, the Second Surrender Space and the Third Surrender Space, as applicable to pay Operating Expenses (Landlord hereby acknowledges and agrees that all fixed rent due under the Lease has been paid by Tenant through June 30, 2003 and all additional rent (other than real estate taxes and operating expenses not billed, but as to real estate taxes, only with respect to the “true-up” of real estate taxes for the period from January 1, 2003 through June 30, 2003, and as to operating expenses, only with respect to the “true-up” of operating expenses for the 2002 calendar year) under the Lease have been paid by Tenant through June 30, 2003, and, except as otherwise expressly provided in this Agreement, that there are no other outstanding amounts owing to Landlord as of the date of this Agreement) and, and the curing of all violations, if any, and the closing out of all open applications and delinquency

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notices, if any, (except as otherwise provided in Paragraph 2(b) below) relating to Tenant’s use and occupancy of the Second Surrender Space and the Third Surrender Space (other than with respect to elevator #F-4 and the Unit C Premises), as applicable, and Tenant’s obligation under the Lease with respect to the First Surrender Space, the Second Surrender Space and the Third Surrender Space, as applicable, (and any liability resulting from Tenant’s failure to perform such obligation) to indemnify, defend and hold Landlord harmless under the Lease for all liabilities, obligations, suits, claims, fines, damages, penalties, costs, charges and expenses (hereinafter collectively referred to as “Damages”) (including, without limitation, attorneys’ fees and disbursements) which may be imposed upon, incurred or paid by, or asserted against Landlord under the Lease with respect to the First Surrender Space, the Second Surrender Space and the Third Surrender Space, as applicable, or for which Landlord may become, or is, liable, that are imposed by, or incurred or paid to, or asserted by, third parties and for which Tenant would otherwise be liable for under the Lease, including, without limitation, Damages resulting from (i) injuries to persons occurring at the First Surrender Space, the Second Surrender Space and the Third Surrender Space, as the case may be, on or prior to the later of the First Effective Date, the Second Effective Date and the Third Effective Date, respectively, and the First Surrender Date, the Second Surrender Date and the Third Surrender Date, respectively; (ii) Tenant’s failure to have paid for any work performed at, or materials or supplies installed at or furnished to, the First Surrender Space, the Second Surrender Space and/or the Third Surrender Space, as the case may be, on or prior to the later of the First Effective Date, the Second Effective Date and the Third Effective Date, respectively, and the First Surrender Date, the Second Surrender Date and the Third Surrender Date, respectively, at the request of, or for the benefit of, Tenant or any person or entity claiming by, through or under Tenant; and (iii) Landlord’s inability to obtain an

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amendment to the certificate of occupancy for the Building because of any act or omission by Tenant (other than with respect to the First Surrender Space and the Unit C Premises), to the extent Tenant would be liable under the Lease for such Damages. Notwithstanding the foregoing, Tenant shall remain obligated to pay the fixed rent under the Lease with respect to (i) the First Surrender Space through the date which is eleven (11) months after the First Surrender Date, (ii) the Second Surrender Space through the date which is eleven (11) months after the Second Surrender Date and (ii) the Third Surrender Space through the date which is eleven (11) months after the Third Surrender Date, which shall be paid from the proceeds of the L/C as provided in subparagraph 5(a)(iv).

               (b) Notwithstanding the provisions of subparagraph (a) above, Tenant shall have no obligation to cure any violations, to close out any open applications or to discharge any delinquency notices as set forth above, (w) with respect to the First Surrender Space and the Unit C Premises, or (x) if the violation was not caused by the act or omission of Tenant or any person claiming by, through or under Tenant, or (y) if the application was not opened by Tenant, or any person claiming by, through or under Tenant, or (z) if the issue surrounding the delinquency notice was not caused by, as the case may be, the act or omission of Tenant or any person or entity claiming by, through or under Tenant, including, but not limited to, Tenant’s contractors and consultants. To the extent such violation, open application and/or delinquency notice is attributable to Tenant’s acts or omissions, then Tenant shall be liable for, and shall pay as additional rent in accordance with the terms of the Lease, as amended, its proportionate share of the cost and expense incurred by Landlord to cure or close out the same, except that Landlord shall be responsible for any further costs payable to Fire Quench (or any substitute vendor other than any substitute vendor employed by or on behalf of Tenant, its employees, agents or

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contractors) and for any further work to be performed by Fire Quench (or any substitute vendor other than any substitute vendor employed by or on behalf of Tenant, its employees, agents or contractors) from and after the date of this Agreement solely with respect to the Surrender Space or elsewhere in the Building so as, except as otherwise expressly set forth herein, to make the Surrender Space (other than the 15^th Premises and the Unit C Premises) compliant with all applicable laws, rules, regulations and codes of any and all governmental and/or quasi-governmental agencies or entities having jurisdiction with respect thereto. Tenant represents and warrants to Landlord that as of the date hereof (i) no money is due and owing from Tenant to Fire Quench for work performed by Fire Quench on behalf of, or at the request of, Tenant with respect to the Surrender Space or any other portion(s) of the Original Premises and (ii) no further work has been contracted for between Tenant and Fire Quench to be performed from and after the date of this Agreement with respect to the Surrender Space or any other portion(s) of the Original Premises. The parties hereto acknowledge and agree that if at any time after the date of this Agreement Tenant contracts with Fire Quench or any other person or entity to cure any violation or close out any open application with respect to the Surrender Space, Tenant shall be responsible for the costs and expenses incurred in connection therewith. Notwithstanding the foregoing or anything contained in this Agreement to the contrary, Landlord acknowledges and agrees that Tenant shall have no obligation to cure violation #38138045M issued with respect to freight elevator #F-8 for failure to maintain.

               (c) Nothing contained in this Agreement shall be deemed to extend the applicable Effective Date or otherwise permit Tenant to hold-over its occupancy or possession of any portion of either Surrender Space beyond October 31, 2003 with respect to the First Surrender Space and the Second Surrender Space and November 30, 2003 with respect to the

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Third Surrender Space.

          3. (a) (i) Subject to the other provisions of this Agreement, on or before the First Effective Date, the Second Effective Date and the Third Effective Date, as the case may be, Tenant shall quit and surrender the First Surrender Space, the Second Surrender Space and the Third Surrender Space, respectively, broom clean, in good order and condition, ordinary wear and tear excepted, free of all tenants, subtenants and other occupants and Tenant shall, as applicable to each relevant portion of the Surrender Space, (i) substantially perform and complete the items of work described on Exhibit C annexed hereto, at its expense, as “Tenant’s Work”, (ii) except as otherwise set forth in this Paragraph 3(a), remove all of Tenant’s trade equipment, trade fixtures and personal property therefrom, including, without limitation, any signage located in the elevator lobbies on the fourteenth (14^th), fifteenth (15^th) and sixteenth (16^th) floors of the Building, (iii) surrender the Surrender Space with all mechanical, electrical and plumbing fixtures, equipment and systems (hereinafter collectively referred to as the “Systems”) in working order and condition (other than the 15^th Premises, the Unit C Premises and elevator #F-4) (but, in any event, only to the extent the preservation of the Systems is not Landlord’s obligation under the Lease), including, without limitation, the two (2) perimeter heating units located in the mechanical room of the 16^th Premises, the perimeter heating unit located in the south east corner mechanical room of the 14^th Premises, the four (4) 100 ton air-conditioning, ventilation and heating units on each of the 14^th Premises and the 16^th Premises, freight elevators #F-6 and #F-8, and the equipment located in each of the kitchen(s), the fitness center and the athletic area(s), (iv) repair any damage (other than mere cosmetic, immaterial damage) to the Surrender Space resulting from Tenant’s removal of its equipment therefrom, removal of any of its trade equipment, trade fixtures and personal property therefrom and any

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signage as set forth in item (ii) above, and (v) in all other respects, except as otherwise set forth in this Paragraph 3(a) and elsewhere in this Agreement, surrender each of the First Surrender Space, the Second Surrender Space and the Third Surrender Space to Landlord in accordance with the applicable provisions of the Lease, as if the First Effective Date, the Second Effective Date and the Third Effective Date, as applicable, were the expiration dates thereof with respect to the First Surrender Space, the Second Surrender Space and the Third Surrender Space, respectively, subject to Tenant’s obligations under the Lease as set forth in Paragraph 2 above and this Paragraph 3. As of the later to occur of the First Effective Date and the First Surrender Date with respect to the First Surrender Space, the later to occur of the Second Effective Date and the Second Surrender Date with respect to the Second Surrender Space and the later to occur of the Third Effective Date and the Third Surrender Date with respect to the Third Surrender Space, Tenant shall not remove the furniture (hereinafter referred to as the “FF&E”) existing in each Surrender Space as indicated on Exhibit B-1 annexed hereto and made a part hereof, as applicable, as of the date hereof, title to such FF&E is being transferred and conveyed to Associated Press by Tenant pursuant to that certain agreement dated as of the date hereof (hereinafter referred to as the “FF&E Agreement”) between Associated Press and Tenant, a copy of which is annexed hereto as Exhibit B-2, and shall leave the FF&E in each Surrender Space in the condition same are in as of the date hereof, reasonable wear and tear excepted.

                    (ii) Upon execution of this Agreement by Landlord and Tenant, Tenant shall pay to Associated Press (as hereinafter defined), on behalf of Landlord, the sum of $8,374,840.39 (hereinafter referred to as the “Associated Press Construction Reimbursement”) on account of the Associated Press’ work to the Surrender Space (hereinafter referred to as the “AP Work”) in accordance with the terms of the Associated Press Lease,

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including architect’s fees, engineering fees, space planning fees and filing fees and expenses and other typical “soft costs” in respect of the AP Work. Additionally, together with its execution and delivery of this Agreement, Tenant shall pay to Landlord the sum of $38,703.14, representing the costs to be incurred by Landlord to replace the louvers that Tenant was otherwise obligated to remove pursuant to item (c)(i) of the First Surrender Space and Second Surrender Space Work as set forth on Exhibit A and such payment shall be in lieu of Tenant performing such work.

                    (iii) With respect to the Unit C Premises (as such term is defined in the Second Amendment), after Tenant has completed the removal and/or abatement of Hazardous Materials (as such term is defined in the Second Amendment), Tenant shall send to Landlord a copy of receipted invoices therefor accompanied by four (4) original ACP-5 certificates and other supporting environmental reports required by all laws, rules and regulations of any governmental agency, Building Department (as such term is defined in the Second Amendment), and/or any other entity having jurisdiction with respect thereto evidencing that such Hazardous Materials have been removed and/or abated. Tenant further agrees to provide to Landlord upon completion of the removal and/or abatement of Hazardous Materials for the 15^th Premises four (4) original ACP-5 certificates and other supporting environmental reports required by all laws, rules and regulations of any governmental agency, Building Department and/or any other entity having jurisdiction with respect thereto evidencing that such Hazardous Materials have been removed and/or abated. Landlord shall cooperate with Tenant, at Tenant’s expense, in obtaining such evidence by promptly executing any documents in connection therewith required to be executed by Landlord. In the event the costs to remove or abate Hazardous Materials in the Unit C Premises is less than $32,614.00, Tenant, within thirty (30)

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days after delivery of notice by Landlord shall pay to Landlord the difference between $32,614.00, and the actual cost to Tenant for such removal or abatement.

                    (iv) (A) The obligations of Tenant with respect to the surrender of the Surrender Space (including, without limitation, the substantial performance of Tenant’s Work and Tenant’s obligations set forth in subparagraphs (ii) and (iii) above) as set forth in this Paragraph 3(a), (B) the covenants, warranties and representations set forth in Paragraph 4(a), (C) the obligations contained in the last sentence of Paragraph 7, and (D) the obligations contained in Paragraph 9 are hereinafter collectively referred to as the “Delivery Conditions.”

               (b) Tenant hereby agrees that Landlord shall not have any accountability with respect to the FF&E and Tenant agrees to indemnify, defend and hold Landlord harmless for all Damages which may be imposed upon, incurred or paid by or asserted against Landlord, or for which Landlord may become, or is, liable with respect to the FF&E for any period prior to the (i) later to occur of the First Effective Date and the First Surrender Date with respect to the First Surrender Space, (ii) later to occur of the Second Effective Date and the Second Surrender Date with respect to the Second Surrender Space and (iii) later to occur of the Third Effective Date and the Third Surrender Date with respect to the Third Surrender Space, except for any Damages resulting from Landlord’s gross negligence or willful misconduct. No part of the Termination Fee (as defined in Paragraph 10 hereof) is in respect of, or is being allocated to, the FF&E, and Tenant shall cooperate with Landlord in substantiating the same. If prior to the later to occur of (x) the First Effective Date and the First Surrender Date with respect to the First Surrender Space, (y) the Second Effective Date and the Second Surrender Date with respect to the Second Surrender Space and (z) the Third Effective Date and the Third Surrender Date with respect to the Third Surrender Space any of the items constituting the FF&E have been

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removed from the First Surrender Space, the Second Surrender Space or the Third Surrender Space, as applicable, or there occurs damage to the FF&E causing the same not to be in its present condition as of the date hereof, reasonable wear and tear excepted, then Tenant shall promptly make such repairs to the FF&E and/or return any items of the FF&E to the First Surrender Space, the Second Surrender Space or the Third Surrender Space, as applicable, and such obligation(s) shall survive the later to occur of (x) the First Effective Date and the First Surrender Date with respect to the First Surrender Space, (y) the Second Effective Date and the Second Surrender Date with respect to the Second Surrender Space and (z) the Third Effective Date and the Third Surrender Date with respect to the Third Surrender Space, as applicable. During the period commencing on the date hereof through the later to occur of (i) the First Effective Date and the First Surrender Date with respect to the First Surrender Space, (ii) the Second Effective Date and the Second Surrender Date with respect to the Second Surrender Space and (iii) the Third Effective Date and the Third Surrender Date with respect to the Third Surrender Space, Tenant shall use the FF&E and the Systems as applicable to the First Surrender Space, the Second Surrender Space or the Third Surrender Space, as the case may be, solely for the conduct of its business and in a careful and proper manner. On or before the First Surrender Date as to the First Surrender Space, the Second Surrender Date as to the Second Surrender Space and the Third Surrender Date as to the Third Surrender Space, Tenant shall deliver to Associated Press any warranties in its possession in effect for the FF&E and a copy of same to Landlord. Upon reasonable advance notice at any time prior to (i) the First Effective Date or the First Surrender Date, if later, with respect to the First Surrender Space, (ii) the Second Effective Date or the Second Surrender Date, if later, with respect to the Second Surrender Space and (iii) the Third Effective Date or the Third Surrender Date, if later, with respect to the Third Surrender

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Space, Landlord and Associated Press shall have the right to enter upon the applicable Surrender Space (in accordance with the terms of the Lease) to inspect the FF&E and the Systems. Tenant shall not hereinafter take any action which will result in any liens or encumbrances on the FF&E. Tenant represents that it is the sole owner of the FF&E and has good title to the same and, as of the First Surrender Date, there will be no liens or encumbrances on the FF&E and none of the same will be subject to any conditional sale, lease, judgment or financing arrangement.

               (c) Tenant’s Work shall be performed in accordance with all applicable provisions of the Lease, including, without limitation, Articles 3 and 45 thereof, as if a “change” or a “Tenant’s Change” (as such terms are defined in Article 45 of the Lease). If Landlord unreasonably delays in responding to Tenant’s submission of any plans required to be submitted in connection with Tenant’s performance of Tenant’s Work in the First Surrender Space, the Second Surrender Space and/or the Third Surrender Space, then the respective Effective Date and the respective dates for any penalties set forth in subparagraph 5(a)(ii) hereof shall be postponed by one (1) day for each day beyond the expiration of the time period required for Landlord to respond to any Tenant’s plans set forth in the Lease that Landlord has failed to respond to such Tenant’s plans, provided that Tenant has given Landlord written notice that by reason of Landlord’s unreasonable delay in responding to Tenant’s submission of any plans required to be submitted by Tenant, Tenant was delayed in performing Tenant’s Work to the First Surrender Space, the Second Surrender Space and/or the Third Surrender Space, as the case may be. For the purposes of this Agreement only, references to “ten (10) business days” in subsections 45(a)(v) and (vii) of the Lease shall be deemed to be references to five (5) business days”.

               (d) Tenant shall send to Landlord, Landlord’s attorneys, Associated

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Press and Associated Press’ attorneys a notice (hereinafter referred to as the “Completion Notice”) specifying the date(s) (hereinafter referred to as the “Substantial Completion Date(s)”) on which Tenant’s Work with respect to the First Surrender Space, the Second Surrender Space and the Third Surrender Space, as applicable, is substantially complete and the other Delivery Conditions applicable to such portions of each Surrender Space are satisfied (it being agreed that the Completion Notice may be sent by telecopier (with written confirmation of delivery) to Landlord, Landlord’s attorneys, Associated Press and Associated Press’ attorneys at the addresses and telecopier numbers provided in Paragraph 15 below). For purposes hereof, Tenant’s Work shall be deemed substantially complete notwithstanding the fact that minor or insubstantial details of construction, mechanical adjustment or decoration remain to be performed, the noncompletion of which does not materially interfere with Associated Press’ use of the office space portions of the First Surrender Space, the Second Surrender Space and the Third Surrender Space, as applicable, and does not result in Landlord being liable to Associated Press for any Delay Payment (as hereinafter defined) as set forth in the Associated Press Lease (in the form executed as of the date hereof). The respective Substantial Completion Date set forth in the respective Completion Notice shall be conclusive and binding upon Landlord as to the First Surrender Space, the Second Surrender Space and the Third Surrender Space, as applicable, unless, solely by giving Tenant notice (hereinafter referred to as the “Dispute Notice”) within five (5) business days after the later of (i) the date on which Tenant gives a Completion Notice to Landlord for each of the First Surrender Space, the Second Surrender Space and the Third Surrender Space, as applicable, and (ii) the Substantial Completion Dates set forth in such Completion Notices, Landlord disputes the fact that on or before the Substantial Completion Date(s) set forth in the Completion Notice(s) the Substantial Completion Date(s)

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actually occurred as to the First Surrender Space, the Second Surrender Space and the Third Surrender Space, as applicable, which Dispute Notice shall provide the particular items of Tenant’s Work (in as much detail as reasonably possible) that are not substantially complete and which Delivery Conditions have not been satisfied. The notice sent by Tenant shall not be effective as a Completion Notice unless it notifies Landlord and Associated Press that if Landlord does not send the Dispute Notice within such five (5) business day period, the Substantial Completion Date set forth in the respective Completion Notice shall be conclusive and binding upon Landlord. If any items of Tenant’s Work are not disputed in said Dispute Notice, such non-disputed items shall be deemed substantially completed. Pending the resolution of a dispute over any of the Substantial Completion Date(s), for all purposes under this Agreement, the Substantial Completion Date(s) shall be deemed to be the date(s) set forth in the Completion Notice(s). If Landlord, Tenant and Associated Press cannot resolve such dispute within ten (10) days after Landlord sends the Dispute Notice to Tenant, such dispute shall be resolved among Landlord, Tenant and Associated Press by arbitration in accordance with the provisions contained in Article 34 of the Associated Press Lease, a copy of such Article is annexed hereto as Exhibit E and made a part hereof. If the dispute (whether by agreement or arbitration) is resolved in Landlord’s favor, then the Substantial Completion Date(s) shall be as determined by such agreement or arbitration and any payments based on the occurrence of the Substantial Completion Date(s) made by Tenant under this Agreement, including any Delay Payments, shall be adjusted accordingly, and any amounts due Landlord shall promptly be paid by Tenant to Landlord. If such dispute shall be resolved by arbitration, and it is determined that on or before the Substantial Completion Date(s) set forth in the Completion Notice(s), the Substantial Completion Date(s) did not actually occur, then the arbitration shall also determine

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whether the Substantial Completion Date(s) nevertheless occurred after the date set forth in the Completion Notice(s). If the arbitration determines that the Substantial Completion Date in question did, in fact occur, then the date thereof so determined shall be the Substantial Completion Date as to the First Surrender Space, the Second Surrender Space or the Third Surrender Space, as the case may be, without any requirement that Landlord be given another Completion Notice. If Tenant agrees with all or any portion of Landlord’s Dispute Notice, Tenant shall provide Landlord with an additional notice advising Landlord that such initially incomplete portions of Tenant’s Work are substantially completed and Landlord shall have three (3) business days to dispute said substantial completion, otherwise same shall be deemed substantially completed.

               (e) If on or before the Outside Date (as such term is hereinafter defined), Tenant’s Work with respect only to the 15th Premises and/or the Unit C Premises is not substantially complete and Tenant is not then diligently prosecuting such Tenant’s Work to substantial completion, then Tenant acknowledges and agrees that Associated Press shall have the right to complete the items of Tenant’s Work with respect only to the 15th Premises and/or the Unit C Premises that had not been completed prior to the Outside Date, by Landlord notifying Tenant, at least five (5) days prior to Associated Press commencing such Tenant’s Work, of Associated Press’ intention to so complete such Tenant’s Work (such notice being herein referred to as a “Self-Help Notice”). If Landlord so notifies Tenant and thereafter Associated Press performs such Tenant’s Work, Tenant shall pay to Landlord (hereinafter referred to as the “Tenant’s Work Reimbursement Cost”), to the extent reasonably paid by Associated Press, the out-of-pocket costs of performing such Tenant’s Work within fifteen (15) days after Landlord’s demand therefor, which demand (hereinafter referred to as the “Tenant’s

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Work Reimbursement Notice”) shall describe, in reasonable detail, the items which comprise the Tenant’s Work Reimbursement Cost, and shall be accompanied by receipted bills, invoices and such other information or documents reasonably required by Tenant to verify the Tenant’s Work Reimbursement Cost.

               (f) Within the fifteen (15) day period commencing on the later of (i) the date on which Landlord delivers to Tenant the Tenant’s Work Reimbursement Notice, and (ii) the date on which Landlord delivers to Tenant the bills, invoices, receipts and other information or documentation reasonably required by Tenant as hereinbefore provided, Tenant may dispute the correctness of the Tenant’s Work Reimbursement Cost set forth therein, specifying (to the extent known to Tenant) the particular respects in which such Tenant’s Work Reimbursement Notice is incorrect. If Landlord and Tenant fail to settle such dispute within thirty (30) days after Tenant notifies Landlord of such dispute, such dispute shall be determined by arbitration in accordance with subsection (I)(2) of Article Fourth of the Second Amendment. Pending the resolution of such dispute by agreement between Landlord and Tenant or by arbitration as aforesaid, Tenant shall not be obligated to pay to Landlord any portion of the Tenant’s Work Reimbursement Cost that Tenant has reasonably and in good faith disputed. If as a result of such arbitration or agreement it is determined that the portion of the Tenant’s Work Reimbursement Cost paid by Tenant is less than the amount owed by Tenant, then the underpayment (plus the interest thereon described in subsection (e) above), shall be paid to Landlord within twenty (20) days after the arbitration decision is rendered and received by Landlord or the dispute is resolved by agreement. If as a result of such arbitration or such agreement it is determined that the portion of the Tenant’s Work Reimbursement Cost paid by Tenant is more than the amount owed by Tenant, then the overpayment (including interest

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thereon as described in subparagraph (e) above) to the extent paid by Tenant shall be refunded by Landlord to Tenant within twenty (20) days after the arbitration decision is rendered and received by Landlord or resolved by such agreement.

               (g) If all of Tenant’s Work with respect to the 15^th Premises and the Unit C Premises is not substantially complete by the Outside Date and Landlord gives Tenant the Self-Help Notice, the applicable Delay Payment(s) shall continue in accordance with, and subject to, subparagraph 5(a)(ii) and shall end as to the 15^th Premises and/or the Unit C Premises, as the case may be, on the date that Associated Press substantially completes Tenant’s Work with respect to such area of the Surrender Space, except that regardless of whether the item(s) of Tenant’s Work in question with respect to the 15^th Premises and the Unit C Premises have been substantially completed by Associated Press by the date that is sixty (60) days after the date on which Landlord has given the Self-Help Notice to Tenant, all Delay Payments with respect to the 15^th Premises and the Unit C Premises which have not theretofore ended shall end on the date that is sixty (60) days after the date on which Landlord has given the Self-Help Notice to Tenant.

               (h) For the purposes of this Agreement, the term “Outside Date” means February 1, 2004, except that for each day after June 18, 2003 that this Agreement has not been fully executed and delivered (including the delivery of all payments required by Tenant hereunder) to Landlord and Tenant the Outside Date shall be extended by one (1) day for each day after June 18, 2003 that this Agreement has not been fully executed and delivered, along with the delivery of the requisite payments required by Tenant hereunder.

          4. (a) Tenant hereby covenants, represents and warrants to Landlord that: (i) Tenant has not committed, permitted or suffered any act or deed whereby the Surrender Space (or any portion(s) thereof), or the security deposited under the Lease, if any, have been, or may

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be, pledged, hypothecated, encumbered, assigned, conveyed or otherwise transferred other than in accordance with Section 56N of the Lease and other than a certain license with respect to a portion of the Third Surrender Space pursuant to a License Agreement (hereinafter referred to as the “License Agreement”) with Saint Vincents Catholic Medical Centers of New York (hereinafter referred to as “Saint Vincents”), (ii) Tenant has not sublet, underlet or otherwise transferred, in any manner whatsoever, any present or future possession, use or occupancy right in or to all or any portions of the Surrender Space other than in accordance with Section 56N of the Lease and other than in accordance with the License Agreement, (iii) as of each Surrender Date with respect to the applicable Surrender Space, such Surrender Space shall be free of all tenants, subtenants and other occupants and all leases and subleases, and there shall be no other persons or entities, or who or which may claim, any rights of possession, occupancy or use of the applicable Surrender Space or any portions thereof, (iv) Tenant shall not commit, permit or suffer any such act or deed referred to in clause “(i)” above, and shall not so further sublet, underlet or otherwise transfer any such present or future possession, use or occupancy right, (v) freight elevator #F-6 is, and will be on the First Surrender Date, in working order and condition, (vi) freight elevator #F-8 is, and will be on the Second Surrender Date, in working order and condition, (vii) loading bay # 22 will, on the First Surrender Date, be in broom clean condition, (viii) loading bay # 21 will, on the Second Surrender Date, be in broom clean condition, (ix) elevator #F-4 will, on the Third Surrender Date, be in its present as-is condition as of the date of this Agreement, (x) the kitchen(s) in the Surrender Space is/are currently being used, or has/have been used in the past, for food cooking and preparation; the fitness center in the Surrender Space is currently being used, or has been used in the past, for the use of fitness and exercise equipment and workout rooms; the athletic area in the Surrender Space is currently being used, or has been

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used in the past, as a basketball court, volleyball court and/or for other athletic facilities; the terrace area on the Surrender Space is currently being used, or has been used in the past, for the placement of, and sitting on, chairs for eating, reading, lounging, meetings and social gatherings; and the mezzanine on the 16^th Premises is currently being used for office purposes, (xi) the kitchen(s) in the Surrender Space and the equipment contained therein is/are, and will be on the First Surrender Date for the First Surrender Space, the Second Surrender Date for the Second Surrender Space and the Third Surrender Date with respect to the Third Surrender Space, in compliance with all applicable laws and/or requirements of public authorities that are applicable to the use of the kitchen(s) and such equipment as a kitchen for food cooking and preparation, (xii) Tenant has not cut the slab between the 15^th Premises and the 16^th Premises as provided in Section (c)(3) of Article 12^th of the Second Amendment, (xiii) Tenant has no actual knowledge (without independent inquiry) of any odor problem with respect to the fitness center, the kitchen or the athletic area as of the date of this Agreement, and (xiv) Tenant has no actual knowledge (without independent inquiry) of any water leakage problem that has not been corrected with respect to the floors of the fitness center as of the date of this Agreement.

               (b) Tenant shall terminate any sublease or other agreement entered into between Tenant and the New York City Industrial Development Agency (hereinafter referred to as the “NYCIDA”) with respect to the Surrender Space and/or Tenant’s improvements to the Surrender Space and any sub-sublease or other agreement entered into between the NYCIDA and Tenant with respect to the Surrender Space and/or such Tenant’s improvements to the Surrender Space, the effective date of such termination shall be on or before the day immediately preceding (x) the First Surrender Date as to the First Surrender Space, (y) the Second Surrender Date as to the Second Surrender Space and (z) the Third Surrender Date as

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to the Third Surrender Space. On or prior to (x) the First Surrender Date as to the First Surrender Space, (y) the Second Surrender Date as to the Second Surrender Space and (z) the Third Surrender Date as to the Third Surrender Space, Tenant shall deliver to Landlord fully executed copies of such termination letters or agreements or other evidence reasonably acceptable to Landlord that the applicable portion of the Surrender Space and/or such Tenants improvements are no longer subject to any such sublease, sub-sublease or other agreement.

               (c) (i) For purposes of this Agreement, a “Landlord Violation” shall mean a violation of applicable law and/or requirement of public authority, the compliance with which is the express obligation of Landlord that (A) has been noted or issued on, before or after the date of this Agreement, (B) was not caused by the act or omission of any tenant of the Building, and (C)(i) actually delays or prevents Associated Press from obtaining any alteration permits required by the applicable governmental authority, and such delay or prevention actually delays or prevents (x) the performance of any change that Associated Press is permitted to make in accordance with, and subject to, the applicable provisions of the Associated Press Lease, or (y) the lawful occupancy of any portion of the Surrender Space (in accordance with, and subject to, the applicable provisions of the Associated Press Lease) upon completion of any AP Work that Associated Press is permitted to make in accordance with, and subject to, the applicable provisions of the Associated Press Lease (it being understood that the imposition by any governmental authority of conditions requiring the cure of any Landlord’s Violation as a condition precedent to obtaining any such alteration permits which shall so delay Associated Press from obtaining any alteration permits shall be deemed such a delay or prevention of Associated Press from obtaining the alteration permit(s) in question), or (D) actually delays or prevents Associated Press from obtaining any use permits required by the applicable

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governmental authority, and such delay or prevention actually delays or prevents the lawful occupancy of the applicable portion of the Surrender Space for the corresponding use in accordance with, and subject to, the applicable provisions of the Associated Press Lease.

                    (ii) Notwithstanding anything contained in this Agreement to the contrary, if the delay or prevention is of the performance of any AP Work to the Surrender Space (other than the athletic area and the terrace area) that Associated Press is permitted or required to make in accordance with, and subject to, the applicable provisions of the Associated Press Lease, or of the lawful occupancy of any portion of the Surrender Space (other than the athletic area or the terrace area) (in accordance with, and subject to, the applicable provisions of the Associated Press Lease) upon completion of the AP Work that Associated Press is permitted or required to make in accordance with, and subject to, the applicable provisions of the Associated Press Lease, and provided such Landlord’s Violation resulted from any act or omission of Tenant, then Tenant shall pay Landlord an amount equal to the Violation Credit Amount (as such term is herein defined). For the purposes of this Paragraph, a “Violation Credit Amount” means the number of rentable square feet of the Surrender Space (other than the athletic area or the terrace area or any other area not included as “rentable square feet” under the Associated Press Lease) that Associated Press is, or will be, delayed or prevented from initially lawfully occupying as a result of a delay or prevention in the performance of any AP Work that Associated Press is permitted or required to make in accordance with, and subject to, the applicable provisions of the Associated Press Lease, multiplied by $.08, for each day of the period after the tenth (10^th) day after Landlord’s receipt of the Violations Notice that Associated Press is delayed or prevented from performing the Associated Press Work in question, or in so lawfully occupying the portions of the Surrender Space in question, in either case, solely as a

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result of a Landlord Violation caused by the act or omission of Tenant. Notwithstanding anything contained in Paragraph 5(c) of this Agreement to the contrary, Tenant shall have no obligation to pay any Violation Credit Amount with respect to any portion of the Surrender Space that Associated Press is actually performing the AP Work or is actually occupying for business purposes.

          5. (a) (i) In the event that all the Delivery Conditions are not satisfied with respect to each of the First Surrender Space, the Second Surrender Space and the Third Surrender Space to Landlord in the manner set forth in Paragraphs 3 and 4 above on or before the applicable Effective Date, the parties hereby agree that Tenant’s occupancy of such Surrender Space(s) after the expiration of the applicable Effective Date shall be under a holdover occupancy arrangement commencing on the first day after such applicable Effective Date, which arrangement shall be upon all of the terms set forth in the Lease, including, without limitation, the payment of fixed rent and additional rent through the (A) First Surrender Date with respect to the First Surrender Space, (B) Second Surrender Date with respect to the Second Surrender Space and (C) Third Surrender Date with respect to the Third Surrender Space (without regard to Article 50 thereof).

                    (ii) Landlord and Tenant acknowledge that Associated Press, Inc. (hereinafter referred to as “Associated Press”) has entered into a lease (hereinafter referred to as the “Associated Press Lease”) with Landlord covering the Surrender Space. Pursuant to the terms of the Associated Press Lease, (A) Landlord is obligated to deliver possession of the First Surrender Space to Associated Press on November 1, 2003, the Second Surrender Space to Associated Press on November 1, 2003 and the Third Surrender Space to Associated Press on December 1, 2003, and (B) if Landlord fails to deliver possession of (1) each of the First

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Surrender Space and the Second Surrender Space to Associated Press by December 1, 2003, Associated Press is entitled to a credit of fixed rent in the amount (x) (hereinafter referred to as the “First Surrender Space Delay Payment”) of $11,967.34 multiplied by the number of days during the period (hereinafter referred to as the “First Surrender Space Abatement Period”) commencing on December 1, 2003 and ending on the date next preceding the date on which Tenant surrenders possession of the First Surrender Space in the manner required by this Agreement, except that for each day after January 1, 2004 that Tenant has failed to surrender possession of the First Surrender Space, such $11,967.34 shall be increased to $15,956.45, and, in addition to Tenant’s obligation to continue to pay the fixed rent as set forth in subparagraph 2(a) of this Agreement, Tenant shall be obligated to pay Landlord the First Surrender Space Delay Payment, and (y) (hereinafter referred to as the “Second Surrender Space Delay Payment”) of $8,403.99 multiplied by the number of days during the period (hereinafter referred to as the “Second Surrender Space Abatement Period”) commencing on December 1, 2003 and ending on the date next preceding the date on which Tenant surrenders possession of the Second Surrender Space in the manner required by this Agreement, except that for each day after January 1, 2004 that Tenant has failed to surrender possession of the Second Surrender Space, such $8,403.99 shall be increased to $11,205.31. The First Surrender Space Delay Payment and the First Surrender Space Abatement Period, and the Second Surrender Space Delay Payment and the Second Surrender Space Abatement Period shall all end on January 31, 2004. Notwithstanding the foregoing, if by January 31, 2004 Tenant has failed to surrender possession of the First Surrender Space, the Second Surrender Space or the Third Surrender Space in the condition required by this Agreement, then, in the case where Tenant has failed to surrender possession of only the First Surrender Space, the Second Surrender Space or the Third Surrender

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Space in the condition required by this Agreement, then Tenant shall be obligated to pay Landlord a Delay Payment in an amount equal to $43,118.21 per day for each day from and after February 1, 2004 that Tenant has failed to surrender possession of only the First Surrender Space, the Second Surrender Space or the Third Surrender Space; and in the case where Tenant has failed to surrender possession of only the First Surrender Space and the Second Surrender Space in the condition required by this Agreement, then Tenant shall be obligated to pay Landlord a Delay Payment in an amount equal to $59,074.66 per day for each day from and after February 1, 2004 that Tenant has failed to surrender possession of only the First Surrender Space and the Second Surrender Space; in the case where Tenant has failed to surrender possession of only the First Surrender Space and the Third Surrender Space in the condition required by this Agreement, then Tenant shall be obligated to pay Landlord a Delay Payment in the amount of $59,074.66 per day for each day from and after February 1, 2004 that Tenant has failed to surrender possession of the First Surrender Space and the Third Surrender Space; in the case where Tenant has failed to surrender possession of only the Second Surrender Space and the Third Surrender Space in the manner required by this Agreement, then Tenant shall be obligated to pay Landlord a Delay Payment in an amount equal to $54,323.25 per day for each day from and after February 1, 2004 that Tenant has failed to surrender possession of only the Second Surrender Space and the Third Surrender Space; and in the case where Tenant has failed to surrender possession of the First Surrender Space, the Second Surrender Space and the Third Surrender Space in the condition required by this Agreement, then Tenant shall be obligated to pay Landlord a Delay Payment in an amount equal to $70,279.97 per day for each day from and after February 1, 2004 that Tenant has failed to surrender possession of the First Surrender Space, the Second Surrender Space and the Third Surrender Space. The First Surrender Space

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Delay Payment, the Second Surrender Space Delay Payment and the Third Surrender Space Delay Payment are sometimes herein collectively referred to as the “Delay Payment”.

                    (iii) Notwithstanding the foregoing, (A) the First Surrender Space Abatement Period shall be reduced by the number of days that the First Surrender Space shall not be delivered to Landlord in the manner required by this Agreement as a result of any of the events or conditions described in Articles 9 and 10 of the Lease or by the damage, destruction or condemnation of all or a portion of the building to which DoubleClick is moving from the Building, (B) the Second Surrender Space Abatement Period shall be reduced by the number of days that the Second Surrender Space shall not be delivered to Landlord in the manner required by this Agreement as a result of any of the events or conditions described in Articles 9 and 10 of the Lease or by the damage, destruction or condemnation of all or a portion of the building to which DoubleClick is moving from the Building and (C) the Third Surrender Space Abatement Period shall be reduced by the number of days that the Third Surrender Space shall not be delivered to Landlord in the manner required by this Agreement as a result of any of the events or conditions described in Article 9 and 10 of the Lease or by damage or destruction or condemnation of all or a portion of the building to which Tenant is moving from the Building, and any other abatement periods described in subparagraph 5(a)(ii) shall be reduced by the number of days that the First Surrender Space, the Second Surrender Space and the Third Surrender Space has not been delivered by Tenant in the condition required by this Agreement, as a result of any of the events or conditions described in Article 9 and 10 of the Lease or by damage, destruction or condemnation of all or a portion of the building to which Tenant is moving from the Building. In addition to Tenant’s obligation to continue to pay the fixed rent as set forth in subparagraph 2(a) of this Agreement, Tenant shall be obligated to pay Landlord the

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Third Surrender Space Delay Payment, but Tenant shall only be liable for so much of the First Surrender Space Delay Payment, the Second Surrender Space Delay Payment and/or the Third Surrender Space Delay Payment as is caused by Tenant’s failure to so deliver the First Surrender Space, the Second Surrender Space and/or the Third Surrender Space and substantially complete Tenant’s Work (the payments required to be made by Tenant under subparagraph 5(a)(i) above and this subparagraph 5(a)(ii) are referred to as the “Holdover Charges”).

                    (iv) Landlord and Tenant acknowledge that Landlord is holding a letter of credit (hereinafter referred to as the “L/C”) in the amount of $11,000,000.00, which, pursuant to the terms of the Third Amendment was to be reduced to $6,000,000.00, and that according to the terms of the L/C, the final expiration date thereof is January 26, 2010. Landlord and Tenant acknowledge and agree that effective as of the date of this Agreement, subparagraph 6(f) of the Third Amendment is deleted in its entirety and accordingly, Tenant shall no longer be entitled to reduce the amount of the Letter of Credit pursuant to the terms thereof. In addition to Landlord’s rights under the Lease to draw down upon the L/C, Tenant acknowledges and agrees that Landlord has the right to draw down upon the L/C from time to time, or to retain the proceeds thereof (if Landlord has theretofore drawn down upon the L/C) in accordance with the terms of the Lease, if Tenant has not delivered the 12^th Premises to Landlord in accordance with the terms of the Third Amendment and if Tenant has not delivered each Surrender Space to Landlord with the Delivery Conditions satisfied and Tenant’s Work substantially complete on or before the respective dates set forth in subparagraph (ii) above, and receive the First Surrender Space Delay Payment, the Second Surrender Space Delay Payment and/or the Third Surrender Space Delay Payment, as the case may be. Tenant further acknowledges and agrees that Landlord shall be entitled to draw down on the L/C in accordance with the terms thereof in the

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event that the issuing bank of the L/C sends to Landlord or Tenant (and in such case Tenant shall immediately send a copy of same to Landlord) a notice that it elects not to renew or extend the L/C and Landlord will hold the proceeds thereof in accordance with the provisions of the Lease. Tenant agrees to cooperate with Landlord and execute any document requested by Landlord in connection with Landlord’s use of the proceeds of the L/C and its presentment of such L/C to the issuing bank for payment in accordance with the terms of the Lease and this Agreement. Within thirty (30) days of the satisfaction of Tenant’s obligations hereunder, Landlord agrees to return to Tenant the L/C, as same has been modified in accordance with Landlord’s right to draw down on such L/C, together with any signed instrument required by the issuer of the L/C to evidence the early termination thereof. Further, if Landlord is then holding cash proceeds of the L/C in any such reduced amount, such cash proceeds shall be returned to Tenant within thirty (30) days of the satisfaction of Tenant’s obligations hereunder. Once Tenant satisfies its obligations set forth in this Agreement, other than its obligation to pay fixed rent as set forth in the last sentence of Paragraph 2(a) above, Landlord acknowledges and agrees that the L/C shall reduce to the amount of $7,936,878.00 and Landlord shall draw down on the L/C on a monthly basis to pay such fixed rent then due, and from after the date Landlord commences to draw down on the proceeds of such L/C pursuant to Paragraph 2(a) above and this subparagraph 5(a)(iv), Tenant shall have no obligation to restore the L/C to the sum of $7,936,878.00.

               (b) Notwithstanding anything to the contrary contained in this Agreement, the acceptance of any Holdover Charges paid by Tenant pursuant to subparagraph 5(a)(i) above shall not preclude Landlord from commencing and prosecuting a holdover or summary eviction proceeding at any time after (i) October 31, 2003 with respect to the First Surrender Space, (ii) October 31, 2003 with respect to the Second Surrender Space and (iii)

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December 31, 2003 with respect to the Third Surrender Space, and the preceding sentence shall be deemed to be an “agreement expressly providing otherwise” within the meaning of Section 232-c of the Real Property Law of the State of New York.

               (c) All damages to Landlord as expressly set forth in this Agreement by reason of the holding over by Tenant may be the subject of a separate action and need not be asserted by Landlord in any summary proceedings against Tenant.

          6. If the Third Amendment is terminated, then all of Tenant’s right, title and interest in and to the 12^th Premises shall be deemed reinstated retroactive to the effective date set forth in the Third Amendment, Tenant shall remain in occupancy of the 12^th Premises (or have the right to reoccupy the 12^th Premises) pursuant to the terms of the Lease applicable to the 12^th Premises and the Lease shall be deemed further amended or certain of the terms thereof restated, as the case may be, as follows:

               (a) Sections (A)(2), (A)(3), (B), (C), and (D)(1) of Article Third of the Second Amendment, Sections (A), (B)(4), (B)(5), (B)(6), (B)(7), (B)(8), (C), (G), (H), (I)(3), (J), and (K) of Article Fourth of the Second Amendment, Articles Seventh, Ninth, Twelfth and Fourteenth of the Second Amendment, and Sections 52(K) and 52(I) of the Lease shall be deemed deleted from the Lease.

               (b) The term “Tenant’s Proportionate Tax Share” as set forth in subsection 42(A)(iii) of the Lease with respect to the 12^th Premises shall be 7.126%.

               (c) The term “Tenant’s Proportionate Operating Share” as set forth in subsection 43(A)(6) of the Lease with respect to the Remaining Space shall be 7.126%.

               (d) Section 56(J)(1) of the Lease is hereby deleted from the Lease in its entirety and the following shall be inserted in lieu thereof:

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              (1) Landlord shall supply condenser water free of charge during “regular hours” (7:00 a.m. – 6:00 p.m.) of “business days” (which term is used herein to mean all days except Saturdays, Sundays and days (hereinafter referred to as “holidays”) observed by the Federal or New York State government as legal holidays or the building service employees’ union holidays) throughout the year and at the rate of $50.00 per hour during “overtime hours” (6:00 p.m. – 7:00 a.m.) for up to 400 tons to serve the 12^th Premises. Landlord shall also make available to Tenant during the term of the lease supplemental condenser water to serve the 12th Premises for up to thirty (30) tons (i.e., two (2) 15 ton units) during regular hours and overtime hours free of charge on business days and for all hours on holidays. With respect to any condenser water required to supply any air-conditioning which Tenant may be permitted to install in excess of 830 tons, Landlord shall make available to Tenant, and Tenant shall pay for, as additional rent, such additional condenser water at the rate of $.072 per ton per hour during regular hours and overtime (or after) hours of business days and for all hours on holidays.

               (e) The proportionate share set forth in subsection 56(J)(2) of the Lease with respect to the Remaining Space shall be 7.126%.

               (f) The amount of the L/C shall be reduced to $5,000,000.00. Landlord agrees to execute an amendment to the L/C or otherwise direct the Issuer of the L/C, as necessary, to facilitate the reduction of the Letter of Credit.

          7. Landlord and Tenant agree that the dedicated passenger elevator cab (hereinafter referred to as the “Dedicated Elevator”) in the high rise elevator bank servicing the 12^th, 14^th 15^th and 16^th floors and the lobby of the Building for the exclusive use of Tenant and its visitors and invitees pursuant to Section (a) of Article Twelfth of the Second Amendment was relinquished by Tenant prior to the date of this Agreement and Tenant represents to Landlord that no work with respect to the Dedicated Elevator has been performed. To the extent the sign afforded to Tenant in connection with the Dedicated Elevator pursuant to Section (b) of Article Twelfth of the Second Amendment has not been removed as of the date of this Agreement, then, within thirty (30) days of the Third Surrender Date, Tenant shall remove such sign and repair any damage to the lobby wall of the Building resulting from such removal.

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          8. Tenant represents and warrants to Landlord that Tenant has not cut the slab between the 15^th Premises and the 16^th floor of the Building, as provided in Section (c)(3) of Article Twelfth of the Second Amendment.

          9. Prior to the Third Surrender Date, Tenant shall, to the extent previously installed by or on behalf of Tenant and not removed as of the date of this Agreement, remove the Lobby Name Sign, the Roof Signs and the Outdoor Name Signs (as set forth in Article Ninth of the Second Amendment) and repair any damage to any portion(s) of the Building resulting from such removal and Tenant hereby relinquishes all rights to install any such Lobby Name Sign, Roof Sign and/or Outdoor Name Sign regardless of whether the Third Amendment is terminated.

          10. (a) In consideration of Landlord’s agreement to permit the termination of the Lease with respect to the Surrender Space, Tenant shall pay to Landlord the sum of $9,835,757.00 (hereinafter referred to as the “Termination Fee”). Tenant shall deliver to Greenberg Traurig, LLP, together with its execution and delivery of this Agreement, by wire transfer the Termination Fee to Landlord in accordance with the wiring instructions set forth on Exhibit C annexed hereto.

               (b) In further consideration of Landlord agreeing to enter into this Agreement with Tenant, Tenant agrees to pay to Landlord the sum of $48,000.00, representing the reimbursement to Landlord for Landlord’s actual legal fees incurred in connection with the drafting, preparation, negotiation and execution of this Agreement and any and all other documents in connection with the same, which includes all out-of-pocket third party costs and expenses incurred by Landlord in connection therewith.

               (c) In the event the Surrender Date is later than the Effective Date with respect to any Surrender Space and provided that Tenant is not then in default beyond the giving

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of notice (if required under the Lease and this Agreement) and the expiration of all applicable cure periods of its obligation to pay any fixed rent and additional rent under the Lease, then the Termination Fee shall be adjusted in accordance with the schedule annexed hereto as Exhibit D and Landlord agrees to return the difference between the Termination Fee and the adjusted Termination Fee within thirty (30) days of the later to occur of the Third Effective Date and the Third Surrender Date.

          11. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof, and all understandings and agreements heretofore or simultaneously had between the parties are merged in and are contained in this Agreement.

          12. Landlord and Tenant each represent and warrant to the other that it has not relied upon any representation or warranty, express or implied, in entering into this Agreement, except those which are set forth herein.

          13. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in that State.

          14. Landlord and Tenant covenant, warrant and represent that there was no broker or finder instrumental in consummating this Agreement other than Cushman & Wakefield, Inc., (hereinafter referred to as “Cushman”), Newmark Company Real Estate, Inc. (“Newmark”), Colliers ABR, Inc. (“Colliers”) and Jones Lang LaSalle Americas, Inc. (“JLL”) (Cushman, Newmark, Colliers and JLL are hereinafter collectively referred to as the “Broker”) and that no conversations or negotiations were had with any broker or finder other than the Broker. Landlord and Tenant agree to indemnify and to hold each other harmless from and against any claims or suits for a brokerage commission or finder’s fee arising out of any conversations or negotiations had by Tenant or Landlord with respect to the surrender of the Surrender Space and

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this Agreement with any broker or finder other than the Broker. Tenant agrees to pay Cushman the sum of $1,063,254.61 as a brokerage commission in connection with the Associated Press Lease.

          15. (a) All notices, consents and approvals required or permitted to be given hereunder shall be (unless otherwise expressly provided herein) in writing and shall be given by registered or certified mail, return receipt requested, or by nationally recognized overnight courier service providing for receipted delivery to the addresses set forth on the first page hereof, and if to Tenant, attention: General Counsel, unless the other party hereto shall be notified of another address in writing. Copies of all notices to Tenant in connection with this Agreement shall be sent, in the same manner, to Loeb & Loeb, LLP, 345 Park Avenue, New York, New York 10154, Attention: Scott I. Schneider, Esq. All notices, consents, approvals payments and statements shall be deemed to have been given three (3) days after same is mailed if mailed as aforesaid or upon receipt or rejection if sent by overnight courier service as aforesaid.

               (b) Notices to be provided by Tenant pursuant to this Agreement to Landlord, Landlord’s attorneys, Associated Press, and Associated Press’ attorneys should be sent to the respective parties at the following addresses;

If to Landlord:

450 Westside Partners L.L.C.
c/o Max Capital Management Corp.
230 Park Avenue
New York, New York 10169
Attention: Anthony Westreich
Telecopier No.: (212) 949-6413

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If to Landlord’s attorneys:

Greenberg Traurig, LLP
200 Park Avenue
New York, New York 10166
Attention: Barry E. Shimkin, Esq.
Telecopier No.: (212) 801-6400

If to Associated Press:

Associated Press, Inc.
50 Rockefeller Center
New York, New York 10020
Attention: Director – Administrative Services
Telecopier No.: (212) 621-7028

and

Associated Press, Inc.
50 Rockefeller Center
New York, New York 10020
Attention: David Tomlin, Esq.
Telecopier No.: (212) 621-5456

If to Associated Press’ attorneys:

Davis & Gilbert, LLP
1740 Broadway
New York, New York 10019
Attention: Gerald R. Uram, Esq.
Telecopier No.: (212) 974-7024

          16. This Agreement may not be changed orally, and shall be binding upon and inure to the benefit of the parties to it, their respective heirs, successors and, as permitted, their assigns. If any provision of this Agreement, or its application to any situation, shall be invalid or unenforceable to any extent, the remainder of this Agreement, or the application thereof to situations other than that as to which it is invalid or unenforceable, shall not be affected thereby, and every provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

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          17. Tenant hereby covenants to pay (and comply with all laws in respect of) any and all federal, state and local taxes which may be due and otherwise payable with respect to the transactions contemplated by this Agreement (which taxes shall include, but not be limited to, the New York City Real Property Transfer Tax and the New York State Real Property Transfer Gains Tax) and to prepare and file all instruments, applications and other documentation in connection therewith. Tenant hereby indemnifies Landlord from any and all liabilities, loss, obligations, damages, penalties, claims, costs and expenses, including reasonable attorneys’ fees, which Landlord may incur in the event Tenant fails to pay promptly when due any of such taxes or comply with any laws in respect thereof.

          18. Except as otherwise expressly provided in this Agreement, the Lease shall remain and continue unmodified and in full force and effect and in accordance with its terms with respect to the Remaining Space.

[signatures follow on next page]

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

LANDLORD:
450 WESTSIDE PARTNERS, L.L.C.,
a Delaware Limited Liability Company
By: Max/FW Management, L.L.C.
By:	Max Capital Management Corp., Manager

By:		/s/ Anthony Westreich
	Title: President

TENANT:
DOUBLECLICK INC.
By:	/s/ Bruce Dalziel
	Title: Chief Financial Officer

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EXHIBIT D
Termination Payment Schedule

     If any portion of the Surrender Space is not delivered in accordance with the scheduled delivery dates, then the Termination Fee shall be adjusted/recalculated on a per diem basis in accordance with the “Timing Sensitivity Matrix” (the “Matrix”) that follows; provided, however, that in calculating such Termination Fee on the Matrix, the work allowance amount of $4,923,434.00 (that was applicable to the 15^th Floor under the Lease) shall be deducted from each dollar amount on the Matrix. By way of example, if the Third Surrender Space was delivered by December 1, 2003, and the First Surrender Space was delivered by November 1, 2003, but the Second Surrender Space was delivered on February 1, 2004, the adjusted Termination Fee would be $9,639,632.00 (i.e., $14,563,066.00 - $4,923,434.00).

37 EX-10.5 7 y89015exv10w5.htm AGREEMENT OF LEASE

Exhibit 10.5

AGREEMENT OF LEASE

111 CHELSEA LLC

LANDLORD

AND

DOUBLECLICK INC.

TENANT

PREMISES:	Portion of the Tenth (10th) Floor
	111 Eighth Avenue
	New York, New York 10011
DATED:	as of July 1, 2003

TABLE OF CONTENTS

		Page No.
Article 1.	Definitions; Interpretation		1
Article 2.	Demise, Premises, Term, Rent		5
Article 3.	Use and Occupancy		7
Article 4.	Alterations		9
Article 5.	Condition of the Premises; Landlord’s Work		12
Article 6.	Repairs; Floor Load		14
Article 7.	Real Estate Tax Increases		15
Article 8.	Compliance With Laws		19
Article 9.	Subordination and Non-Disturbance; Estoppel Certificates		21
Article 10.	Services		23
Article 11.	Insurance		33
Article 12.	Destruction of the Premises; Property Loss or Damage		35
Article 13.	Eminent Domain		37
Article 14.	Assignment and Subletting		38
Article 15.	Access to Premises		47
Article 16.	Default		48
Article 17.	Remedies and Damages		51
Article 18.	Fees and Expenses		53
Article 19.	No Representations by Landlord		53
Article 20.	End of Term		54
Article 21.	Quiet Enjoyment		54
Article 22.	No Waiver; Non-Liability		55
Article 23.	Waiver of Trial By Jury		56
Article 24.	Inability To Perform		56
Article 25.	Bills and Notices		57
Article 26.	Rules and Regulations		57
Article 27.	Broker		57
Article 28.	Indemnity		58
Article 29.	Temporary Space		59
Article 30.	Landlord’s Contribution		60
Article 31.	Right of First Offer		61
Article 32.	Security Deposit		64
Article 33.	Termination Option		67
Article 34.	Miscellaneous		67
Exhibit A:	Floor Plan of the Premises
Exhibit B:	Rules and Regulations
Exhibit C:	Landlord’s Work
Exhibit D:	Floor Plan of the Temporary Space
Exhibit E:	Form of Letter of Credit
Exhibit F:	Landlord’s Consulting Professionals

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          AGREEMENT OF LEASE, dated as of July 1, 2003, between 111 CHELSEA LLC, a Delaware limited liability company with an address c/o Taconic Investment Partners LLC, 111 Eighth Avenue, New York, New York 10011 (“Landlord”), and DOUBLECLICK INC., a Delaware corporation with an address at 450 West 33rd Street, New York, New York 10001 (“Tenant”).

W I T N E S S E T H:

          The parties hereto, for themselves, their legal representatives, successors and assigns, covenant and agree as follows.

     ARTICLE 1. DEFINITIONS; INTERPRETATION

          Section 1.1 For all purposes of this Lease, the following terms shall have the following meanings:

Additional Rent:	Tenant’s Tax Payment, and any and all other sums, other than Fixed Rent, payable by Tenant to Landlord under this Lease.
Affiliate:	With respect to any Person, any other Person that, directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.
Alterations:	Alterations, installations, improvements, additions or other physical changes (other than decorations, movable fixtures and equipment), including the Initial Alterations, in and to the Premises and elsewhere in the Building, made by or on behalf of Tenant prior to and during the Term or any renewal or extension thereof.
Base Rate:	The annual rate of interest publicly announced from time to time by Citibank, N.A., New York, New York (or any successor thereto) as its “base rate”, or such other term as may be used by Citibank, N.A. from time to time for the rate presently referred to as its base rate.
Building:	All the buildings, equipment and other improvements and appurtenances of every kind and description now located or hereafter erected, constructed or placed upon the land and any and all alterations, renewals, replacements, additions and substitutions thereto, presently known by the address of 111 Eighth Avenue, New York, New York.
Building Systems:	The mechanical, electrical, heating, ventilating, air conditioning, elevator, plumbing, sanitary, fire suppression, life-safety and other service systems of the Building, but not including the portions of such systems installed in the Premises or elsewhere in the Building by or on behalf of Tenant and exclusively serving the Premises.
Business Days:	All days, excluding Saturdays, Sundays, and all days observed by either the State of New York, the United States of America or by the labor unions servicing the Building as legal holidays.

Commencement
Date:	July 1, 2003.
Control:	As to any Entity: (a) the ownership, directly or indirectly, of more than fifty percent (50%) of the Ownership Interests of such entity, and (b) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Entity, whether through the ownership of Ownership Interests or by contract.
Default Rate:	A rate per annum equal to three (3) percentage points above the Base Rate.
Entity:	A corporation, limited liability company, limited partnership, limited liability partnership, general partnership, business trust, foundation, or any other legal entity in which Ownership Interests may be owned and transferred.
Expiration Date:	June 30, 2018.
Governmental
Authority:	Any of the United States of America, the State of New York, the City of New York, any political subdivision thereof and any agency, department, commission, board, bureau or instrumentality of any of the foregoing, now or hereafter existing, having jurisdiction over the Real Property or any portion thereof or the vaults, curbs, sidewalks, streets and areas adjacent thereto.
HVAC:	Heat, ventilation and air-conditioning.
Hazardous
Materials:	Any substances, materials or wastes regulated by any Governmental Authority and deemed or defined as a “hazardous substance”, “hazardous material”, “toxic substance”, “toxic pollutant”, “contaminant”, “pollutant”, “solid waste”, “hazardous waste” or words of similar import under applicable Laws, including oil and petroleum products, natural or synthetic gas, polychlorinated biphenyls, asbestos in any form, urea formaldehyde, radon gas, or the emission of non-ionizing radiation, microwave radiation or electromagnetic fields at levels in excess of those (if any) specified by any Governmental Authority or which may cause a health hazard or danger to property, or the emission of any form of ionizing radiation.
Initial Alterations:	Defined in Section 5.3.
Landlord Party:	Any of Landlord, any Affiliate of Landlord, Landlord’s managing and leasing agents for the Building, each Mortgagee and Superior Lessor, and each of their respective direct and indirect partners, officers, shareholders, directors, members, trustees, beneficiaries, employees, principals,

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	contractors, licensees, invitees, servants, advisors, agents and representatives.
Landlord’s Work:	Defined in Section 5.2.
Law or Laws:	All present and future laws, rules, orders, ordinances, regulations, statutes, requirements, codes, executive orders, rules of common law, and any judicial interpretations thereof, extraordinary as well as ordinary, of all Governmental Authorities, including the Americans with Disabilities Act (42 U.S.C. §12,101 et seq.), New York City Local Law 58 of 1987, and any law of like import, and all rules, regulations and government orders with respect thereto, and of any applicable fire rating bureau, or other body exercising similar functions, of general applicability or affecting the Real Property or the maintenance, use or occupation thereof, or any street or sidewalk comprising a part of or in front thereof or any vault in or under the Building.
Mortgage:	Any mortgage or trust indenture which may now or hereafter affect the Real Property, the Building or any Superior Lease and the leasehold interest created thereby, and all renewals, extensions, supplements, amendments, modifications, consolidations and replacements thereof or thereto, substitutions therefor, and advances made thereunder.
Mortgagee:	Any mortgagee, trustee or other holder of a Mortgage.
Ownership Interests:	As to any Entity, the outstanding voting stock, membership interests, partnership interests or other legal or equitable ownership interests of any kind, however characterized, in such Entity.
Permitted Use:	The use of the Premises by Tenant as (i) administrative and general offices, and (ii) as to not more than 5,000 Rentable Square Feet of the Premises, as a data center for the installation, operation and maintenance of telecommunications switching and transmission equipment and facilities in connection with Tenant’s business (the “Permitted Data Center”), and for no other purposes, except as otherwise expressly provided in this Lease.
Person:	Any Entity, estate, trust, unincorporated association, tenancy-in-common, or any Governmental Authority.
Premises:	A portion of the tenth (10th) floor of the Building, as shown on the floor plan attached to this Lease as Exhibit A.
Premises Area:	The Rentable Square Foot area of the Premises, consisting of a total of 76,000 Rentable Square Feet, as the Premises Area may be increased or decreased from time to time pursuant to this Lease.
Real Property:	The Building, together with the plot of land upon which it stands.

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Rent:	Collectively, Fixed Rent and Additional Rent.
Rent
Commencement
Date:	The date that is six (6) months after the Commencement Date.
Rentable Square
Feet:	The deemed rentable area of the Building or any portion thereof, computed on the basis of the current standard employed by Landlord on the date hereof with respect to the calculation of the deemed Rentable Square Foot area of the Building; provided, however, that in no event shall such deemed Rentable Square Footage constitute or imply any representation or warranty by Landlord as to the actual size of any floor or other portion of the Building, including the Premises.
Rules and
Regulations:	The rules and regulations attached to this Lease as Exhibit B, and such additional rules and regulations as Landlord may adopt from time to time.
Security Deposit:	Defined in Section 32.1.
Substantial
Completion:	As to any construction performed by any party in the Premises, including the Initial Alterations, any other Alterations, or Landlord’s Work, that such work has been completed substantially in accordance with (i) the provisions of this Lease applicable thereto, (ii) the plans and specifications for such work, and (iii) all applicable Laws, except for minor details of construction, decoration and mechanical adjustments, if any, the noncompletion of which does not materially interfere with Tenant’s use of the Premises or performance of the Initial Alterations, or which, in accordance with good construction practice, should be completed after the completion of other work to be performed in the Premises.
Superior Lease:	Any ground or underlying lease of the Real Property or any part thereof, now existing or in the future entered into by Landlord, and all renewals, extensions, supplements, amendments and modifications thereof.
Superior Lessor:	A lessor under a Superior Lease.
Tenant Party:	Any of Tenant, any Affiliate of Tenant, any subtenant or any other occupant of the Premises (except for any subtenant or occupant of the Leaseback Space pursuant to Section 14.4), and their respective direct or indirect partners, officers, shareholders, directors, members, trustees, beneficiaries, employees, principals, contractors, licensees, invitees, servants, agents or representatives.
Tenant’s Property:	Tenant’s movable fixtures and movable partitions, telephone and other communications equipment, computer systems, furniture, trade fixtures,

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	furnishings, and other items of personal property which are removable without material damage to the Premises or Building.
Term:	The term of this Lease, which shall commence on the Commencement Date and shall expire on the Expiration Date.
Unavoidable Delays:	Defined in Article 24.

          Section 1.2 All of the Exhibits attached to this Lease are incorporated in and made a part of this Lease, but in the event of any conflict or inconsistency between the provisions of this Lease and the Exhibits, the provisions of this Lease shall control. As used in this Lease: (a) the word “or” is not exclusive and the word “including” is not limiting, (b) references to a law include any rule or regulation issued under the law and any amendment to the law, rule or regulation, (c) whenever the words “include”, “includes”, or “including” appear, they shall be deemed to be followed by the words “without limitation”, (d) personal pronouns shall be deemed to include the other genders and the singular to include the plural, (e) all references to notices to be given by or to a party shall, unless otherwise expressly stated, be deemed to refer to written notices, (f) all Article, Section and Exhibit references shall, unless otherwise expressly stated, be deemed references to the Articles, Sections and Exhibits of this Lease, (g) if a party has agreed in this Lease that it will not unreasonably withhold its consent or approval, such consent or approval shall not be unreasonably conditioned or delayed, and (h) whenever a financial obligation is stated to be at a party’s expense, such obligation shall be at such party’s sole cost and expense, unless expressly stated to the contrary. Wherever a period of time is stated in this Lease as commencing or ending on specified dates, such period of time shall be deemed (i) inclusive of such stated commencement and ending dates, and (ii) to commence at 12:00 a.m. Eastern Time on such stated commencement date and to end at 11:59 p.m. Eastern Time on such stated ending date. The captions used in this Lease are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of this Lease nor the intent of any provision hereof.

     ARTICLE 2. DEMISE, PREMISES, TERM, RENT

          Section 2.1 (a) Landlord hereby leases the Premises to Tenant, and Tenant hereby leases the Premises from Landlord, for the Term, at an annual rent (“Fixed Rent”) as follows:

          (i) One Million Sixty-Four Thousand and 00/100 Dollars ($1,064,000.00) per annum ($88,666.67 per month) for the period commencing on the Rent Commencement Date and ending on December 31, 2004;

          (ii) One Million One Hundred Six Thousand Five Hundred Sixty and 00/100 Dollars ($1,106,560.00) per annum ($92,213.33 per month) for the period commencing on January 1, 2005 and ending on December 31, 2005;

          (iii) Two Million Two Hundred Thirteen Thousand Nine Hundred Seventy-One and 20/100 Dollars ($2,213,971.20) per annum ($184,497.60 per month) for the period commencing January 1, 2006 and ending on December 31, 2006;

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          (iv) Two Million Two Hundred Fifty-Eight Thousand Two Hundred Fifty and 62/100 Dollars ($2,258,250.62) per annum ($188,187.55 per month) for the period commencing on January 1, 2007 and ending on December 31, 2007;

          (v) Two Million Three Hundred Three Thousand Four Hundred Fifteen and 64/100 Dollars ($2,303,415.64) per annum ($191,951.30 per month) for the period commencing on January 1, 2008 and ending on December 31, 2008;

          (vi) Two Million Five Hundred Seventy-Seven Thousand Four Hundred Eighty-Three and 95/100 Dollars ($2,577,483.95) per annum ($214,790.33 per month) for the period commencing on January 1, 2009 and ending on December 31, 2009;

          (vii) Two Million Six Hundred Twenty-Nine Thousand Thirty-Three and 63/100 Dollars ($2,629,033.63) per annum ($219,086.14 per month) for the period commencing on January 1, 2010 and ending on December 31, 2010;

          (viii) Two Million Six Hundred Eighty-One Thousand Six Hundred Fourteen and 30/100 Dollars ($2,681,614.30) per annum ($223,467.86 per month) for the period commencing on January 1, 2011 and ending on December 31, 2011;

          (ix) Two Million Seven Hundred Thirty-Five Thousand Two Hundred Forty-Six and 59/100 Dollars ($2,735,246.59) per annum ($227,937.22 per month) for the period commencing on January 1, 2012 and ending on December 31, 2012;

          (x) Two Million Seven Hundred Eighty-Nine Thousand Nine Hundred Fifty-One and 52/100 Dollars ($2,789,951.52) per annum ($232,495.96 per month) for the period commencing on January 1, 2013 and ending on December 31, 2013;

          (xi) Three Million Seventy-Three Thousand Seven Hundred Fifty and 55/100 Dollars ($3,073,750.55) per annum ($256,145.88 per month) for the period commencing on January 1, 2014 and ending on December 31, 2014;

          (xii) Three Million One Hundred Thirty-Five Thousand Two Hundred Twenty-Five and 56/100 Dollars ($3,135,225.56) per annum ($261,268.80 per month) for the period commencing on January 1, 2015 and ending on December 31, 2015;

          (xiii) Three Million One Hundred Ninety-Seven Thousand Nine Hundred Thirty and 07/100 Dollars ($3,197,930.07) per annum ($266,494.17 per month) for the period commencing on January 1, 2016 and ending on December 31, 2016;

          (xiv) Three Million Two Hundred Sixty-One Thousand Eight Hundred Eighty-Eight and 67/100 Dollars ($3,261,888.67) per annum ($271,824.06 per month) for the period commencing on January 1, 2017 and ending on December 31, 2017; and

          (xv) Three Million Three Hundred Twenty-Seven Thousand One Hundred Twenty-Six and 45/100 Dollars ($3,327,126.45) per annum ($277,260.54 per

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month) for the period commencing on January 1, 2018 and ending on the Expiration Date.

          (b) Tenant agrees to pay Fixed Rent to Landlord without notice or demand, in lawful money of the United States, in monthly installments in advance on the first (1st) day of each calendar month during the Term, at the office of Landlord or such other place as Landlord may designate, without any set-off, offset, abatement (except as expressly provided in this Lease) or deduction whatsoever. Fixed Rent and Additional Rent shall be payable by check drawn on a bank that is a member of the New York Clearinghouse Association, or on any other bank reasonably acceptable to Landlord either having an office in New York City or which is chartered as a national banking association, or by wire transfer of immediately available funds.

          Section 2.2 Notwithstanding anything to the contrary contained herein, upon execution and delivery of this Lease, Tenant shall pay to Landlord the sum of Eighty-Eight Thousand Six Hundred Sixty-Six and 67/100 Dollars ($88,666.67) representing the installment of Fixed Rent for the first (1^st) full calendar month of the Term starting on or after the Rent Commencement Date. If the Rent Commencement Date occurs on a date other than the first (1^st) day of any calendar month, Tenant shall also pay to Landlord, on the Rent Commencement Date, a sum equal to Two Thousand Nine Hundred Fifty-Five and 56/100 Dollars ($2,955.56), multiplied by the number of calendar days in the period from the Rent Commencement Date to the last day of the month in which the Rent Commencement Date occurs.

          Section 2.3 Notwithstanding anything to the contrary set forth in Section 2.1, Tenant shall have no obligation to pay Fixed Rent on account of the period commencing on the Commencement Date and ending one day prior to the Rent Commencement Date. Nothing contained herein shall affect Tenant’s obligation to make any other payment under this Lease during the aforementioned period.

     ARTICLE 3. USE AND OCCUPANCY

          Section 3.1 Tenant shall use and occupy the Premises for the Permitted Use and for no other purpose. Tenant shall not use or occupy or permit the use or occupancy of any part of the Premises in any manner not permitted hereunder, or which in Landlord’s reasonable judgment would adversely affect, in any material respect (i) any services required to be furnished to any tenant or other occupant of the Building, (ii) the use and occupancy of any part of the Building by any other tenant or other occupant, or (iii) the exterior appearance or reputation of the Building.

          (b) In connection with and ancillary to the primary use of the Premises for the Permitted Uses, Tenant may, at Tenant’s expense and subject to the provisions of this Lease and applicable Laws, use certain portions of the Premises, for Tenant’s own business requirements only, as a pantry for use solely by Tenant and its invitees, which may contain reheating but not cooking equipment, including items such as a microwave, coffee maker, sink, ice maker, vending machines, tables and chairs, dishwasher, hot water heater and refrigerator. In addition, Tenant may, subject to the provisions of this Lease and applicable Laws, use certain portions of the Premises as (i) private lavatories (including shower facilities), (ii) employee lounges and recreation areas, including exercise rooms or areas, and (iii) the Permitted Data Center. All of

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the foregoing uses shall be upon and subject to the satisfaction of the following conditions (A) no cooking or other preparation of food (other than the reheating of food by microwave and the preparation of beverages) shall be done in any such pantry, (B) no food or beverages will be kept or served in the Premises in a manner or under any conditions that result in fumes or odors being emitted from, or detectable outside of, the Premises, (C) Tenant will keep such portion or portions of the Premises in a clean and sanitary condition and free of refuse and vermin (including the use of extermination services whenever required), and (D) Tenant will keep the plumbing and sanitary systems and installations serving such portion or portions of the Premises to the points they connect with the main vertical risers and stacks of the Building in a good state of repair and operating condition.

          Section 3.2 Tenant shall not use or permit the Premises or any part thereof to be used: (a) for the business of printing or other manufacturing of any kind, (b) as a retail branch of a bank or savings and loan association, or as a retail loan company, or as a retail stock broker’s or dealer’s office, (c) for the storage of significant quantities of merchandise, (d) for the distribution, by mail-order, electronically, or otherwise, of merchandise originating at or shipped from the Premises, (e) as a restaurant or bar or for the sale of food or beverages, (f) as a news or cigar stand, (g) as an employment agency, labor union office, school, physician’s or dentist’s office, dance or music studio, (h) as a barber shop or beauty salon, (i) for the sale, at retail or otherwise, of any goods or products, (j) by the United States Government, the City or State of New York, any Governmental Authority (except for any sublease permitted pursuant to Section 14.1(b)), any foreign government, the United Nations or any agency or department of any of the foregoing or any Person having sovereign or diplomatic immunity, (k) for the rendition of medical, dental or other therapeutic or diagnostic services, (l) for the conduct of an auction, or (m) except for the Permitted Data Center, for the installation, operation and maintenance of a data center or any switching, electronic, optronic and transmission equipment and facilities in connection with the operation of a telecommunications, web hosting or colocation business.

          Section 3.3 In the event that on the later to occur of (a) the Commencement Date, or (b) the date Tenant has delivered to Landlord (i) payment of the first month’s rent pursuant to Section 2.2, (ii) the insurance certificates required pursuant to Section 11.1, and (iii) the Letter of Credit pursuant to Section 32.2, Landlord fails to deliver possession of the Premises to Tenant as required under this Lease, then, in addition to any other rights and remedies available to Tenant under applicable Laws, Fixed Rent and Additional Rent shall be abated until Landlord so delivers possession of the Premises to Tenant.

          Section 3.4 Landlord shall make available to Tenant, at Landlord’s expense, the right to park two (2) designated vehicles for Tenant’s executives, on an unreserved monthly basis, in the parking garage located in the Building (the “Spaces”), on a nonexclusive basis in common with Landlord and other tenants of the Building and their officers, employees, contractors, agents, customers and invitees, subject to the rules and regulations promulgated by the operator of the parking garage from time to time. In no event shall this Section 3.4 be deemed to convey to Tenant any leasehold or other proprietary interest in or to the Spaces. Without limitation of the foregoing, Landlord shall have no liability to Tenant in the event that the parking garage in the Building ceases to operate or is prevented from operating, or the Spaces become unavailable for any reason whatsoever, other than as the result of the negligence or willful misconduct of Landlord or any Landlord Party.

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     ARTICLE 4. ALTERATIONS

          Section 4.1 Tenant shall not make any Alterations without Landlord’s prior written consent in each instance in accordance with Section 4.2, other than decorative Alterations such as painting, wall coverings, floor coverings, shelving and millwork not permanently affixed to the Premises (collectively, “Decorative Alterations”), as to which Landlord’s consent shall not be required. Landlord’s consent shall be granted or denied in Landlord’s sole discretion; provided, however, that Landlord shall not unreasonably withhold its consent to Alterations proposed to be made by Tenant provided that such Alterations (a) are non-structural and do not, in any material respect, adversely affect the Building Systems or services, (b) are performed only by contractors approved in writing by Landlord as provided in Section 4.2(b), (c) do not adversely affect, in any material respect, any part of the Building other than the Premises, and (d) do not adversely affect, in any material respect, any service required to be furnished by Landlord to Tenant or to any other tenant or occupant of the Building.

          Section 4.2 (a) Prior to making any Alterations (other than Decorative Alterations), Tenant shall (i) except for Decorative and Minor Alterations (defined in Section 4.2(c)), submit to Landlord, for Landlord’s written approval, detailed plans and specifications therefor in form reasonably satisfactory to Landlord, (ii) if such Alterations require a filing with any Governmental Authority or require the consent of such authority, then such plans and specifications shall (A) be prepared and certified by a registered architect or licensed engineer, and (B) comply with all Laws to the extent necessary for such governmental filing or consent, (iii) at its expense, obtain all required permits, approvals and certificates, and (iv) furnish to Landlord duplicate original insurance policies or certificates of worker’s compensation (covering all persons to be employed by Tenant, and all contractors and subcontractors supplying materials or performing work in connection with such Alterations) and commercial general liability (including property damage coverage) insurance and Builder’s Risk coverage (issued on a completed value basis) all in such form, with such companies, for such periods and in such amounts as Landlord may reasonably require, naming Landlord and its managing agent, and any Superior Lessor and any Mortgagee as to which Tenant has been given notice as additional insureds. Except as otherwise expressly set forth herein, all Alterations shall be performed by Tenant at Tenant’s expense (A) in a good and workmanlike manner using materials of first class quality, (B) in compliance with all Laws, and (C) in accordance with the plans and specifications previously approved by Landlord (where plans and specifications are required hereunder). Tenant shall at its expense obtain all approvals, consents and permits from every Governmental Authority having or claiming jurisdiction prior to, during and upon completion of any Alterations. Tenant shall promptly reimburse Landlord, as Additional Rent within thirty (30) days after demand, for any and all actual out-of-pocket costs and expenses incurred by Landlord (without markup) in connection with Landlord’s review of Tenant’s plans and specifications for any such Alteration.

          (b) Landlord shall not unreasonably withhold, or delay for more than five (5) Business Days, its approval of the contractors proposed to be used by Tenant for Alterations, provided that in the case of the fire safety trade, Tenant shall select its contractors and subcontractors from Landlord’s list of approved contractors, which list may be modified by Landlord from time to time. Landlord has approved JLS Industries, Inc. as the contractor to be employed by Tenant in the performance of the Initial Alterations.

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          (c) Notwithstanding the foregoing provisions of this Article 4, and in addition to Decorative Alterations as to which no monetary limit shall apply, Tenant shall be permitted to make minor, non-structural alterations to the Premises (“Minor Alterations”) upon prior notice to Landlord, but without the necessity of procuring Landlord’s consent thereto, provided that the estimated cost of each Minor Alteration does not exceed $250,000.00 in any one instance. The provisions of 4.2(b) shall be applicable to Minor Alterations. Prior to commencing any Minor Alteration, Tenant shall furnish Landlord with (i) working drawings or plans for such Minor Alteration in sufficient detail to permit Landlord to determine that such Alteration complies with the requirements hereof, and (ii) the names of the contractors proposed to be used by Tenant for such Minor Alteration.

          (d) Prior to Landlord’s approval or disapproval of the plans and specifications for any Alterations, Tenant and its contractors may perform preparatory work in the Premises such as measurements, painting, and other non-structural work that would not, if performed separately, require Landlord’s consent under this Article 4; provided, however, that Landlord shall have no liability to Tenant in connection with such preparatory work if Landlord shall disapprove, in accordance with the provisions of this Lease, the plans and specifications for the Alterations to which such preparatory work relates.

          (e) Upon completion of any Alterations, Tenant, at its expense, shall promptly obtain certificates of final approval of such Alterations as may be required by any Governmental Authority, and shall furnish Landlord with copies thereof, together with “as-built” plans and specifications for such Alterations prepared on an Autocad Computer Assisted Drafting and Design System, Version 12 or later (or such other system or medium as Landlord may accept in Landlord’s sole discretion).

          Section 4.3 (a) All Alterations made by or on behalf of Tenant shall become the property of Landlord on the Expiration Date or sooner termination of this Lease. Landlord may condition its approval of Alterations that differ materially from ordinary office installations, such as kitchen facilities, vaults, shower facilities, raised floors, internal stairways, or slab penetrations, by requiring Tenant to agree in writing to remove such Alterations at the end of the Term as set forth in this Section 4.3 (any such Alterations that Landlord so requires Tenant to agree to remove, “Non-Standard Alterations”). Landlord acknowledges that Alterations by Tenant consisting of supplemental HVAC equipment or pantries not containing cooking equipment (other than microwave ovens) will not constitute Non-Standard Alterations. In addition, Tenant shall have no obligation to remove or restore telephone wiring or computer or data cabling installed by Tenant in the Building, except to the extent provided in Section 10.10. If Landlord does not specify at the time of its approval that an Alteration constitutes a Non-Standard Alteration, Tenant shall have no obligation to remove such Alteration on the Expiration Date or sooner termination of this Lease. On the Expiration Date or earlier termination of the Term (i) Tenant shall remove Tenant’s Property from the Premises, and (ii) unless Landlord notifies Tenant no later than sixty (60) days prior to the Expiration Date that any or all of the Non-Standard Alterations shall not be removed from the Premises, Tenant shall remove the Non-Standard

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Alterations from the Premises, at Tenant’s expense. Tenant shall repair and restore in a good and workmanlike manner (reasonable wear and tear and damage for which Tenant is not liable hereunder excepted) any damage to the Premises and the Building caused by such removal of Tenant’s Property and the Non-Standard Alterations. Any of the Non-Standard Alterations or Tenant’s Property that Tenant is required to remove and that are not so removed by Tenant at or prior to the Expiration Date or earlier termination of the Term shall be deemed abandoned and may, at the election of Landlord, either be retained as Landlord’s property or be removed from the Premises by Landlord, and Tenant shall reimburse Landlord, as Additional Rent within thirty (30) days after demand, for Landlord’s actual out-of-pocket costs incurred in connection with such removal. The provisions of this Section 4.3 shall survive the Expiration Date or earlier termination of this Lease.

          (b) Landlord agrees to respond to any written request for approval of plans and specifications for the Initial Alterations within five (5) Business Days after delivery to Landlord (with simultaneous hand delivery to Landlord’s designated consulting professionals listed on Exhibit F to this Lease, as such list may be modified by Landlord from time to time on notice to Tenant) of complete and detailed architectural, structural, mechanical and engineering plans and specifications as required for such Alterations (collectively, the “Initial Plans”). In addition, Landlord agrees to respond to any resubmission of the Initial Plans within three (3) Business Days after written resubmission, unless substantial revisions are required to the Initial Plans, in which event Landlord shall respond to Tenant within five (5) Business Days thereafter. In the event that Landlord disapproves all or any portion of the Initial Plans, Landlord shall notify Tenant of the grounds for such disapproval with reasonable specificity. If Landlord fails to approve or disapprove the Initial Plans proposed by Tenant on or before the end of the applicable review period set forth herein, Tenant shall have the right to provide Landlord with a second written request for approval (a “Second Request”), which shall specifically identify the Initial Plans to which such request relates, and set forth in bold capital letters the following statement: IF LANDLORD FAILS TO RESPOND WITHIN TWO (2) BUSINESS DAYS AFTER RECEIPT OF THIS NOTICE, THEN TENANT SHALL BE ENTITLED TO COMMENCE CONSTRUCTION IN ACCORDANCE WITH THE PLANS AND SPECIFICATIONS PREVIOUSLY SUBMITTED TO LANDLORD AND TO WHICH LANDLORD HAS FAILED TO TIMELY RESPOND. In the event that Landlord fails to respond to a Second Request within two (2) Business Days after receipt by Landlord, the Initial Plans or revisions thereto for which the Second Request is submitted shall be deemed to be approved by Landlord, and Tenant shall be entitled to commence construction of the Initial Alterations or portion thereof to which the Initial Plans relate, provided that the Initial Plans have been appropriately filed in accordance with applicable Laws, all permits and approvals required to be issued by any Governmental Authority shall have been duly issued, and Tenant shall otherwise have complied with all provisions of this Lease applicable to Alterations.

          (c) The provisions of Section 4.3(b) shall be applicable to Alterations proposed by Tenant subsequent to the Initial Alterations, provided that for purposes of such subsequent Alterations, all references in Section 4.3(b) to periods of “five (5) Business Days” shall be deemed to mean “ten (10) Business Days”, all references to periods of “three (3) Business Days” shall be deemed to mean “five (5) Business Days”, all references to periods of “two (2) Business Days” shall be deemed to mean “five (5) Business Days”, and all references to the Initial Plans shall be deemed to mean the plans and specifications submitted by Tenant with respect to such Alterations.

          (d) In connection with the performance of Alterations, Landlord will not unreasonably withhold its consent to requests by Tenant or Tenant’s contractors to enter portions

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of the Building outside the Premises (including tenanted spaces, to the extent Landlord has the right to permit such entry under applicable leases) for the purpose of performing work required in connection with such Alterations. With respect to the Initial Alterations, Landlord hereby consents to the foregoing right of entry, and to the performance by Tenant and Tenant’s contractors of construction work on a 24-hour a day basis, provided that Tenant and its contractors shall comply with all applicable Laws and with such reasonable limitations and requirements as Landlord shall impose in order to minimize interference with or disruption of Landlord’s operation of the Building or the use and occupancy of the Building by other tenants and occupants.

          (e) Prior to the approval of the Initial Plans and prior to the issuance of the building permits and other approvals, if any, of any Governmental Authorities required for the Initial Alterations, in addition to the preparatory work Tenant may perform pursuant to Section 4.2(d), Tenant and its contractors may perform non-structural elements of the Initial Alterations in the Premises such as installing track for sheetrock walls (but not the sheetrock walls themselves), lamination of existing walls, and similar work; provided, however, that Landlord shall have no liability to Tenant in connection with such work if for any reason the building permits and other approvals, if any, for such Initial Alterations are not issued. Further, following receipt of building permits and any other approvals of any Governmental Authorities required for the Initial Alterations, but before approval of the Initial Plans, Tenant may perform other elements of work in connection with the Initial Alterations other than any structural or MEP work.

          Section 4.4 If, because of any act or omission of Tenant or any Tenant Party, any mechanic’s lien, U.C.C. financing statement or other lien, charge or order for the payment of money shall be filed against Landlord, or against all or any portion of the Premises, the Building or the Real Property, Tenant shall, at its expense, cause the same to be discharged of record, by bonding or otherwise, within thirty (30) days after Tenant receives actual notice of the filing thereof, and Tenant shall indemnify, defend and save Landlord harmless against and from all costs, expenses, liabilities, suits, penalties, claims and demands (including reasonable attorneys’ fees and disbursements) resulting therefrom.

          Section 4.5 Tenant shall not, at any time prior to or during the Term, directly or indirectly employ, or permit the employment of, any contractor, mechanic or laborer in the Premises, whether in connection with any Alteration or otherwise, if in Landlord’s sole judgment such employment will interfere or cause any conflict with other contractors, mechanics, or laborers engaged in the construction, maintenance or operation of the Building by Landlord, Tenant or others, or the use and enjoyment of other tenants or occupants of the Building.

     ARTICLE 5. CONDITION OF THE PREMISES; LANDLORD’S WORK

          Section 5.1 Tenant has examined the Premises and, subject to the completion of Landlord’s Work as provided in Section 5.2, agrees to accept possession of the Premises in their “as is” condition on the Commencement Date, and further agrees that, except for the performance of Landlord’s Work and the payment of Landlord’s Contribution as expressly set forth in this Article 5, Landlord shall have no obligation to perform any work, supply any materials, incur any expenses or make any installations in order to prepare the Premises for Tenant’s occupancy. The taking of possession of the Premises by Tenant shall be conclusive

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evidence as against Tenant that at the time such possession was so taken, the Premises were in good and satisfactory condition, except as otherwise expressly set forth herein and except for latent defects.

          Section 5.2 Prior to the Commencement Date, Landlord shall perform the work described on Exhibit C to this Lease at the Premises (and any other work specifically described in this Lease as Landlord’s Work), at Landlord’s expense and in accordance with applicable Laws (“Landlord’s Work”). Landlord has Substantially Completed the elements of Landlord’s Work listed as items 1 and 2 on Exhibit C, and Landlord shall Substantially Complete the element of Landlord’s Work listed as item 4 on Exhibit C (the “Slab Work”) on or before July 31, 2003. Notwithstanding anything to the contrary set forth in this Lease, if Landlord fails to Substantially Complete the Slab Work on or before July 31, 2003, Tenant may, on notice to Landlord, perform the Slab Work, at Landlord’s expense, and Landlord shall reimburse Tenant for the cost thereof within thirty (30) days after presentation of invoices. Landlord shall use commercially reasonable efforts to Substantially Complete the remaining items of Landlord’s Work (i) in a good and workmanlike manner and so as not to materially interfere with the performance by Tenant of the Initial Alterations, and (ii) on or before the date upon which Tenant shall Substantially Complete the Initial Alterations. Within five (5) days after Landlord gives notice to Tenant that Landlord’s Work is Substantially Complete, Tenant shall cause its architect, construction manager and/or its contractors to examine the Premises and deliver to Landlord a “punch list” describing in reasonable detail any fully or partially unfinished or improperly completed portions of Landlord’s Initial Work, and also describing any of the existing improvements, including existing piping and electrical conduit, then remaining in the Premises that Tenant wishes Landlord to demolish, and Landlord shall promptly complete or correct such Landlord’s Work in a manner so as to not interfere with the performance of the Initial Alterations.

          Section 5.3 (a) Landlord acknowledges that Tenant intends to perform certain Alterations in order to prepare the Premises for its occupancy (collectively, the “Initial Alterations”). The Initial Alterations shall be approved by Landlord as and to the extent required under Article 4, in compliance with all applicable Laws, and shall include the (i) installation of a sprinkler system or other fire suppression system satisfactory to Landlord, and (ii) the renovation of the men’s and women’s bathrooms located in the Premises (as distinct from those located in the central core area of the tenth (10^th) floor, which are the subject of Section 5.3(b)), without reduction in the number of fixtures as now existing in such bathrooms. Landlord agrees that the existing main sprinkler loop in the eastern core area of the tenth (10^th) floor of the Building shall not be removed, and shall be available to Tenant in connection with the installation of its sprinkler system or other fire suppression system. Landlord agrees to make Landlord’s Contribution toward the cost of the Initial Alterations, subject to and in accordance with Article 30.

          (b) Tenant shall have the right, during the performance of the Initial Alterations, to renovate the existing common area hallways, and/or common area men’s and women’s bathrooms located in the central core area of the tenth (10^th) floor (the “Common Area Bathrooms”), at Tenant’s expense and subject to the provisions of Article 4, without reduction in the number of fixtures as now existing in the Common Area Bathrooms. If Tenant elects to perform any of such renovations, Tenant shall complete such renovations promptly, in a good

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and workmanlike manner and in compliance with all applicable Laws. Following the completion of such renovations, Landlord shall maintain, clean and supply the Common Area Bathrooms (but not the bathrooms within the Premises) in a Building standard manner.

          (c) Tenant shall have the right, during the performance of the Initial Alterations or thereafter during the Term, to connect Tenant’s electronic security system to the Building security system, provided that Tenant’s security system is compatible with the Building security system, at Tenant’s expense and subject to the provisions of Article 4. If technically feasible, Landlord will permit Tenant’s electronic access cards that provide access to the Premises to also provide access through the Building ground floor lobby turnstiles, provided that Tenant’s access cards must be imprinted on one side with the Building standard access card logotype and format. Tenant will reimburse Landlord for any actual, reasonable, out-of-pocket costs incurred by Landlord for third-party services for programming, software or connection charges in connection with the foregoing, but otherwise the same shall be without charge to Tenant.

          Section 5.4 On request by Tenant, Landlord, at Tenant’s expense, shall promptly join in any applications for any permits, approvals or certificates from any Governmental Authority required to be obtained by Tenant, and shall sign such applications promptly after request by Tenant and shall otherwise cooperate with Tenant in connection therewith, provided that Landlord shall not be obligated to incur any cost or expense, including attorneys’ fees and disbursements for which Landlord is not reimbursed by Tenant, or suffer or incur any liability for which Landlord is not indemnified by Tenant. Landlord agrees to promptly sign such applications prior to Landlord’s review and approval of the plans and specifications to which such applications relate; provided, however, that no such action by Landlord shall in any way constitute a waiver of Landlord’s right to approve or disapprove such plans and specifications in accordance with the provisions of this Lease.

     ARTICLE 6. REPAIRS; FLOOR LOAD

          Section 6.1 Landlord shall maintain and repair the Building Systems and the public portions of the Building, both exterior and interior, and the structural elements thereof, including the roof, foundation and curtain wall. Tenant, at Tenant’s expense, shall take good care of the Premises and the fixtures, systems, equipment and appurtenances therein that serve or benefit the Premises, and make all non-structural repairs thereto as and when needed to preserve them in good working order and condition, except for reasonable wear and tear, obsolescence and damage for which Tenant is not responsible pursuant to the provisions of Articles 11 and 12. Notwithstanding the foregoing, and subject to Section 11.2, all damage or injury to the Premises or to any other part of the Building, or to its fixtures, equipment and appurtenances, caused by or resulting from the negligence or willful misconduct of, or Alterations made by Tenant or any Tenant Party shall be repaired at Tenant’s expense, (a) by Tenant, if the required repairs are non-structural and do not affect any Building System, subject to Landlord’s approval as and to the extent provided under Article 4, or (b) by Landlord (if the required repairs are structural or affect, in any material respect, any Building System). Tenant also shall repair all damage to the Building and the Premises caused by the making of any Alterations or by the moving of Tenant’s Property. All of such repairs shall be of quality or class equal to the original work or construction. If Tenant fails after fifteen (15) days notice to proceed with due diligence to make

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repairs required to be made by Tenant, Landlord may make such repairs at Tenant’s expense, and Tenant shall pay the costs and expenses so incurred by Landlord, with interest at the Default Rate, as Additional Rent within thirty (30) days after rendition of a bill or statement therefor.

          Section 6.2 Tenant shall not place a load upon any floor of the Premises exceeding the floor load per square foot that such floor was designed to carry and which is allowed by law. Tenant shall not move any safe, heavy equipment, freight, bulky matter or fixtures into or out of the Building without Landlord’s prior consent, which will not be unreasonably withheld. If such items require special handling, Tenant shall employ only persons holding a Master Rigger’s license to do such work.

          Section 6.3 There shall be no allowance to Tenant for a diminution of rental value, no constructive eviction of Tenant and no liability on the part of Landlord by reason of inconvenience, annoyance or injury to business arising from Landlord making, or failing to make, any repairs, alterations, additions or improvements in or to any portion of the Building or the Premises, or in or to fixtures, appurtenances or equipment thereof. Landlord shall use commercially reasonable efforts to minimize interference with Tenant’s access to and use and occupancy of the Premises in making any repairs, alterations, additions or improvements; provided, however, that Landlord shall have no obligation to employ contractors or labor at overtime or other premium pay rates or to incur any other overtime costs or additional expenses whatsoever, unless Tenant agrees to reimburse Landlord for the incremental cost thereof. Notwithstanding the foregoing, if an emergency condition exists that Landlord is obligated to cure or repair pursuant to this Lease, and such condition poses an imminent danger to persons or property or is likely to render the Premises or any material portion thereof unusable for the conduct of Tenant’s business, then Landlord shall, at Landlord’s expense, use overtime labor to the extent necessary to correct such condition.

          Section 6.4 Notwithstanding anything to the contrary contained in any other provision of this Lease, in the event that (a) Tenant is unable to use all or any material portion of the Premises for the ordinary conduct of Tenant’s business, and such condition continues for a period in excess of five (5) consecutive days, (b) Tenant does not actually use the Premises or such portion thereof during such period, and (c) such condition has not been caused by any act, negligence or misconduct of Tenant or any Tenant Party, then Fixed Rent and Tenant’s Tax Payment shall be reduced on a per diem basis in the proportion that the area of the unusable portion of the Premises bears to the total Premises Area, for the period commencing on the first (1st) day after the commencement of such condition and ending on the earlier of (i) the date Tenant reoccupies the Premises or the affected portion thereof, as the case may be, for the ordinary conduct of its business, or (ii) the date that such condition is substantially remedied. Tenant shall give Landlord prompt notice of the occurrence of any such condition.

          Section 6.5 Tenant shall not require, permit, suffer or allow the cleaning of any window in the Premises from the outside in violation of Section 202 of the New York Labor Law or any successor statute thereto, or of any other Law.

     ARTICLE 7. REAL ESTATE TAX INCREASES

          Section 7.1 The following terms shall have the meanings set forth below:

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          (a) “Taxes” shall include the aggregate amount of (i) all real estate taxes, assessments (special or otherwise) (provided that any such special assessments shall be included as if payable in the maximum number of installments permitted), including assessments made as a result of the Real Property or any part thereof being within a business improvement district, sewer and water rents, rates and charges and any other governmental levies, impositions or charges, whether general, special, ordinary, extraordinary, foreseen or unforeseen, which may be assessed, levied or imposed upon all or any part of the Real Property, and (ii) any expenses (including reasonable attorneys’ fees and disbursements and experts’ and other witness’ fees) incurred in contesting any of the foregoing or the Assessed Valuation (as defined in Section 7.1(d)) of all or any part of the Real Property. Taxes (including Base Taxes) shall be calculated without giving effect to any reductions, abatements, exemptions or similar benefits or paybacks provided under the New York City Industrial and Commercial Incentive Program. If the methods of taxation prevailing at the date hereof are altered so that in lieu of or as an addition to or as a substitute for all or any part of the Taxes, there shall be assessed, levied or imposed (A) a tax, assessment, levy, imposition or charge based on the rents received from the Real Property, whether or not wholly or partially as a capital levy or otherwise, (B) a tax, assessment, levy, imposition or charge measured by or based in whole or in part on all or any part of the Real Property and imposed upon Landlord, or (C) any other tax, assessment, levy, imposition, charge or license fee however described or imposed, then all such taxes, assessments, levies, impositions, charges or license fees or the part thereof so measured or based shall be deemed to be Taxes; provided, however, that any such taxes, fees or charges that are in “addition to” taxes otherwise payable under this Section 7.1(a) shall (1) only be deemed Taxes if such taxes are imposed upon owners of commercial buildings in Manhattan generally, as constituting real estate taxes for the purpose of calculating similar lease tax escalation provisions, and (2) be calculated on the basis that the Real Property is the only asset of Landlord. Taxes shall not include franchise, gift, inheritance, estate, sales, income or profit taxes imposed upon Landlord, any Superior Lessor or any Mortgagee by any Governmental Authority, or any fines, interest or penalties imposed for late payment of Taxes.

          (b) “Tenant’s Share” means three and 3/10^ths of one percent (3.3%).

          (c) “Base Taxes” means the Taxes payable for the Tax Year commencing on July 1, 2004 and ending June 30, 2005.

          (d) “Assessed Valuation” means the amount for which the Real Property is assessed pursuant to applicable provisions of the New York City Charter and of the Administrative Code of the City of New York for the purpose of imposition of Taxes.

          (e) “Tax Year” means the period July 1 through June 30 (or such other period as may be duly adopted by the City of New York as its fiscal year for real estate tax purposes).

          (f) “Comparison Year” means any Tax Year commencing with the 2005/2006 Tax Year.

          (g) “Landlord’s Statement” means an instrument or instruments containing a comparison of the Base Taxes and the Taxes payable for any Comparison Year.

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          (h) “Tenant’s Projected Tax Payment” means Tenant’s Tax Payment (as defined in Section 7.1(i)), if any, made by Tenant for the prior Comparison Year, plus an amount equal to Landlord’s estimate of the amount of increase in Tenant’s Tax Payment for the then current Comparison Year, divided by twelve (12) and payable monthly by Tenant to Landlord as Additional Rent.

          (i) “Tenant’s Tax Payment” means Tenant’s Share of the excess of the Taxes payable for any Comparison Year over the Base Taxes.

          Section 7.2 (a) If the Taxes payable for any Comparison Year (any part or all of which falls within the Term) shall exceed the Base Taxes, Tenant shall pay Tenant’s Tax Payment to Landlord, as Additional Rent within thirty (30) days after demand from Landlord accompanied by Landlord’s Statement. Before or after the start of each Comparison Year, Landlord shall furnish a Landlord’s Statement to Tenant. If there is any increase in Taxes payable for any Comparison Year, whether during or after such Comparison Year, or if there is any decrease in the Taxes payable for any Comparison Year, Landlord may furnish a revised Landlord’s Statement for such Comparison Year, and Tenant’s Tax Payment for such Comparison Year shall be adjusted, and within thirty (30) days after Tenant’s receipt of such revised Landlord’s Statement, Tenant shall (i) with respect to any increase in Taxes payable for such Comparison Year, pay such increase in Tenant’s Tax Payment to Landlord, or (ii) with respect to any decrease in Taxes payable for such Comparison Year, Landlord shall credit such decrease in Tenant’s Tax Payment against the next installment(s) of Rent, provided that if such decrease in Taxes is attributable to the final Comparison Year of the Term, Landlord shall pay the amount of such decrease in Tenant’s Tax Payment to Tenant. If, during the Term, Landlord shall elect to collect Tenant’s Tax Payments in full or in quarterly or bi-annual or other installments on any other date or dates than as presently required, then following Landlord’s notice to Tenant, Tenant’s Tax Payments shall be correspondingly revised. The benefit of any discount for any early payment or prepayment of Taxes relating to all or any part of the Real Property shall accrue solely to the benefit of Landlord and Taxes shall be computed without subtracting such discount.

          (b) Tenant shall pay Tenant’s Projected Tax Payment to Landlord, as Additional Rent, for each Comparison Year. On each date that Tenant’s Tax Payment is due from Tenant pursuant to the terms of this Section 7.2, Landlord shall apply the aggregate of the installments of Tenant’s Projected Tax Payment then on account with Landlord against Tenant’s Tax Payment or installment thereof then due from Tenant. In the event that such aggregate amount is not sufficient to discharge such Tax Payment or installment, Landlord shall so notify Tenant, and the amount of Tenant’s payment obligation with respect to such Tax Payment or installment pursuant to this Section 7.2, shall be equal to the amount of the insufficiency and shall be payable within thirty (30) days of demand by Landlord. If, however, such aggregate amount is greater than the Tax Payment or installment, Landlord shall credit the amount of such excess against the next installment(s) of Rent due hereunder, and if such credit is payable during or on account of the final year of the Term, Landlord shall pay such amount to Tenant within thirty (30) days of Landlord’s determination of the amount thereof.

          (c) Only Landlord shall be eligible to institute Tax reduction or other proceedings to reduce the Assessed Valuation of the Real Property, and the filings of any such proceeding by Tenant without Landlord’s prior written consent shall constitute a default

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hereunder. If the Base Taxes are reduced by final determination of legal proceedings, settlement or otherwise, then Base Taxes shall be correspondingly revised, the Additional Rent theretofore paid or payable on account of Tenant’s Tax Payment hereunder for all Comparison Years shall be recomputed on the basis of such reduction, and Tenant shall pay to Landlord, as Additional Rent within thirty (30) days after being billed therefor, any deficiency between the amount of such Additional Rent theretofore computed and paid by Tenant to Landlord and the amount thereof due as a result of such recomputations. If the Base Taxes are increased by such final determination of legal proceedings, settlement or otherwise, then, Landlord shall either pay to Tenant, or at Landlord’s election, credit against subsequent payments of Rent an amount equal to the excess of the amounts of such Additional Rent theretofore paid by Tenant over the amount thereof actually due as a result of such recomputations. If Landlord receives a refund or reduction of Taxes for any Comparison Year, Landlord shall, within ninety (90) days after such refund is actually received or such credit is actually applied against Taxes then due and payable, either pay to Tenant, or, at Landlord’s election, credit against subsequent installment(s) of Rent an amount equal to Tenant’s Share of the refund or reduction, provided that such amount shall not exceed Tenant’s Tax Payment paid for such Comparison Year. Nothing herein contained shall obligate Landlord to file any application or institute any proceeding seeking a reduction in Taxes or Assessed Valuation.

          (d) Tenant shall pay Tenant’s Tax Payment as provided in this Section 7.2 regardless of the fact that Tenant may be exempt, in whole or in part, from the payment of any taxes by reason of Tenant’s diplomatic or other tax exempt status or for any other reason whatsoever.

          (e) Tenant shall pay to Landlord, as Additional Rent within thirty (30) days after demand, any occupancy tax or rent tax applicable to the Premises now in effect or hereafter enacted, if payable by Landlord in the first instance or hereafter required to be paid by Landlord.

          (f) If the Expiration Date occurs on a date other than July 1 or June 30, respectively, any Additional Rent payable by Tenant to Landlord under this Section 7.2 for the Comparison Year in which the Expiration Date occurs, shall be apportioned in that percentage which the number of days in the period from July 1 to the Expiration Date bears to the total number of days in such Comparison Year. In the event of a termination of this Lease, any Additional Rent under this Section 7.2 shall be paid or adjusted within thirty (30) days after submission of Landlord’s Statement. In no event shall Fixed Rent ever be reduced by operation of this Section 7.2 and the rights and obligations of Landlord and Tenant under the provisions of this Section 7.2 with respect to any Additional Rent shall survive the Expiration Date or earlier termination of this Lease.

          Section 7.3 (a) The computations of Additional Rent under this Article 7 are intended to constitute a formula for an agreed rental adjustment and may or may not constitute an actual reimbursement to Landlord for costs and expenses paid by Landlord with respect to the Building.

          (b) Each Landlord’s Statement sent to Tenant shall be conclusively binding upon Tenant unless Tenant shall (i) pay to Landlord the amount set forth in such statement when due, without prejudice to Tenant’s right to dispute such statement, and (ii) within one hundred

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eighty (180) days after such statement is sent, send a notice to Landlord objecting to such statement and specifying in reasonable detail the reasons for Tenant’s claim that such statement is incorrect.

          Section 7.4 Landlord’s failure to render a Landlord’s Statement with respect to any Comparison Year shall not prejudice Landlord’s right to thereafter render a Landlord’s Statement with respect thereto or with respect to any subsequent Comparison Year, nor shall the rendering of a Landlord’s Statement prejudice Landlord’s right to thereafter render a corrected Landlord’s Statement for that Comparison Year. Nothing herein contained shall restrict Landlord from issuing a Landlord’s Statement at any time there is an increase in Taxes during any Comparison Year or any time thereafter.

     ARTICLE 8. COMPLIANCE WITH LAWS

          Section 8.1 (a) Tenant, at its expense, shall comply with all Laws applicable to the Premises or the use and occupancy thereof by Tenant, and make all repairs or Alterations required thereby, whether structural or nonstructural, ordinary or extraordinary, unless otherwise expressly provided herein; provided, however, that Tenant shall not be obligated to comply with any Law requiring any structural alteration to the Premises unless the application of such Law arises from (i) Tenant’s particular manner of use or occupancy of the Premises (as distinguished from the use or occupancy of the Premises for office purposes generally), (ii) subject to Section 11.2, any cause or condition created by or on behalf of any Tenant Party (including any Alterations), (iii) the breach of any of Tenant’s obligations under this Lease, or (iv) any Hazardous Materials having been brought into the Building by any Tenant Party. Tenant shall not do or permit to be done any act or thing on the Premises that will invalidate or be in conflict with Landlord’s insurance policies, and shall not do or permit anything to be done in or upon the Premises, or use the Premises in a manner, or bring or keep anything therein, which shall increase the rates for casualty or liability insurance applicable to the Building. If, as a result of the negligence or willful misconduct of Tenant or any Tenant Party, or by reason of Tenant’s failure to comply with the provisions of this Article 8, the insurance rates for the Building are increased, then Tenant shall desist from doing or permitting to be done any such negligence or willful misconduct and shall reimburse Landlord, as Additional Rent hereunder, for that part of all insurance premiums thereafter paid by Landlord which shall have been charged because of such act, negligence or willful misconduct by Tenant, and shall make such reimbursement within thirty (30) days following demand by Landlord.

          (b) Tenant, at its expense, after notice to Landlord, may contest by appropriate proceedings prosecuted diligently and in good faith, the validity, or applicability to the Premises or Tenant, of any Law, provided that: (i) Landlord shall not be subject to criminal penalty or to prosecution for a crime, or any other fine or charge, nor shall the Premises or any part thereof or the Real Property or any part thereof be subject to being condemned or vacated, nor shall the Real Property or any part thereof be subjected to any lien or encumbrance, by reason of non-compliance or otherwise by reason of such contest (unless bonded or otherwise released within thirty (30) days after Tenant receives notice of the filing thereof); (ii) no unsafe or hazardous condition relating to such contest shall remain unremedied; (iii) such non-compliance or contest shall not constitute or result in any default beyond applicable grace and notice periods under any Superior Lease or Superior Mortgage, or if any such Superior Lease or Superior Mortgage shall

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permit such non-compliance or contest on condition of the taking of action or furnishing of security by Landlord, such action shall be taken and such security shall be furnished at the expense of Tenant; (iv) such non-compliance or contest shall not prevent Landlord from obtaining any and all permits and licenses then required under applicable Laws in connection with the operation of the Building; and (v) Tenant shall keep Landlord advised as to the status of such proceedings, including any settlement thereof. Tenant agrees to indemnify Landlord in accordance with Article 28 from liability or expense arising out of any such deferral of compliance or contest. Landlord agrees to execute any documents reasonably required by Tenant in order to permit Tenant effectively to carry on any such contest, provided Landlord is not thereby subjected to any material cost or expense not reimbursed by Tenant or exposed to any material liability or obligation on account thereof.

          Section 8.2 Tenant shall not at any time use or occupy the Premises in violation of the certificate of occupancy at such time issued for the Premises or for the Building and in the event that any Governmental Authority shall declare by notice, violation, order or in any other manner whatsoever that the Premises are used for a purpose in violation of such certificate of occupancy, Tenant shall, on five (5) days’ notice from Landlord or any Governmental Authority, immediately discontinue such use of the Premises. Failure by Tenant to discontinue such use after such notice shall be considered a default in the fulfillment of a material covenant of this Lease, and Landlord shall have the right to exercise any and all of its rights and remedies pursuant to Articles 16 and 17. Landlord represents that the current (temporary) certificate of occupancy for the Building, a copy of which has been provided to Tenant, permits the use of the Premises for the Permitted Uses. Landlord will not amend or modify the certificate of occupancy for the Building so as to prevent the use of the Premises for the Permitted Uses.

          Section 8.3 (a) Landlord, at its expense, shall comply with all Laws applicable to (i) the Premises, to the extent that such compliance is not the obligation of Tenant pursuant to the provisions of Section 8.1, and (ii) the Building, in either case only to the extent that the failure to effect such compliance would subject Tenant to liability or adversely affect, in any material respect (A) Tenant’s use or occupancy of the Premises for the Permitted Uses, (B) Tenant’s access to the Premises, (C) the provision of required Building services to the Premises, or (D) Tenant’s ability to perform Alterations that would otherwise be permitted hereunder.

          (b) Landlord may defer compliance with any Laws that it is obligated to comply with hereunder, so long as Landlord shall be contesting the validity or applicability thereof in good faith by appropriate proceedings, provided that (i) Tenant shall not be subject to criminal penalty or to prosecution for a crime, or any other fine or charge, (ii) neither the Premises nor any part of the Building or Real Property that affects the Premises or Tenant’s use and occupancy thereof shall be subject to being condemned or vacated by reason of non-compliance or otherwise by reason of such contest, (iii) such non-compliance or contest shall not prevent Tenant from lawfully occupying the Premises for the Permitted Uses, or performing any Alterations in the Premises (including the Initial Alterations), or obtaining any and all permits and licenses then required under applicable Laws in connection with the operation of the Premises, (iv) Landlord shall use reasonable efforts to keep Tenant advised as to the status of such proceedings, (v) no unsafe or hazardous condition relating to such contest remains

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unremedied that affects Tenant or the Premises in any material respect, and (vi) such non-compliance shall not adversely affect, in any material respect, Tenant’s access to the Premises or the provision of required Building services to the Premises. Landlord agrees to indemnify Tenant in accordance with Article 28 from liability or expense arising out of any such deferral of compliance or contest.

          (c) Without limiting the generality of the foregoing, in the event that following the Commencement Date, Tenant is unable to obtain any building permits or other permits, approvals or certificates from any Governmental Authority required for the performance of the Initial Alterations solely as the result of the existence of any violations of Laws affecting the Building, not caused by Tenant and compliance with which are the responsibility of Landlord pursuant to this Lease, then following notice thereof from Tenant (i) Landlord shall proceed diligently and in good faith to cure and/or cause such violations to be discharged of record, and (ii) the Rent Commencement Date shall be postponed by two (2) days for each day that the Substantial Completion of the Initial Alterations is actually delayed by reason of such violations of Laws.

     ARTICLE 9. SUBORDINATION AND NON-DISTURBANCE; ESTOPPEL CERTIFICATES

          Section 9.1 This Lease, and all rights of Tenant hereunder, are and shall be subject and subordinate in all respects to all Mortgages and Superior Leases. This Section 9.1 shall be self-operative and no further instrument of subordination shall be required. In confirmation of such subordination, Tenant shall promptly execute and deliver any instrument that Landlord or any Superior Lessor or Mortgagee may reasonably request to evidence such subordination.

          Section 9.2 Except as set forth in this Article 9 and in Article 12, in the event of any act or omission of Landlord which would give Tenant the right, immediately or after lapse of a period of time, to cancel or terminate this Lease, or to claim a partial or total eviction, Tenant shall not exercise such right (a) until it has given written notice of such act or omission to each Mortgagee and Superior Lessor whose name and address shall previously have been furnished to Tenant in writing, and (b) unless such act or omission shall be one which is not capable of being remedied by Landlord or such Mortgagee or Superior Lessor within a reasonable period of time, until a reasonable period for remedying such act or omission shall have elapsed following the giving of such notice and following the time when such Mortgagee or Superior Lessor shall have become entitled under such Mortgage or Superior Lease, as the case may be, to remedy the same (which reasonable period shall in no event be less than the period to which Landlord would be entitled under this Lease or otherwise, after similar notice, to effect such remedy), provided such Mortgagee or Superior Lessor shall with due diligence give Tenant written notice of its intention to remedy such act or omission, and such Mortgagee or Superior Lessor shall commence and thereafter continue with reasonable diligence to remedy such act or omission. If more than one Mortgagee or Superior Lessor shall become entitled to any additional cure period under this Section 9.2, such cure periods shall run concurrently, not consecutively.

          Section 9.3 If a Mortgagee or Superior Lessor shall succeed to the rights of Landlord under this Lease, whether through possession or foreclosure action or delivery of a new lease or deed, then at the request of such party so succeeding to Landlord’s rights (“Successor

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Landlord”) and upon Successor Landlord’s written agreement to accept Tenant’s attornment, Tenant shall attorn to and recognize Successor Landlord as Tenant’s landlord under this Lease, and shall promptly execute and deliver any instrument that Successor Landlord may reasonably request to evidence such attornment. Upon such attornment this Lease shall continue in full force and effect as, or as if it were, a direct lease between Successor Landlord and Tenant upon all of the terms, conditions and covenants as are set forth in this Lease and shall be applicable after such attornment except that Successor Landlord shall not:

          (a) be liable for any previous act or omission of Landlord under this Lease, but if such previous act or omission of Landlord constitutes a default under this Lease that continues after the date of such attornment and adversely affects Tenant’s use and occupancy of the Premises in any material respect, then Successor Landlord shall be obligated to cure such continuing default;

          (b) be subject to any offset which theretofore may have accrued to or be claimed by Tenant against Landlord; or

          (c) be bound by any previous material modification of this Lease, not expressly provided for in this Lease, or by any previous prepayment of more than one month’s Fixed Rent, unless such modification or prepayment shall have been expressly approved in writing by such Mortgagee or Superior Lessor.

          Section 9.4 (a) Notwithstanding the foregoing provisions of this Article 9, as a condition to Tenant’s agreement hereunder to subordinate Tenant’s interest in this Lease to any existing or future Mortgages or Superior Leases, Landlord shall deliver to Tenant for execution and acknowledgment a Non-Disturbance Agreement from the holder of each Mortgage and Superior Lease. A “Non-Disturbance Agreement” shall mean a subordination, attornment and non-disturbance agreement duly executed and acknowledged by the holder of a Mortgage or a Superior Lease, as the case may be, in recordable form and in the form customarily employed by such Mortgagee or Superior Lessor and reasonably satisfactory to Tenant. Landlord represents to Tenant that (i) 111 8th Funding Company, a Delaware corporation (“Lender”) is the sole Mortgagee of the Building and the Real Property, and (ii) there are no Superior Leases affecting the Building or the Real Property. Tenant shall reimburse Landlord, within thirty (30) days after demand therefor, for Landlord’s out-of-pocket costs incurred in payment of the fees and disbursements of counsel to any Mortgagee or Superior Lessor. Tenant agrees to execute, acknowledge and deliver to Landlord any such Non-Disturbance Agreement promptly after delivery by Landlord or any Mortgagee or Superior Lessor.

          (b) If Landlord fails to deliver to Tenant a Non-Disturbance Agreement from Lender within thirty (30) days following the date that this Lease is fully executed and unconditionally delivered to Landlord and Tenant, then Tenant shall have the right to terminate this Lease by notice to Landlord, and upon the giving of such notice this Lease shall automatically terminate and be of no further force and effect, and thereafter neither party shall have any liability to the other hereunder, except as expressly provided hereunder, and Landlord shall return to Tenant the Security Deposit and any prepaid rent deposited by Tenant hereunder.

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          Section 9.5 Each party agrees, at any time and from time to time, as requested by the other party, upon not less than ten (10) Business Days’ prior notice, to execute and deliver to the other a written statement executed and acknowledged by such party (a) stating that this Lease is then in full force and effect and has not been modified (or if modified, setting forth all modifications), (b) setting forth the then annual Fixed Rent, (c) setting forth the date to which the Fixed Rent and Additional Rent have been paid, (d) stating whether or not, to the best knowledge of the signatory, the other party is in default under this Lease, and if so, setting forth the specific nature of all such defaults, (e) stating the amount of the Security Deposit, (f) stating whether there are any subleases affecting the Premises, (g) stating the address of the signatory to which all notices and communication under the Lease shall be sent, the Commencement Date and the Expiration Date, and (h) as to any other matters reasonably requested by the party requesting such certificate. The parties acknowledge that any statement delivered pursuant to this Section 9.5 may be relied upon by others with whom the party requesting such certificate may be dealing, including any purchaser or owner of the Real Property or the Building, or of Landlord’s interest in the Real Property or the Building or any Superior Lease, or by any Mortgagee or Superior Lessor, or by any prospective or actual sublessee of the Premises or assignee of this Lease, or permitted transferee of or successor to Tenant.

     Article 10. Services

          Section 10.1 Electricity. (a) Landlord shall, as part of Landlord’s Work, make available to Tenant, at two disconnect switches to be installed by Landlord within the two existing electrical closets located on the tenth (10^th) floor of the Building, 1400 amperes (connected load) of 460/480 volt, 3-phase, 4-wire, AC electrical capacity dedicated to Tenant (the “Electrical Capacity”), consisting of 600 amperes at one disconnect switch, and 800 amperes at the other disconnect switch. The Electrical Capacity shall be available to Tenant throughout the Term, subject to Unavoidable Delays. Tenant shall be solely responsible, at Tenant’s expense, for the installation of any additional risers or other electrical facilities and equipment required in order to deliver the Electrical Capacity from such disconnect switches to the interior of the Premises and to distribute it therein. Tenant shall use Landlord’s designated electrical contractor to perform any required tap-ins to the Building’s electrical system. There shall be no tap-in or other charge to Tenant for the initial work necessary to provide the Electrical Capacity to Tenant at the disconnect switches described above in this Section 10.1(a). Tenant shall pay Landlord, as Additional Rent, at any time and from time to time, but no more frequently than monthly, for its consumption of electricity at the Premises, as provided in Section 10.1(c).

          (b) “Landlord’s Electricity Cost” means the cost per kilowatt hour and cost per kilowatt demand, adjusted by time of day factors, fuel adjustment charges and other applicable rate adjustments, to Landlord for the purchase of electricity from the public utility or other electricity provider furnishing electricity service to the Building from time to time (the “Electricity Provider”), including sales and other taxes imposed by any Governmental Authority on Landlord’s purchase of electricity. If at any time during the Term the cost elements comprising Landlord’s Electricity Cost shall be increased or decreased by the Electricity Provider, or Landlord’s Electricity Cost shall be increased or decreased for any other reason, then effective as of the date of such increase or decrease, Tenant’s payment for submetered electricity under this Section 10.1 shall be proportionately increased or decreased. Landlord reserves the right to contract with different Electricity Providers from time to time in its sole

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judgment, and without reference to whether any Electricity Provider selected by Landlord provides lower rates than any other electricity supplier. Currently, Landlord’s Electricity Cost is based upon Consolidated Edison Company’s Service Classification rate schedule S.C. #4 Rate II as in effect on the Commencement Date. If Landlord receives any rebates applicable generally to the S.C. #4 Rate II rate schedule or a successor classification, Landlord’s Electricity Cost will be appropriately adjusted to reflect such rebates.

          (c) The calculations and determinations of the charges for electricity consumed by Tenant shall be based on the readings of one or more submeters to be installed by Landlord at Tenant’s expense, applied to Landlord’s Electricity Cost, including a coincident demand submeter (the “Coincident Demand Submeter”). If more than one submeter is used to measure Tenant’s consumption of electricity in the Premises, Tenant shall be billed only on the basis of the “coincident” demand as measured and calculated from time to time by the Coincident Demand Submeter, i.e., as though a single meter were measuring such demand. Tenant shall pay to Landlord, as Additional Rent on demand from time to time but no more frequently than monthly, for its consumption of electricity at the Premises, a sum equal to 103% of the product of (i) Landlord’s Electricity Cost, multiplied by (ii) the actual number of kilowatts and kilowatt-hours of electric current consumed by Tenant in such billing period. In addition, Tenant shall pay to Landlord, as Additional Rent, the amount of any taxes imposed by any Governmental Authority on Landlord’s receipts from the sale of electricity to Tenant. Landlord agrees to maintain and repair such submeters during the Term, at Landlord’s expense, excluding any required repairs resulting from the negligence or willful misconduct of Tenant or any Tenant Party.

          (d) During the period beginning on the Commencement Date and ending on the date upon which the submeters to be installed by Landlord in the Premises become operational, Tenant shall pay to Landlord a fixed fee for electricity supplied to the Premises of (i) during the period prior to the date Tenant first occupies all or any portion of the Premises for the conduct of its business, an amount per annum equal to One and 00/100 Dollar ($1.00) multiplied by the Premises Area, in equal monthly installments on the first (1^st) day of each month during such period, and (ii) from and after the date Tenant first occupies all or any portion of the Premises for the conduct of its business, an amount per annum equal to Two and 50/100 Dollars ($2.50) multiplied by the Premises Area, in equal monthly installments on the first (1^st) day of each month during such period, through the date such submeters become operational. If such submeters are not operational as of the date Tenant first occupies all or any portion of the Premises for the conduct of its business, then within six (6) months following the date such submeters become operational, Landlord and Tenant will meet and compare Tenant’s actual electric charges as determined by such submeters, over a period of not less than three (3) months, to the electric charges paid by Tenant pursuant to clause (ii) of the immediately preceding sentence on account of the period prior to the date such submeters become operational. If such comparison indicates that there has been an overpayment or underpayment, then the appropriate party shall pay or refund the amount thereof to the other party within thirty (30) days of the date such amount is determined. During the Term, Landlord shall test such submeters at reasonable intervals upon request by Tenant. If any such test discloses that any such submeters are inaccurate, then within six (6) months following the date such submeters are repaired, replaced or recalibrated, Landlord and Tenant will make appropriate financial adjustments in accordance with the procedure described in the two immediately preceding sentences.

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          (e) Tenant covenants that its use and consumption of electricity shall not at any time exceed the Electrical Capacity supplied to the Premises from time to time pursuant to this Section 10.1, nor exceed the capacity of any of the electrical facilities and installations in or otherwise serving or being used in the Premises, and Tenant shall, on notice from Landlord, promptly cease the use of any of Tenant’s electrical equipment that will cause Tenant to exceed such capacity. Any additional feeders, risers, electrical facilities and other such installations required for electric service to the Premises will be supplied by Landlord, at Tenant’s expense, on Landlord’s prior consent in each instance, provided that in Landlord’s reasonable judgment such additional electrical facilities and installations, feeders or risers are necessary for Tenant’s use of the Premises and are permissible under applicable Laws (including the New York State Energy Conservation Construction Code) and insurance regulations and the installation of such feeders or risers will not cause permanent damage or injury to the Building or the Premises or cause or create a dangerous or hazardous condition or entail excessive or unreasonable alterations or repairs or interfere with, or disturb, other tenants or occupants of the Building.

          (f) Landlord shall not in any way be liable or responsible to Tenant for any loss, damage or expense which Tenant may sustain or incur as a result of the unavailability of or interruption in the supply of electric current to the Premises or a change in the quantity or character or nature of such current and such change, interruption or unavailability shall not constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of rent (except that Tenant’s liability to pay Landlord for electricity under this Section 10.1 shall cease as of the date of such disturbance), or relieve Tenant from any of its obligations under this Lease, or impose any liability upon Landlord or its agents, by reason of inconvenience or annoyance to Tenant, or injury to or interruption of Tenant’s business, or otherwise, unless caused by the negligence or willful misconduct of Landlord or any Landlord Party, subject to Section 11.2.

          (g) Landlord reserves the right to discontinue furnishing electricity to Tenant in the Premises on not less than sixty (60) days notice to Tenant, at Landlord’s option, or if submetering of electricity in the Building is hereafter prohibited by any Laws, or if Landlord is otherwise required by the Electricity Provider to discontinue furnishing electricity to Tenant. This Lease shall continue in full force and effect and shall be unaffected thereby except that from and after the effective date of such discontinuance, Landlord shall not be obligated to furnish electricity to Tenant, and Tenant shall have no further obligation to pay Landlord for electricity to supplied to the Premises. If Landlord so discontinues furnishing electricity, Tenant shall arrange to obtain electricity directly from the Electricity Provider. Such electricity may be furnished to Tenant by means of the then existing electrical facilities serving the Premises to the extent available, suitable and safe for such purposes.

          (h) Tenant shall apply, within ten (10) Business Days of Tenant’s receiving notice from Landlord pursuant to Section 10.1(g), to the Electricity Provider in order to obtain direct electric service, and from and after the date upon which Tenant procures direct electric service, Landlord shall be relieved of any further obligation to furnish electricity to Tenant pursuant to this Section 10.1. All costs associated with Tenant’s obtaining direct electric service to the Premises shall be borne by (i) Landlord, if Landlord voluntarily discontinues such service, or is compelled to discontinue such service by the Electricity Provider or pursuant to applicable Laws, or (ii) Tenant, if such discontinuance arises out of the negligence or willful misconduct of

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Tenant. Landlord will not voluntarily discontinue furnishing electricity to Tenant until Tenant receives directly from the Electricity Provider at a level of service not less than the Electrical Capacity, unless the Electricity Provider is not prepared to furnish electricity to the Premises on the date required as a result of Tenant’s delay or negligence in arranging for service, Tenant’s refusal to provide a deposit or other security requested by the Electricity Provider, or Tenant’s refusal to take any other action reasonably requested by the Electricity Provider.

          Section 10.2 Heat, Ventilation And Air-Conditioning. (a) Landlord shall provide steam heat to the perimeter radiators in the Premises on Business Days from 8:00 a.m. to 6:00 p.m. on Business Days, and from 8:00 a.m. to 1:00 p.m. on Saturdays, during each period from October 15^th through April 15^th during the Term, through the Building standard heating system (the “Building Heating System). Landlord shall not be responsible if the normal operation of the Building Heating System shall fail to provide heat at uniform temperatures throughout the Premises. Tenant shall cooperate fully with Landlord and shall comply with the regulations and requirements Landlord may prescribe for the proper functioning and protection of the Building Heating System.

          (b) Landlord shall not be required to furnish heat during periods other than the hours and days set forth in this Section 10.2 (“Overtime Periods”), unless Landlord has received notice from Tenant requesting such service not less than twenty-four (24) hours prior to the time Tenant requires overtime heating service. Tenant shall pay Landlord, as Additional Rent within thirty (30) days after demand, for heating service during Overtime Periods at the standard rate then fixed by Landlord for the Building, which rate is presently $75.00 per hour, subject to increase during the Term to reflect increases in Landlord’s actual costs in providing overtime heating service. Failure by Landlord to provide heat or any other services during Overtime Periods shall not constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of Fixed Rent or Additional Rent, or relieve Tenant from any of its obligations under this Lease, or impose any liability upon Landlord or its agents by reason of inconvenience or annoyance to Tenant, or injury to or interruption of Tenant’s business or otherwise.

          (c) Landlord shall have no obligation to provide air-conditioning or ventilation services to the Premises. Tenant shall be solely responsible, at Tenant’s expense, for the installation of an HVAC system serving the Premises, and of all feeders, risers, ductwork, fans, piping and other mechanical, electrical and plumbing facilities and equipment required in order to make such HVAC system functional in the Premises (collectively, “Tenant’s HVAC System”). Landlord’s approval of such work will not be unreasonably withheld, provided that such installation shall otherwise be subject to the provisions of Article 4. Following the installation of Tenant’s HVAC System, Tenant shall be solely responsible, at its expense, for the operation, maintenance, repair and replacement of Tenant’s HVAC System.

          (d) Landlord will provide to Tenant condenser water sufficient to operate up to 400 tons of air-conditioning from the Building HVAC system on Business Days between the hours of 8:00 a.m. and 7:00 p.m., without additional charge to Tenant. Tenant shall have the right to tap into the Building’s condenser water system, at Tenant’s expense, at either of two locations on the tenth (10^th) floor of the Building, one located in Staircase C, and the other located on the west side of the truck elevator area on the Eighth Avenue side of the Building.

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There shall be no tap-in or other charge to Tenant for the initial work necessary to tap into the Building condenser water system. If Tenant requires condenser water at times other than between the hours of 8:00 a.m. and 7:00 p.m. on Business Days, then Landlord shall provide up to 400 tons of condenser water to Tenant at the Building’s then-applicable rate for overtime condenser water service. As of the date hereof, such rate is twenty-two cents ($0.22) per hour per ton of condenser water, subject to increase during the Term to reflect increases in Landlord’s actual costs in providing overtime condenser water service.

          (e) In connection with the installation of Tenant’s HVAC System, Landlord will not unreasonably withhold its consent to the removal by Tenant of certain windows in the Premises and the installation by Tenant of exterior louvers in place of such windows in the exterior curtain wall of the Building on the 15^th Street and/or 16^th Street sides of the Building, provided that (i) Tenant will not install louvers or in any other way alter the appearance of the windows of the Premises facing Eighth Avenue or on the 15^th Street or 16^th Street sides of the Building within two (2) full window bays of the Eighth Avenue façade of the Building, and (ii) all elements of the design and materials of such louvers that would be visible from the exterior of the Building shall be consistent with the existing louvers installed in the Building, in Landlord’s reasonable judgment.

          Section 10.3 Elevators. (a) Landlord shall provide passenger elevator service (consisting of not less than three (3) passenger elevators) to the Premises on Business Days from 8:00 a.m. to 8:00 p.m. and freight elevator facilities on a non-exclusive basis, on Business Days from 8:00 a.m. to 4:45 p.m. (“Freight Business Hours”), and shall have one passenger elevator available at all other times, so that Tenant shall have access to the Premises 24 hours a day, 365 days a year. Such elevator service shall be subject to such rules and regulations as Landlord may promulgate from time to time with respect thereto. Landlord shall have the right to change the operation or manner of operation of any of the elevators in the Building, to temporarily discontinue the use of any one or more cars in any of the passenger, freight or truck elevator banks, and/or to permanently or temporarily discontinue the use of any one or more cars in any of the freight or truck elevator banks, provided that Tenant shall continue to be provided with adequate freight elevator service, taking into account Tenant’s use of the Premises for the Permitted Uses. Tenant shall have the right to close off the elevator doors to the truck elevator located in the Premises so as to prevent access to the Premises through such doors, provided that Tenant shall not thereby interfere in any material respect with the functioning of the truck elevator itself.

          (b) Tenant shall have the right, in common with others, to use the Building freight elevators during Freight Business Hours on a first-come, first-served basis, including use in connection with the construction of the Initial Alterations and for moving into the Premises. Landlord will make the freight elevator available to Tenant during other than Freight Business Hours, on not less than 24 hours prior request by Tenant (subject to reasonable Building requirements and any prior reservations made by other tenants and occupants of the Building), and Tenant shall pay Landlord’s then-current hourly charge therefor as Additional Rent within thirty (30) days after demand. As of the date hereof, Landlord’ s current charge for freight elevator service during other than Freight Business Hours is $100 per hour, subject to increase to reflect increases in Landlord’s costs of providing such service (including the charges for a hoisting engineer, if required). Landlord shall provide Tenant with up to fifty (50) hours of

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overtime freight elevator service for the Initial Alterations and Tenant’s move into the Premises, at Landlord’s expense and without charge to Tenant.

          Section 10.4 Cleaning and Rubbish Removal. Tenant shall, at Tenant’s expense, provide cleaning services at the Premises pursuant to reasonable rules and regulations established by Landlord from time to time, and use a cleaning contractor approved by Landlord, which approval shall not be unreasonably withheld, subject to the provisions of Section 4.5. Tenant shall, at Tenant’s expense, provide refuse and rubbish removal service at the Premises at times, and pursuant to regulations, established by Landlord from time to time. Such services may be provided by Tenant’s own employees, subject to the provisions of Section 4.5.

          Section 10.5 Water. Landlord shall furnish cold water in such quantities as are reasonably required for ordinary drinking, lavatory, pantry, shower and cleaning purposes to the Premises, without additional charge to Tenant except as follows. If Tenant uses materially greater quantities of water than that ordinarily required for such purposes by reason of additional Alterations, then, at Landlord’s option, Landlord may install a water meter and thereby measure Tenant’s consumption of water for all purposes, and Tenant shall thereupon (a) pay to Landlord the cost of any such meters and their installation, (b) at Tenant’s expense, keep any such meters and any such installation equipment in good working order and repair, and (c) pay to Landlord, as Additional Rent, as and when billed therefor for water consumed, together with a charge for any required pumping thereof, all sewer rents, charges or any other taxes, rents, levies or charges which now or hereafter are assessed, imposed or shall become a lien upon the Premises or the Real Property pursuant to law, order or regulation made or issued in connection with any such metered use, consumption, maintenance or supply of water, water system, or sewage or sewage connection or system, and in default in making such payment Landlord may pay such charges and collect the same from Tenant.

          Section 10.6 No Warranty of Landlord. Landlord does not warrant that any of the services to be provided by Landlord to Tenant hereunder, or any other services which Landlord may supply (a) will be adequate for Tenant’s particular purposes or as to any other particular need of Tenant or (b) will be free from interruption, and Tenant acknowledges that any one or more such services may be interrupted or suspended by reason of Unavoidable Delays. In addition, Landlord reserves the right to stop, interrupt or reduce service of the Building Systems by reason of Unavoidable Delays, or for repairs, additions, alterations, replacements, decorations or improvements which are, in the judgment of Landlord, necessary to be made, until said repairs, alterations, replacements or improvements shall have been completed. Any such interruption or discontinuance of service, or the exercise of such right by Landlord to suspend or interrupt such service shall not (i) constitute an actual or constructive eviction, or disturbance of Tenant’s use and possession of the Premises, in whole or in part, (ii) entitle Tenant to any compensation or to any abatement or diminution of Fixed Rent or Additional Rent, except as expressly provided in this Lease, (iii) relieve Tenant from any of its obligations under this Lease, or (iv) impose any responsibility or liability upon Landlord or its agents by reason of inconvenience or annoyance to Tenant, or injury to or interruption of Tenant’s business, or otherwise. Landlord shall use reasonable efforts to minimize interference with Tenant’s access to and use and occupancy of the Premises in making any repairs, alterations, additions, replacements, decorations or improvements; provided, however, that Landlord shall have no obligation to employ contractors or labor at overtime or other premium pay rates or to incur any

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other overtime costs or additional expenses whatsoever, except as provided in Section 6.3. Landlord shall not be required to furnish any services except as expressly provided in this Article 10.

          Section 10.7 Building Emergency Generator

          (a) At Tenant’s option, subject to the availability of emergency generator capacity in the Building from time to time, as determined by Landlord, Landlord shall make up to 1400 amperes of 460-volt emergency electric power service (“EPS”) available to Tenant for use in the Premises from the Building emergency electric generator system (the “Building Generator”), for a minimum term (the “EPS Term”), measured from the date Tenant connects to the Transfer Switch (defined below), equal to the lesser of five (5) years or the then-remaining Term of this Lease, as provided in this Section 10.7. Landlord shall reserve not less than 1400 amperes of EPS capacity for Tenant’s use for a period of one hundred eighty (180) days after the Commencement Date, but shall have no obligation to reserve EPS capacity for Tenant thereafter. If Tenant so elects, Tenant shall notify Landlord, and if (subject to the immediately preceding sentence) sufficient EPS capacity is then available, Landlord shall install, at Tenant’s expense (i) an automatic transfer switch (the “Transfer Switch”), in the Premises at a location to be designated by Landlord and reasonably satisfactory to Tenant, sufficient to supply the requested amperage of EPS at 460/480 volts to the Premises at connection points dedicated exclusively to Tenant, and (ii) a connection from the Building Generator to the Transfer Switch. Landlord shall make the EPS capacity so provided to Tenant available for the entire EPS Term. Tenant shall have the right to terminate its obligation to receive EPS from Landlord at any time after the expiration of the EPS Term, on not less than ninety (90) days prior notice to Landlord.

          (b) Tenant shall pay Landlord for EPS as follows:

          (i) Tenant shall pay all actual costs and expenses incurred by Landlord in making EPS available to the Premises, including the costs to furnish and install the Transfer Switch and all cabling and other devices necessary to connect the Building Generator to the Transfer Switch, within thirty (30) days after demand by Landlord; and

          (ii) Tenant shall pay an annual fee (the “EPS Fee”) during the EPS Term, irrespective of whether or not emergency power is ever required or used by Tenant, in the amount of $150.00 per ampere per year. The EPS Fee shall be payable by Tenant to Landlord as Additional Rent in advance in equal monthly installments on the first day of each month during the EPS Term.

          (c) Landlord shall supply EPS to Tenant only if there is an interruption or failure in the supply of electric current to the Premises, and under no other circumstances. Tenant shall be responsible for the payment of any occupancy tax, or any other tax (other than Landlord’s income tax) imposed upon the Additional Rent paid by Tenant pursuant to this Section 10.7.

          (d) Tenant shall not transfer or assign the right to receive EPS service except in connection with an assignment of this Lease consented to by Landlord as and to the extent

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required under Article 14, and under no circumstances shall this right be transferred or assigned to any party who is not a tenant under this Lease. Tenant acknowledges that the Building Generator (and any replacement or substitute therefor), and all connections thereto, are and shall remain the sole property of Landlord and may not be removed by Tenant.

          (e) Landlord shall have the right, in Landlord’s sole discretion and at Landlord’s expense, at any time and from time to time during the EPS Term, upon not less than thirty (30) days prior written notice to Tenant, to relocate any of the generators comprising the Building Generator system to other areas of the Building, or to substitute different or additional generators for those comprising the Building Generator system as of the date hereof. Tenant shall cooperate with Landlord to effectuate any such relocation or substitution affecting the Building Generator system.

          (f) Upon and subject to the provisions of this Lease, Landlord shall maintain and repair the Building Generator in good working order throughout the EPS Term, and shall maintain such service contracts and take such other actions as may be necessary in Landlord’s sole judgment to keep the Building Generator in good working order; provided, however, that Landlord shall not be liable in any way to Tenant for any delay, interruption, failure, variation or defect in or with regard to the Building Generator or EPS, and in no event shall Landlord be liable to Tenant for special, indirect or consequential damages which may result from any such delay, interruption, failure, variation or defect. Landlord will not contract to supply EPS to any Person that would cause the total contractual commitments for EPS capacity in the Building to exceed the capacity of the Building Generator. At Tenant’s request, Landlord will conduct tests of the Building Generator, but not more frequently than quarterly.

          Section 10.8 Antenna Equipment. (a) Landlord will grant to Tenant, for Tenant’s own use and not for resale purposes, without additional charge to Tenant, a non- exclusive license of sufficient space on the roof of the Building, at a location designated by Landlord, taking into account Tenant’s reasonable “line of sight” requirements, for the construction, installation, operation and use by Tenant of not more than two (2) antenna masts for the installation of up to two (2) satellite dishes, none of which shall exceed one (1) meter in diameter, as well as a cable television dish, for use in conjunction with Tenant’s equipment and facilities in the Premises, together with related cabling, mountings and supports for the foregoing (collectively, the “Antenna Equipment”), at a location or locations designated by Landlord, taking into account any reasonable “line of sight” requirements of Tenant. In lieu of the aforementioned two one-meter satellite dishes, Tenant may install one (1) satellite dish up to two (2) meters in diameter, provided that the location of such dish shall be satisfactory to Landlord and not visible from street level within a three-block radius of the Building. In addition, Landlord will make available to Tenant, without additional charge, electric power sufficient for Tenant’s needs in connection with the Antenna Equipment, at a location reasonably accessible to the Antenna Equipment.

          (b) Landlord retains the right to use the portions of the Building’s roofs adjacent to the Antenna Equipment for any purpose whatsoever, provided such use shall not interfere with the functioning of the Antenna Equipment. Tenant shall have reasonable access to the Antenna Equipment at all times, and Landlord shall not interfere with the use of the Antenna Equipment so as to cause the operation thereof to be interrupted or impaired. Tenant shall use

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and operate the Antenna Equipment so as not to cause any interference to Landlord’s use of the roof, or damage to or interference with the operation of the Building or the Building Systems. If any of the Antenna Equipment interferes with any equipment installed by Landlord or any other tenant in the Building, or interferes with the operation of the Building or the Building Systems, or if Landlord determines that the operation thereof (i) may cause a health hazard or danger to property, or (ii) may not be in accordance with governmental or quasi-governmental standards for non-ionizing radiation for occupational or general public health levels, then Tenant, at its expense, shall take all steps necessary to eliminate such interference, and if Tenant shall fail to eliminate such interference, Tenant shall relocate the Antenna Equipment to another area on the roof designated by Landlord. In the event Tenant fails, within thirty (30) days after notice, to relocate or remove the Antenna Equipment, Landlord may do so, and Tenant shall promptly reimburse Landlord for any costs and expenses incurred by Landlord in connection therewith.

          (c) Landlord may at its option, at any time during the Term on not less than thirty (30) days prior notice to Tenant (except in the event of an emergency) relocate the Antenna Equipment to another area on the roof designated by Landlord, provided that such relocation of the Antenna Equipment does not cause the operation thereof to be interrupted or impaired, other than temporarily, and except as set forth in Section 10.8(b), such relocation is performed at Landlord’s expense. Landlord shall use reasonable efforts to minimize the duration of such interruption, provided that Landlord shall have no obligation to employ contractors or labor at overtime or other premium pay rates or to incur any other overtime costs or additional expenses whatsoever, except as provided in Section 6.3. In such event Tenant shall pay, as Additional Rent upon presentation of appropriate invoices, all additional costs incurred by Landlord in connection therewith.

          (d) Landlord shall not have any obligations with respect to the Antenna Equipment or compliance with any Laws (including the obtaining of any required permits or licenses, or the maintenance thereof) relating thereto, nor shall Landlord be responsible for any damage that may be caused to Tenant or the Antenna Equipment by any other tenant or occupant of the Building. Landlord makes no representation that the Antenna Equipment will be able to receive or transmit communication signals without interference or disturbance (whether or not by reason of the installation or use of similar equipment by others on the roof) and Tenant agrees that Landlord shall not be liable to Tenant therefor.

          Section 10.9 Riser Space. Landlord will make available to Tenant, without additional charge, riser and lateral space sufficient to accommodate (i) five (5) conduits, each up to four (4) inches in diameter, running from the basement of the Building to the Premises or from the Premises to such other areas as are connection points for the Building’s service providers, and (ii) two (2) conduits, each up to two (2) inches in diameter, running from the Premises to the Antenna Equipment. Landlord will cooperate with Tenant in order to make available the most practicable existing direct pathways for such conduit, taking into account the rights of other tenants and occupants of the Building in the common areas of the Building and the common shafts and risers, and the Building construction rules and regulations with respect to such installations, provided that in no event shall any core drilling be required for such pathways. In addition, Landlord will provide a location in the basement of the Building, within a reasonable distance from Tenant’s conduit, for Tenant to install a 750 MCM copper insulated ground conductor connecting to the Premises. Landlord represents to Tenant that there is an existing

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Verizon telephone point of termination closet installed on the tenth (10^th) floor of the Building adjacent to the common area men’s room, but makes no representations as to the capacity of such closet. Tenant shall have the right to connect to such telephone closet, subject to the rights of Verizon therein. If Tenant requires additional riser space, then upon request by Tenant, subject to availability of riser space in the Building, as determined by Landlord in its reasonable discretion, Landlord will make available riser space at Landlord’s then-current rate for riser space in the Building, which rate is currently an annual charge of $10.00 per lineal foot. All work in connection with the installation of such conduit, including core drilling, if required, shall be performed by Tenant at Tenant’s expense, including the cost of a fire watch and related supervisory costs relating to any core drilling, which shall be performed in such a manner and at such times as Landlord shall reasonably prescribe. Landlord shall make available to Tenant reasonable access within the Building’s core for purposes of such installation work.

          Section 10.10 An Affiliate of Landlord (such Entity, and any successor thereto, the “Operator”) has constructed a carrier-neutral cross-connect facility (sometimes referred to as a “meet-me-room”) to be available for use by Tenant, Landlord, other tenants and occupants of the Building, and telecommunications service providers to the Building (the “Meet-Me-Room”). Tenant agrees to license from the Operator space for the installation of a single cabinet, and to make interconnections to Tenant’s telecommunications service providers in the Building through the Meet-Me-Room, at a monthly access for such space charge in the amount of $1,000.00 per month ($12,000.00 per year), commencing on the date Tenant first occupies the Premises for the conduct of Tenant’s business, as Additional Rent on the first day of each month during the Term thereafter. Landlord will provide, install and connect, at Landlord’s expense, twenty-four (24) fiberoptic strands for fiber interconnectivity running from the Premises to the Meet-Me-Room, in accordance with Tenant’s requirements. There shall be no separate charge for cross-connects installed by or on behalf of Tenant in the Meet-Me-Room. Landlord shall provide one (1) twenty-ampere electrical circuit, at 460/480 volts, 3-phase, 4-wire, to Tenant for use in the Meet- Me-Room, without additional charge to Tenant. Except as set forth in this Section 10.10, Tenant shall not be required to pay any other costs or charges with respect to the Meet-Me-Room and Tenant’s use and occupancy thereof.

          (b) Tenant acknowledges that other tenants and occupants of the Building may have similar rights to use the Meet-Me-Room. In no event shall Tenant or any Tenant Party cause any interference with or damage to the Meet-Me-Room or any property of others located therein. At Landlord’s election, Landlord may also require that (i) all installations of equipment, connections, cages, cabinets, wiring and other items to be installed on behalf of Tenant shall be installed by Landlord or its designated contractors, and (ii) all users of the Meet-Me-Room shall use standard specifications for all wiring, cabling and connecting lines to be installed therein. If Landlord imposes the foregoing requirements, it shall use all commercially reasonable efforts to impose substantially the same requirements on all other users of the Meet-Me-Room (other than Landlord and its Affiliates). Tenant shall cooperate in keeping the Meet-Me-Room locked and in restricting access to the Meet-Me-Room to employees, contractors and other persons who need access in order to facilitate such interconnections. Landlord also shall have the right, in Landlord’s sole discretion, to enforce such other security measures and installation guidelines as Landlord deems appropriate. However, except to the extent resulting from the negligence or willful misconduct of Landlord or any Landlord Party, Landlord shall have no liability to Tenant

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for any damage or interference caused by any Person to Tenant or any Tenant’s Property in the Meet-Me-Room.

          (c) In the event that the Operator ceases to operate the Meet-Me-Room for any reason whatsoever, then, to the extent Landlord is not legally prevented from doing so, and so long as no Material Default shall then be continuing:

          (i) For a period of not less than ninety (90) days following the date the Operator ceases to operate the Meet-Me-Room (the “Occupancy Period”), Landlord will provide the services required to be provided to Tenant in the Meet-Me-Room in accordance with industry custom and practice and the terms and conditions of Tenant’s license agreement with the Operator, provided that Landlord shall not be (A) liable for any previous default of the Operator under the applicable license agreement unless such previous default created or resulted in a condition that continues to exist following Landlord’s coming into possession of the Meet-Me-Room, in which event Landlord shall be obligated to cure such condition to the extent it adversely affects Tenant’s use, possession, enjoyment or occupancy of the Meet-Me-Room, and (B) in all events, Landlord shall have no liability to Tenant for any offsets, credits, prepaid license fees (unless actually received by Landlord) or any other financial obligations of any kind whatsoever in connection with the Meet-Me-Room; and

          (ii) During the Occupancy Period, Landlord will not evict Tenant or otherwise disturb Tenant’s use, possession, occupancy and enjoyment of the Meet-Me-Room in accordance with the provisions of this Agreement.

          (d) On or before the last day of the Occupancy Period, Tenant shall vacate and surrender possession of its space in the Meet-Me-Room to Owner, and shall remove all of its interconnections and other installations from the Meet-Me-Room as provided in Section 10.10(e).

          (e) The privileges granted Tenant under this Section 10.10 merely constitute a license, shall not be deemed to grant Tenant a leasehold or other real property interest in the Meet-Me-Room or any portion thereof, shall continue until and automatically terminate and expire upon the expiration or earlier termination of this Lease, and the termination of such license shall be self-operative and no further instrument shall be required to effect such termination. On the Expiration Date or sooner termination of the Term, Tenant shall promptly remove, at Tenant’s expense, all cable, wiring, connecting lines, and other installations, equipment and property installed or placed by or for Tenant in the Meet-Me-Room.

     Article 11. Insurance

          Section 11.1 Tenant, at its expense, shall obtain and keep in full force and effect a policy of commercial general liability insurance, including premises operations and contractual liability under which the insurer agrees to insure Tenant’s obligations under Article 28, under which Tenant is named as the insured and Landlord, Landlord’s asset manager, Landlord’s managing agent for the Building, and any Superior Lessors and any Mortgagees (whose names shall have been furnished to Tenant) are named as additional insureds, which insurance shall

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provide primary coverage without contribution from any other insurance carried by or for the benefit of Landlord, Landlord’s managing agent or any Superior Lessors or Mortgagees named as additional insureds. Tenant’s primary commercial general liability policy shall contain a provision that the policy shall be noncancellable unless fifteen (15) days’ written notice shall have been given to Landlord and Landlord shall similarly receive fifteen (15) days’ notice of any material change in coverage. The minimum limits of liability (which may include umbrella coverage) shall be a combined single limit with respect to each occurrence in an amount of not less than $5,000,000 per location general aggregate limit; provided, however, that Landlord shall retain the right to require Tenant to increase said coverage to that amount of insurance which in Landlord’s reasonable judgment is then being customarily required by prudent landlords of comparable buildings in the City of New York, and provided further that Landlord shall require similar increases of other tenants of space in the Building comparable to the Premises, to the extent Landlord shall then have the right to do so under applicable leases. Tenant shall also obtain and keep in full force and effect during the Term (a) insurance against loss or damage by fire, and such other risks and hazards as are insurable under then available standard forms of “all risk” insurance policies with extended coverage (including theft, sprinkler leakage and boiler and machinery, if applicable) at full replacement value, to Tenant’s Property and Alterations for the full insurable value thereof or on a replacement cost basis; (b) Workers’ Compensation Insurance, as required by law; (c) New York Disability Benefits Law Policy; (d) liquor liability coverage, if alcohol is served or permitted on the Premises, and (e) such other insurance in such amounts as Landlord, any Mortgagee or Superior Lessor may reasonably require from time to time, based upon insurance standards then customarily imposed upon other commercial office tenants in Manhattan. All insurance required to be carried by Tenant pursuant to the terms of this Lease shall be effected under valid and enforceable policies issued by reputable and independent insurers permitted to do business in the State of New York, and rated in Best’s Insurance Guide, or any successor thereto (or if there be none, an organization having a national reputation) as having a Best’s Rating” of “A-” and a “Financial Size Category” of at least “IX” or if such ratings are not then in effect, the equivalent thereof. Tenant shall have the right to insure and maintain the insurance coverages set forth in this Section 11.1 under blanket insurance policies covering other premises occupied or owned by Tenant and Tenant’s Affiliates, so long as such blanket policies comply as to terms and amounts with the insurance provisions set forth in this Lease without co-insurance, and provided that upon request, Tenant shall deliver to Landlord a certificate of Tenant’s insurer evidencing the portion of such blanket insurance allocated to the Premises.

          Section 11.2 (a) Landlord and Tenant hereby waive any and all rights of recovery against the other, and against any Landlord Party or Tenant Party, as the case may be, for loss of or damage to the property of the waiving party to the extent such loss or damage would be covered under a comprehensive “all risk” insurance policy with extended coverage at full replacement value insuring Tenant’s Property and Alterations or Landlord’s interest in the Building, as the case may be. In addition, the parties hereto shall procure an appropriate clause in, or endorsement on, any fire or extended coverage insurance covering the Premises, the Building and personal property, fixtures and equipment located thereon or therein, pursuant to which the insurance companies waive subrogation or consent to a waiver of right of recovery and subject to obtaining such clauses or endorsements of waiver of subrogation or consent to a waiver of right of recovery, hereby agree not to make any claim against or seek to recover from the other for any loss or damage to its property or the property of others resulting from fire or

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other hazards covered by such fire and extended coverage insurance. Tenant acknowledges that Landlord shall not carry insurance on and shall not be responsible for damage to Alterations or Tenant’s Property, and that Landlord shall not carry insurance against, or be responsible for any loss suffered by Tenant due to, interruption of Tenant’s business.

          (b) Landlord and Tenant each hereby releases the other (and the respective Landlord Parties and Tenant Parties, as the case may be) with respect to any claim (including a claim for negligence) that it might otherwise have against the other party for loss, damages or destruction of the type that would be covered under a comprehensive “all risk” insurance policy with extended coverage; i.e., in the case of Landlord, as to the Building, and, in the case of Tenant, as to Tenant’s Property and Alterations (including rental value or business interruption, as the case may be) occurring during the Term.

          (c) For so long as 111 Chelsea LLC (“Current Landlord”) shall remain the owner of the Building, Current Landlord agrees to maintain (i) insurance against loss or damage to the Building by fire and such other risks and hazards as are insurable and available at commercially reasonable rates under then available forms of “all risk” insurance policies with extended coverage, and (ii) a policy of commercial general liability insurance with minimum limits of liability in amounts comparable to insurance maintained by other prudent landlords of comparable buildings in the City of New York.

          Section 11.3 On or prior to the Commencement Date, Tenant shall deliver to Landlord appropriate certificates of insurance required to be carried by Tenant pursuant to this Article 11, including evidence of waivers of subrogation required pursuant to Section 11.2. Evidence of each renewal or replacement of a policy shall be delivered by Tenant to Landlord at least twenty (20) days prior to the expiration of such policy.

     Article 12. Destruction of the Premises; Property Loss or Damage

          Section 12.1 (a) If the Premises are damaged by fire or other casualty, or if the Building is so damaged that Tenant shall be deprived of reasonable access to the Premises or use of the Premises, Tenant shall give prompt notice thereof to Landlord, and the damage (i) to the Building shall be repaired by and at the expense of Landlord so that access to the Premises shall be substantially the same as prior to the damage, and (ii) to the Premises shall be repaired (A) by Landlord as to the core, shell, floor slab, roof, windows, curtain wall and other structural elements of the Building located in the Premises, and the Building Systems to the point of delivery to the Premises (the “Base Building Restoration”), and (B) by Tenant as to all other elements of the Premises, including Alterations and Tenant’s Property. Commencing on the date of such fire or other casualty, Fixed Rent and Additional Rent shall be reduced in the proportion that the area of the part of the Premises that is neither usable nor used by Tenant bears to the total Premises Area (provided, however, that in the event that the Premises shall be so damaged so as not to be usable or accessible and Tenant is unable to conduct its business in the remaining portion of the Premises, then Fixed Rent and Additional Rent shall be entirely abated), until the earlier to occur of (1) one hundred fifty (150) days after the date the Base Building Restoration shall be Substantially Completed, or (2) the date Tenant shall resume occupancy of the Premises for the conduct of its business. Landlord shall have no obligation to repair any damage to, or to replace, any Alterations or Tenant’s Property.

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          Section 12.2 Notwithstanding anything to the contrary set forth in Section 12.1, if (a) the Premises are totally damaged or are rendered wholly untenantable, or (b) the Building shall be so damaged or destroyed by fire or other casualty (whether or not the Premises are damaged or destroyed) such that (i) the cost of restoration would require the expenditure of more than thirty-five (35%) percent of the full insurable value of the Building immediately prior to the casualty, and (ii) as a result thereof, Landlord shall have terminated the leases of tenants occupying not less than thirty-five percent (35%) of the floor area of the portion of the Building extending twelve (12) full column bays west from Eighth Avenue, and from the ground floor to the roof, then in such event, Landlord may, not later than sixty (60) days following the date of the damage, give Tenant a notice in writing terminating this Lease. If this Lease is so terminated, the Term shall expire upon the tenth (10^th) day after such notice is given, and Tenant shall vacate and surrender the Premises to Landlord as soon as reasonably practicable thereafter. Upon the termination of this Lease under the conditions provided for in this Section 12.2, Tenant’s liability for Fixed Rent and Additional Rent shall cease as of the date of such fire or other casualty, and Landlord shall refund to Tenant the Security Deposit and any prepaid portion of Fixed Rent or Additional Rent for any period after such date.

          Section 12.3 (a) If the Premises are damaged by fire or other casualty and are rendered wholly untenantable thereby, or if the Building shall be so damaged that Tenant shall be deprived of reasonable access to the Premises, and if Landlord shall not have terminated this Lease pursuant to Section 12.2, Landlord shall, within sixty (60) days following the date of the damage, cause a contractor or architect selected by Landlord to give notice (the “Restoration Notice”) to Tenant of the date by which such contractor or architect believes the restoration of the Premises shall be Substantially Completed. If the Restoration Notice shall indicate that the restoration shall not be substantially completed within twelve (12) months following the date of such damage or destruction, Tenant shall have the right to terminate this Lease by giving written notice (the “Termination Notice”) to Landlord not later than forty-five (45) days following receipt of the Restoration Notice. If Tenant gives a Termination Notice, this Lease shall be deemed cancelled and terminated as of the date of the giving of the Termination Notice as if such date were the Expiration Date, and Fixed Rent and Additional Rent shall be apportioned and shall be paid or refunded, as the case may be up to and including the date of such damage or destruction. Notwithstanding anything set forth to the contrary in this Article 12, in the event that a fire or other casualty rendering the Premises wholly untenantable, or that causes substantial damage to the Premises or prevents access thereto, shall occur during the final eighteen (18) months of the Term, either Landlord or Tenant may terminate this Lease by giving the other party a Termination Notice as set forth herein.

          (b) If Tenant shall either have had the right to give a Termination Notice pursuant to Section 12.3(a), but shall not have done so, or shall not have had the right to give a Termination Notice pursuant to Section 12.3(a), and in either case Landlord shall fail to Substantially Complete the Base Building Restoration within twelve (12) months following the date of such damage or destruction, then Tenant shall again have the right to terminate this Lease by giving a Termination Notice, and unless Landlord Substantially Completes the Base Building Restoration within thirty (30) days following the giving of such Termination Notice, this Lease shall be deemed canceled and terminated as set forth in this Section 12.3.

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          Section 12.4 This Article 12 constitutes an express agreement governing any case of damage or destruction of the Premises or the Building by fire or other casualty, and Section 227 of the Real Property Law of the State of New York, which provides for such contingency in the absence of an express agreement, and any other law of like nature and purpose now or hereafter in force shall have no application in any such case. The provisions of this Article 12 shall survive the Expiration Date or sooner termination of the Term.

     Article 13. Eminent Domain

          Section 13.1 (a) If (i) all of the floor area of the Premises, or so much thereof as shall render the Premises wholly untenantable, shall be acquired or condemned for any public or quasi-public use or purpose, or (ii) a portion of the Real Property, not including the Premises, shall be so acquired or condemned, but by reason of such acquisition or condemnation, Tenant no longer has means of access to the Premises, then this Lease and the Term shall end as of the date of the vesting of title with the same effect as if that date were the Expiration Date. In the event of any termination of this Lease and the Term pursuant to the provisions of this Article 13, Fixed Rent and Additional Rent shall be apportioned as of the date of sooner termination and any prepaid portion of Fixed Rent or Additional Rent for any period after such date shall be refunded by Landlord to Tenant.

          (b) If the part of the Real Property so acquired or condemned contains more than ten percent (10%) of the total Premises Area immediately prior to such acquisition or condemnation, or if, by reason of such acquisition or condemnation, Tenant no longer has reasonable means of access to the Premises, Tenant may terminate this Lease by notice to Landlord given within forty-five (45) days following the date Tenant receives notice of such acquisition or condemnation. If Tenant so notifies Landlord, this Lease shall terminate and the Term shall end and expire upon the thirtieth (30^th) day following the giving of such notice.

          Section 13.2 In the event of any such acquisition or condemnation of all or any part of the Real Property, Landlord shall be entitled to receive the entire award for any such acquisition or condemnation. Tenant shall have no claim against Landlord or the condemning authority for the value of any unexpired portion of the Term or any Alterations, and Tenant hereby expressly assigns to Landlord all of its right in and to any such award. Nothing contained in this Section 13.2 shall be deemed to prevent Tenant from making a separate claim in any condemnation proceedings for the then value of any Tenant’s Property included in such taking and for any moving expenses, provided such award shall be made by the condemning authority in addition to, and shall not result in a reduction of, the award made by it to Landlord.

          Section 13.3 If only a part of the Real Property shall be so acquired or condemned then, subject to Section 13.1, this Lease and the Term shall continue in force and effect. If a part of the Premises shall be so acquired or condemned and this Lease and the Term shall not be terminated, Landlord, at Landlord’s expense, shall restore that part of the Premises not so acquired or condemned so as to constitute tenantable Premises. From and after the date of the vesting of title, Fixed Rent and Additional Rent shall be reduced in the proportion which the area of the part of the Premises so acquired or condemned bears to the total area of the Premises immediately prior to such acquisition or condemnation.

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     Article 14. Assignment and Subletting

          Section 14.1 (a) Except as expressly provided in this Article 14, Tenant, for itself, its heirs, distributees, executors, administrators, legal representatives, successors and assigns, expressly covenants that it shall not assign, mortgage, pledge, encumber, or otherwise transfer this Lease, nor sublet (nor underlet), nor suffer, nor permit the Premises or any part thereof to be used or occupied by others (whether for desk space, mailing privileges or otherwise), without the prior written consent of Landlord in each instance, which consent may be withheld in Landlord’s sole and absolute discretion. If this Lease is assigned, or if the Premises or any part thereof are sublet or occupied by anybody other than Tenant, or if this Lease or the Premises are encumbered (whether by operation of law or otherwise) without Landlord’s consent, then Landlord may, after default by Tenant, collect rent from the assignee, subtenant or occupant, and apply the net amount collected to Fixed Rent and Additional Rent, but no assignment, subletting, occupancy or collection shall be deemed a waiver by Landlord of the provisions hereof, the acceptance by Landlord of the assignee, subtenant or occupant as a tenant, or a release by Landlord of Tenant from the further performance by Tenant its obligations under this Lease, and Tenant shall remain fully liable therefor. The consent by Landlord to any assignment or subletting shall not in any way be construed to relieve Tenant from obtaining the express consent in writing of Landlord, to the extent required hereunder, to any further assignment or subletting. Except as otherwise expressly provided herein, in no event shall any permitted subtenant assign or encumber its sublease or further sublet all or any portion of its sublet space, or otherwise suffer or permit the sublet space or any part thereof to be used or occupied by others, without Landlord’s prior written consent in each instance, which consent, will not be unreasonably withheld, subject to the provisions of Section 14.6. Any assignment, sublease, mortgage, pledge, encumbrance or transfer in contravention of the provisions of this Article 14 shall be void.

          (b) Notwithstanding anything to the contrary set forth in this Article 14 or elsewhere in this Lease, Landlord hereby consents to a sublease by Tenant to the New York Industrial Development Agency (the “IDA”) of certain of Tenant’s Alterations and improvements to the Premises and to a sub-sublease by the IDA to Tenant of such Alterations and improvements, provided that such sublease and sub-sublease shall be subject and subordinate in all respects to this Lease, to all matters to which this Lease is subject and subordinate, and to all of Landlord’s rights and remedies under this Lease. Landlord agrees to cooperate, at no cost to Landlord, in all other reasonable requests of Tenant, the IDA, or the New York City Economic Development Corporation in order to provide for the continuation of certain economic incentive benefits currently available to Tenant, or for Tenant to receive new or additional benefits.

          Section 14.2 If Tenant intends to assign this Lease or sublet all or part of the Premises, Tenant shall give notice (a “Tenant’s Notice”) thereof to Landlord, setting forth: (a) as to an assignment of this Lease, the date Tenant desires the assignment to be effective and any consideration Tenant would receive for such assignment, (b) as to a sublease of all or a part of the Premises (i) the proposed commencement date (which shall be not less than thirty (30) nor more than one hundred and eighty (180) days after the giving of Tenant’s Notice) and expiration date of the sublease, (ii) the rental rate and other material business terms on which Tenant would sublease such premises, and (iii) a description of the Premises showing the portion to be sublet, (c) a statement setting forth in reasonable detail the identity of the proposed assignee or

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subtenant, the nature of its business and its proposed use of the Premises, (d) current financial information with respect to the proposed assignee or subtenant, including its most recent financial report, and (e) a true and complete copy of a term sheet or summary of terms (which need not be legally binding) agreed to by Tenant and the proposed assignee or subtenant with respect to the proposed assignment or sublease, and any other agreements relating thereto. Tenant’s Notice shall be deemed an offer from Tenant to Landlord whereby Landlord (or Landlord’s designee) may, at its option, (A) sublease such space (the “Leaseback Space”) from Tenant as provided in Section 14.4, or (B) if the proposed transaction is (1) an assignment of this Lease, or (2) a subletting of eighty percent (80%) or more of the Premises Area for all or substantially all of the remaining Term, terminate this Lease. The foregoing options may be exercised by Landlord by notice given to Tenant within thirty (30) days after delivery of Tenant’s Notice to Landlord, and during such thirty-day period, Tenant shall not assign this Lease nor sublet such space to any Person other than Landlord.

          Section 14.3 If Landlord exercises its option to terminate this Lease pursuant to Section 14.2, then this Lease shall terminate and expire on the date that such assignment or sublease was to be effective or commence, as the case may be, and Fixed Rent and Additional Rent due hereunder shall be paid and apportioned to such date. In such event, Landlord and Tenant, on request of either party, shall enter into an amendment of this Lease ratifying and confirming such termination. Following such termination, Landlord shall be free to and shall have no liability to Tenant if Landlord should lease the Premises (or any part thereof) to Tenant’s prospective assignee or subtenant.

          Section 14.4 If Landlord exercises its option to sublet the Leaseback Space, such sublease to Landlord or its designee (as subtenant) shall be at a rental rate equal to the product of (i) the rental rate per Rentable Square Foot of rent and additional rent set forth in Tenant’s Notice, multiplied by (ii) the Rentable Square Foot area of the Leaseback Space, shall be for the same term as that of the proposed subletting, and such sublease shall:

          (a) be upon such other terms and conditions as are contained in Tenant’s Notice, and be expressly subject to all of the covenants, agreements, terms, provisions and conditions of this Lease, except such as are irrelevant or inapplicable, and except as expressly set forth in this Article 14 to the contrary;

          (b) give the subtenant the unqualified and unrestricted right, without Tenant’s permission, to assign such sublease or any interest therein and/or to sublet the space covered by such sublease or any part or parts of such space and to make any and all changes, alterations and improvements in the space covered by such sublease, and if the proposed sublease will result in all or substantially all of the Premises being sublet, grant Landlord or its designee the option to extend the term of such sublease for the balance of the Term less one day;

          (c) provide that any assignee or further subtenant of Landlord or its designee, may, at Landlord’s option, be permitted to make alterations, decorations and installations in such space or any part thereof and shall also provide in substance that any such alterations, decorations and installations in such space therein made by any assignee or subtenant of Landlord or its designee may be removed, in whole or in part, by such assignee or subtenant, at its option, prior to or upon the expiration or other termination of such sublease; provided,

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however, that such assignee or subtenant shall, at its expense, repair any damage and injury caused by such removal; and

          (d) provide that (i) the parties to such sublease expressly negate any intention that any estate created under such sublease be merged with any other estate held by either of said parties, (ii) any assignment or sublease by Landlord or its designee (as the subtenant) may be for any purpose or purposes that Landlord, in Landlord’s uncontrolled discretion, shall deem suitable or appropriate, (iii) Tenant shall, at Tenant’s expense, at all times provide and permit reasonably appropriate means of ingress to and egress from such space so sublet by Tenant to Landlord or its designee, (iv) Landlord may, at Tenant’s expense, make such alterations as may be required or deemed necessary by Landlord to physically separate the subleased space from the balance of the Premises and to comply with any Laws or insurance requirements relating to such separation, and (v) that at the expiration of the term of such sublease, Tenant will accept the space covered by such sublease in its then existing condition, subject to the obligations of the subtenant to make such repairs thereto as may be necessary to preserve the premises demised by such sublease in good order and condition, and provided that Tenant shall have no obligation under this Lease to restore any Alterations made by or on behalf of such subtenant. Notwithstanding the foregoing, if such sublease is for a term expiring not less three (3) years prior to the Expiration Date, Landlord shall restore, or cause to be restored, any Alterations made in the Leaseback Space by Landlord or the subtenant that were made without the prior approval of Tenant, which approval shall not be unreasonably withheld as to Alterations that are not Non-Standard Alterations.

          Section 14.5 (a) If Landlord exercises its option to sublet the Leaseback Space, Landlord shall indemnify and save Tenant harmless from all obligations under this Lease as to the Leaseback Space during the period of time it is so sublet to Landlord, except as to any obligation which arises out of or results from the negligence or willful misconduct of Tenant or any Tenant Party.

          (b) Performance by Landlord, or its designee, under a sublease of the Leaseback Space shall be deemed performance by Tenant of any similar obligation under this Lease and any default under any such sublease shall not give rise to a default under a similar obligation contained in this Lease nor shall Tenant be liable for any default under this Lease or deemed to be in default hereunder if such default is occasioned by or arises from any act or omission of the tenant under such sublease or is occasioned by or arises from any act or omission of any occupant holding under or pursuant to any such sublease.

          (c) Tenant shall have no obligation, at the Expiration Date or earlier termination of the Term, to remove any alteration, installation or improvement made in the Leaseback Space by Landlord (or Landlord’s designee).

          (d) Any consent required of Tenant, as Landlord under the sublease, shall be deemed granted if consent with respect thereto is granted by Landlord under this Lease, and any failure of Landlord (or its designee) to comply with the provisions of the sublease other than with respect to the payment of Fixed Rent and Additional Rent to Tenant, shall not constitute a default thereunder or hereunder if Landlord shall have consented to such non-compliance.

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          Section 14.6 In the event Landlord does not exercise either option provided to it pursuant to Section 14.2, and provided that no monetary or other material Event of Default (a “Material Default”) shall have occurred and be continuing under this Lease as of the time Landlord’s consent is requested by Tenant, Landlord’s consent (which must be in writing and in form and substance reasonably satisfactory to Landlord) to the proposed assignment or sublease shall not be unreasonably withheld or delayed for more than ten (10) days; provided, however, that:

          (a) Tenant shall have complied with the provisions of Section 14.2 and Landlord shall not have exercised any of its options thereunder within the time permitted therefor;

          (b) In Landlord’s reasonable judgment, the proposed assignee or subtenant is engaged in a business or activity, and the Premises, or the relevant part thereof, will be used in a manner, which (i) is in keeping with the then standards of the Building, and (ii) does not violate the restrictions set forth in Article 3;

          (c) The proposed assignee or subtenant is a reputable Person with sufficient financial worth considering the responsibility involved, and Landlord has been furnished with evidence thereof;

          (d) In the event Landlord has comparable space in the Building available for lease for a comparable term (“Comparable Space”), then (i) neither the proposed assignee or subtenant, nor any Affiliate thereof, is then an occupant of any part of the Building, and (ii) the proposed assignee or subtenant is not a Person (or Affiliate of a Person) with whom Landlord or Landlord’s agents are then, or have been within the previous six (6) month period, negotiating in connection with the rental of space in the Building (for purposes hereof “negotiating” means that a Person has submitted or received a written proposal or term sheet, attended meetings to negotiate business terms, or has received proposed lease documents);

          (e) The form of the proposed sublease or instrument of assignment shall be reasonably satisfactory to Landlord and shall comply with the applicable provisions of this Article 14, and Tenant shall deliver a true and complete original, fully executed counterpart of such sublease or other instrument to Landlord promptly upon the execution and delivery thereof;

          (f) Tenant and its proposed subtenant or assignee, as the case may be, shall execute and deliver to Landlord an agreement, in form and substance reasonably satisfactory to Landlord, setting forth the terms and conditions upon which Landlord shall have granted its consent to such assignment or subletting, and the agreement of Tenant and such subtenant or assignee, as the case may be, to be bound by the provisions of this Article 14;

          (g) There shall not be more than three (3) occupants of the Premises (including Tenant and any other permitted occupants and subtenants);

          (h) [Intentionally Omitted];

          (i) Tenant shall reimburse Landlord, as Additional Rent upon demand, for (A) the out-of-pocket costs and expenses incurred by Landlord in connection with the

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assignment or sublease, including the costs of making investigations as to the acceptability of the proposed assignee or subtenant and the cost of reviewing plans and specifications proposed to be made in connection therewith, and (B) Landlord’s reasonable legal fees and disbursements incurred in connection with the granting of any requested consent and the preparation of Landlord’s written consent to the sublease or assignment;

          (j) Tenant shall not have (i) advertised or publicized in any way the availability of the Premises without prior notice to and approval by Landlord, which approval shall not be unreasonably withheld or delayed for more than ten (10) days, or (ii) listed the Premises for sublease or assignment with a broker, agent or otherwise at a rental rate less than the fixed rent and additional rent at which Landlord is then offering to lease Comparable Space in the Building;

          (k) The proposed occupancy shall not impose an extra burden on services to be supplied by Landlord to Tenant, unless Tenant and such proposed subtenant or assignee shall agree with Landlord in writing to pay the costs of such additional services; and

          (l) The proposed subtenant or assignee shall not be entitled, directly or indirectly, to diplomatic or sovereign immunity and shall be subject to the service of process in, and the jurisdiction of the courts of New York State.

Except for any sublease by Tenant to Landlord or its designee pursuant to this Article 14, each sublease pursuant to this Section 14.6 shall be subject to all of the provisions of this Lease. Notwithstanding any such sublease to Landlord (but subject to the other provisions of this Article 14) or any such sublease to any other subtenant, or any acceptance of Fixed Rent or Additional Rent by Landlord from any subtenant, Tenant will remain fully liable for the payment of the Fixed Rent and Additional Rent due and to become due hereunder and for the performance of all the covenants, agreements, terms, provisions and conditions contained in this Lease on Tenant’s part to be observed and performed, and for all acts and omissions of any licensee or subtenant or anyone claiming under or through any subtenant which shall be in violation of any of the obligations of this Lease, and any such violation shall be deemed to be a violation by Tenant.

          Section 14.7 In the event that (a) Landlord fails to exercise either of its options under Section 14.2 and consents to a proposed assignment or sublease, and (b) Tenant fails to execute and deliver the assignment or sublease to which Landlord consented within one hundred eighty (180) days after the giving of such consent, then Tenant shall again comply with all of the provisions and conditions of Section 14.2 before assigning this Lease or subletting all or part of the Premises.

          Section 14.8 No sublease shall be for a term ending later than one day prior to the Expiration Date of this Lease. Except for subleases entered into pursuant to Sections 14.10 or 14.11, no sublease shall be delivered, and no subtenant shall take possession of the Premises or any part thereof, until an executed counterpart of such sublease has been delivered to Landlord and approved in writing by Landlord, which approval shall not be unreasonably withheld. Each sublease shall be subject and subordinate to this Lease and to the matters to which this Lease is or shall be subordinate, and each subtenant by entering into a sublease is deemed to have agreed that in the event of termination, re-entry or dispossession by Landlord under this Lease, Landlord

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may, at its option, take over all of the right, title and interest of Tenant, as sublandlord, under such sublease, and such subtenant shall, at Landlord’s option, attorn to Landlord pursuant to the then executory provisions of such sublease, except that Landlord shall not (i) be liable for any previous act or omission of Tenant under such sublease, (ii) be subject to any counterclaim, offset or defense, not expressly provided in such sublease, which theretofore accrued to such subtenant against Tenant, (iii) be bound by any previous modification of such sublease (unless consented to by Landlord) by any previous prepayment of more than one month’s Fixed Rent or of any Additional Rent (unless such prepaid Rent is actually received by Landlord), or (iv) be obligated to perform any work in the subleased space or to prepare it for occupancy, and in connection with such attornment, the subtenant shall execute and deliver to Landlord any instruments Landlord may reasonably request to evidence and confirm such attornment. Each subtenant or licensee of Tenant shall be deemed, automatically upon and as a condition of its occupying or using the Premises or any part thereof, to have agreed to be bound by the terms and conditions set forth in this Article 14. The provisions of this Article 14 shall be self-operative and no further instrument shall be required to give effect to this provision.

          Section 14.9 If Landlord shall consent to any assignment of this Lease or to any sublease, or if Tenant shall enter into any other assignment or sublease permitted hereunder (other than those permitted under Section 14.10 or 14.11), Tenant shall, in consideration therefor, pay to Landlord, as Additional Rent:

          (a) In the case of an assignment, on the effective date of the assignment, an amount equal to fifty percent (50%) of (i) all sums and other consideration paid to Tenant for such assignment, including amounts attributed or attributable to the sale of Tenant’s Property (less, in the case of the sale thereof, the then net unamortized or undepreciated cost thereof, determined on the basis of Tenant’s federal income tax returns), minus (ii) the reasonable out-of-pocket costs and expenses of Tenant in entering into such assignment, such as brokerage fees, legal fees, architectural fees and advertising fees paid to unrelated third parties, and the cost of any improvements or Alterations made by Tenant solely for the purpose of preparing the Premises or portion thereof for such assignment.

          (b) In the case of a sublease, an amount equal to fifty percent (50%) of (i) all rents, additional charges or other consideration payable to Tenant under the sublease in excess of the Fixed Rent and Additional Rent accruing during the term of the sublease in respect of the subleased space (at the rate per square foot payable by Tenant hereunder) pursuant to the terms hereof (including sums paid for the sale or rental of Tenant’s Property, less, in the case of the sale thereof, the then net unamortized or undepreciated cost thereof, determined on the basis of Tenant’s federal income tax returns) minus (ii) the reasonable out-of-pocket costs and expenses of Tenant in entering into such sublease, such as brokerage fees, legal fees, architectural fees and advertising fees paid to unrelated third parties, and the cost of any improvements or Alterations made by Tenant solely for the purpose of preparing the Premises or portion thereof for such sublease, and work allowances actually paid to the subtenant. The sums payable under this Section 14.9(b) shall be paid by Tenant to Landlord as Additional Rent as and when paid by the subtenant to Tenant.

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          Section 14.10 (a) If Tenant is an Entity, and a majority of the Ownership Interests in Tenant are not publicly traded on a recognized stock exchange or over-the-counter market, then any transfer (by one or more transfers), of a majority of the Ownership Interests of Tenant shall be deemed an assignment of this Lease for all purposes of this Article 14. The term “transfer” shall be deemed to include the issuance of new Ownership Interests resulting in a majority of the Ownership Interests of Tenant being held by Persons which do not hold a majority of the Ownership Interests of Tenant on the date hereof, except for (i) transfers by owners of Ownership Interests to members of their immediate families or to trusts for the benefit of such family members, (ii) public offerings of Ownership Interests on a recognized stock exchange or over-the-counter market, and (iii) transactions permitted pursuant to Section 14.10(b). The transfer of a majority of the Ownership Interests of Tenant through one or more transfers on a recognized stock exchange or over-the-counter market shall not be deemed an assignment of this Lease for purposes of this Article 14.

          (b) If Tenant is an Entity, and Tenant is merged or consolidated with another Entity, or if substantially all of Tenant’s assets are transferred to another Entity, then such merger, consolidation or transfer of assets shall be deemed an assignment of this Lease for all purposes of this Article 14. Notwithstanding the foregoing, Landlord’s consent shall not be required for such assignment, and the provisions of Sections 14.2, 14.6, 14.9 and 14.10 shall not be applicable thereto, so long as each of the following conditions have been satisfied: (i) such merger, consolidation or transfer of assets shall have been made for a legitimate independent business purpose and not for the principal purpose of transferring this Lease, (ii) the successor to Tenant or transferee of substantially all of Tenant’s assets shall have a net worth, computed in accordance with generally accepted accounting principles consistently applied, at least equal to the lesser of (A) the net worth of Tenant immediately prior to such merger, consolidation or transfer, or (B) the net worth of Tenant herein named on the date of this Lease, and (iii) proof satisfactory to Landlord of such net worth shall have been delivered to Landlord at least ten (10) days prior to the effective date of any such transaction.

          (c) The limitations set forth in this Section 14.10 shall be deemed to apply to subtenants, assignees and guarantors of this Lease, if any, and any transfer of Ownership Interests in, or any merger, consolidation or transfer of assets of, any such Entity in violation of this Section 14.10 shall be deemed to be an assignment of this Lease in violation of Section 14.1

          (d) A material modification, amendment or extension of a sublease shall be deemed a sublease for the purposes of Section 14.1, and a lease takeover agreement shall be deemed an assignment of this Lease for the purposes of Section 14.1. Notwithstanding anything to the contrary set forth in this Article 14, if a subtenant of any portion of the Premises violates the provisions of this Article 14, then so long as Tenant promptly commences and diligently prosecutes to completion (or settlement) appropriate legal proceedings against such subtenant, the fifteen Business Day period set forth in Section 16.1(b) shall be deemed extended, and no Event of Default shall be deemed to have occurred under this Lease on account of such violation by such subtenant.

          Section 14.11 Provided that no Material Default shall then have occurred and be continuing, Tenant may, without Landlord’s consent, but upon not less than ten (10) days’ prior notice to Landlord, (i) permit any Affiliate of Tenant to sublet all or part of the Premises for any

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Permitted Use, or (ii) assign this Lease to any Affiliate of Tenant, and in either such case, the provisions of Sections 14.2, 14.6, 14.9 and 14.10 shall not be applicable thereto. In no event shall any sublease to an Affiliate be deemed to vest in any such Affiliate any right or interest in this Lease or the Premises. In no event shall any assignment or sublease to an Affiliate relieve, release, impair or discharge any of Tenant’s obligations under this Lease.

          Section 14.12 (a) Any assignment or transfer which is deemed an assignment of this Lease, whether made with Landlord’s consent pursuant to Section 14.1 or without Landlord’s consent to the extent permitted under Sections 14.10 and 14.11, shall be made only if, and shall not be effective until, the assignee shall execute, acknowledge and deliver to Landlord an agreement in form and substance satisfactory to Landlord whereby the assignee shall assume the obligations of this Lease on the part of Tenant to be performed or observed from and after the effective date of such assignment or transfer, and whereby the assignee shall agree that the provisions in Section 14.1 shall, notwithstanding such assignment or transfer, continue to be binding upon it in respect of all future assignments and transfers.

          (b) The joint and several liability of Tenant and any immediate or remote successor in interest of Tenant and the due performance of the obligations of this Lease on Tenant’s part to be performed or observed shall not be discharged, released or impaired in any respect by any agreement or stipulation made by Landlord, or any grantee or assignee of Landlord by way of mortgage or otherwise, extending the time, or modifying any of the obligations of this Lease, or by any waiver or failure of Landlord, or any grantee or assignee of Landlord by way of mortgage or otherwise, to enforce any of the obligations of this Lease.

          (c) The listing of any name other than that of Tenant, whether on the doors of the Premises or the Building directory, or otherwise, shall not operate to vest any right or interest in this Lease or in the Premises, nor shall it be deemed to be the consent of Landlord to any assignment or transfer of this Lease or to any sublease of Premises or to the use or occupancy thereof by others. Any such listing shall constitute a privilege extended by Landlord, revocable at Landlord’s will by notice to Tenant, provided that Landlord shall not unreasonably revoke such privilege as to any Affiliate of Tenant, or any subtenant of Tenant or assignee of this Lease approved by Landlord pursuant to this Article 14.

          (d) Tenant shall indemnify Landlord and the Landlord Parties, in accordance with the provisions of Article 28, from any and all losses, liabilities, damages, costs, and expenses (including reasonable attorneys’ fees and disbursements) resulting from any claims against Landlord by any Person in connection with any proposed or actual assignment of this Lease or subletting of all or any portion of the Premises except to the extent caused by the negligence or wilful misconduct of Landlord or any Landlord Party.

          Section 14.13 (a) For purposes of this Section 14.13, the following terms have the following meanings:

          (i) “Eligible Sublease” means a direct sublease between Tenant and an Eligible Subtenant demising the entire Premises Area for an initial sublease term (i.e., not including any renewals) of not less than five (5) years.

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          (ii) “Eligible Subtenant” means a Person who or which is not an Affiliate of Tenant, and has a financial condition reasonably satisfactory to Landlord taking into account the obligations in question. The financial condition of a subtenant shall be deemed satisfactory if such subtenant has a net worth, computed in accordance with generally accepted accounting principles consistently applied, equal to or greater than Two Hundred Fifty Million and 00/100 Dollars ($250,000,000.00).

          (iii) “Landlord Non-Disturbance Agreement” means a non-disturbance agreement in customary form, reasonably satisfactory to Landlord, providing in substance that (A) Landlord will not name or join the Eligible Subtenant as a party defendant or otherwise in any suit, action or proceeding to enforce any rights granted to Landlord under this Lease, and (B) if this Lease shall terminate or be terminated by reason of Tenant’s default hereunder (any such termination, an “Attornment Event”), then Landlord will recognize the Eligible Subtenant as the direct tenant of Landlord on the terms and conditions of the Eligible Sublease as amended upon an Attornment Event as provided in Section 14.13(c).

          (iv) “Subtenant LC” means a letter of credit in the amount of the Security Deposit, to be deposited by the Eligible Subtenant with Landlord in accordance with all of the requirements set forth in Article 32 of this Lease.

          (b) Landlord shall, within thirty (30) days after Tenant’s request, accompanied by an executed counterpart of the Eligible Sublease such other information and certifications as Landlord may reasonably request in order to determine that the conditions of this Section 14.13 have been satisfied, and so long as no Event of Default shall then have occurred and be continuing under this Lease, deliver to Tenant and the Eligible Subtenant a Landlord Non-Disturbance Agreement. Following the Eligible Subtenant’s execution and delivery of the Landlord Non-Disturbance Agreement, Landlord shall promptly execute and deliver a counterpart thereof to the Eligible Subtenant.

          (c) The Landlord Non-Disturbance Agreement shall provide that, upon an Attornment Event, and notwithstanding anything to the contrary set forth therein, the Eligible Sublease shall be deemed amended as follows:

          (i) If applicable from time to time, the fixed rent and additional rent under the Eligible Sublease shall be increased (but not decreased) so that it is equal to the Fixed Rent and Additional Rent that would have been payable under this Lease had this Lease not been terminated.

          (ii) The terms and provisions thereof shall be restated to be substantially the same as the terms and provisions of this Lease, except that (A) the length of the term (including renewals, other than renewals which would extend beyond the then Expiration Date of this Lease) shall remain as set forth in the Eligible Sublease, (B) the Eligible Sublease shall not include any rights that are limited to or dependent upon occupancy by DoubleClick Inc. (“Original Tenant”), or any rights of Tenant under this Lease which the Eligible Subtenant is not entitled to under the terms of the Eligible Sublease, and (C) if the Eligible Sublease contains one or more provisions that are more

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restrictive of the Eligible Subtenant thereunder than the corresponding provisions of this Lease are with respect to Tenant hereunder, then the more restrictive Eligible Sublease provisions shall continue in effect under the Eligible Sublease.

          (iii) The Eligible Subtenant shall deposit the Subtenant LC with Landlord, to be held by Landlord pursuant to Article 32 of this Lease.

          (iv) The Eligible Subtenant shall attorn to Landlord in accordance with the provisions of this Lease, as modified hereby.

          (d) Notwithstanding anything to the contrary set forth in this Section 14.13, any Landlord Non-Disturbance Agreement shall (i) be personal to the Eligible Subtenant, and (ii) provide that in the event of a termination of this Lease other than by reason of Tenant’s default or Tenant’s voluntary surrender (for example, following damage or destruction pursuant to Article 12), then the Landlord Non-Disturbance Agreement shall automatically terminate and be of no further force and effect as of the termination date of this Lease.

     Article 15. Access to Premises

          Section 15.1 Tenant shall permit Landlord, Landlord’s agents and public utilities servicing the Building to erect, use and maintain ducts, pipes and conduits in and through the Premises, provided that such installations (i) are concealed within existing walls, columns and ceilings, to the extent feasible, and where not feasible, are appropriately furred and finished, (ii) do not cause the usable area of the Premises to be reduced except to a de minimis extent, and (iii) do not interfere, except to a de minimis extent, with Tenant’s use and occupancy of the Premises. Landlord shall promptly repair any damage to the Premises, Alterations or Tenant’s Property caused by any work performed pursuant to this Article 15. Landlord shall undertake any such work in such a manner so as to minimize any interference that might be occasioned to Tenant’s business operations and to minimize any damage that might result to the appearance or function of the affected areas of the Premises; provided, however, that Landlord shall have no obligation to employ contractors or labor at overtime or other premium pay rates or to incur any other overtime costs or additional expenses whatsoever, except as provided in Section 6.3. Landlord or Landlord’s agents shall have the right to enter the Premises at all reasonable times upon reasonable prior notice (except no such prior notice shall be required in case of emergency), which notice may be oral, to examine the same, to show them to prospective purchasers, Mortgagees, Superior Lessors or ground lessees of the Building and their respective agents and representatives, or (during the final 12 months of the Term) to prospective tenants of the Premises, and to make such repairs, alterations, improvements or additions (i) as Landlord may deem necessary or desirable to the Premises, to the extent expressly set forth herein, or to any other portion of the Building, or (ii) which Landlord may elect to perform following Tenant’s failure, after notice and an opportunity to cure, except in an emergency, to make repairs or perform any work which Tenant is obligated to make or perform under this Lease, or (iii) for the purpose of complying with applicable Laws, and Landlord shall be allowed to take all material into and upon the Premises to the extent required without constituting an eviction or constructive eviction of Tenant in whole or in part, and Fixed Rent and Additional Rent will not be abated (except as expressly provided in this Lease) while such repairs, alterations,

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improvements or additions are being made, by reason of loss or interruption of business of Tenant, or otherwise.

          Section 15.2 (a) If Tenant shall not be present when for any reason entry into the Premises shall be necessary by reason of emergency, Landlord or Landlord’s agents may enter the same without rendering Landlord or such agents liable therefor (if during such entry Landlord or Landlord’s agents shall accord reasonable care to Tenant’s property), and without in any manner affecting this Lease. Nothing herein contained, however, shall be deemed or construed to impose upon Landlord any obligation, responsibility or liability whatsoever for the care, supervision or repair of the Building or any part thereof, other than as herein provided.

          (b) Notwithstanding the foregoing, Landlord agrees that except in an emergency, neither Landlord nor any Landlord Party shall enter the Permitted Data Center without a representative of Tenant present during such entry. Tenant agrees to make a representative available to Landlord for any such entry upon at least one (1) day’s prior notice, which notice may be oral or electronic.

          Section 15.3 Landlord shall have the right from time to time to alter the Building and, without the same constituting an actual or constructive eviction and without incurring any liability to Tenant therefor, to change the arrangement 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, provided that (i) Tenant shall not be thereby deprived of access to the Premises, (ii) no such changes by Landlord shall interfere, in any material respect, with Tenant’s use and occupancy of the Premises, and (iii) if Landlord moves or alters any Common Area Bathrooms previously renovated by Tenant pursuant to Section 5.3(b), Landlord shall restore or refurbish such affected Common Area Bathrooms substantially in the same manner and quality as Tenant’s prior renovations thereof. All parts (except surfaces facing the interior of the Premises) of all walls, windows and doors bounding the Premises (including exterior Building walls, exterior core corridor walls, exterior doors and entrances other than doors and entrances solely servicing the Premises), all balconies, terraces and roofs adjacent to the Premises, all space in or adjacent to the Premises used for shafts, stacks, stairways, chutes, pipes, conduits, ducts, fan rooms, heating, air cooling (other than Tenant’s HVAC System and the conduits provided to Tenant pursuant to Section 10.9), plumbing and other mechanical facilities, service closets and other Building facilities are not part of the Premises, and Landlord shall have the use thereof, as well as access thereto through the Premises for the purposes of operation, maintenance, alteration and repair.

     Article 16. Default

          Section 16.1 Each of the following events shall be an “Event of Default” hereunder:

          (a) if Tenant defaults in the payment when due of any installment of Fixed Rent, and such default shall continue for a period of five (5) Business Days after notice thereof from Landlord, or in the payment when due of any Additional Rent, and such default continues for a period of ten (10) days after notice thereof from Landlord; or

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          (b) if Tenant’s interest in this Lease is transferred in violation of Article 14 and such event is not cured within fifteen (15) Business Days after notice from Landlord; or

          (c) if the Premises or a substantial portion thereof is abandoned; or

          (d) (i) if Tenant admits in writing its inability to pay its debts as they become due; or

          (ii) if Tenant commences or institutes any case, proceeding or other action (A) seeking relief as a debtor, or to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its property; or

          (iii) if Tenant makes a general assignment for the benefit of creditors; or

          (iv) if any case, proceeding or other action is commenced or instituted against Tenant (A) seeking to have an order for relief entered against it as debtor or to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its property, which either (1) results in any such entry of an order for relief, adjudication of bankruptcy or insolvency or such an appointment or the issuance or entry of any other order having a similar effect, or (2) remains undismissed for a period of ninety (90) days; or

          (v) if any case, proceeding or other action is commenced or instituted against Tenant seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its property which results in the entry of an order for any such relief which has not been vacated, discharged, or stayed or bonded pending appeal within ninety (90) days after the entry thereof; or

          (vi) if Tenant takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in Subsections 16.1(d)(ii), (iii), (iv) or (v); or

          (vii) if a trustee, receiver or other custodian is appointed for any substantial part of the assets of Tenant, which appointment is not vacated or

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effectively stayed within thirty (30) days, or if any such vacating or stay does not thereafter remain in effect; or

          (e) if Tenant defaults in the observance or performance of any other term, covenant or condition of this Lease on Tenant’s part to be observed or performed and Tenant fails to remedy such default within thirty (30) days after notice by Landlord to Tenant of such default, or, if such default is of such a nature that it cannot be completely remedied within such period of thirty (30) days, if Tenant fails to commence to remedy such default within such thirty-day period, or fails thereafter to diligently prosecute to completion all steps necessary to remedy such default.

          Section 16.2 If an Event of Default occurs, Landlord may at any time thereafter give written notice to Tenant stating that this Lease and the Term shall expire and terminate on the date specified in such notice, which date shall not be less than seven (7) days after the giving of such notice. If Landlord gives such notice, this Lease and the Term and all rights of Tenant under this Lease shall expire and terminate as if the date set forth in such notice were the Expiration Date and Tenant immediately shall quit and surrender the Premises, but Tenant shall remain liable as hereinafter provided. Anything contained herein to the contrary notwithstanding, if such termination shall be stayed by order of any court having jurisdiction over any proceeding described in Section 16.1(d), or by federal or state statute, then, following the expiration of any such stay, or if the trustee appointed in any such proceeding, Tenant or Tenant as debtor-in-possession shall fail to assume Tenant’s obligations under this Lease within the period prescribed therefor by law or within one hundred twenty (120) days after entry of the order for relief or as may be allowed by the court, or if said trustee, Tenant or Tenant as debtor-in-possession shall fail to provide adequate protection of Landlord’s right, title and interest in and to the Premises or adequate assurance of the complete and continuous future performance of Tenant’s obligations under this Lease, Landlord, to the extent permitted by law or by leave of the court having jurisdiction over such proceeding, shall have the right, at its election, to terminate this Lease on seven (7) days’ notice to Tenant, Tenant as debtor-in-possession or said trustee and upon the expiration of said seven (7) day period this Lease shall cease and expire as set forth above and Tenant, Tenant as debtor-in-possession or said trustee shall immediately quit and surrender the Premises as aforesaid.

          Section 16.3 If, at any time, (a) Tenant shall comprise two (2) or more Persons, (b) Tenant’s obligations under this Lease shall have been guaranteed by any Person other than Tenant, or (c) Tenant’s interest in this Lease shall have been assigned, the word “Tenant,” as used in Section 16.1(d), shall be deemed to mean any one or more of the Persons primarily or secondarily liable for Tenant’s obligations under this Lease. Any monies received by Landlord from or on behalf of Tenant during the pendency of any proceeding of the types referred to in Section 16.1(d) shall be deemed paid as compensation for the use and occupation of the Premises and the acceptance of any such compensation by Landlord shall not be deemed an acceptance of Fixed Rent and/or Additional Rent or a waiver on the part of Landlord of any rights under this Lease.

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     Article 17. Remedies and Damages

          Section 17.1 (a) If an Event of Default shall occur, and this Lease and the Term shall expire and come to an end as provided in Article 16:

          (i) Tenant shall quit and peacefully surrender the Premises to Landlord, and Landlord and its agents may immediately, or at any time after such Event of Default or after the date upon which this Lease and the Term shall expire and come to an end, re-enter the Premises or any part thereof, without notice to the maximum extent permitted by Law, either by summary proceedings, or by any other applicable action or proceeding (without being liable to indictment, prosecution or damages therefor), and may repossess the Premises and dispossess Tenant and any other Persons from the Premises and remove any and all of their property and effects from the Premises; and

          (ii) Landlord, at Landlord’s option, may relet the whole or any part or parts of the Premises from time to time, either in the name of Landlord or otherwise, to such tenant or tenants, for such term or terms ending before, on or after the Expiration Date, at such rental or rentals and upon such other conditions, which may include concessions and free rent periods, as Landlord, in its sole discretion, may determine; provided, however, that Landlord shall have no obligation to relet the Premises or any part thereof and shall in no event be liable for refusal or failure to relet the Premises or any part thereof, or, in the event of any such reletting, for refusal or failure to collect any rent due upon any such reletting, and no such refusal or failure shall operate to relieve Tenant of any liability under this Lease or otherwise affect any such liability, and Landlord, at Landlord’s option, may make such repairs, replacements, alterations, additions, improvements, decorations and other physical changes in and to the Premises as Landlord, in its sole discretion, considers advisable or necessary in connection with any such reletting or proposed reletting, without relieving Tenant of any liability under this Lease or otherwise affecting any such liability.

          (b) To the maximum extent permitted by Law, Tenant hereby waives the service of any notice of intention to re-enter or to institute legal proceedings to that end which may otherwise be required to be given under any present or future law. Tenant, on its own behalf and on behalf of all Persons claiming through or under Tenant, including all creditors, does further hereby waive any and all rights which Tenant and all such Persons might otherwise have under any present or future law to redeem the Premises, or to re-enter or repossess the Premises, or to restore the operation of this Lease, after (i) Tenant shall have been dispossessed by a judgment or by warrant of any court or judge, (ii) any re-entry by Landlord, or (iii) any expiration or termination of this Lease and the Term, whether such dispossess, re-entry, expiration or termination shall be by operation of law or pursuant to the provisions of this Lease. The words “re-enter,” re-entry” and “re-entered” as used in this Lease shall not be deemed to be restricted to their technical legal meanings. In the event of a breach or threatened breach by Tenant, or any Persons claiming through or under Tenant, of any term, covenant or condition of this Lease, Landlord shall have the right to enjoin such breach and the right to invoke any other remedy allowed by law or in equity as if re-entry, summary proceedings and other special remedies were not provided in this Lease for such breach. The rights to invoke the remedies set

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forth in this Lease are cumulative and shall not preclude Landlord from invoking any other remedy allowed at law or in equity.

          Section 17.2 (a) If this Lease and the Term shall expire and come to an end as provided in Article 16, or by or under any summary proceeding or any other action or proceeding, or if Landlord shall re-enter the Premises as provided in Section 17.1, or by or under any summary proceeding or any other action or proceeding, then, in any of such events:

          (i) Tenant shall pay to Landlord all Fixed Rent and Additional Rent payable under this Lease by Tenant to Landlord to the date upon which this Lease and the Term shall have expired and come to an end or to the date of re-entry upon the Premises by Landlord, as the case may be;

          (ii) Tenant also shall be liable for and shall pay to Landlord, as damages, any deficiency (the “Deficiency”) between (A) Fixed Rent and Additional Rent for the period which otherwise would have constituted the unexpired portion of the Term (conclusively presuming the Additional Rent for each year thereof to be the same as was payable for the year immediately preceding such termination or re-entry), and (B) the net amount, if any, of rents collected under any reletting effected pursuant to the provisions of Subsection 17.1(a)(ii) for any part of such period (first deducting from the rents collected under any such reletting all of Landlord’s expenses in connection with the termination of this Lease, Landlord’s re-entry upon the Premises and with such reletting including all repossession costs, brokerage commissions, legal expenses, attorneys’ fees and disbursements, alteration costs and other expenses of preparing the Premises for such reletting). Tenant shall pay the Deficiency in monthly installments on the days specified in this Lease for payment of installments of Fixed Rent, and Landlord shall be entitled to recover from Tenant each monthly Deficiency as the same shall arise. No suit to collect the amount of the Deficiency for any month shall prejudice Landlord’s right to collect the Deficiency for any subsequent month by a similar proceeding; and

          (iii) whether or not Landlord shall have collected any monthly Deficiency as aforesaid, Landlord shall be entitled to recover from Tenant, and Tenant shall pay to Landlord, on demand, in lieu of any further Deficiency and as and for liquidated and agreed final damages, a sum equal (A) to the amount by which the Fixed Rent and Additional Rent for the period which otherwise would have constituted the unexpired portion of the Term (without taking into account any termination thereof and/or re-entry pursuant to this Lease, and conclusively presuming the Additional Rent for each year thereof to be the same as was payable for the year immediately preceding such termination or re-entry) exceeds (B) the then fair and reasonable rental value of the Premises, including Additional Rent for the same period, both discounted to present value at a rate of interest per annum equal to the rate then applicable to United States Treasury Bills having a term equal to the then unexpired Term of the Lease, less (C) the aggregate amount of Deficiencies previously collected by Landlord pursuant to the provisions of Subsection 17.2(a)(ii) for the same period. If, before presentation of proof of such liquidated damages to any court, commission or tribunal, Landlord shall have relet the Premises or any part thereof for the period which otherwise would have constituted the unexpired portion of the Term, or any part thereof, the amount of net rents collected in

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connection with such reletting shall be deemed, prima facie, to be the fair and reasonable rental value for the part or the whole of the Premises so relet during the term of the reletting.

          (b) If Landlord shall relet the Premises, or any part thereof, together with other space in the Building, the net rents collected under any such reletting and the expenses of any such reletting shall be equitably apportioned for the purposes of this Section 17.2. Tenant shall in no event be entitled to any rents collected or payable under any reletting, whether or not such rents shall exceed the Fixed Rent reserved in this Lease.

     Article 18. Fees and Expenses

          Section 18.1 If an Event of Default shall occur under this Lease or if Tenant shall do or permit to be done any act or thing upon the Premises which would cause Landlord to be in default under any Superior Lease or Mortgage, or if Tenant shall fail to comply with its obligations under this Lease and the preservation of property or the safety of any tenant, occupant or other person is threatened thereby, Landlord may, after reasonable prior notice to Tenant except in an emergency, perform the same for the account of Tenant or make any expenditure or incur any obligation for the payment of money for the account of Tenant. All amounts expended by Landlord in connection with the foregoing, including reasonable attorneys’ fees and disbursements in instituting, prosecuting or defending any action or proceeding or recovering possession, and the cost thereof, with interest thereon at the Default Rate, shall be deemed to be Additional Rent hereunder and shall be paid by Tenant to Landlord within thirty (30) days of rendition of any bill or statement (with reasonable backup) to Tenant therefor.

          Section 18.2 If Tenant shall fail to pay any installment of Fixed Rent within five (5) days of the date due, or Additional Rent within five (5) days after notice from Landlord that same was due and not paid, Tenant shall pay to Landlord, in addition to such installment of Fixed Rent and/or Additional Rent, as the case may be, as a late charge and as Additional Rent, a sum equal to interest at the Default Rate on the amount unpaid, computed from the date such payment was due to and including the date of payment.

     Article 19. No Representations by Landlord

          Except as and to the extent expressly set forth herein, Landlord and Landlord’s agents have made no warranties, representations, statements or promises with respect to (a) the rentable and usable areas of the Premises or the Building, (b) the amount of any current or future Taxes, (c) the compliance with applicable Laws of the Premises or the Building, or (d) the suitability of the Premises for any particular use or purpose. No rights, easements or licenses are acquired by Tenant under this Lease, by implication or otherwise, except as expressly set forth herein. This Lease (including any Exhibits referred to herein and all supplementary agreements provided for herein) contains the entire agreement between the parties and all understandings and agreements previously made between Landlord and Tenant are merged in this Lease, which alone fully and completely expresses their agreement. Tenant is entering into this Lease after full investigation, and is not relying upon any statement or representation made by Landlord not embodied in this Lease.

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     Article 20. End of Term

          Section 20.1 On the Expiration Date or sooner termination of this Lease, Tenant shall quit and surrender the Premises to Landlord, vacant, broom clean, in good order and condition, ordinary wear and tear and damage for which Tenant is not responsible under the terms of this Lease excepted, and Tenant shall remove all of Tenant’s Property and the Non-Standard Alterations from the Premises, and this obligation shall survive the Expiration Date or sooner termination of the Term. If the last day of the Term or any renewal thereof falls on Saturday or Sunday, this Lease shall expire on the Business Day immediately preceding. Tenant expressly waives, for itself and for any Person claiming through or under Tenant, any rights which Tenant or any such Person may have under the provisions of Section 2201 of the New York Civil Practice Law and Rules and of any successor law of like import then in force in connection with any holdover summary proceedings which Landlord may institute to enforce the foregoing provisions of this Article 20.

          Section 20.2 Tenant acknowledges that Tenant or any Tenant Party remaining in possession of the Premises after the Expiration Date or earlier termination of this Lease would create an unusual hardship for Landlord and for any prospective tenant. Tenant therefore covenants that if for any reason Tenant or any Tenant Party shall fail to vacate and surrender possession of the Premises or any part thereof on or before the Expiration Date or earlier termination of this Lease and the Term, then Tenant’s continued possession of the Premises shall be as a holdover tenant, during which time, without prejudice and in addition to any other rights and remedies Landlord may have under this Lease or under applicable Laws, Tenant shall pay to Landlord for each month and for each portion of any month during which Tenant holds over, an amount equal to: (i) one hundred fifty percent (150%) of the total monthly amount of Fixed Rent and Additional Rent payable hereunder immediately prior to the Expiration Date or earlier termination (the “Existing Rent”) for the first thirty (30) days during which Tenant remains in possession of all or any portion of the Premises, and (ii) two hundred percent (200%) of the Existing Rent thereafter. The provisions of this Section 20.2 shall not in any way be deemed to (A) permit Tenant to remain in possession of the Premises after the Expiration Date or sooner termination of this Lease, or (B) imply any right of Tenant to use or occupy the Premises upon expiration or termination of this Lease and the Term, and no acceptance by Landlord of payments from Tenant after the Expiration Date or sooner termination of the Term shall be deemed to be other than on account of the amount to be paid by Tenant in accordance with the provisions of this Article 20. Tenant’s obligations under this Article 20 shall survive the Expiration Date or earlier termination of this Lease.

     Article 21. Quiet Enjoyment

          Provided no Event of Default has occurred and is continuing, Tenant may peaceably and quietly enjoy the Premises without hindrance by Landlord or any Person lawfully claiming through or under Landlord, subject, nevertheless, to the terms and conditions of this Lease.

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     Article 22. No Waiver; Non-Liability

          Section 22.1 No act or thing done by Landlord or Landlord’s agents during the Term shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept such surrender shall be valid unless in writing and signed by Landlord. No employee of Landlord or of Landlord’s agents shall have any power to accept the keys of the Premises prior to the termination of this Lease. The delivery of keys to any employee of Landlord or of Landlord’s agents shall not operate as a termination of this Lease or a surrender of the Premises. Any Building employee to whom any property shall be entrusted by or on behalf of Tenant shall be deemed to be acting as Tenant’s agent with respect to such property and neither Landlord nor its agents shall be liable for any damage to property of Tenant or of others entrusted to employees of the Building, nor for the loss of or damage to any property of Tenant by theft or otherwise.

          Section 22.2 The failure of Landlord or Tenant to seek redress for violation of, or to insist upon the strict performance of, any covenant or condition of this Lease, or any of the Rules and Regulations set forth or hereafter adopted by Landlord, shall not prevent a subsequent act, which would have originally constituted a violation, from having all of the force and effect of an original violation. The receipt by Landlord or the payment by Tenant of Fixed Rent and/or Additional Rent with knowledge of the breach of any covenant of this Lease shall not be deemed a waiver of such breach. The failure of Landlord to enforce any of the Rules and Regulations set forth, or hereafter adopted, against Tenant or any other tenant in the Building shall not be deemed a waiver of any such Rules and Regulations. Landlord shall not enforce the Rules and Regulations against Tenant in a discriminatory manner. No provision of this Lease shall be deemed to have been waived by either Landlord or Tenant, unless such waiver be in writing signed by the party against whom such waiver is claimed. No payment by Tenant or receipt by Landlord of a lesser amount than the monthly Fixed Rent or any Additional Rent shall be deemed to be other than on account of the next installment of Fixed Rent or Additional Rent, as the case may be, or as Landlord may elect to apply same, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as Fixed Rent or Additional Rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such Fixed Rent or Additional Rent or pursue any other remedy in this Lease provided. Any executory agreement hereafter made shall be ineffective to change, modify, discharge or effect an abandonment of this Lease in whole or in part unless such executory agreement is in writing and signed by the party against whom enforcement of the change, modification, discharge or abandonment is sought. All references in this Lease to the consent or approval of Landlord shall be deemed to mean the written consent or approval of Landlord and no consent or approval of Landlord shall be effective for any purpose unless such consent or approval is set forth in a written instrument executed by Landlord.

          Section 22.3 (a) Except to the extent arising from the negligence or willful misconduct of Landlord or any Landlord Party, neither Landlord nor any Landlord Party shall be liable for any injury or damage to persons or property or interruption of Tenant’s business resulting from fire, explosion, falling plaster, steam, gas, electricity, water, rain or snow or leaks from any part of the Building or from the pipes, appliances or plumbing works or from the roof, street or subsurface or from any other place or by dampness or by any other cause of whatsoever nature, provided, however, that Tenant, in accordance with Section 11.2, shall first look for

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recovery to any insurance required to be carried by Tenant pursuant to the terms of this Lease); nor shall Landlord or its agents be liable for any such damage caused by other tenants or persons in the Building or caused by construction of any private, public or quasi-public work; nor shall Landlord be liable for any latent defect in the Premises or in the Building (except that Landlord shall be required to repair such defects to the extent provided in Article 6). Nothing in the foregoing shall affect any right of Landlord to the indemnity from Tenant to which Landlord may be entitled under Article 28.

          (b) If, at any time or from time to time, any windows of the Premises are temporarily closed, darkened or bricked-up for any reason whatsoever, or any of such windows are permanently closed, darkened or bricked-up if required by any Law or related to any construction upon property adjacent to the Real Property by parties other than Landlord, Landlord shall not be liable for any damage Tenant may sustain thereby and Tenant shall not be entitled to any compensation therefor nor abatement of Fixed Rent or Additional Rent nor shall the same release Tenant from its obligations hereunder nor constitute an eviction or constructive eviction of Tenant from the Premises.

     Article 23. Waiver of Trial By Jury

          The respective parties hereto shall and they hereby do waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other (except for personal injury or property damage) on any matters whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant’s use or occupancy of the Premises, or for the enforcement of any remedy under any statute, emergency or otherwise. If Landlord commences any summary proceeding against Tenant, Tenant will not interpose any counterclaim of whatever nature or description in any such proceeding (unless failure to impose such counterclaim would preclude Tenant from asserting in a separate action the claim which is the subject of such counterclaim), and will not seek to consolidate such proceeding with any other action which may have been or will be brought in any other court by Tenant.

     Article 24. Inability To Perform

          This Lease and the obligation of Tenant to pay Fixed Rent and Additional Rent hereunder and perform all of the other covenants and agreements hereunder on the part of Tenant to be performed will not be affected, impaired or excused because Landlord is unable to fulfill any of its obligations under this Lease expressly or impliedly to be performed by Landlord or because Landlord is unable to make, or is delayed in making any repairs, additions, alterations, improvements or decorations or is unable to supply or is delayed in supplying any equipment or fixtures, if Landlord is prevented or delayed from so doing by reason of strikes or labor troubles or by accident, or by any cause whatsoever beyond Landlord’s reasonable control, including laws, governmental preemption in connection with a national emergency or by reason of any Laws or by reason of the conditions of supply and demand which have been or are affected by war or other emergency (“Unavoidable Delays”).

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     Article 25. Bills and Notices

          Section 25.1 Except as otherwise expressly provided in this Lease, any bills, statements, consents, notices, demands, requests or other communications given or required to be given under this Lease shall be in writing and shall be deemed given if delivered by hand (against a signed receipt), sent by a nationally recognized overnight courier service, or sent by registered or certified mail (return receipt requested) and addressed:

     (a) if to Tenant, (i) at Tenant’s address at the Premises, or (ii) at any place where Tenant or any agent or employee or Tenant may be found if mailed subsequent to Tenant’s abandoning or surrendering the Premises, in each case with a copy to Loeb & Loeb LLP, 345 Park Avenue, New York, New York 10154, Attention: Scott I. Schneider, Esq.; or

     (b) if to Landlord, as follows: 111 Chelsea LLC, c/o Taconic Investment Partners LLC, 111 Eighth Avenue, New York, New York 10011, Attention: Paul E. Pariser, Principal, with a copy to: Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022, Attention: Eric Asmundsson, Esq.

          Section 25.2 Any such bill, statement, consent, notice, demand, request or other communication given as provided in this Article 25 shall be deemed given (i) on the date hand delivered, (ii) three (3) Business Days after the date mailed, or (iii) one (1) Business Day after the date sent by overnight courier service.

     Article 26. Rules and Regulations

          Landlord reserves the right, from time to time, to adopt additional reasonable and non-discriminatory Rules and Regulations and to amend the Rules and Regulations then in effect. Tenant and all Tenant Parties shall comply with the Rules and Regulations, as so supplemented or amended. Nothing contained in this Lease shall be construed to impose upon Landlord any duty or obligation to enforce the Rules and Regulations or terms, covenants or conditions in any other lease against any other tenant, and Landlord shall not be liable to Tenant for violation of the same by any other tenant, its employees, agents, visitors or licensees; provided, however, that Landlord shall not enforce such Rules and Regulations against Tenant in a discriminatory manner. If there shall be any inconsistencies between this Lease and the Rules and Regulations, the provisions of this Lease shall prevail. Landlord agrees that any modifications to the Rules and Regulations as annexed hereto (as compared to the standard Building Rules and Regulations as of the date hereof) shall be deemed incorporated into this Lease, so that such modified provisions may not be negated by subsequent changes to the Rules and Regulations.

     Article 27. Broker

          Section 27.1 Each of Landlord and Tenant represents and warrants to the other that it has not dealt with any broker in connection with this Lease other than Insignia/ESG, Inc. and Newmark & Company Real Estate, Inc. (collectively, “Broker”) and that to the best of its knowledge and belief, no other broker, finder or similar Person procured or negotiated this Lease or is entitled to any fee or commission in connection herewith.

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          Section 27.2 Each of Landlord and Tenant shall indemnify, defend, protect and hold the other party harmless from and against any and all losses, liabilities, damages, claims, judgments, fines, suits, demands, costs, interest and expenses of any kind or nature (including reasonable attorneys’ fees and disbursements) which the indemnified party may incur by reason of any claim of or liability to any broker, finder or like agent (other than Broker) arising out of any dealings claimed to have occurred between the indemnifying party and the claimant in connection with this Lease, or the above representation being false. The provisions of this Article 27 shall survive the Expiration Date or earlier termination of the Term.

     Article 28. Indemnity

          Section 28.1 Subject to the provisions of Section 11.2, Tenant shall indemnify, defend and hold harmless Landlord and all Landlord Parties from and against any and all claims against any of such parties arising from or in connection with (i) any negligence or tortious conduct of Tenant or any Tenant Party, and (ii) any accident, injury or damage whatsoever caused to any person or the property of any person occurring in, at or upon the Premises, except, in each case, to the extent that any such claim results from the negligence or tortious conduct of Landlord or any other Landlord Party; together with all costs, expenses and liabilities incurred in or in connection with each such claim or action or proceeding brought thereon, including all reasonable attorneys’ fees and expenses.

          Section 28.2 Subject to the provisions of Section 11.2, Landlord shall indemnify, defend and hold harmless Tenant and all Tenant Parties from and against all claims against any of such parties arising from or in connection with (i) any negligence or tortious conduct of Landlord or any Landlord Party, and (ii) any accident, injury or damage whatsoever caused to any person or the property of any person occurring in, at or upon the common or public areas of the Building (specifically excluding the Premises), except, in each case, to the extent that any such claim results from the negligence or tortious conduct of Tenant or any Tenant Party; together with all costs, expenses and liabilities incurred in or in connection with each such claim or action or proceeding brought thereon, including all reasonable attorneys’ fees and expenses.

          Section 28.3 (a) If any claim that is within the scope of any indemnity set forth in this Lease is asserted against any indemnified party, then the indemnified party shall give prompt notice (each, an “Indemnity Notice”) thereof to the indemnifying party, within a time period so as not to prejudice the indemnifying party’s or its insurer’s ability to defend effectively any action or proceeding brought on such claim, and the indemnifying party shall have the right and obligation to defend and control the defense of any action or proceeding brought on such claim with counsel chosen by the indemnifying party, subject to the approval of the indemnified party (such approval not to be unreasonably withheld) or by the indemnifying party’s insurance company. If the indemnified party fails promptly to give an Indemnity Notice or if the indemnified party shall not afford the indemnifying party the right to defend and control the defense of any such action or proceeding then, in either of such events, the indemnifying party shall have no obligation under the applicable indemnity set forth in this Lease with respect to such action or proceeding or other actions or proceedings involving the same or related facts. If the indemnifying party shall defend any such action or proceeding, then:

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          (i) the indemnified party shall cooperate with the indemnifying party (or its insurer) in the defense of any such action or proceeding in such manner as the indemnifying party (or its insurer) may from time to time reasonably request and the indemnifying party shall not be liable for the costs of any separate counsel employed by the indemnified party;

          (ii) the indemnifying party shall not be liable for any settlement made without the indemnifying party’s consent;

          (iii) if such action or proceeding can be settled by the payment of money and without the need to admit liability on the indemnified party’s part, then the indemnifying party shall have the right to settle such action or proceeding without the indemnified party’s consent and the indemnifying party shall have no obligation under the applicable indemnity set forth in this Lease with respect to such action or proceeding or other actions or proceedings involving the same or related facts if the indemnified party refuses to agree to such a settlement; and

          (iv) if such action or proceeding cannot be settled merely by the payment of money and without the need to admit liability on the indemnified party’s part, then the indemnifying party shall not settle such action or proceeding without the indemnified party’s consent (which consent shall not be unreasonably withheld, conditioned or delayed) and if the indemnified party unreasonably withholds, conditions or delays its consent to any such settlement, then the indemnifying party shall have no obligation under the applicable indemnity set forth in this Lease with respect to such action or proceeding or other actions or proceedings involving the same or related facts.

          (b) If an indemnifying party shall, in good faith, believe that a claim set forth in an Indemnity Notice is not within the scope of the indemnifying party’s indemnity set forth in this Lease then, pending determination of that question, the indemnifying party shall not be deemed to be in default under this Lease by reason of its failure or refusal to indemnify and hold harmless any indemnified party therefrom or to pay such costs, expenses and liabilities, but if it shall be finally determined by a court of competent jurisdiction or that such claim was within the scope of such indemnifying party’s indemnity set forth in this Lease then such indemnifying party shall be liable for any judgment or reasonable settlement or any reasonable legal fees incurred by the party entitled to indemnity hereunder. The provisions of this Article 28 shall survive the Expiration Date or earlier termination of this Lease.

     Article 29. Temporary Space

          Section 29.1 (a) Landlord hereby grants to Tenant a revocable license of approximately 7,500 Rentable Square Feet of temporary space on the second (2nd) floor of the Building, as shown on the floor plan attached as Exhibit D to this Lease (the “Temporary Space”), for use by Tenant and Tenant’s contractors and subcontractors during the period from the Commencement Date through December 31, 2003 (the “License Period”), without additional charge to Tenant except as provided in Section 29.3. Tenant shall use the Temporary Space as and for construction staging space and storage of construction materials and equipment, subject to applicable Laws, the certificate of occupancy for the Building, and the provisions of this

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Lease, and for no other purpose. Landlord shall provide electricity to the Temporary Space for lighting and for construction-related purposes, and Tenant shall pay for such electricity at the rate of $625.00 per month, payable on the first day of each month during the License Period and any period thereafter during which Tenant remains in possession of the Temporary Space.

          (b) Tenant’s contractors, subcontractors and any other persons using the Temporary Space shall not use the passenger elevators during the License Period to travel to and from the Temporary Space and between the Temporary Space and the Premises, and shall only use the freight elevators or the Building staircases for such purposes.

          Section 29.2 Landlord shall have the right at any time during the Term, upon giving Tenant not less than five (5) Business Days prior notice (a “Relocation Notice”), to provide Tenant with licensed space elsewhere in the Building of approximately the same size as the Temporary Space, with reasonable access to the freight elevators serving the Premises (the “Replacement Space”). On or before the fifth (5^th) Business Day after the Relocation Notice is given, Tenant shall, at its expense, remove all of the contents of the Temporary Space and relocate it in the Replacement Space. Tenant’s occupancy of the Replacement Space shall be on all of the terms and conditions applicable to the Temporary Space as provided in this Article 29, and from and after such relocation, the Replacement Space shall be deemed to be the Temporary Space as though Landlord and Tenant had entered into an express written amendment of this Lease with respect thereto.

          Section 29.3 The privileges granted Tenant under this Article 29 merely constitute a license and shall not, now or at any time during or after the License Period, be deemed to grant Tenant a leasehold or other real property interest in the Temporary Space or any portion thereof. The license granted to Tenant hereunder shall continue until and automatically terminate and expire on the last day of the License Period, and the termination of such license shall be self-operative and no further instrument shall be required to effect such termination. If for any reason Tenant or any Tenant Party fails to vacate and surrender possession of the Temporary Space or any part thereof on or before the expiration of the License Period, then without prejudice and in addition to any other rights and remedies Landlord may have under this Lease or under applicable Laws, Tenant shall pay to Landlord for each month or portion thereof during which Tenant holds over, an amount equal to Thirty-Five Thousand and 00/100 Dollars ($35,000.00) per month.

     Article 30. Landlord’s Contribution

          Section 30.1 (a) Landlord shall contribute Three Million Four Hundred Ninety-Six Thousand and 00/100 Dollars ($3,496,000.00) (“Landlord’s Contribution”) toward the actual cost of the Initial Alterations (including carpeting, wall covering, fixtures, telephone and computer installations, and “soft costs” incurred in connection with such alterations, including architectural and engineering fees, provided that such “soft costs” shall not exceed ten percent (10%) of Landlord’s Contribution); provided, however, that this Lease shall be in full force and effect and no Event of Default shall have occurred and be continuing hereunder; provided, further, that if Tenant duly cures such Event of Default prior to the termination of this Lease, Tenant’s entitlement to Landlord’s Contribution shall be reinstated.

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          (b) Any cost of the Initial Alterations in excess of Landlord’s Contribution shall be paid by Tenant. Tenant shall not be entitled to receive any portion of Landlord’s Contribution not actually expended by Tenant in the performance of the Initial Alterations, nor shall Tenant have any right to apply any unexpended portion of Landlord’s Contribution as a credit against Fixed Rent, Additional Rent or any other obligation of Tenant hereunder. No part of Landlord’s Contribution may be assigned by Tenant prior to actual payment thereof by Landlord to Tenant.

          Section 30.2 Landlord shall make progress payments to Tenant on a monthly basis, for the work performed during the previous month, less a retainage of 10% of each progress payment (the “Retainage”). Each of Landlord’s progress payments will be limited to an amount equal to (a) the aggregate amounts (reduced by the Retainage) previously paid or then payable by Tenant (as certified by an authorized officer of Tenant and by Tenant’s independent, licensed architect) to Tenant’s contractors, subcontractors and material suppliers for the Initial Alterations (excluding any payments for which Tenant has previously been reimbursed out of previous disbursements from Landlord’s Contribution), multiplied by (b) a fraction, the numerator of which is the amount of Landlord’s Contribution, and the denominator of which is the total contract price (or, if there is no specified or fixed contract price for the Initial Alterations, then Landlord’s reasonable estimate thereof) for the performance of all of the Initial Alterations shown on all plans and specifications approved by Landlord. Such progress payments shall be made within thirty (30) days after the delivery to Landlord of requisitions, signed by a financial officer of Tenant, which requisitions shall set forth the names of each contractor and subcontractor to whom payment is due, and the amount thereof, and shall be accompanied by (i) with the exception of the first requisition, copies of partial waivers of lien from all contractors, subcontractors and material suppliers covering all work and materials which were the subject of previous progress payments by Landlord and Tenant, and (ii) a written certification from Tenant’s architect that the work for which the requisition is being made has been completed substantially in accordance with the plans and specifications approved by Landlord, and (iii) such other documents and information as Landlord may reasonably request. Landlord shall disburse the Retainage upon submission by Tenant to Landlord of a requisition therefor, accompanied by all documentation required under this Section 30.2, together with (A) proof of the satisfactory completion of all required inspections and issuance of any required approvals, permits and sign-offs for the Initial Alterations by all Governmental Authorities having jurisdiction thereover, (B) final “as-built” plans and specifications for the Initial Alterations as required pursuant to Section 4.2(e), and (C) the issuance of final lien waivers by all contractors, subcontractors and material suppliers covering all of the Initial Alterations.

     Article 31. Right of First Offer

          Section 31.1 For purposes of this Lease, the following terms shall have the following meanings:

     (a) “Available for Leasing” means that at the time in question (i) no party leases or occupies the Expansion Space (or if leased or occupied, such party’s rights are scheduled to expire, and Landlord is prepared to market such space, within twelve (12) months of the time in question), whether pursuant to a written lease or other written agreement, and

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(ii)  no party holds any written option or right to lease or occupy the Expansion Space that is superior to Tenant’s rights hereunder, or to renew its lease or rights of occupancy therefor.

          (b) “Expansion Space” means the rentable portions of the tenth (10^th) floor of the Building adjacent to the Premises (as they may be expanded from time to time pursuant to this Article 31) and not leased by Tenant from time to time.

          (c) “Substantially Changed Terms” means terms and conditions of any proposed lease of any Expansion Space to a third party, pursuant to which the overall economic benefits (taking into account all elements of transaction, including length of term) to Landlord are reduced by ten percent (10%) or more, as compared to the terms and conditions previously offered to Tenant in an Expansion Notice.

          Section 31.2 (a) If any portion of the Expansion Space becomes Available for Leasing during the Term, Landlord shall deliver notice thereof to Tenant (an “Expansion Notice”), describing the Expansion Space in question and setting forth Landlord’s determination of the then fair market Fixed Rent for the Expansion Space (the “FMV”). Provided that all of the conditions precedent set forth in this Article 31 are fully satisfied by Tenant, Tenant shall have the option (the “Expansion Option”), exercisable by Tenant delivering written notice to Landlord (an “Exercise Notice”) within ten (10) Business Days of the giving by Landlord of the Expansion Notice, to lease the Expansion Space on the terms and conditions set forth in this Article 31, and this Lease shall thereupon be modified as provided in Section 31.4. The Expansion Option may be exercised only with respect to all of the Expansion Space that is the subject of an Expansion Notice. Time shall be of the essence with respect to all periods of time expressly set forth in this Article 31. Following the timely giving of the Expansion Notice, the parties shall, if necessary negotiate in good faith for a period of fifteen (15) days to reach a mutually satisfactory Fixed Rent for the Expansion Space, and if the parties are unable to agree upon Fixed Rent at the end of such fifteen (15) day period, them Tenant shall have the right, by notice to Landlord given within ten (10) days after the end of such fifteen (15) day period, to either (i) rescind its giving of the Expansion Notice, or (ii) refer the dispute to arbitration as provided in Section 31.5.

          (b) If Tenant fails to timely give an Exercise Notice with respect to any Expansion Space, Landlord shall be free to lease such Expansion Space to any other Person, provided that Landlord shall not thereafter enter into a lease of such Expansion Space on terms and conditions that constitute Substantially Changed Terms unless Landlord shall first deliver to Tenant a revised Expansion Notice describing such Substantially Changed Terms. In such event, Tenant shall have the right, exercisable within seven (7) Business Days following Tenant’s receipt of such revised Expansion Notice from Landlord, to deliver to Landlord an Exercise Notice agreeing to enter into a lease of the applicable Expansion Space on such Substantially Changed Terms. Further, if Tenant fails to timely give an Exercise Notice with respect to any Expansion Space, or expressly declines to lease such Expansion Space, and Landlord enters into a lease of such Expansion Space with a third party, then if such Expansion Space shall thereafter become Available for Leasing during the Term of this Lease, then Landlord shall again give Tenant an Expansion Notice as and when such Expansion Space becomes Available for Leasing, on and subject to all of the terms and conditions of this Article 31.

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          Section 31.3 Tenant shall have no right to exercise the Expansion Option unless all of the following conditions have been satisfied or waived by Landlord on the date of the Exercise Notice and on the date on which Landlord delivers to Tenant vacant possession of the Expansion Space (the “Expansion Space Commencement Date”):

          (i) No Material Default shall have occurred and be continuing under this Lease; and

          (ii) Original Tenant (or a permitted assignee, subtenant, successor or transferee pursuant to Sections 14.10 or 14.11, but not any other assignee, subtenant or successor tenant), and its Affiliates shall occupy all of the then-existing Premises Area.

          Section 31.4 Provided that Tenant timely delivers an Exercise Notice, then, subject to Tenant’s right to rescind its giving of the Expansion Notice pursuant to Section 31.2, effective on the Expansion Space Commencement Date, the Expansion Space shall be added to and be deemed to be a part of the Premises for all purposes of this Lease, on the following terms and conditions:

          (a) Tenant shall lease the Expansion Space upon all of the terms and conditions of this Lease except for Fixed Rent, which shall be equal to the FMV, as initially determined by Landlord, subject to Tenant’s right to arbitrate such determination of FMV as provided in Section 31.5;

          (b) Tenant shall pay Tenant’s Tax Payment with respect to the Expansion Space as provided in Article 7, and the Base Taxes applicable to the Expansion Space shall be the Base Taxes set forth in Section 7.1(c); and

          (c) Landlord will deliver the Expansion Space to Tenant in its then “as is” condition, and Landlord shall not be obligated to perform any work or make any payments to Tenant (in the nature of Landlord’s Contribution or otherwise) with respect thereto.

          Section 31.5 If Tenant disputes Landlord’s calculation of the FMV as set forth in the Expansion Space Notice, such dispute shall be submitted to arbitration and shall be determined by a single arbitrator appointed in accordance with the American Arbitration Association Real Estate Valuation Arbitration Proceeding Rules. Such arbitrator shall be impartial and shall have not less than ten (10) years’ experience in the New York metropolitan area in a calling related to the leasing of commercial and retail space in buildings comparable to the Building, and the fees of such arbitrator shall be shared equally by Landlord and Tenant.

          (b) Within fifteen (15) days following the appointment of such arbitrator, each party shall attend a hearing before such arbitrator wherein each party shall submit a report setting forth its determination of the FMV, together with such information on comparable rentals, or such other evidence, as such party shall deem relevant. The arbitrator shall, within fifteen (15) days following such hearing and submission of evidence, render his or her decision by selecting the determination of the FMV submitted by either Landlord or Tenant which, in the judgment of the arbitrator, most nearly reflects the FMV. The decision of such arbitrator shall be final and binding upon the parties.

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          (c) For purposes of the determination of the FMV, whether by estimate of Landlord or by arbitration, Landlord or such arbitrator shall take into account the then current rentals or occupancy fees for the renting of or granting of use or occupancy rights for comparable space in the Building and in comparable buildings in Manhattan for the Permitted Use. The determination of the FMV shall be based on all relevant factors, including the assumptions and criteria stated in this Article 31, specifically including the factors set forth in Section 31.4, and the arbitrator shall not have the power to add to, modify or change any of the provisions of this Lease. After a determination has been made of the FMV, the parties shall execute and deliver to each other an agreement setting forth the Fixed Rent for the Expansion Space as so determined.

          (d) If the final determination of Fixed Rent for the Expansion Space is not made on or before the Expansion Space Commencement Date, then pending such final determination, Tenant shall pay as Fixed Rent for the Expansion Space the amount of Fixed Rent as set forth by Landlord in the Expansion Notice. If, based on the final determination of such Fixed Rent, the payments made by Tenant on account of Fixed Rent were (i) less than Fixed Rent as finally determined, Tenant shall pay to Landlord the amount of such deficiency within thirty (30) days after demand, or (ii) greater than Fixed Rent as finally determined, Landlord shall refund the amount of such excess to Tenant within thirty (30) days after demand.

          Section 31.6 If Landlord shall be prevented from delivering possession of any portion of the Expansion Space to Tenant as provided in this Article 31 for any reason, including the holding over or retention of possession of any tenant or any other occupant, the validity of this Lease shall not be impaired thereby, and Tenant shall take possession of the Expansion Space when, as and if vacant possession of the Expansion Space is delivered to Tenant. In the event of any holding over by any tenant, subtenant or occupant of the Expansion Space beyond the scheduled expiration date of such Person’s lease, sublease or other occupancy agreement, regardless of the reason for such holding over, Landlord will promptly take all commercially reasonable actions to obtain possession of the Expansion Space, including commencing and prosecuting appropriate legal proceedings against any such holdover tenant, subtenant or occupant. The provisions of this Section 31.4 are intended to constitute “an express provision to the contrary” within the meaning of Section 223 a of the New York Real Property Law or any successor law or ordinance, and Tenant hereby waives any right to rescind this Lease with respect to the Expansion Space, except as set forth in the preceding sentence, and further waives the right to recover any damages from Landlord on account of Landlord’s failure to deliver possession of the Expansion Space to Tenant.

     Article 32. Security Deposit

          Section 32.1 Tenant has deposited with Landlord the sum of Four Million Two Hundred Fifty-Six Thousand and 00/100 Dollars ($4,256,000.00) as security for the full and faithful performance of all of the obligations of Tenant under this Lease (all or any part of such amount, the “Security Deposit”), in the form of the Letter of Credit as set forth in Section 32.2. If an Event of Default shall occur under this Lease, Landlord may draw on the Letter of Credit, and may use, apply or retain all or any part of the cash proceeds of the Letter of Credit for the payment of any Fixed or Additional Rent or any other sum in default or for the payment of any other amount that Landlord may spend or become obligated to spend by reason of such Event of Default, or to compensate Landlord for any other loss, cost or damage Landlord may suffer by

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reason of such Event of Default, to the extent permitted under this Lease and applicable Laws. Tenant shall, within ten (10) days after notice from Landlord, deposit with Landlord cash or a letter of credit in an amount sufficient to restore the Security Deposit to the amount then required pursuant to the terms of this Article 32. Tenant’s obligation to make such payment shall be deemed a requirement that Tenant pay an item of Additional Rent, and Tenant’s failure to do so shall be a breach of this Lease. Landlord shall deposit any cash proceeds of the Letter of Credit in a standard interest-bearing security deposit account in a bank located in New York State. To the extent not prohibited by Law, Landlord shall be entitled to receive and retain as an administrative expense in an amount equal to interest on such proceeds at the rate of one percent (1%) per annum, which fee Landlord shall have the right to withdraw, at any time and from time to time, as Landlord may determine. So long as no Event of Default shall then be continuing, the balance of the interest, if any, shall be paid to Tenant annually, or, at Landlord’s option, credited against the next ensuing installments of Fixed Rent due hereunder, within a reasonable time following the date upon which the depository bank customarily makes interest payments. Landlord shall not be required to credit Tenant with any interest for any period during which Landlord does not receive interest on such funds. Tenant shall not assign or encumber any part of the Security Deposit, and no assignment or encumbrance by Tenant of all of any part of the Security Deposit shall be binding upon Landlord, whether made prior to, during, or after the Term. Landlord shall not be required to exhaust its remedies against Tenant or against the Security Deposit before having recourse to any other form of security held by Landlord, and recourse by Landlord to any Security Deposit shall not affect any remedies of Landlord provided in this Lease or available to Landlord under applicable Laws. So long as no Event of Default shall then have occurred and be continuing, the Security Deposit or any balance thereof shall be returned to Tenant within sixty (60) days after the expiration or sooner termination (other than a termination pursuant to Article 16) of the Term and Tenant’s surrender to Landlord of the Premises.

          Section 32.2 Tenant shall deliver the Security Deposit to Landlord in the form of a clean, irrevocable, non-documentary and unconditional letter of credit (the “Letter of Credit”) issued by and drawn upon any commercial bank, trust company, national banking association or savings and loan association having offices for banking and drawing purposes in the City of New York and which is a member of the New York Clearinghouse Association (the “Issuing Bank”) and which (or the parent company of which) shall have outstanding unsecured, uninsured and unguaranteed indebtedness, or shall have issued a letter of credit or other credit facility that constitutes the primary security for any outstanding indebtedness (which is otherwise uninsured and unguaranteed), that is then rated, without regard to qualification of such rating by symbols such as “+” or “-” or numerical notation, “Aa” or better by Moody’s Investors Service and “AA” or better by Standard & Poor’s Corporation, and has combined capital, surplus and undivided profits of not less than $500,000,000.00. Landlord hereby approves JPMorgan Chase Bank as a qualified Issuing Bank. The Letter of Credit shall have a term of not less than one year, be in form and content satisfactory to Landlord (and substantially as shown on Exhibit E to this Lease), be for the account of Landlord, be in the amount of the Security Deposit then required to be deposited hereunder, and be fully transferable by Landlord to successor owners of the Building without the payment of any fees or charges by any party other than Tenant, provided that if the Letter of Credit is transferred at the request of Landlord more than once in any seven (7) year period, the transfer fees for each additional transfer shall be paid by Landlord. The Letter of Credit shall provide that it shall be deemed automatically renewed, without

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amendment, for consecutive periods of one year each thereafter during the Term, unless the Issuing Bank sends notice (the “Non-Renewal Notice”) to Landlord by certified mail, return receipt requested, not less than thirty (30) days prior to the then expiration date of the Letter of Credit that the Issuing Bank elects not to have such Letter of Credit renewed. Additionally, the Letter of Credit shall provide that Landlord shall have the right, exercisable at any time after Landlord’s receipt of the Non-Renewal Notice, by sight draft on the Issuing Bank, to receive the monies represented by the existing Letter of Credit and to hold such proceeds pursuant to the terms of this Article 32 as a cash security deposit pending the replacement Letter of Credit. If an Event of Default shall have occurred and be continuing under any provision of this Lease, including the provisions relating to the payment of Fixed Rent and Additional Rent, Landlord may apply or retain the whole or any part of the cash security so deposited or may notify the Issuing Bank and thereupon receive all the monies represented by the Letter of Credit and use, apply, or retain the whole or any part of such proceeds as provided in this Section 32.2. Any portion of the cash proceeds of the Letter of Credit not so used or applied by Landlord in satisfaction of the obligations of Tenant as to which such Event of Default shall have occurred shall be deposited by Landlord and retained as a cash security deposit as provided in Section 32.1. If Landlord applies or retains any part of the cash security or proceeds of the Letter of Credit, as the case may be, Tenant shall, within ten (10) days after written demand, deposit with Landlord the amount so applied or retained so that Landlord shall have the full Security Deposit required pursuant to Section 32.1 on hand at all times during the Term. So long as no Event of Default shall then have occurred and be continuing, the Letter of Credit shall be returned to Tenant within sixty (60) days after the Expiration Date and after delivery of possession of the Premises to Landlord. In the event of a sale or lease of Landlord’s interest in the Premises, within thirty (30) days of notice of such sale or leasing, Tenant, at Tenant’s expense, shall arrange for the transfer of the Letter of Credit to the new landlord, as designated by Landlord, or have the Letter of Credit reissued in the name of the new landlord, and Landlord shall thereupon be released by Tenant from all liability for the return of the Letter of Credit; provided, however, that if the Letter of Credit is reissued, Landlord shall return the original Letter of Credit issued in Landlord’s name to Tenant.

          Section 32.3 Notwithstanding anything set forth in this Article 32 to the contrary, and provided that no Material Default shall have occurred during the immediately preceding twenty-four (24) month period, then after notice from Tenant to Landlord (a “Reduction Notice”) given not less than thirty (30) days prior to each of the following dates (the “Reduction Dates”), the Security Deposit shall be reduced, on each Reduction Date, to the following amounts:

Reduction Date	Security Deposit
January 1, 2011		$3,192,000.00
July 1, 2013		$2,128,000.00

          Section 32.3 No failure by Tenant to give Landlord a Reduction Notice prior to any Reduction Date shall operate to waive or discharge Landlord’s obligation to so reduce the Security Deposit, but such Reduction Date shall be deemed delayed until fifteen (15) days after Tenant shall give the Reduction Notice with respect to such Reduction Date. Further, if a

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Material Default shall have occurred within the twenty-four (24) month period immediately preceding a Reduction Date, such Reduction Date, and Tenant’s rights to the applicable reduction in the Security Deposit, shall be deferred until such time as there shall have been no Material Default for a continuous period of twenty-four (24) months, at which time (if ever), Tenant shall then be entitled to give the applicable Reduction Notice. If for any reason Landlord is holding the Security Deposit in cash on any Reduction Date, and not in the form of a Letter of Credit pursuant to Section 32.2, Landlord shall refund to Tenant the amount by which the Security Deposit is reduced pursuant hereto within fifteen (15) days after each the later to occur of the applicable Reduction Date or the giving of the applicable Reduction Notice. If Landlord is holding the Security Deposit in the form of the Letter of Credit, then, provided that Tenant tenders to Landlord a replacement Letter of Credit or an amendment thereof on or about each Reduction Date in the appropriately reduced amount of the Security Deposit, Landlord shall exchange the Letter of Credit then held by Landlord for the Letter of Credit tendered by Tenant.

     Article 33. Termination Option

          Tenant shall have a one-time right to terminate this Lease (the “Termination Option”), by notice to Landlord (the “Early Termination Notice”) given no earlier than June 1, 2011 and no later than July 31, 2012, which termination shall, subject to the provisions of this Article 33, be effective on June 30, 2013 (the “Termination Date”), provided that (i) this Lease shall be in full force and effect and no Material Default shall have occurred and be continuing on the date of Tenant’s giving of the Early Termination Notice and on the Termination Date, and (b) together with the Early Termination Notice, Tenant shall pay to Landlord the sum of Three Million Five Hundred Thousand and 00/100 Dollars ($3,500,000.00) (the “Termination Payment”). Time shall be of the essence as to the giving of the Early Termination Notice by Tenant, and if Tenant fails to timely give the Early Termination Notice, Tenant shall have no further rights under this Article 33 to exercise the Early Termination Option or otherwise to terminate this Lease prior to the Expiration Date. In the event that Tenant shall timely give the Termination Notice and shall otherwise comply with the conditions set forth in this Article 33 to the exercise of the Termination Option, including the making of the Termination Payment, this Lease and the Term shall expire and come to an end on the Termination Date with the same effect as if such date were the Expiration Date, and Tenant shall remain liable to pay all Fixed Rent and Additional Rent due and payable, and to perform any and all other obligations of Tenant accruing under this Lease on or prior to the Termination Date. On the Termination Date termination, Tenant shall vacate and deliver possession of the Premises to Landlord as provided in Article 20.

     Article 34. Miscellaneous

          Section 34.1 (a) The obligations of Landlord under this Lease accruing after a sale, conveyance or transfer of the Real Property shall not be binding upon Landlord named herein after the sale, conveyance, assignment or transfer by such Landlord (or upon any subsequent landlord after the sale, conveyance, assignment or transfer by such subsequent landlord) of its interest in the Building or the Real Property, as the case may be, and in the event of any such sale, conveyance, assignment or transfer, Landlord shall be and hereby is entirely freed and relieved of all covenants and obligations of Landlord hereunder accruing thereafter, and the transferee of Landlord’s interest in the Building or the Real Property, as the case may be,

- 67 -

shall be deemed to have assumed all obligations under this Lease. Prior to any such sale, conveyance, assignment or transfer, the liability of Landlord for Landlord’s obligations under this Lease shall be limited to Landlord’s interest in the Real Property (including rents, insurance, sale and condemnation proceeds prior to their distribution or application by Landlord) and Tenant shall not look to any other property or assets of Landlord or the property or assets of any of the Exculpated Parties (defined below) in seeking either to enforce Landlord’s obligations under this Lease or to satisfy a judgment for Landlord’s failure to perform such obligations.

          (b) Notwithstanding anything set forth in this Lease to the contrary, Tenant shall look solely to Landlord to enforce Landlord’s obligations hereunder and no partner, member, shareholder, director, officer, principal, employee or agent, directly or indirectly, of Landlord (collectively, the “Landlord Exculpated Parties”) shall be personally liable for the performance of Landlord’s obligations under this Lease. Tenant shall not seek any damages against any of the Landlord Exculpated Parties. In no event shall Landlord be liable for, and Tenant, on behalf of itself and all Tenant Parties, hereby waives any claim for, any indirect, consequential or punitive damages, including loss of profits or business opportunity, arising under or in connection with this Lease.

          (c) Notwithstanding anything set forth in this Lease to the contrary, Landlord shall look solely to Tenant to enforce Tenant’s obligations hereunder and no partner, member, shareholder, director, officer, principal, employee or agent, directly or indirectly, of Tenant (collectively, the “Tenant Exculpated Parties”) shall be personally liable for the performance of Tenant’s obligations under this Lease. Landlord shall not seek any damages against any of the Tenant Exculpated Parties. In no event shall Tenant be liable for, and Landlord, on behalf of itself and all Landlord Parties, hereby waives any claim for, any indirect, consequential or punitive damages, including loss of profits or business opportunity, arising under or in connection with this Lease.

          Section 34.2 Wherever in this Lease Landlord’s consent or approval is required, if Landlord shall refuse such consent or approval, Tenant in no event shall be entitled to make, nor shall Tenant make, any claim, and Tenant hereby waives any claim, for money damages (nor shall Tenant claim any money damages by way of set-off, counterclaim or defense) based upon any claim or assertion by Tenant that Landlord unreasonably withheld or unreasonably delayed its consent or approval. Tenant’s sole remedy shall be an action or proceeding to enforce any such provision, for specific performance, injunction or declaratory judgment; provided, however, if Landlord is determined to have acted unreasonably, Landlord shall reimburse Tenant for all of its costs and expenses and legal fees with respect to any action commenced against Landlord.

          Section 34.3 (a) Landlord will, at the request of Tenant, maintain listings on the directory in the Building lobby of the names of Tenant and any officers or employees of Tenant, for so long as Landlord maintains a Building lobby directory, provided that the number of listings shall be in the same proportion to the capacity of the Building directory as the Premises Area bears to the Rentable Square Foot area of the Building. Tenant shall deliver to Landlord, on or prior to the Commencement Date, a list of all names to be included in the directory. Tenant may deliver revised listings to Landlord, but in no event shall Landlord be obligated to revise the Building directory more often than once a month. There shall be no charge to Tenant for its

- 68 -

initial listings on the Building directory, but Tenant shall pay $35.00 for each revised listing requested by Tenant.

          (b) Tenant shall have the right to install identifying signage in the tenth (10^th) floor passenger elevator lobby on the Eighth Avenue side of the Building, of dimensions, materials, design and appearance subject to Landlord’s written approval, which shall not be unreasonably withheld.

          Section 34.4 (a) This Lease may not be changed, modified, terminated or discharged, in whole or in part, except by a writing, executed by the party against whom enforcement of the change, modification, termination or discharge is to be sought.

          (b) This Lease shall be governed in all respects by the laws of the State of New York applicable to agreements executed in and to be performed wholly within the State.

          (c) If any term, covenant, condition or provision of this Lease, or the application thereof to any person or circumstance, shall ever be held to be invalid or unenforceable, then in each such event the remainder of this Lease or the application of such term, covenant, condition or provision to any other person or any other circumstance (other than those as to which it shall be invalid or unenforceable) shall not be thereby affected, and each term, covenant, condition and provision hereof shall remain valid and enforceable to the fullest extent permitted by law.

          (d) If at the commencement of, or at any time or times during the Term, the Fixed Rent and Additional Rent reserved in this Lease shall not be fully collectible by reason of any Law, Tenant shall enter into such agreements and take such other steps (without additional expense to Tenant) as Landlord may request and as may be legally permissible to permit Landlord to collect the maximum rents which may from time to time during the continuance of such legal rent restriction be legally permissible (and not in excess of the amounts reserved therefor under this Lease). Upon the termination of such legal rent restriction prior to the expiration of the Term, (i) Fixed Rent and Additional Rent shall become and thereafter be payable hereunder in accordance with the amounts reserved in this Lease for the periods following such termination, and (ii) Tenant shall pay to Landlord, if legally permissible, an amount equal to (A) the items of Fixed Rent and Additional Rent which would have been paid pursuant to this Lease but for such legal rent restriction less (B) the rents paid by Tenant to Landlord during the period or periods such legal rent restriction was in effect.

          (e) The covenants, conditions and agreements contained in this Lease shall bind and inure to the benefit of Landlord and Tenant and their respective legal representatives, successors, and, except as otherwise provided in this Lease, their assigns.

          Section 34.5 Except as expressly provided to the contrary in this Lease, Tenant agrees that all disputes arising, directly or indirectly, out of or relating to this Lease, and all actions to enforce this Lease, shall be dealt with and adjudicated in the state courts of New York or the Federal courts sitting in New York City; and for that purpose hereby expressly and irrevocably submits itself to the jurisdiction of such courts. Tenant hereby irrevocably appoints

- 69 -

the Secretary of the State of New York as its authorized agent upon which process may be served in any such action or proceeding.

          Section 34.6 Tenant hereby irrevocably waives, with respect to itself and its property, any diplomatic or sovereign immunity of any kind or nature, and any immunity from the jurisdiction of any court or from any legal process, to which Tenant may be entitled, and agrees not to assert any claims of any such immunities in any action brought by Landlord under or in connection with this Lease. Tenant acknowledges that the making of such waivers, and Landlord’s reliance on the enforceability thereof, is a material inducement to Landlord to enter into this Lease.

          In Witness Whereof, Landlord and Tenant have respectively executed this Lease as of the day and year first above written.

Landlord:	111 Chelsea LLC,
	By:	Taconic Chelsea Holdings LLC, managing member
		By:     Taconic SL Principals LLC, managing member

By:		/s/ Paul Pariser
	Paul E. Pariser, Principal

Tenant:	DoubleClick Inc.
	By:	/s/ Bruce Dalziel
		Name:   Bruce Dalziel
		Title:     Chief Financial Officer

Tenant’s Federal Tax Identification Number:  13-3870996

- 70 - EX-31.1 8 y89015exv31w1.txt CERTIFICATION EXHIBIT 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350) I, Kevin P. Ryan, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of DoubleClick Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) [Paragraph omitted in accordance with SEC transition instructions contained in SEC Release 34-47986] c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ KEVIN P. RYAN ----------------- Kevin P. Ryan Chief Executive Officer Dated: August 11, 2003 EX-31.2 9 y89015exv31w2.txt CERTIFICATION EXHIBIT 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350) I, Bruce Dalziel, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of DoubleClick Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) [Paragraph omitted in accordance with SEC transition instructions contained in SEC Release 34-47986] c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ BRUCE DALZIEL ----------------- Bruce Dalziel Chief Financial Officer Dated: August 11, 2003 2 EX-32.1 10 y89015exv32w1.txt CERTIFICATION EXHIBIT 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350) In connection with the Quarterly Report on Form 10-Q of DoubleClick Inc. (the "Company") for the quarterly period ended June 30, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Kevin P. Ryan, as Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ KEVIN P. RYAN ----------------- Kevin P. Ryan Chief Executive Officer Dated: August 11, 2003 A signed original of this written statement required by Section 906 has been provided to DoubleClick Inc. and will be retained by DoubleClick and furnished to the Securities and Exchange Commission or its staff upon request. 3 EX-32.2 11 y89015exv32w2.txt CERTIFICATION EXHIBIT 32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350) In connection with the Quarterly Report on Form 10-Q of DoubleClick Inc. (the "Company") for the quarterly period ended June 30, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Bruce Dalziel, as Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ BRUCE DALZIEL ----------------- Bruce Dalziel Chief Financial Officer Dated: August 11, 2003 A signed original of this written statement required by Section 906 has been provided to DoubleClick Inc. and will be retained by DoubleClick and furnished to the Securities and Exchange Commission or its staff upon request. 4 -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.3

THIRD AMENDMENT OF LEASE

EX-10.4

FOURTH AMENDMENT OF LEASE

EX-10.5

AGREEMENT OF LEASE

EX-31.1

                                                                    EXHIBIT 31.1

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
                            (18 U.S.C. SECTION 1350)

I, Kevin P. Ryan, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of DoubleClick Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
      and have:

      a)    Designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, to ensure that material information relating to the
            registrant, including its consolidated subsidiaries, is made known
            to us by others within those entities, particularly during the
            period in which this report is being prepared;

      b)    [Paragraph omitted in accordance with SEC transition instructions
            contained in SEC Release 34-47986]

      c)    Evaluated the effectiveness of the registrant's disclosure controls
            and procedures and presented in this report our conclusions about
            the effectiveness of the disclosure controls and procedures, as of
            the end of the period covered by this report based on such
            evaluation; and

      d)    Disclosed in this report any change in the registrant's internal
            control over financial reporting that occurred during the
            registrant's most recent fiscal quarter (the registrant's fourth
            fiscal quarter in the case of an annual report) that has materially
            affected, or is reasonably likely to materially affect, the
            registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

      a)    All significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the registrant's ability to
            record, process, summarize and report financial information; and

      b)    Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal control over financial reporting.

                                    /s/ KEVIN P. RYAN
                                    -----------------
                                    Kevin P. Ryan
                                    Chief Executive Officer

Dated: August 11, 2003

EX-31.2

                                                                    EXHIBIT 31.2

                    CERTIFICATION OF CHIEF FINANCIAL OFFICER
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
                            (18 U.S.C. SECTION 1350)

I, Bruce Dalziel, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of DoubleClick Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
      and have:

      a)    Designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, to ensure that material information relating to the
            registrant, including its consolidated subsidiaries, is made known
            to us by others within those entities, particularly during the
            period in which this report is being prepared;

      b)    [Paragraph omitted in accordance with SEC transition instructions
            contained in SEC Release 34-47986]

      c)    Evaluated the effectiveness of the registrant's disclosure controls
            and procedures and presented in this report our conclusions about
            the effectiveness of the disclosure controls and procedures, as of
            the end of the period covered by this report based on such
            evaluation; and

      d)    Disclosed in this report any change in the registrant's internal
            control over financial reporting that occurred during the
            registrant's most recent fiscal quarter (the registrant's fourth
            fiscal quarter in the case of an annual report) that has materially
            affected, or is reasonably likely to materially affect, the
            registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

      a)    All significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the registrant's ability to
            record, process, summarize and report financial information; and

      b)    Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal control over financial reporting.

                                    /s/ BRUCE DALZIEL
                                    -----------------
                                    Bruce Dalziel
                                    Chief Financial Officer

Dated: August 11, 2003



                                       2

EX-32.1

                                                                    EXHIBIT 32.1

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
            PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
                            (18 U.S.C. SECTION 1350)

      In connection with the Quarterly Report on Form 10-Q of DoubleClick Inc.
(the "Company") for the quarterly period ended June 30, 2003, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), Kevin P.
Ryan, as Chief Executive Officer of the Company, hereby certifies, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:

      (1) The Report fully complies with the requirements of sections 13(a) or
15(d) of the Securities Exchange Act of 1934; and

      (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.

                                    /s/ KEVIN P. RYAN
                                    -----------------
                                    Kevin P. Ryan
                                    Chief Executive Officer

Dated: August 11, 2003

        A signed original of this written statement required by Section 906 has
been provided to DoubleClick Inc. and will be retained by DoubleClick and
furnished to the Securities and Exchange Commission or its staff upon request.



                                       3

EX-32.2

                                                                    EXHIBIT 32.2

                    CERTIFICATION OF CHIEF FINANCIAL OFFICER
            PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
                            (18 U.S.C. SECTION 1350)

      In connection with the Quarterly Report on Form 10-Q of DoubleClick Inc.
(the "Company") for the quarterly period ended June 30, 2003, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), Bruce
Dalziel, as Chief Financial Officer of the Company, hereby certifies, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:

      (1) The Report fully complies with the requirements of sections 13(a) or
15(d) of the Securities Exchange Act of 1934; and

      (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.

                                    /s/ BRUCE DALZIEL
                                    -----------------
                                    Bruce Dalziel
                                    Chief Financial Officer

Dated: August 11, 2003

        A signed original of this written statement required by Section 906 has
been provided to DoubleClick Inc. and will be retained by DoubleClick and
furnished to the Securities and Exchange Commission or its staff upon request.



                                        4