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SECURITIES AND EXCHANGE COMMISSION
AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13D
(Rule 13d-101)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
INFOSEEK CORPORATION
(a Delaware corporation)
(Name of Issuer)
COMMON STOCK
(Title of Class of Securities)
45678M107
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(CUSIP Number)
David K. Thompson
The Walt Disney Company
500 South Buena Vista Street
Burbank, California 91521
(818) 560-1000
(Name, address and telephone number of person
authorized to receive notices and communications)
November 18, 1998
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box. [_]
Note. Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. See Rule 13d-7 for
other parties to whom copies are to be sent.
(Page 1 of 21 Pages)
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CUSIP NO. 45678M107 SCHEDULE 13D PAGE 2 OF 21 PAGES
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
The Walt Disney Company
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
2 (b) [_]
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SEC USE ONLY
3
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SOURCE OF FUNDS
4 WC; see Item 3.
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
5 REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [_]
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CITIZENSHIP OR PLACE OF ORGANIZATION
6 Delaware
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SOLE VOTING POWER
NUMBER OF 7 2,642,000 shares plus a warrant to purchase
15,720,000 shares
SHARES
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BENEFICIALLY SHARED VOTING POWER
8 23,461,965 shares
OWNED BY
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EACH SOLE DISPOSITIVE POWER
9 2,642,000 shares plus a warrant to purchase
REPORTING 15,720,000 shares
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10 23,461,965 shares
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11 26,103,965 shares (including shares owned by Disney Enterprises,
Inc., a wholly owned subsidiary of the reporting person) plus a
warrant to purchase 15,720,000 shares
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
12 EXCLUDES CERTAIN SHARES [_]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13 43.31%, excluding the warrant; 55.04% assuming exercise in full
of the warrant.
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TYPE OF REPORTING PERSON
14 CO
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CUSIP NO. 45678M107 SCHEDULE 13D PAGE 3 OF 21 PAGES
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON
Disney Enterprises, Inc.
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
2 (b) [_]
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SEC USE ONLY
3
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SOURCE OF FUNDS
4 OO; see Item 3.
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
5 REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [_]
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CITIZENSHIP OR PLACE OF ORGANIZATION
6 Delaware
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NUMBER OF SOLE VOTING POWER
7 0 shares
SHARES
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BENEFICIALLY SHARED VOTING POWER
8 23,461,965 shares
OWNED BY
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EACH SOLE DISPOSITIVE POWER
9 0 shares
REPORTING
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PERSON SHARED DISPOSITIVE POWER
10 23,461,965 shares
WITH
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11 23,461,965 shares
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
12 EXCLUDES CERTAIN SHARES [_]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13 38.93%
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TYPE OF REPORTING PERSON
14 CO
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CUSIP NO. 45678M107 SCHEDULE 13D PAGE 4 OF 21 PAGES
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ITEM 1. SECURITY AND ISSUER
This statement relates to the Common Stock, par value $.001 per share
("Infoseek Common Stock"), of Infoseek Corporation, a Delaware corporation
("Infoseek"). The Infoseek Common Stock includes the rights attached thereto
pursuant to Infoseek's share purchase rights plan. The principal executive
offices of Infoseek are located at 1399 Moffett Park Drive, Sunnyvale,
California 94089.
ITEM 2. IDENTITY AND BACKGROUND
(a) - (c), (f). This Statement is being filed by The Walt Disney Company,
a Delaware corporation ("TWDC"), and Disney Enterprises, Inc., a Delaware
corporation and wholly owned subsidiary of TWDC ("DEI" and, collectively with
TWDC, the "Filing Persons"). The address for both Filing Persons is 500 South
Buena Vista Street, Burbank, California 91521. The Filing Persons are
diversified entertainment companies whose principal businesses consist of
creative content, broadcasting and theme parks and resorts. Attached as
Exhibit 1 is a chart setting forth, with respect to each executive officer and
director of the Filing Persons, his or her name, business address, principal
occupation or employment, the name and principal business of the organization
in which such employment is conducted, and citizenship. Attached as Exhibit 2
is an agreement between the Filing Persons that this statement is filed on
behalf of each of them.
(d) During the last five years, neither Filing Person nor, to the best
knowledge of the Filing Persons, any executive officer or director of either
Filing Person has been convicted in a criminal proceeding (excluding traffic
violations and similar misdemeanors).
(e) During the last five years, neither Filing Person nor, to the best
knowledge of the Filing Persons, any executive officer or director of either
Filing Person was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which either
Filing Person or any executive officer or director of either Filing Person was
or is subject to a judgment, decree or final order enjoining future violations
of, or prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
On June 18, 1998, Infoseek, Infoseek Corporation, a California
corporation ("Infoseek California"), DEI and Starwave Corporation, a Washington
corporation that was approximately 91% owned by DEI ("Starwave"), entered into
an Agreement and Plan of Reorganization (the "Reorganization Agreement"),
pursuant to which Infoseek acquired Starwave by way of a merger (the "Merger")
on November 18, 1998 (the "Closing Date"). As a result of the Merger, among
other things, each share of Class A Common Stock and Class B Common Stock of
Starwave was converted into the right to receive 0.264957 shares of Infoseek
Common Stock (the "Exchange Ratio"). Immediately prior to the Merger, DEI was
the holder of 48,680,740 shares of Starwave Class A Common Stock and 39,869,348
shares of Starwave Class B Common Stock. Pursuant to the Merger and based on
the Exchange Ratio, DEI received 23,461,965 shares of Infoseek
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CUSIP NO. 45678M107 SCHEDULE 13D PAGE 5 OF 21 PAGES
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Common Stock in exchange for its shares of Starwave Common Stock. The
Reorganization Agreement is attached hereto as Exhibit 3 and is incorporated
herein by reference.
In addition, on June 18, 1998, Infoseek and TWDC entered into a Common
Stock and Warrant Purchase Agreement (the "Purchase Agreement"). Pursuant to
the Purchase Agreement, on the Closing Date, TWDC acquired (i) 2,642,000
shares of Infoseek Common Stock and (ii) a warrant (the "Warrant") to purchase
15,720,000 shares of Infoseek Common Stock, in exchange for an aggregate
purchase price of (a) $70,013,000 in cash, which was paid from TWDC's working
capital, and (b) a five-year promissory note of TWDC in favor of Infoseek (the
"Note") in the principal amount of $139,000,000. The Note bears interest at a
rate of 6.5% per annum and is repayable in twenty quarterly principal
installments of $6,950,000 together with interest thereon, beginning on the
three month anniversary of the Closing Date. The Purchase Agreement and the
Note are attached hereto as Exhibits 4 and 5, respectively, and are
incorporated herein by reference.
The Warrant vests and becomes exercisable as to one-third of the shares
of Infoseek Common Stock subject to the Warrant upon each of the first, second
and third anniversaries of the Closing Date, subject to acceleration upon a
Standstill Termination Event (as defined in Item 6 below under the description
of the "Governance Agreement"). The exercise price for each share of Infoseek
Common Stock subject to the Warrant is equal to (i) 120% of the average
closing sale prices of Infoseek Common Stock on the Nasdaq National Market (or
another national market) for the thirty trading days prior to the time such
Warrant vests and becomes exercisable or (ii) if not traded on a market, by
unanimous determination of the Infoseek Board of Directors or, if the Board
cannot agree, through an appraisal mechanism, subject, in each case, to a
maximum per share exercise price of $50.00. The Warrant does not entitle the
holder to any rights as a stockholder prior to exercise and is transferable
only to subsidiaries of TWDC that are at least 80% owned by TWDC. The Warrant
expires on November 18, 2003. If the Warrant is exercised, it is anticipated
that the exercise price for the shares subject thereto will be paid from the
working capital of TWDC. The Warrant is attached hereto as Exhibit 6 and is
incorporated herein by reference.
ITEM 4. PURPOSE OF TRANSACTION
The Filing Persons acquired shares of Infoseek Common Stock and the
Warrant in order to obtain a substantial equity position in the Issuer and the
ability to acquire a majority equity position in the Issuer through the
exercise of the Warrant or other transactions permitted under the Governance
Agreement (as defined in Item 6 below). In addition, the Filing Persons have
acquired certain rights and incurred certain obligations with respect to
Infoseek which are contained in various related agreements that were entered
into in connection with the Reorganization Agreement and the Purchase
Agreement (the "Related Agreements"), all of which are described in Item 6
below, filed as exhibits hereto (as indicated in Item 6 below) and
incorporated herein by reference. In particular, the Governance Agreement sets
forth terms pertaining to, among other things, the Filing Persons'
restrictions on acquisition and disposition of Infoseek Common Stock, voting
obligations with respect to Infoseek Common Stock, board representation
rights, and rights to maintain their percentage ownership of Infoseek Common
Stock through purchases from Infoseek or in the open market, as well as
special board and shareholder approval requirements for certain types of
material transactions, all as more fully described in Item 6 below.
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CUSIP NO. 45678M107 SCHEDULE 13D PAGE 6 OF 21 PAGES
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Subject to the terms of the Governance Agreement, the Filing Persons may
seek to acquire additional shares of Infoseek Common Stock or other securities
of Infoseek through exercise of the Warrant or the exercise of the Filing
Persons' maintenance rights under the Governance Agreement (as described in
Item 6 below), which may include acquisition of a majority and/or controlling
interest in Infoseek. In addition, subject to the terms of the Governance
Agreement, while it is not the Filing Persons' present intention to do so, the
Filing Persons may seek to (a) acquire additional shares of Infoseek Common
Stock or other securities of Infoseek through open market purchases, privately
negotiated transactions, a public tender offer, a merger, reorganization or
comparable transaction, or otherwise, any of which may include acquisition of
a majority and/or controlling interest in Infoseek, or (b) acquire a material
amount of the assets of Infoseek. Subject to the terms of the Governance
Agreement, an acquisition of a majority or controlling equity interest in
Infoseek by the Filing Persons could result in (i) changes in the Board of
Directors of Infoseek, (ii) changes in the capitalization or dividend policy
of Infoseek, (iii) changes in Infoseek's Certificate of Incorporation or
Bylaws that may impede the acquisition of control of Infoseek by any person
other than the Filing Persons, (iv) delisting of Infoseek Common Stock from
the Nasdaq National Market (or other national securities market), (v)
termination of registration of Infoseek Common Stock pursuant to Section
12(g)(4) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or (vi) other events comparable to those enumerated above.
Alternatively, while it is not the Filing Persons' present intention to do so
and the Governance Agreement restricts the ability of the Filing Persons to do
so, the Filing Persons may dispose of some or all of the shares of Infoseek
Common Stock held by them or obtained upon exercise of the Warrant in the open
market, in privately negotiated transactions to third parties, through a
public offering upon exercise of the registration rights outlined below in
Item 6, or otherwise, depending upon the course of action that the Filing
Persons pursue, market conditions and other factors. Although the foregoing
represents the range of activities that may be taken by the Filing Persons
with respect to Infoseek, the possible activities of the Filing Persons are
subject to change at any time.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) TWDC is the beneficial owner of 26,103,965 shares of Infoseek
Common Stock, or 43.31% of the outstanding shares of Infoseek Common Stock,
which includes 23,461,965 shares held directly by DEI (representing 38.93% of
the outstanding shares of Infoseek Common Stock) and 2,642,000 shares held
directly by TWDC (representing 4.38% of the outstanding shares of Infoseek
Common Stock). TWDC is also the beneficial owner of the Warrant to purchase
15,720,000 shares of Infoseek Common Stock. If the Warrant were exercised in
full, TWDC would be the beneficial owner of 41,823,965 shares of Infoseek
Common Stock, representing 55.04% of the outstanding shares of Infoseek Common
Stock. In addition, pursuant to the Governance Agreement, upon the occurrence
of certain events, the Filing Persons will be entitled to acquire additional
shares of Infoseek Common Stock and warrants to purchase such shares in
amounts sufficient to maintain the Filing Persons' percentage ownership of
Infoseek Common Stock, as more fully described in Item 6 below. Further,
pursuant to the First Offer Agreement (as defined in Item 6 below), TWDC has a
right of first refusal with respect to certain proposed sales of Infoseek
Common Stock by Steven T. Kirsch, Infoseek's Chairman and a principal
shareholder of Infoseek.
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CUSIP NO. 45678M107 SCHEDULE 13D PAGE 7 OF 21 PAGES
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(b) TWDC has sole voting and dispositive power with respect to the
2,642,000 shares of Infoseek Common Stock held by it and will have sole voting
and dispositive power with respect to any of the 15,720,000 shares of Infoseek
Common Stock subject to the Warrant that may be acquired by TWDC upon exercise
of the Warrant. The Filing Persons have shared voting and dispositive power
with respect to the 23,461,965 shares of Infoseek Common Stock held by DEI.
DEI does not have sole voting or dispositive power with respect to any shares
held by it.
(c) Other than as described in Item 3 above, neither of the Filing
Persons had any transactions in Infoseek Common Stock in the last sixty (60)
days.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
In addition to the terms of the Reorganization Agreement, the Purchase
Agreement, the Warrant and the Note as described above in Item 3, the Related
Agreements entered into by the Filing Persons, Infoseek, Infoseek California and
certain of their affiliates consist of the following:
a. Governance Agreement dated June 18, 1998 among Infoseek, TWDC and DEI
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(the "Governance Agreement", which is attached hereto as Exhibit 7
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and incorporated herein by reference).
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The Governance Agreement provides for the following:
The Filing Persons' Standstill Restrictions. During the Standstill Period
(as defined below), none of the Filing Persons, any affiliate (as defined
under the Exchange Act) of the Filing Persons or any group (as defined under
Rule 13d-3 of the Exchange Act, a "13D Group") of which the Filing Persons or
any of their affiliates are members, may directly or indirectly, acquire or
beneficially own Infoseek voting stock or authorize or make a tender offer,
exchange offer or other offer therefor, if the effect of such acquisition
would be to increase the percentage of total current voting power represented
by all shares of voting stock of Infoseek beneficially owned by the Filing
Persons to more than 49.9% of total current voting power of Infoseek voting
stock then outstanding, provided that the foregoing shall not prohibit the
Filing Persons and/or any of their affiliates from making a tender offer for
100% of the Infoseek shares of voting stock they do not own during the
Standstill Period so long as such tender offer has been approved by a majority
of Infoseek Disinterested Directors (as defined below) and is conditioned upon
a majority of the shares of voting stock held by Disinterested Shareholders
(as defined below) being tendered and not withdrawn with respect to such offer
(a "TWDC Tender Offer"). Following the Standstill Period, the Filing Persons,
their affiliates or any 13D Group of which the Filing Persons or any of their
affiliates are members shall be entitled to commence a tender or exchange
offer to purchase or exchange for cash or other consideration any Infoseek
voting stock provided that such offer is
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CUSIP NO. 45678M107 SCHEDULE 13D PAGE 8 OF 21 PAGES
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conditioned upon and not consummated unless a majority of the shares of voting
stock held by Disinterested Shareholders are tendered and not withdrawn with
respect to such tender or exchange offer.
As used in the Governance Agreement, the following terms are defined
as follows: "Standstill Period" means the period beginning June 18, 1998 and
ending on the occurrence of a Standstill Termination Event; "Standstill
Reinstatement Event" means the occurrence of either of the following prior to
the third anniversary of the Closing Date: (i) withdrawal or termination of a
third party tender offer at any time during which a TWDC Tender Offer is not
then pending or (ii) withdrawal, termination, or material alteration of a TWDC
Tender Offer other than an increase in price; "Standstill Revised Limit" means
the percentage of the total current voting power of Infoseek represented by all
shares of Infoseek voting stock held by the Filing Persons as of the occurrence
of a Standstill Reinstatement Event; and "Standstill Termination Event" means
the earliest to occur of the following: (i) the third anniversary of the Closing
Date, (ii) a change in control of Infoseek, (iii) a third party tender offer to
acquire 25% or more of the then total current voting power of Infoseek, (iv) a
TWDC Tender Offer, or (v) any person who is not one of the Filing Persons or an
affiliate of the Filing Persons or 13D Group of which the Filing Persons or an
affiliate of the Filing Persons are members has acquired any Infoseek voting
stock which results in such person or 13D Group owning or having the right to
acquire more than 25% of the total current voting power of Infoseek unless such
acquisition of shares by such person or 13D Group was approved by Infoseek's
Board of Directors pursuant to a 75% supermajority Infoseek Board approval,
provided however, that upon a Standstill Reinstatement Event, the Standstill
Termination Event shall be deemed not to have occurred and the Standstill Period
shall be deemed to be reinstated, and provided further that, upon a Standstill
Reinstatement Event, if the Standstill Revised Limit is greater than the
Standstill Limit, then the Standstill Revised Limit and not the Standstill Limit
shall thereafter be deemed the Standstill Limit.
The Filing Persons' Transfer Restrictions. Unless the Filing Persons
beneficially own less than 5% of the total current voting power of Infoseek or
until the Filing Persons own at least 90% of the total current voting power of
Infoseek, the Filing Persons may not, directly or indirectly, sell, transfer,
pledge, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase or
otherwise dispose of, any shares of Infoseek voting stock or non-voting
convertible securities of Infoseek except: (i) to Infoseek; (ii) to an 80% owned
subsidiary of the Filing Persons (a "TWDC Controlled Corporation"); (iii) after
the Standstill Period, pursuant to a bona fide firmly underwritten public
offering (which underwriter or underwriters of such offering shall include, if
requested, an underwriter selected by a majority of the Disinterested Directors
of Infoseek) registered under the Securities Act of 1933, as amended (the
"Securities Act"); (iv) after the Standstill Period, pursuant to a rights
offering, dividend or other pro rata distribution to the stockholders of TWDC;
(v) after the Standstill Period, pursuant to Rule 144 promulgated under the
Securities Act, in a brokers' transaction (as defined under Rule 144); (vi)
after the Standstill Period, in private placement transactions exempt from the
registration requirements of the Securities Act; (vii) in response to a bona
fide public tender offer or exchange offer subject to Regulation 14D or Rule
13e-3 promulgated under the Exchange Act for cash or other consideration which
is made by or on behalf of Infoseek; or (viii) in response to a third party
tender offer, with certain limitations.
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CUSIP NO. 45678M107 SCHEDULE 13D PAGE 9 OF 21 PAGES
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In addition, except in the case of a bona fide offer or proposal that,
if consummated, would result in a change in control of Infoseek (in which event
the following restrictions would terminate), unless the Filing Persons
beneficially own less than 5% of the total current voting power of Infoseek or
until the Filing Persons own at least 90% of the total current voting power of
Infoseek, the Filing Persons have agreed (i) not to transfer any of Infoseek
voting stock shares acquired upon exercise of any Warrants for a one year period
after the date of the acquisition of such shares except to a TWDC Controlled
Corporation or upon the occurrence of a third party tender offer and (ii) not to
transfer any Warrants except to a TWDC Controlled Corporation.
No transferee of Infoseek voting stock or non-voting convertible
securities sold, transferred or otherwise disposed of by the Filing Persons as
permitted by the Governance Agreement shall be bound (other than a TWDC
Controlled Corporation) by the terms thereof, nor shall such transferee (other
than a TWDC Controlled Corporation) be entitled, in any manner whatsoever, to
any rights afforded the Filing Persons under the Governance Agreement.
Infoseek's Right of First Refusal. Unless the Filing Persons
beneficially own shares representing less than 5% of the total current voting
power of Infoseek or until the Filing Persons own at least 90% of the total
current voting power of Infoseek, prior to the Filing Persons effecting any
sale, transfer or other disposition of Infoseek shares or non-voting convertible
securities in connection with a private placement transaction which directly or
indirectly would result in the transfer to any single person or 13D Group of 5%
or more of the total current voting power of Infoseek, then Infoseek shall have
a first refusal right to purchase all such shares or non-voting convertible
securities. Infoseek may assign this right of first refusal to any other person
or persons except certain competitors of the Filing Persons.
The Filing Persons' Voting Obligations. The Filing Persons shall take
such action as may be required so that all shares of Infoseek voting stock
beneficially owned by the Filing Persons are voted for or cast in favor of: (i)
during the Standstill Period, nominees to the Board of Directors of Infoseek in
accordance with the Governance Agreement and the joint recommendations of the
management of Infoseek and a majority of the Disinterested Directors of
Infoseek, (ii) increases in the authorized capital stock of Infoseek and
amendments to stock option plans and employee stock purchase plans, in each case
approved by Infoseek's Board of Directors, and (iii) all matters approved by a
majority of the Filing Persons' nominees to the Infoseek Board of Directors.
Unless otherwise approved by a majority of the Disinterested Directors
of Infoseek (as further described under "Board Representation Rights" below),
during the Standstill Period, on all matters submitted to the vote, written
consent or approval of the holders of Infoseek voting stock other than those
matters set forth in the preceding paragraph, the Filing Persons shall take such
action as may be required so that all shares of Infoseek voting stock
beneficially owned by the Filing Persons which are in excess of the number of
shares representing 43% of the total current voting power of Infoseek are voted
or cast on all matters submitted to a vote, consent or other approval of the
shareholders of Infoseek on each such matter in the same proportion as the votes
cast by the voting stock held by the Disinterested Shareholders of Infoseek with
respect to such matters.
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CUSIP NO. 45678M107 SCHEDULE 13D PAGE 10 OF 21 PAGES
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Except for the foregoing, nothing in the Governance Agreement
precludes the Filing Persons from voting shares of Infoseek voting stock which
they beneficially own in such manner as the Filing Persons determine, in their
sole discretion, on any matter presented to shareholders for a vote, consent or
other approval; provided, however, that, in no event shall the Filing Persons
exercise dissenter's rights under applicable law in connection with any merger,
consolidation or other reorganization which is approved by Infoseek's Board of
Directors and which is intended to qualify for pooling-of-interests accounting
treatment (to be reflected in a comfort letter from a nationally recognized
accounting firm in customary form).
Infoseek's Repurchase Right. If at any time there is a change in
control of the Filing Persons and the Filing Persons do not then beneficially
own Infoseek shares representing a majority of the then total current voting
power of Infoseek, then Infoseek shall have the right to purchase all, but not
less than all, of the Infoseek shares and the Warrants then owned by the Filing
Persons and their affiliates, at any time not to exceed sixty (60) days after
the Filing Persons inform Infoseek in writing of such change in control of the
Filing Persons, provided that, not later than 10 business days after receipt of
such notice, Infoseek notifies the Filing Persons in writing of its intent to
exercise the right of repurchase such securities. The purchase price per share
of such shares shall be the fair market value thereof as of the date of
occurrence of the change in control of the Filing Persons and the purchase price
for any Warrants shall be the purchase price of such Warrants paid by the Filing
Persons to Infoseek for such Warrants. Infoseek may not assign its right of
repurchase except to an 80% controlled subsidiary.
The Filing Persons' Rights to Maintain. During the Standstill
Period, provided that the Filing Persons beneficially own at least 10% of the
Total Outstanding Company Equity (as defined below), if the percentage interest
of the Filing Persons in the Total Outstanding Company Equity is or would be
reduced at any time as a result of an issuance of new Infoseek securities, the
Filing Persons shall have the right to purchase for cash the Filing Persons' Pro
Rata Portion (as defined below), in whole or in part, at an aggregate purchase
price equal to the product of the price per share at which such new securities
were or will be sold in such issuance multiplied by the Filing Persons' Pro Rata
Portion or any part thereof (the "Purchase Price"). As defined in the Governance
Agreement, the "Filing Persons' Pro Rata Portion" means either (i) in the case
of any issuances of new securities for cash consideration in connection with a
financing transaction, 43% of the number of new securities, or (ii) in the case
of any issuance of new securities in connection with an acquisition transaction,
that number of new securities that would equal 43% after the issuance to the
Filing Persons; and "Total Outstanding Company Equity" means the total number of
shares of outstanding capital stock of Infoseek, on a fully diluted basis
assuming the conversion, exchange or exercise of all outstanding securities,
whether vested or unvested, convertible, exchangeable or exercisable into or for
Company common stock.
In addition, upon any issuance of new Infoseek securities, and only if
(i) the Filing Persons purchase at least 15% of the Filing Persons' Pro Rata
Portion of such issuance from Infoseek or in the open market, or (ii) during the
Standstill Period, the Filing Persons own at least 35% of the Total Outstanding
Company Equity, or (iii) after the Standstill Period, the Filing Persons own at
least 30% of the Total Outstanding Company Equity, then the Filing Persons shall
also have the right to purchase for cash a Warrant exercisable for such number
of Infoseek's new securities, either (a) in the event of an issuance of new
securities in connection with a financing transaction,
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CUSIP NO. 45678M107 SCHEDULE 13D PAGE 11 OF 21 PAGES
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equal to 15% of the new securities, or (b) in the event of an issuance of new
securities in connection with an acquisition transaction, equal to 15% of the
new securities plus that number of new securities of the Filing Persons' Pro
Rata Portion actually purchased by the Filing Persons (either (a) or (b) as
applicable, the "Warrant Coverage"). Any such Warrant shall be in the form of
the Warrants purchased by TWDC pursuant to the Purchase Agreement; provided
however, that any such Warrants so purchased shall be fully vested and
exercisable, and the per share exercise price for such new securities
underlying such Warrant shall be equal to the price per share at which such
new securities were sold in such issuance of such new securities by Infoseek.
The Filing Persons' purchase price for any such Warrant shall be an amount in
cash determined to be the fair market value of such Warrants by (a) mutual
agreement of Infoseek and the Filing Persons or (b) an investment bank
mutually agreed upon by Infoseek and the Filing Persons (based on a Black-
Scholes option pricing model) (the "Warrant Price").
Additionally, the Filing Persons may, at any time and from time to
time, in lieu of purchasing the Filing Persons' Pro Rata Portion or any part
thereof from Infoseek in connection with an acquisition transaction, purchase on
the open-market such number of shares of voting stock as have the equivalent
equity interest as the Filing Persons' Pro Rata Portion. Such open market
purchases would entitle the Filing Persons to purchase Warrant Coverage if such
purchases are made within 60 days after receipt by the Filing Persons of notice
of such issuance from Infoseek. The Filing Persons may purchase shares of voting
stock both from Infoseek and in the open market, in its discretion, in
connection with any equity issuance, subject to the Standstill Limit during the
Standstill Period.
Board Representation Rights. Pursuant to the Governance Agreement,
the Bylaws of Infoseek authorize an eight (8) member Board of Directors of
Infoseek, and the following three persons designated by the Filing Persons were
elected to Infoseek's Board of Directors upon consummation of the Merger: Steven
Bornstein (President and Chief Executive Officer of ESPN, a subsidiary of TWDC),
Robert Iger (President of ABC, Inc., a subsidiary of TWDC), and Jake Winebaum
(Chairman of the Buena Vista Internet Group, a subsidiary of TWDC). Following
the Closing Date, so long as the Filing Persons beneficially own at least 10% of
Infoseek's total current voting power, Infoseek shall include in the slate of
nominees recommended by Infoseek's management to shareholders for election as
directors at any special or annual meeting of shareholders of Infoseek and shall
use its best efforts in all other respects to cause the election of, that number
of persons designated by the Filing Persons equal to the greater of (i) one, or
(ii) that number determined by multiplying the then number of members of the
Board of Directors by the percentage of total current voting power of Infoseek
then owned by the Filing Persons. If such calculation results in a whole number
plus a fraction, the Filing Persons shall only be permitted to designate such
whole number of persons; provided however, that if the Filing Persons
beneficially own more than 25% of the total current voting power of Infoseek and
the Filing Persons are not entitled pursuant to the foregoing calculation to
appoint more than 25% of the members of the Board of Directors, then such
fraction shall be rounded up to the next nearest whole number for purposes of
determining the number of the Filing Persons' designees on Infoseek's Board of
Directors. At any time during the Standstill Period, the Filing Persons shall
not be entitled, and the Filing Persons have agreed not, to cast votes for the
Filing Persons' designees for the Infoseek Board of Directors in excess of the
lesser of (i) the number of directors which the Filing Persons are entitled to
elect under the preceding terms of the Governance Agreement or (ii) 49.9% of the
<PAGE>
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CUSIP NO. 45678M107 SCHEDULE 13D PAGE 12 OF 21 PAGES
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members of the Board of Directors. During the Standstill Period, in the event
that the number of the Filing Persons' designees for the Infoseek Board of
Directors exceeds the number of designees that the Filing Persons are entitled
to designate (the "Excess Directors"), the Filing Persons shall cause that
number of Excess Directors to resign and not stand for reelection in connection
with any special or annual meeting of shareholders of Infoseek.
Events Requiring Supermajority Board Approval. Until the Filing
Persons' percentage beneficial ownership of the Total Outstanding Company Equity
falls below 10%, Infoseek shall not effectuate any Event Requiring Supermajority
Board Approval without first having obtained a 75% supermajority Infoseek Board
approval. As defined in the Governance Agreement, an "Event Requiring
Supermajority Board Approval" means (i) any amendment of Infoseek's Bylaws or
Infoseek's Certificate of Incorporation, (ii) a change in control of Infoseek or
any subsidiary of Infoseek, (iii) a sale of more than 15% of the total assets of
Infoseek or any subsidiary of Infoseek, (iv) issuances of securities of Infoseek
representing 15% or more of the total current voting power, (v) the sale or
issuance of any securities of Infoseek for consideration of $200 million or
more, (vi) transactions involving expenditures of cash by Infoseek or any
subsidiary or incurrence of indebtedness by Infoseek or any subsidiary, in
either case, in excess of $200 million, or (vii) appointment of a new Chief
Executive Officer of Infoseek.
Events Requiring Disinterested Board Approval. Until such time as the
Filing Persons own 90% or more of Infoseek's total current voting stock, neither
Infoseek nor the Filing Persons shall effectuate an Event Requiring
Disinterested Board Approval without first having obtained Disinterested Board
Approval with respect to such event. As defined in the Governance Agreement,
"Disinterested Board Approval" means the affirmative vote or written consent of
a majority of the Disinterested Directors duly obtained in accordance with the
applicable provisions of Infoseek's bylaws and applicable law; "Disinterested
Director" means, during the Standstill Period, a member of the Board of
Directors of Infoseek who is not a director nominated by the Filing Persons and,
after the Standstill Period, a member of the Board of Directors of Infoseek who
is an independent director; "Event Requiring Disinterested Board Approval"
means: (i) any amendment to Infoseek's Bylaws or Certificate of Incorporation,
(ii) any transaction between Infoseek (or any affiliate of Infoseek) and the
Filing Persons (or any affiliate of the Filing Persons), which (a) requires
payments by any party in excess of $5 million or (b) contemplates a term equal
to or in excess of three years, (iii) adoption of a "poison pill" share purchase
rights plan by Infoseek, or any amendment of, or redemption, or exchange of
rights issued pursuant to any such plan, provided that, such plan excludes from
the definition of "Acquiring Person" therein the Filing Persons and wholly owned
(direct or indirect) subsidiaries of the Filing Persons so long as neither the
Filing Persons nor any affiliate of the Filing Persons has breached the Filing
Persons' standstill restrictions described above and so long as the Filing
Persons beneficially own at least 5% of the total current voting power of
Infoseek, (iv) any transfer of any Infoseek shares or non-voting convertible
securities by the Filing Persons to certain competitors of Infoseek in a private
placement (as opposed to a public offering), (v) during the Standstill Period,
any transfer of 25% or more of Infoseek voting stock by the Filing Persons in a
private placement (as opposed to a public offering) to any single person or 13D
Group, (vi) commencing a tender offer or exchange offer by the Filing Persons or
any affiliate of the Filing Persons (or any 13D Group that includes the Filing
Persons or any affiliate of the Filing Persons) to purchase or exchange for cash
or other consideration any Infoseek voting stock, except for a TWDC Tender Offer
made (a) during a Third
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CUSIP NO. 45678M107 SCHEDULE 13D PAGE 13 OF 21 PAGES
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Party Tender Offer, or (b) following a Standstill Termination Event so long as
the cause of the Standstill Termination Event was not a TWDC Tender Offer,
(vii) during the Standstill Period, the Filing Persons' solicitation of
proxies with respect to any Infoseek voting stock or becoming a "participant"
in any "election contest" (as such terms are used in Rule 14(a)-11 of
Regulation 14A promulgated under the Exchange Act) relating to the election of
directors of Infoseek, (viii) any termination by the Filing Persons of the
License Agreement (as defined below) (a) as a result of Infoseek's failure to
use commercially reasonable efforts to meet certain spending requests for the
new internet portal service to be known as the Go Network to be developed by
Infoseek and the Filing Persons (the "New Portal Service"), at any time after
a majority of the members of Infoseek's Board of Directors are directors
nominated by the Filing Persons, (b) as a result of the acquisition by any
person or group of 25% or more of the voting power of Infoseek thereof if the
event that causes the Filing Persons to have such termination right is (y) a
transfer by the Filing Persons of Infoseek shares (other than a transfer
pursuant to a third party tender offer) or (z) after a majority of the members
of Infoseek's Board of Directors are the Filing Persons' nominees, an issuance
of shares by Infoseek which results in a third party owning 25% or more of the
total current voting power of Infoseek, or (c) as a result of the bankruptcy
or receivership of Infoseek if the event that causes such termination right is
that the Filing Persons, in their capacity as shareholders (and not as
creditors) of Infoseek, have applied for or actively supported the appointment
of a receiver for Infoseek and such receiver has been appointed, (ix) a
transfer by the Filing Persons of Infoseek shares which results in a third
party owning 25% or more of the total current voting power of Infoseek (other
than a transfer pursuant to third party tender offer), (x) during the
Standstill Period, or after the Standstill Period, unless the Filing Persons
own 50% or more of the total current voting power of Infoseek, any of items
(i) through (iv) set forth as an Event Requiring Disinterested Shareholder
Approval as described below, (xi) any dissolution or liquidation of Infoseek,
(xii) voluntary filing of a petition for bankruptcy or receivership by
Infoseek, or the failure to oppose any other person's petition for bankruptcy
or any other person's action to appoint a receiver of Infoseek, or (xiii) any
amendment, modification or waiver (including a termination other than in
accordance with the various termination provisions contained in the Governance
Agreement) of any of the provisions of the Governance Agreement.
Events Requiring Disinterested Shareholder Approval. Until such time
as the Filing Persons own 90% or more of the total current voting power of
Infoseek, neither Infoseek nor the Filing Persons (including any affiliate of
such parties) shall effectuate an Event Requiring Disinterested Shareholder
Approval without first having obtained Disinterested Shareholder Approval with
respect to such event; provided however, that Disinterested Shareholder Approval
shall not be required, if on the record date for such approval of such Event
Requiring Disinterested Shareholder Approval, the Filing Persons beneficially
own less than 25% of the total current voting power of Infoseek. As defined in
the Governance Agreement, "Disinterested Shareholder" means any shareholder of
Infoseek who is not the Filing Persons or an affiliate of the Filing Persons or
a member of a 13D Group in which the Filing Persons or an affiliate of the
Filing Persons is also a member; "Disinterested Shareholder Approval" means the
affirmative vote or written consent of greater than 50% of the total current
voting power of Infoseek held by all Disinterested Shareholders; "Event
Requiring Disinterested Shareholder Approval" means: (i) the amendment of any
portion of Infoseek's charter that effectuates therein the provisions requiring
Disinterested Board Approval and Disinterested Shareholder Approval, (ii) a sale
or disposition of all or substantially all of Infoseek's assets, (iii) the
issuance of securities of Infoseek representing 20% or
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CUSIP NO. 45678M107 SCHEDULE 13D PAGE 14 OF 21 PAGES
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more of (a) Infoseek's then Total Outstanding Company Equity or (b) Infoseek's
then total current voting power or (iv) a merger, consolidation, or other
reorganization of Infoseek with or into the Filing Persons or any affiliate of
the Filing Persons.
b. Registration Rights Agreement dated November 18, 1998 among
-----------------------------------------------------------
Infoseek, TWDC and DEI (the "Registration Rights Agreement",
------------------------------------------------------------
which is attached hereto as Exhibit 8 and incorporated herein
-------------------------------------------------------------
by reference).
-------------
Pursuant to the Registration Rights Agreement, Infoseek is obligated
to register, at its expense, under the Securities Act, Infoseek Common Stock
held by the Filing Persons, 80% or greater subsidiaries of the Filing Persons or
TWDC stockholders following a pro rata distribution of Infoseek shares to such
stockholders in the following circumstances:
(1) Upon a request to register shares with an anticipated
total offering price of $10,000,000 or more, Infoseek is obligated to file, on
not more than two occasions, a registration statement with respect to such
shares within 45 days and use best efforts to cause such registration to be
declared effective, subject to certain limitations and conditions. Such
registration will be on a form mutually agreed by the parties, but may be
pursuant to a shelf registration if Infoseek is eligible, upon the Filing
Persons' request. The obligation to register such shares pursuant to the
Registration Rights Agreement begins three years after the Closing Date or
upon the earlier termination of the Standstill Period.
(2) If Infoseek proposes to register any of its securities
under the Securities Act either for its own account or for the account of
others (except in connection with employee benefit plans, mergers or stock
issuable upon conversion of convertible securities), the Filing Persons and
others with registration rights are entitled to notice of the registration and
are entitled to include their shares of Infoseek Common Stock in such
registration, provided, among other conditions, that the underwriters of any
such offering have the right to limit the number of shares included in the
registration, subject to the Filing Persons' shares receiving priority over
all other parties (other than Infoseek) exercising registration rights in
connection with the offering.
c. First Offer Letter Agreement dated July 14, 1998 between TWDC
-------------------------------------------------------------
and Steven T. Kirsch, Infoseek's Chairman and a principal
---------------------------------------------------------
shareholder of Infoseek (the "First Offer Agreement", which is
--------------------------------------------------------------
attached hereto as Exhibit 9 and incorporated herein by
-------------------------------------------------------
reference).
---------
Pursuant to the First Offer Agreement, Steven T. Kirsch has agreed
that if, following the Closing Date and prior to the fourth anniversary
thereof, he elects to transfer (other than to family members or for estate
planning or charitable purposes) shares of Infoseek Common Stock with an
aggregate value of $1,000,000 or more to a third party, then he will first
offer to sell such shares to TWDC, and TWDC will have the right to purchase
all (but not less than all) of such shares, at the same purchase price offered
to Mr. Kirsch by the third party.
<PAGE>
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CUSIP NO. 45678M107 SCHEDULE 13D PAGE 15 OF 21 PAGES
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d. License Agreement dated June 18, 1998 between DEI and Infoseek
--------------------------------------------------------------
California (the "License Agreement", which is attached hereto
-------------------------------------------------------------
as Exhibit 10 and incorporated herein by reference).
---------------------------------------------------
Pursuant to the License Agreement, DEI has agreed to grant to Infoseek
California a worldwide license to utilize the trademarks, service marks and
World Wide Web addresses and domain names associated with the New Portal Service
and the copyrights in the user interface design of the New Portal Service in
connection with the development, operation and exploitation of the New Portal
Service. The license will be exclusive to Infoseek California and any other use
of the licensed intellectual property is subject to Infoseek California's
approval (which approval may not be unreasonably withheld for uses that do not
compete with Infoseek California). Infoseek California has agreed to pay DEI a
royalty equal to one percent of Infoseek California's revenues other than
Infoseek California revenues derived from Infoseek California's software sales
and services. Such royalties are not earned or paid until the end of any
Infoseek California fiscal year in which Infoseek California has positive
earnings before interest, taxes and amortization ("EBITA") as defined and
royalty payments in any year will not exceed fifteen percent of Infoseek
California's EBITA in such year. DEI has agreed to pay Infoseek California
royalties based on a specified percentage of the revenues received by DEI
attributable to other licenses and uses of the licensed intellectual property by
DEI or its licensees.
The license may be terminated by DEI only upon occurrence of the
following events, subject to limitation as set forth in the description of the
Governance Agreement above: (i) acquisition by any person or group (other than
the Filing Persons) of more than 25% of the voting equity of California; (ii)
Infoseek California's failure to use commercially reasonable efforts to meet
certain spending requirements for the New Portal Service, as set forth in a
mutually agreed upon business plan, provided that these termination rights
expire in ten years or earlier if certain conditions are met; or (iii)
bankruptcy or receivership of Infoseek California. Subject to adjustment by
unanimous vote of the two member advisory committee established pursuant to the
Product Management Agreement described below, these spending requirements for
the New Portal Service for the first three years are $40.5 million, $58.3
million and $64.8 million, respectively. Thereafter such requirements are to be
set by unanimous vote of the advisory committee, provided that, if no amount is
agreed to by the advisory committee, such amount shall be based on the prior
year's spending requirement as adjusted for projected growth based on changes in
the consumer price index or certain other metrics. The amounts spent by Infoseek
California on the purchase of promotional services under the Promotional
Services Agreement described below apply towards these spending requirements.
If DEI terminates the license, Infoseek California will grant to DEI a
worldwide, nonexclusive, royalty-free license, with certain rights to
sublicense, to use Infoseek California technology in connection with the
development and operation of the New Portal Service, with rights to obtain
updates to the licensed technology at most favored nation prices for five years
after any such termination.
<PAGE>
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CUSIP NO. 45678M107 SCHEDULE 13D PAGE 16 OF 21 PAGES
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e. Product Management Agreement dated June 18, 1998 between DEI
------------------------------------------------------------
and Infoseek California (the "Product Management Agreement",
------------------------------------------------------------
which is attached hereto as Exhibit 11 and incorporated herein
--------------------------------------------------------------
by reference).
-------------
Under the Product Management Agreement, DEI and Infoseek California
have agreed to establish an advisory committee (consisting of one Infoseek
California representative (initially Harry M. Motro, Infoseek's President and
Chief Executive) and one DEI representative (initially Jake Winebaum, Chairman
of Buena Vista Internet Group, a subsidiary of TWDC)) for the overall management
of the New Portal Service to be developed and launched by Infoseek California as
well as to coordinate the overall relationship between DEI and Infoseek
California. While decisions of the advisory committee generally will be required
to be unanimous, the DEI representative will have tie-breaking authority over
branding issues and marketing plan formulation, as well as content and
advertising standards, and the Infoseek California representative will have tie-
breaking authority over product development, operation, production,
distribution, advertising sales, execution of the marketing plan and day-to-day
operations of the service. Under this agreement, DEI and Infoseek California
have also each agreed to provide certain prominent positioning for and links to
the Filing Persons' content and Infoseek California search and directory
services within Infoseek California and the Filing Persons' respective online
services.
f. Promotional Service Agreement dated June 18, 1998 between ABC,
--------------------------------------------------------------
Inc. ("ABC") and Infoseek California (the "Promotional Service
--------------------------------------------------------------
Agreement", which is attached hereto as Exhibit 12 and
------------------------------------------------------
incorporated herein by reference).
---------------------------------
Pursuant to the Promotional Service Agreement, ABC has agreed to
provide, and Infoseek California has agreed to purchase, $165,000,000 in
promotional services over a five-year period for the New Portal Service,
consisting of both traditional and non-traditional opportunities. In addition,
this agreement requires the Filing Persons to co-brand all ABCNews.com and
ESPN.com nontraditional media promotions with promotions for the New Portal
Service. Infoseek California will have the right to renew the Promotional
Services Agreement, other than with respect to the co-branding requirement, at
the end of its initial five-year term, for a subsequent five-year term. The
obligations under the Promotional Services Agreement are not conditioned on
the success of the planned New Portal Service. The purchases of promotional
services by Infoseek California under the Promotional Services Agreement apply
towards the spending requirements discussed under the description of the
License Agreement.
g. Amended and Restated ESPN/Starwave Partnership Agreement dated
--------------------------------------------------------------
June 18, 1998 between ESPN Online Investments, Inc., an
-------------------------------------------------------
indirect subsidiary of the Filing Persons ("ESPN Partner"), and
---------------------------------------------------------------
Starwave Ventures, a Washington corporation and subsidiary of
-------------------------------------------------------------
Starwave ("Starwave Partner") (the "ESPN Joint Venture
------------------------------------------------------
Agreement", which is attached hereto as Exhibit 13 and
------------------------------------------------------
incorporated herein by reference).
---------------------------------
The ESPN Joint Venture Agreement creates ESPN/Starwave Partners, a New
York general partnership ("ESPN Partners"), and provides for ESPN Partners'
development, production and exploitation of narrowband products incorporating
and containing amateur or professional sports content, news and information
owned or controlled by ESPN Enterprises, Inc. or its affiliates (collectively
"ESPN"). Pursuant to the ESPN Joint Venture Agreement, each of Starwave Partner
<PAGE>
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CUSIP NO. 45678M107 SCHEDULE 13D PAGE 17 OF 21 PAGES
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and ESPN Partner receives a quarterly allocation of fifty percent of ESPN
Partners' net income (with corresponding levels of funding commitments based
on estimated cash expenses and capital expenditures for such period) in years
during which there is net income, and Starwave Partner is allocated sixty
percent of the net losses and ESPN Partner is allocated forty percent of the
net losses (with corresponding levels of funding commitments based on
estimated cash expenses and capital expenditures for such period) in loss
years. The ESPN Joint Venture Agreement includes a mechanism for adjusting
each partner's profit participation in the event that a partner fails to make
any funding commitment cash contribution.
In addition, pursuant to the ESPN Joint Venture Agreement, each of
ESPN Partner and Starwave Partner has agreed that neither ESPN Partner nor
Starwave Partner, as the case may be, nor any of their respective affiliates,
will, during the term of the ESPN Joint Venture Agreement, in the U.S. or
Canada, develop, distribute, produce, exploit, market, promote on-air, provide
services of any nature or provide a license or permit a third party to utilize
any of their respective intellectual property rights with respect to
narrowband products containing professional or amateur sports content, news or
information. This exclusivity will not apply to the parties' activities
associated with the development, expansion and commercialization of sports
components of the New Portal Service, nor will it apply to Starwave Partner or
its affiliates' activities associated with search or directory products,
services, components or other search or directory subject matter.
The ESPN Joint Venture Agreement has a ten-year term and can only be
terminated by ESPN Partner or Starwave Partner if (i) a party to the ESPN
Joint Venture Agreement or Infoseek California is subject to a bankruptcy or
similar proceeding, (ii) Starwave Partner willfully and repeatedly misuses the
trademarks or service marks of ESPN in material breach of the agreement and
repeatedly fails to cure such misuses, or (iii) the other partner's profit
participation is equal to or less than twenty-five percent and ESPN Partners
sustains either eight consecutive net loss fiscal quarters or ten total net
loss fiscal quarters. Upon expiration or termination of the ESPN Joint Venture
Agreement, ESPN Partner will be entitled to receive in-kind distribution of
editorial-related content assets and Starwave Partner will be entitled to
receive in-kind distribution of all technology assets and substantially all
other assets of ESPN Partners.
h. Amended and Restated ESPN/Starwave Management and Services
----------------------------------------------------------
Agreement dated June 18, 1998 among ESPN, Starwave and ESPN
-----------------------------------------------------------
Partners (the "ESPN/Starwave Management Services Agreement",
------------------------------------------------------------
which is attached hereto as Exhibit 14 and incorporated herein
--------------------------------------------------------------
by reference).
-------------
Pursuant to the ESPN/Starwave Management Services Agreement, ESPN
provides ESPN content and electronic commerce services for the narrowband
sports products developed pursuant to the ESPN Joint Venture Agreement, and
Starwave provides hosting services and technology development and maintenance
services in connection with such narrowband sports products.
<PAGE>
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CUSIP NO. 45678M107 SCHEDULE 13D PAGE 18 OF 21 PAGES
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i. Representation Agreement dated June 18, 1998 among ESPN
-------------------------------------------------------
Partners, Starwave and Infoseek (the "ESPN Representation
---------------------------------------------------------
Agreement", which is attached hereto as Exhibit 15 and
------------------------------------------------------
incorporated herein by reference).
---------------------------------
Under the ESPN Representation Agreement, Starwave has agreed to act as
the exclusive representative of ESPN Partners in the sale of advertising for
ESPN.com and other internet services that are owned or operated by ESPN
Partners, such as NFL.com, NASCAR Online and NBA.com. For the exclusive right
to provide these services, Starwave has agreed to make quarterly payments to
ESPN Partners equal to the greater of (i) a guaranteed minimum amount or (ii)
advertising revenues actually billed to third parties in the performance of
the services (whether or not collected), in each case less Starwave's costs of
providing the services and a profit margin.
j. Amended and Restated ABC News/Starwave Partnership Agreement
------------------------------------------------------------
dated June 18, 1998 between DOL Online Investments, Inc., a
-----------------------------------------------------------
California corporation and subsidiary of the Filing Persons
-----------------------------------------------------------
("ABC Partner"), and Starwave Partner (the "ABC Joint Venture
-------------------------------------------------------------
Agreement", which is attached hereto as Exhibit 16 and
------------------------------------------------------
incorporated herein by reference).
---------------------------------
The ABC News Joint Venture Agreement creates ABC/Starwave Partners, a
New York general partnership ("ABC News Partners"), and provides for ABC News
Partners' development, production and exploitation of narrowband products
containing broad national, international and local news content. Pursuant to
the ABC News Joint Venture Agreement, each of Starwave Partner and ABC Partner
receives a quarterly allocation of fifty percent of ABC News Partners' net
income (with corresponding levels of funding commitments based on estimated
cash expenses and capital expenditures for such period) in years in which
there is net income, and Starwave Partner is allocated sixty percent of the
net losses and ABC Partner is allocated forty percent of the net losses (with
corresponding levels of funding commitments based on estimated cash expenses
and capital expenditures for such period) in loss years. The ABC News Joint
Venture Agreement includes a mechanism for adjusting each partner's profit
participation in the event that a partner fails to make any funding commitment
cash contribution.
In addition, pursuant to the ABC News Joint Venture Agreement, each of
Starwave Partner and ABC Partner has agreed that neither ABC Partner nor
Starwave Partner, as the case may be, nor any of their respective affiliates,
will, during the term of the ABC News Joint Venture Agreement, in the U.S. or
Canada, develop, distribute, produce, exploit, market or promote on-air
(subject to ABC's current agreement with America Online), or provide services
of any nature or provide a license or permit a third party to utilize any of
their respective intellectual property rights with respect to narrowband
products dedicated primarily to national and international news, other than
narrowband products dedicated primarily to entertainment or personal finance
news. This exclusivity will not apply to the parties' activities associated
with the development, expansion and commercialization of news components of
the New Portal Service, nor will it apply to Starwave Partner or its
affiliates' activities associated with search or directory products, services,
components or other search or directory subject matter.
The ABC News Joint Venture Agreement has a ten year term and can only
be terminated by ABC Partner or Starwave Partner if (i) a party to the
agreement or Infoseek is subject to a
<PAGE>
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CUSIP NO. 45678M107 SCHEDULE 13D PAGE 19 OF 21 PAGES
- ----------------------- ---------------------
bankruptcy or similar proceeding, (ii) Starwave Partner willfully and
repeatedly misuses the trademarks or service marks of ABC or its affiliates in
material breach of the agreement and repeatedly fails to cure such misuses, or
(iii) the other partner's profit participation is equal to or less than twenty-
five percent and ABC News Partners sustains either eight consecutive net loss
fiscal quarters or ten total net loss fiscal quarters. Upon expiration or
termination, ABC Partner will be entitled to receive in-kind distribution of
editorial-related content assets and Starwave Partner will be entitled to
receive in-kind distribution of all technology assets and substantially all
other assets of ABC News Partners.
k. Amended and Restated ABC News/Starwave Management and Services
--------------------------------------------------------------
Agreement dated June 18, 1998 among ABC, Starwave and ABC News
--------------------------------------------------------------
Partners (the "ABC News/Starwave Management Services
----------------------------------------------------
Agreement", which is attached hereto as Exhibit 17 and
------------------------------------------------------
incorporated herein by reference).
---------------------------------
Pursuant to the ABC News/Starwave Management Services Agreement, ABC
provides ABC content and electronic commerce services for the narrowband news
products developed pursuant to the ABC News Joint Venture Agreement, and
Starwave provides hosting services and technology development and maintenance
services in connection with such narrowband news products.
l. Representation Agreement dated June 18, 1998 among ABC News
-----------------------------------------------------------
Partners, Starwave and Infoseek (the "ABC News Representation
-------------------------------------------------------------
Agreement", which is attached hereto as Exhibit 18 and
------------------------------------------------------
incorporated herein by reference).
---------------------------------
Under the ABC News Representation Agreement, Starwave has agreed to
act as the exclusive representative of ABC News Partners in the sale of
advertising services for ABCNews.com and other internet services that are
owned and/or operated by ABC News Partners, such as Mr. Showbiz, Celebsite,
and Wall of Sound. For the exclusive right to provide these services, Starwave
has agreed to make quarterly payments to ABC News Partners equal to the
greater of (i) a guaranteed minimum amount or (ii) advertising revenues
actually billed to third parties in the performance of the services (whether
or not collected), in each case less Starwave's costs of providing the
services and a profit margin.
m. Tax Sharing Agreement dated November 18, 1998 between Infoseek
--------------------------------------------------------------
and TWDC (the "Tax Sharing Agreement", which is attached hereto
---------------------------------------------------------------
as Exhibit 19 and incorporated herein by reference).
---------------------------------------------------
Pursuant to the Tax Sharing Agreement, at TWDC's option, TWDC,
Infoseek and certain of their subsidiaries may file one or more consolidated,
combined or unitary tax returns. In such event, the Tax Sharing Agreement sets
forth terms pertaining to, among other things, cooperation among the parties
in the preparation of tax returns, responsibility for filing tax returns,
allocation of tax liabilities and payment or reimbursement of tax liabilities.
<PAGE>
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CUSIP NO. 45678M107 SCHEDULE 13D PAGE 20 OF 21 PAGES
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<TABLE>
<CAPTION>
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
<S> <C>
Exhibit 1 Chart re Executive Officers and Directors of Filing Persons
Exhibit 2 Agreement of TWDC and DEI relating to the filing of a joint Schedule 13D.
Exhibit 3 Agreement and Plan of Reorganization dated June 18, 1998 among DEI, Starwave, Infoseek and
Infoseek California.
Exhibit 4 Common Stock and Warrant Purchase Agreement dated June 18, 1998 between TWDC and Infoseek
Exhibit 5 Promissory Note of TWDC in favor of Infoseek dated November 18, 1998.
Exhibit 6 Warrant of Infoseek, dated November 18, 1998, issued to TWDC with respect to
the purchase of up to 15,720,000 shares of Infoseek Common Stock.
Exhibit 7 Governance Agreement dated June 18, 1998 among Infoseek, TWDC and DEI.
Exhibit 8 Registration Rights Agreement dated November 18, 1998 among Infoseek, TWDC and DEI.
Exhibit 9 First Offer Letter Agreement dated July 14, 1998 between TWDC and Steven T. Kirsch.
Exhibit 10 License Agreement dated June 18, 1998 between DEI and Infoseek California.*
Exhibit 11 Product Management Agreement dated June 18, 1998 between DEI and Infoseek California.
Exhibit 12 Promotional Service Agreement dated June 18, 1998 between ABC and Infoseek California.*
Exhibit 13 Amended and Restated ESPN/Starwave Partnership Agreement dated June 18, 1998 between
ESPN Partner and Starwave Partner.
Exhibit 14 Amended and Restated ESPN/Starwave Management and Services Agreement dated June 18, 1998 among
ESPN, Starwave and ESPN Partners.
Exhibit 15 Representation Agreement dated June 18, 1998 among ESPN Partners, Starwave and Infoseek.
Exhibit 16 Amended and Restated ABC News/Starwave Partnership Agreement dated June 18, 1998 between ABC
Partner and Starwave Partner.
Exhibit 17 Amended and Restated ABC News/Starwave Management and Services Agreement dated June 18, 1998
among ABC, Starwave and ABC News Partners.
Exhibit 18 Representation Agreement dated June 18, 1998 among ABC News Partners, Starwave and Infoseek.
Exhibit 19 Tax Sharing Agreement dated November 18, 1998 between Infoseek and TWDC.
</TABLE>
* Portions of this Exhibit were filed confidentially with the Commission in
connection with the filing of the Joint Proxy Statement/Prospectus of Infoseek
California and Starwave pertaining to the Merger.
<PAGE>
- ----------------------- ---------------------
CUSIP NO. 45678M107 SCHEDULE 13D PAGE 21 OF 21 PAGES
- ----------------------- ---------------------
SIGNATURE
After reasonable inquiry and to the best knowledge and belief of the
undersigned, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: November 25, 1998
The Walt Disney Company,
a Delaware corporation
By: /s/ Sanford M. Litvack
----------------------
Sanford M. Litvack
Senior Executive Vice President and
Chief of Corporate Operations
Disney Enterprises, Inc.,
a Delaware corporation
By: /s/ Sanford M. Litvack
----------------------
Sanford M. Litvack
President
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
Exhibit 1 Chart re Executive Officers and Directors of Filing Persons
Exhibit 2 Agreement of TWDC and DEI relating to the filing of a joint Schedule 13D.
Exhibit 3 Agreement and Plan of Reorganization dated June 18, 1998 among DEI, Starwave, Infoseek and
Infoseek California.
Exhibit 4 Common Stock and Warrant Purchase Agreement dated June 18, 1998 between TWDC and Infoseek
Exhibit 5 Promissory Note of TWDC in favor of Infoseek dated November 18, 1998.
Exhibit 6 Warrant of Infoseek, dated November 18, 1998, issued to TWDC with respect to the purchase of
up to 15,720,00 shares of Infoseek Common Stock.
Exhibit 7 Governance Agreement dated June 18, 1998 among Infoseek, TWDC and DEI.
Exhibit 8 Registration Rights Agreement dated November 18, 1998 among Infoseek, TWDC and DEI.
Exhibit 9 First Offer Letter Agreement dated July 14, 1998 between TWDC and Steven T. Kirsch.
Exhibit 10 License Agreement dated June 18, 1998 between DEI and Infoseek California.*
Exhibit 11 Product Management Agreement dated June 18, 1998 between DEI and Infoseek California.
Exhibit 12 Promotional Service Agreement dated June 18, 1998 between ABC and Infoseek California.*
Exhibit 13 Amended and Restated ESPN/Starwave Partnership Agreement dated June 18, 1998 between ESPN
Partner and Starwave Partner.
Exhibit 14 Amended and Restated ESPN/Starwave Management and Services Agreement dated June 18, 1998
among ESPN, Starwave and ESPN Partners.
Exhibit 15 Representation Agreement dated June 18, 1998 among ESPN Partners, Starwave and Infoseek.
Exhibit 16 Amended and Restated ABC News/Starwave Partnership Agreement dated June 18, 1998 between ABC
Partner and Starwave Partner.
Exhibit 17 Amended and Restated ABC News/Starwave Management and Services Agreement dated June 18, 1998
among ABC, Starwave and ABC News Partners.
Exhibit 18 Representation Agreement dated June 18, 1998 among ABC News Partners, Starwave and Infoseek.
Exhibit 19 Tax Sharing Agreement dated November 18, 1998 between Infoseek and TWDC.
</TABLE>
* Portions of this Exhibit were filed confidentially with the Commission in
connection with the filing of the Joint Proxy Statement/Prospectus of Infoseek
California and Starwave pertaining to the Merger.
<PAGE>
EXHIBIT 1
<TABLE>
<CAPTION>
Director (D) and/or Organization Where
Executive Officer Employment is Conducted
(EO) of Principal ------------------------------------
------------------- Occupation Principal
Name TWDC DEI Citizenship or Employment Name Business Business Address
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Reveta F. Bowers D N/A USA Head of School Center for Early Education 563 N. Alfred
Education Street, West
Hollywood, CA
90048
- ----------------------------------------------------------------------------------------------------------------------------------
John F. Cooke EO EO USA Executive Vice The Walt Disney Creative content, 500 South Buena
President - Company broadcasting and Vista Street,
Corporate Affairs theme parks and Burbank, CA
of TWDC and DEI resorts 91521
- ----------------------------------------------------------------------------------------------------------------------------------
Roy E. Disney D/EO N/A USA Vice Chairman of The Walt Disney Creative content, 500 South Buena
the Board Company broadcasting and Vista Street,
theme parks and Burbank, CA
resorts 91521
- ----------------------------------------------------------------------------------------------------------------------------------
Michael D. Eisner D/EO N/A USA Chairman of the The Walt Disney Creative content, 500 South Buena
Board and Chief Company broadcasting and Vista Street,
Executive Officer theme parks and Burbank, CA
resorts 91521
- ----------------------------------------------------------------------------------------------------------------------------------
Judith Estrin D N/A USA Senior Vice Cisco Systems, Networking for 170 Tasman
President and Chief Inc. the Internet Drive, San
Technology Officer Jose, CA
95134-6345
- ----------------------------------------------------------------------------------------------------------------------------------
John J. Feenie EO N/A Australia Executive Vice The Walt Disney Creative content, 500 South Buena
President - China Company broadcasting and Vista Street,
Affairs theme parks and Burbank, CA
resorts 91521
- ----------------------------------------------------------------------------------------------------------------------------------
Stanley P. Gold D N/A USA President and Chief Shamrock Diversified 4444 Lakeside
Executive Officer Holdings, Inc. Investment Drive, Burbank,
Company CA 91510-7774
- ----------------------------------------------------------------------------------------------------------------------------------
Sanford M. Litvack D/EO D/EO USA Senior Executive The Walt Disney Creative content, 500 South Buena
Vice President and Company broadcasting and Vista Street,
Chief of Corporate theme parks and Burbank, CA
Operations of TWDC resorts 91521
and President of DEI
- ----------------------------------------------------------------------------------------------------------------------------------
Ignacio E. Lozano, Jr. D N/A USA Chairman Lozano Publishing 411 West Fifth
Enterprises Street, 12/th/
Floor, Los
Angeles, CA
90013
- ----------------------------------------------------------------------------------------------------------------------------------
Louis M. Meisinger EO EO USA Executive Vice The Walt Disney Creative content, 500 South Buena
President and Company broadcasting and Vista Street,
General Counsel of theme parks and Burbank, CA
TWDC and DEI resorts 91521
- ----------------------------------------------------------------------------------------------------------------------------------
George J. Mitchell D N/A USA Special Counsel Verner, Lipfert, Legal Services 901 15/th/
Bernard, Street NW,
McPherson and #700,
Hand Washington, DC
20005
- ----------------------------------------------------------------------------------------------------------------------------------
Peter E. Murphy EO N/A USA Executive Vice The Walt Disney Creative content, 500 South Buena
President and Chief Company broadcasting and Vista Street,
Strategic Officer theme parks and Burbank, CA
resorts 91521
- ----------------------------------------------------------------------------------------------------------------------------------
Thomas S. Murphy D N/A USA Retired N/A N/A c/o The Walt
Disney Company,
500 South Buena
Vista Street,
Burbank, CA
91521
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 1 (continued)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Richard A. Nunis D N/A USA Chairman of Walt The Walt Disney Creative content, 500 South Buena
Disney Attractions Company broadcasting and Vista Street,
theme parks and Burbank, CA
resorts 91521
- ------------------------------------------------------------------------------------------------------------------------------------
Leo J. O'Donovan, S.J. D N/A USA President Georgetown Education Washington, DC
University 20057-1789
- ------------------------------------------------------------------------------------------------------------------------------------
Preston Padden EO N/A USA Executive Vice The Walt Disney Creative content, 500 South Buena
President - Company broadcasting and Vista Street,
Government theme parks and Burbank, CA
Relations resorts 91521
- ------------------------------------------------------------------------------------------------------------------------------------
Sidney Poitier D N/A USA Actor/Executive Verdon-Cedric Film/TV 9350 Wilshire
Productions, Production Blvd., #310-311,
Ltd. Beverly Hills,
CA 90212
- ------------------------------------------------------------------------------------------------------------------------------------
Marsha L. Reed N/A D USA Corporate The Walt Disney Creative content, 500 South Buena
Secretary Company broadcasting and Vista Street,
theme parks and Burbank, CA
resorts 91521
- ------------------------------------------------------------------------------------------------------------------------------------
Irwin E. Russell D N/A USA Attorney Private Legal Services 9401 Wilshire
Practice Blvd., #760,
Beverly Hills,
CA 90212-2933
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas O. Staggs EO N/A USA Executive Vice The Walt Disney Creative content, 500 South Buena
President and Chief Company broadcasting and Vista Street,
Financial Officer theme parks and Burbank, CA
resorts 91521
- ------------------------------------------------------------------------------------------------------------------------------------
Robert A.M. Stern D N/A USA Senior Partner Robert A.M. Architecture 460 West 34/th/
Stern Architects Street, New
York, NY 10001
- ------------------------------------------------------------------------------------------------------------------------------------
David K. Thompson N/A D USA Senior Vice The Walt Disney Creative content, 500 South Buena
President - Company broadcasting and Vista Street,
Assistant General theme parks and Burbank, CA
Counsel & Assistant resorts 91521
Secretary
- ------------------------------------------------------------------------------------------------------------------------------------
Andrea Van de Kamp D N/A USA Senior Vice Sotheby's Auction House 9665 Wilshire
President, Chairman Blvd., #101,
West Coast Beverly Hills,
Operations CA 90212
- ------------------------------------------------------------------------------------------------------------------------------------
E. Cardon Walker D N/A USA Retired N/A N/A c/o The Walt
Disney Company,
500 South Buena
Vista Street,
Burbank, CA
91521
- ------------------------------------------------------------------------------------------------------------------------------------
Raymond L. Watson D N/A USA Vice Chairman of The Irvine Land Development 550 Newport
the Board Company Center Drive,
Newport Beach,
CA 92658
- ------------------------------------------------------------------------------------------------------------------------------------
Gary L. Wilson D N/A USA Chairman of the Northwest Airline 5101 Northwest
Board Airlines Transportation Drive, St. Paul,
Corporation MN 55111-3034
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 2
JOINT FILING AGREEMENT
Each of The Walt Disney Company, a Delaware corporation, and Disney
Enterprises, Inc., a Delaware corporation (collectively, the "Filing Persons")
hereby agrees to file jointly a Schedule 13D and any amendments thereto relating
to the Common Stock, par value $.001 per share, of Infoseek Corporation, a
Delaware corporation, as permitted by Rule 13d-1 of the Securities Exchange Act
of 1934, as amended. Each Filing Person agrees that the information set forth
in such Schedule 13D and any amendments thereto with respect to such person will
be true, complete and correct as of the date of such Schedule 13D or such
amendment to the best of its knowledge and belief after reasonable inquiry.
Each Filing Person shall promptly notify the other if any of the information set
forth in such Schedule 13D shall be or become inaccurate in any material respect
or if such Filing Person learns of information which would require an amendment
to such Schedule 13D.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to execute this agreement as of the 25/th/ of November, 1998.
The Walt Disney Company,
a Delaware corporation
By: /s/ David K. Thompson
---------------------
David K. Thompson
Senior Vice President
Disney Enterprises, Inc.,
a Delaware corporation
By: /s/ David K. Thompson
---------------------
David K. Thompson
Senior Vice President
<PAGE>
EXHIBIT 3
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
INFOSEEK CORPORATION,
INFOSEEK CORPORATION,
STARWAVE CORPORATION,
AND
DISNEY ENTERPRISES, INC.
DATED AS OF JUNE 18, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE I FORMATION OF HOLDING COMPANY AND SUBSIDIARIES ............... 1
1.1 Organization of Holding Company................................ 1
1.2 Directors and Officers of the Holding Company.................. 2
1.3 Organization of Merger Subsidiaries............................ 2
1.4 Actions of Directors and Officers.............................. 2
1.5 Actions of Parent and Company.................................. 2
1.6 The Mergers.................................................... 2
1.7 The Closing.................................................... 3
1.8 Directors...................................................... 3
1.9 Officers....................................................... 3
1.10 Merger Sub Stock............................................... 3
1.11 Cancellation of Holding Company Capital Stock.................. 3
1.12 Conversion of Parent Stock..................................... 3
1.13 Treasury Stock................................................. 4
1.14 Conversion of Company Common Stock............................. 4
1.15 Exchange Agent................................................. 5
1.16 Holding Company to Provide Common Stock........................ 5
1.17 Exchange Procedures............................................ 5
1.18 Dividends, Fractional Shares, Etc. ............................ 5
1.19 Certain Definitions............................................ 6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND DEI ...... 7
2.1 Organization of the Company.................................... 8
2.2 Subsidiaries................................................... 8
2.3 Company Capital Structure...................................... 8
2.4 Authority...................................................... 9
2.5 No Conflict.................................................... 9
2.6 Consents....................................................... 10
2.7 Company Financial Statements and Controls...................... 10
2.8 No Undisclosed Liabilities..................................... 10
2.9 No Changes..................................................... 10
2.10 Tax Matters.................................................... 11
2.11 Restrictions on Business Activities............................ 13
2.12 Title of Properties; Absence of Liens and Encumbrances;
Condition of Equipment........................................ 13
2.13 Intellectual Property.......................................... 14
2.14 Agreements, Contracts and Commitments.......................... 16
2.15 Interested Party Transactions.................................. 16
2.16 Governmental Authorization..................................... 17
2.17 Litigation..................................................... 17
2.18 Minute Books................................................... 17
2.19 Environmental Matters.......................................... 17
2.20 Brokers' and Finders' Fees; Third Party Expenses............... 18
2.21 Employee Benefit Plans; Compensation; Labor Matters............ 18
2.22 Insurance...................................................... 19
2.23 Compliance with Laws........................................... 19
2.24 Warranties; Indemnities........................................ 19
2.25 Ownership of Parent Stock...................................... 20
2.26 Claims for Losses.............................................. 20
2.27 Capital Summary Statements..................................... 20
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT...................... A-20
3.1 Organization, Standing and Power................................. A-20
3.2 Parent Subsidiaries.............................................. A-20
3.3 Authority; No Conflict; Consents................................. A-20
3.4 Parent Capital Structure......................................... A-21
3.5 SEC Documents; Parent Financial Statements....................... A-21
3.6 No Undisclosed Liabilities....................................... A-22
3.7 No Material Adverse Effect....................................... A-22
3.8 Brokers' and Finders' Fees....................................... A-22
3.9 Litigation....................................................... A-22
3.10 Taxes............................................................ A-22
3.11 Employee Benefit Plans; Compensation............................. A-23
3.12 Compliance with Laws............................................. A-25
3.13 Agreements, Contract, Commitments................................ A-25
3.14 Intellectual Property............................................ A-25
3.15 Real Property.................................................... A-26
3.16 Interested Party Transactions.................................... A-26
3.17 Restrictions on Business Activities.............................. A-26
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME............................ A-27
4.1 Conduct of the Parties........................................... A-27
4.2 No Solicitation.................................................. A-29
4.3 No HSR Violation................................................. A-31
ARTICLE V ADDITIONAL AGREEMENTS........................................... A-31
5.1 Registration Statement; Preparation of Joint Proxy Statement..... A-31
5.2 Shareholder Meetings............................................. A-33
5.3 Cooperation; Access to Information............................... A-33
5.4 Confidentiality.................................................. A-33
5.5 Expenses......................................................... A-33
5.6 Public Disclosure................................................ A-34
5.7 Consents......................................................... A-34
5.8 FIRPTA Compliance................................................ A-34
5.9 Reasonable Efforts............................................... A-34
5.10 Notification of Certain Matters.................................. A-34
5.11 Voting Agreements................................................ A-34
5.12 Director Nominees................................................ A-34
5.13 Non-Competition.................................................. A-34
5.14 Regulatory Filings; Reasonable Efforts........................... A-35
5.15 Additional Documents and Further Assurances...................... A-35
5.16 Employees........................................................ A-35
5.17 Form S-8......................................................... A-35
5.18 Director Action with Respect to Option Plans..................... A-35
5.19 Directors' Insurance and Indemnification......................... A-35
5.20 Stock Listing.................................................... A-35
5.21 Certain Tax Matters.............................................. A-35
5.22 Non Solicitation of Company Employees............................ A-39
5.23 Net Worth Test................................................... A-39
5.24 Compliance with Laws............................................. A-39
5.25 Share and Warrant Ownership...................................... A-40
5.26 Parent Option Grants............................................. A-40
5.27 ABC News/Starwave Partners....................................... A-40
</TABLE>
A-ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
5.28 Funding of Ventures ............................................. A-40
5.29 Third Party Agreements........................................... A-40
5.30 Adoption of Option and Employee Stock Purchase Plans............. A-41
ARTICLE VI CONDITIONS TO THE MERGER ...................................... A-41
6.1 Conditions to Obligations of Each Party ......................... A-41
6.2 Conditions to Obligations of Company and DEI .................... A-41
6.3 Conditions to the Obligations of Parent and Holding Company ..... A-42
ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION .. A-43
7.1 Survival of Representations and Warranties ...................... A-43
7.2 Indemnification ................................................. A-43
7.3 Claims Against DEI for Indemnification .......................... A-44
7.4 Resolution of Conflicts; Arbitration ............................ A-44
7.5 Third-Party Claims .............................................. A-45
7.6 Exclusive Remedy ................................................ A-45
7.7 Indemnification For Taxes ....................................... A-45
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER ........................... A-46
8.1 Termination ..................................................... A-46
8.2 Effect of Termination ........................................... A-48
8.3 Termination Fees ................................................ A-48
8.4 Amendment ....................................................... A-49
8.5 Extension; Waiver ............................................... A-49
ARTICLE IX GENERAL PROVISIONS ............................................ A-49
9.1 Notices ......................................................... A-49
9.2 Interpretation .................................................. A-50
9.3 Counterparts .................................................... A-51
9.4 Entire Agreement; Assignment .................................... A-51
9.5 Severability .................................................... A-51
9.6 Other Remedies .................................................. A-51
9.7 Governing Law ................................................... A-51
9.8 Rules of Construction ........................................... A-51
9.9 Attorneys Fees .................................................. A-51
</TABLE>
A-iii
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of June 18, 1998 among Infoseek Corporation., a California
corporation ("Parent"), Infoseek Corporation, a newly organized Delaware
Corporation ("Holding Company"), Starwave Corporation, a Washington
corporation (the "Company"), and Disney Enterprises, Inc., a Delaware
corporation and the majority shareholder of the Company ("DEI").
RECITALS
A. The Boards of Directors of each of the constituent companies hereto
believe it is in the best interests of each company and their respective
shareholders to consummate the reorganization (the "Reorganization") provided
for herein, pursuant to which Holding Company, will acquire all of the capital
stock of each of Parent and the Company through the mergers of the Merger
Subsidiaries (as defined in Section 1.3) with and into each of the Parent and
the Company.
B. For federal income tax purposes, it is intended that (i) the Parent
Merger (as hereinafter defined) qualify as a reorganization under the
provisions of Section 368(a) of the United States Internal Revenue Code of
1986, as amended, (the "Code") and/or as an exchange under the provisions of
Section 351 of the Code and (ii) that the Company Merger (as hereinafter
defined) qualify as a reorganization under the provisions of Section 368(a) of
the Code and/or as an exchange under the provisions of Section 351 of the
Code.
C. Concurrently with the execution hereof, in order to induce Parent to
enter into this Agreement, certain shareholders of the Company and Parent are
each entering into a shareholders agreement providing for certain voting and
other restrictions with respect to shares of Parent Common Stock (as defined
in Section 1.12(a)) upon the terms and conditions specified therein.
D. Concurrently with the execution hereof, in order to induce the Company to
enter this Agreement, certain shareholders of Parent and DEI are each entering
into a shareholders agreement providing for certain voting and other
restrictions with respect to shares of Company Common Stock, upon the terms
and conditions specified therein; and Parent and DEI (or one of its
Affiliates) have entered into certain Transaction Agreements (as defined in
Section 2.4).
E. The Company and DEI, on the one hand, and Parent and Holding Company, on
the other hand, desire to make certain representations, warranties, covenants
and other agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, the parties agree as follows:
ARTICLE I
Formation of Holding Company and Subsidiaries
1.1 Organization of Holding Company. The Certificate of Incorporation and
Bylaws of the Holding Company shall be in such forms as shall be mutually
determined by Parent and DEI; provided that the Certificate of Incorporation
of Holding Company shall be amended to be substantially in the form of the
Articles of Incorporation of Parent and to preserve the existing rights
afforded to shareholders thereunder (subject to any changes required in
accordance with the provisions of Delaware General Corporate Law). The
Certificate of Incorporation of Holding Company will additionally be amended
to provide that the authorized capital stock of Holding Company shall consist
initially of shares of common stock, no par value (the "Holding Company Common
Stock") and shares of preferred stock, no par value (the "Holding Company
Preferred Stock").
1
<PAGE>
1.2 Directors and Officers of the Holding Company. Subject to Section 5.12,
the directors and officers of the Holding Company shall be designated by
Parent. Each officer and director shall remain in office until his or her
successor is elected.
1.3 Organization of Merger Subsidiaries. As promptly as practicable
following the execution of this Agreement, Parent shall cause the following
companies to be organized for the sole purpose of effectuating the Parent
Merger and the Company Merger contemplated herein:
(i) Indigo Acquisition Corp., a corporation organized under the laws of
the State of California ("Merger Sub A"). The Articles of Incorporation and
Bylaws of Merger Sub A shall be in such forms as shall be determined by the
Parent and reasonably acceptable to DEI as soon as practicable following
the execution of this Agreement. The authorized capital stock of Merger Sub
A shall initially consist of 1,000 shares of common stock, no par value,
which shall be issued to Holding Company at a price of $1.00 per share;
(ii) Starwave Acquisition Corp., a corporation organized under the laws
of the State of Washington ("Merger Sub B" and, together with Merger Sub A,
the "Merger Subsidiaries" which will conduct no business activity that is
unrelated to the Mergers). The Articles of Incorporation and Bylaws of
Merger Sub B shall be in such forms as shall be determined by the Parent
and reasonably acceptable to DEI as soon as practicable following the
execution of this Agreement. The authorized capital stock of Merger Sub B
shall initially consist of 100 shares of common stock, par value $.01 per
share, which shall be issued to Holding Company at a price of $1.00 per
share.
1.4 Actions of Directors and Officers. As promptly as practicable following
the execution of this Agreement, the Parent shall designate the directors and
officers of Merger Sub A and Merger Sub B. The Parent shall cause (i) Holding
Company to elect the directors of the Merger Subsidiaries, (ii) the directors
of Merger Sub A and Merger Sub B to elect their respective officers, (iii) the
directors of Holding Company to ratify and approve this Agreement and to
approve the forms of the Merger Agreements (as defined below), (iv) the Merger
Agreements to be executed on behalf of the parties thereto, and (v) the
directors and officers of the Merger Subsidiaries to take such steps as may be
necessary or appropriate to complete the organization of the Merger
Subsidiaries and to approve the Merger Agreements.
1.5 Actions of Parent and Company. As promptly as practicable following the
execution of this Agreement, as the holders of all of the outstanding shares
of capital stock of Holding Company, the Parent shall cause Holding Company to
ratify and approve this Agreement, and shall cause Holding Company, as the
sole shareholder of each of the Merger Subsidiaries, to adopt the Merger
Agreements. The Parent shall cause Holding Company and the Merger Subsidiaries
to perform their respective obligations under this Agreement and the Merger
Agreements.
1.6 The Mergers. Pursuant to Plans of Merger, in forms to be mutually agreed
upon by the Parent and the Company (sometimes hereinafter referred to
individually as the "Parent Merger Agreement" and the "Company Merger
Agreement", respectively, and collectively as the "Merger Agreements"), which
Parent Merger Agreement and Company Merger Agreement shall upon such mutual
agreement be attached hereto as Exhibit A-1 and Exhibit A-2, respectively,
upon the terms and subject to the conditions set forth in this Agreement and
in the Merger Agreements:
(a) Merger Sub A shall be merged with and into Parent (the "Parent
Merger") in accordance with the applicable provisions of the laws of the
State of California. Parent shall be the surviving corporation in the
Parent Merger and shall continue its corporate existence under the laws of
the State of California. As a result of the Parent Merger, Parent shall
become a wholly owned Subsidiary of Holding Company. The effects and
consequences of the Parent Merger shall be as set forth in the Parent
Merger Agreement.
(b) Merger Sub B will be merged with and into the Company (the "Company
Merger"), in accordance with the applicable provisions of the laws of the
State of Washington. The Company shall be the surviving corporation in the
Company Merger and shall continue its corporate existence under the laws of
the State of
2
<PAGE>
Washington. As a result of the Company Merger, the Company shall become a
wholly owned Subsidiary of Holding Company. The effects and consequences of
the Company Merger shall be as set forth in the Company Merger Agreement.
The term "Mergers" shall mean the Parent Merger and the Company Merger,
each of which shall occur on the same date and which are intended to
constitute a single transaction.
(c) The term "Effective Time" shall mean the time and date which is the
later of (i) the date and time of the filing of the Certificate of Merger
relating to the Parent Merger with the Secretary of State of the State of
California (or such other date and time as may be specified in such
certificate as may be permitted by California law) and (ii) the date and
time of the filing of a Certificate of Merger by the Secretary of State of
the State of Washington with respect to the Company Merger (or such other
date and time as may be specified in such certificate as may be permitted
by Washington law).
1.7 The Closing. Subject to the terms and conditions of this Agreement, the
closing of the transactions contemplated by this Agreement and the Merger
Agreements (the "Closing") shall take place (a) at the offices of Wilson
Sonsini Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo
Alto, California 94304, at 10:00 a.m., local time, on the first business day
following the day on which the last to be fulfilled or waived of the
conditions set forth in Article VI shall be fulfilled or waived in accordance
herewith or (b) at such other time, date or place as Parent and the Company
may agree. The date on which the Closing occurs is hereinafter referred to as
the "Closing Date."
1.8 Directors. The directors of Parent immediately prior to the Effective
Time shall be the directors of the surviving corporation of the Parent Merger
as of the Effective Time and until their successors are duly appointed or
elected in accordance with applicable law. The directors of Merger Sub A and
the directors of Merger Sub B immediately prior to the Effective Time shall be
the directors of the surviving corporation of the Parent Merger and the
Company Merger, respectively, as of the Effective Time and until their
successors are duly appointed or elected in accordance with applicable law.
1.9 Officers. The officers of Parent and the Company immediately prior to
the Effective Time shall be the officers of the surviving corporations of the
Parent Merger and the Company Merger, respectively, as of the Effective Time
and until their successors are duly appointed or elected in accordance with
applicable law.
1.10 Merger Sub Stock. At the Effective Time, each share of the common stock
of Merger Sub A outstanding immediately prior to the Effective Time shall be
converted into and shall become one (1) share of common stock of the surviving
corporation of the Parent Merger. At the Effective Time, each share of the
common stock of Merger Sub B outstanding immediately prior to the Effective
Time shall be converted into and shall become one share of common stock of the
surviving corporation of the Company Merger.
1.11 Cancellation of Holding Company Capital Stock. At the Effective Time,
each share of the capital stock of Holding Company issued and outstanding
immediately prior to the Effective Time shall be canceled and cease to exist,
and the amounts paid by Parent for such shares shall be returned by Holding
Company to Parent.
1.12 Conversion of Parent Stock.
(a) Subject to Section 1.12 (b), at the Effective Time, each share of common
stock, no par value, of Parent ("Parent Common Stock") issued and outstanding
at the Effective Time shall be converted into one share of Holding Company
Common Stock. Upon such conversion, all such shares of Parent Common Stock
shall be canceled and cease to exist, and each certificate theretofore
representing any such shares shall, without any action on the part of the
holder thereof, be deemed to represent an equivalent number of shares of
Holding Company Common Stock.
(b) Notwithstanding anything in this Section 1.12 to the contrary, shares of
Parent Common Stock which are issued and outstanding immediately prior to the
Effective Time and which are held by shareholders who have not voted such
shares in favor of the Parent Merger and who shall have properly exercised and
perfected their rights of appraisal for such shares in the manner provided by
California Corporation Law and who, as of the
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Effective Time, shall not have effectively withdrawn or lost such dissenters
rights (collectively, the "Parent Dissenting Shares") shall not be converted
into or represent the right to receive the consideration for Parent Common
Stock pursuant to this Section 1.12, but the holder shall only be entitled to
such rights as are granted by applicable law. If such holder shall have so
failed to perfect or shall have effectively withdrawn or lost such right, his
shares shall thereupon be deemed to have been converted into and to have
become exchangeable for, at the Effective Time, the right to receive the
consideration provided for Parent Common Stock.
(c) At the Effective Time, each outstanding option or right to purchase
shares of Parent Common Stock (a "Parent Option") shall be contributed and
assumed by Holding Company in such manner that it is converted into an option
to purchase shares of Holding Company Common Stock, as provided below.
Following the Effective Time, each such Parent Option shall be exercisable
upon the same terms and conditions as then are applicable to such Parent
Option, except that (i) each such Parent Option shall be exercisable for that
number of shares of Holding Company Common Stock equal to the product obtained
by multiplying the number of shares of Parent Common Stock that were issuable
upon exercise in full of such assumed Parent Option immediately prior to the
Effective Time by one, and (ii) the per share exercise price for the shares of
Holding Company Common Stock issuable upon exercise of such assumed Parent
Option shall be equal to the exercise price per share of Parent Common Stock
at which such Parent Option was exercisable immediately prior to the Effective
Time. It is the intention of the parties that, to the extent that any such
Parent Option constituted an "incentive stock option" (within the meaning of
Section 422 of the Code) immediately prior to the Effective Time, such option
continue to qualify as an incentive stock option to the maximum extent
permitted by Section 422 of the Code, and that the assumption of the Parent
Stock Options provided by this Section 1.12(c) satisfy the conditions of
Section 424(a) of the Code.
1.13 Treasury Stock. At the Effective Time, each share of Parent Common
Stock which is held in the treasury of Parent immediately prior to the
Effective Time shall, by virtue of the Mergers, cease to be outstanding and
shall be canceled and retired without payment of any consideration therefor.
1.14 Conversion of Company Common Stock.
(a) At the Effective Time each issued and outstanding share of Company
Capital Stock, $0.01 par value, shall be converted, without any action on the
part of the holders hereof, into the right to receive, upon surrender of a
certificate representing such share of Company Capital Stock in the manner
provided in Section 1.17, that number of shares of Holding Company Common
Stock equal to the Exchange Ratio.
(b) Notwithstanding anything contained in this Section 1.14 to the contrary,
each share of Company Common Stock issued and held in the Company's treasury
immediately prior to the Effective Time shall, by virtue of the Company
Merger, cease to be outstanding and shall be canceled and retired without
payment of any consideration therefor.
(c) Notwithstanding anything in this Section 1.14 to the contrary, shares of
Company Common Stock which are issued and outstanding immediately prior to the
Effective Time and which are held by shareholders who have not voted such
shares in favor of the Company Merger and who shall have properly exercised
and perfected their rights of appraisal for such shares in the manner provided
by the Washington Business Corporation Act (the "WCL") and who, as of the
Effective Time, shall not have effectively withdrawn or lost such dissenters
rights ( collectively, the "Dissenting Shares") shall not be converted into or
represent the right to receive the consideration for Company Capital Stock
pursuant to Section 1.14, but the holder shall only be entitled to such rights
as are granted by applicable law. If such holder shall have so failed to
perfect or shall have effectively withdrawn or lost such right, his shares
shall thereupon be deemed to have been converted into and to have become
exchangeable for, at the Effective Time, the right to receive that number of
shares of Holding Company Common Stock equal to the Exchange Ratio. The
Company shall give Parent prompt notice of any Dissenting Shares (and shall
also give Parent prompt notice of any withdrawals of such demands for payment
in exercise of a shareholder's dissenters' rights) and Parent shall have the
right to direct all negotiations and proceedings with respect to any such
demands. Neither the Company nor the surviving corporation of the Company
Merger shall,
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except with the prior written consent of Parent, voluntarily make any payment
with respect to, or settle or offer to settle, any such demand for payment in
exercise of a shareholder's dissenters' rights.
(d) At the Effective Time, each outstanding option or right to purchase
shares of Company Common Stock (a "Company Option") shall be transferred to
and assumed by Holding Company in such manner that it is converted into an
option to purchase shares of Holding Company Common Stock, as provided below.
Following the Effective Time, each such Company Option shall be exercisable
upon the same terms and conditions as then are applicable to such Company
Option, except that (i) each such Company Option shall be exercisable for that
number of shares of Holding Company Common Stock equal to the product obtained
by multiplying the number of shares of Company Capital Stock that were
issuable upon exercise in full of such assumed Company Option immediately
prior to the Effective Time by the Exchange Ratio, rounded down to the nearest
whole number of shares of Parent Common Stock and (ii) the per share exercise
price for the shares of Holding Company Common Stock issuable upon exercise of
such assumed Company Option shall be equal to the quotient obtained by
dividing the exercise price per share of Company Capital Stock at which such
Company Option was exercisable immediately prior to the Effective Time by the
Exchange Ratio, rounded up to the nearest whole cent. It is the intention of
the parties that, to the extent that any such Company Option constituted an
"incentive stock option" (within the meaning of Section 422 of the Code)
immediately prior to the Effective Time, such option continue to qualify as an
incentive stock option to the maximum extent permitted by Section 422 of the
Code, and that the assumption of the Company Stock Options provided by this
Section 1.14(d) satisfy the conditions of Section 424(a) of the Code.
1.15 Exchange Agent. Parent shall appoint a reputable institution,
reasonably acceptable to DEI, to serve as exchange agent (the "Exchange
Agent") in the Mergers.
1.16 Holding Company to Provide Common Stock. Promptly after the Effective
Time, Holding Company shall make available to the Exchange Agent for exchange
in accordance with this Article I the shares of Holding Company Common Stock
issuable pursuant to Article I in exchange for all of the outstanding shares
of Company Capital Stock.
1.17 Exchange Procedures. On the Closing Date or as soon thereafter as
practicable, the Shareholders may surrender the certificates representing
their Company Capital Stock (the "Company Stock Certificates") to the Exchange
Agent for cancellation together with a letter of transmittal in such form and
having such provisions as Parent may reasonably request. Upon surrender of a
Company Stock Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, the Exchange Agent will promptly deliver to the holder
of such Company Stock Certificate (other than the holders of Dissenting
Shares) in exchange therefor, subject to Section 1.18, the number of shares of
Holding Company Common Stock issuable in exchange for such Company Stock
Certificate pursuant to this Article I, and the Company Stock Certificate so
surrendered shall forthwith be canceled. Until so surrendered, each
outstanding Company Stock Certificate (other than certificates representing
Dissenting Shares) will be deemed from and after the Effective Time, for all
corporate purposes and subject to Section 1.18, to evidence only the right to
receive shares of Holding Company Common Stock issuable in accordance with
this Article I.
1.18 Dividends, Fractional Shares, Etc.
(a) Notwithstanding any other provisions of this Agreement, no dividends or
other distributions declared after the Effective Time on Holding Company
Common Stock shall be paid with respect to any shares of Company Capital Stock
represented by a Company Stock Certificate, until such Company Stock
Certificate is surrendered for exchange as provided herein. Subject to the
effect of applicable laws, following surrender of any such Company Stock
Certificate, there shall be paid to the holder of the Holding Company Stock
Certificates issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore payable with respect to such whole
shares of Holding Company Common Stock and not paid, less the amount of any
withholding taxes which may be required
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thereon, and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of Holding Company Common Stock, less the amount of any
withholding taxes which may be required thereon.
(b) From and after the Effective Time, there shall be no transfers on the
stock transfer books of Parent or the Company of the shares of Parent Common
Stock or Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates representing any
such shares are presented to the surviving corporations of the Parent Merger
or the Company Merger, they shall be canceled and exchanged for certificates
for the consideration, if any, deliverable in respect thereof pursuant to this
Agreement and the Merger Agreements in accordance with the procedures set
forth in this Article I. Subject to applicable law, Company Stock Certificates
surrendered for exchange by any person constituting an "affiliate" of the
Company for purposes of Rule 145(c) under the Securities Act of 1933, as
amended (the "Securities Act"), shall not be exchanged until Parent has
received a written agreement from such person agreeing to comply with the
provisions of Rule 145 under the Securities Act.
(c) No fractional shares of Holding Company Common Stock shall be issued
pursuant to the Company Merger. In lieu of the issuance of any fractional
share of Holding Company Common Stock pursuant to the Company Merger, cash
adjustments will be paid to holders in respect of any fractional share of
Holding Company Common Stock that would otherwise be issuable, and the amount
of such cash adjustment shall be equal to the product of such fractional
amount and the average closing price of Parent Common Stock for the ten (10)
trading days ending on the trading day prior to the Closing Date.
(d) None of the Parent, the Company, the Holding Company, the Exchange Agent
or any other person shall be liable to any former holder of shares of Parent
Common Stock or Company Capital Stock for any amount properly delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(e) In the event that any Company Stock Certificate (other than certificates
representing Dissenting Shares) shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Company Stock Certificate to be lost, stolen or destroyed and, if required by
Holding Company, the posting by such person of a bond in such reasonable
amount as Holding Company may direct as indemnity against any claim that may
be made against it with respect to such Company Stock Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Company Stock Certificate the applicable merger consideration, cash in lieu of
fractional shares, and unpaid dividends and distributions on shares of Holding
Company Common Stock deliverable in respect thereof pursuant to this Agreement
and the Company Merger Agreement.
1.19 Certain Definitions. For all purposes of this Agreement, the following
terms shall have the following meanings:
"Closing Balance Sheet" shall mean the estimated unaudited consolidated
balance sheet of the Company as of the Closing Date prepared in accordance
with GAAP (except that such unaudited consolidated balance sheet does not
contain the footnotes required by GAAP) and in good faith and based upon
the accounting procedures and methodologies utilized in preparing the Year-
End Financials and the Interim Financials.
"Company Capital Stock" shall mean shares of Company Common Stock and
shares of any other capital stock of the Company.
"Company Common Stock" shall mean shares of Class A Common Stock and the
Class B Common Stock of the Company.
"Company Options" shall mean all issued and outstanding options,
warrants, and other rights to acquire or receive Company Capital Stock
(whether or not vested).
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"Estimated Net Worth" shall equal the Net Worth of the Company as set
forth on the Closing Balance Sheet.
"Exchange Ratio" shall equal the quotient obtained by dividing (i)
28,138,000 by (ii) the sum of: (x) the aggregate number of Total
Outstanding Company Shares and (y) the aggregate number of shares of
Company Capital Stock subject to Company Options outstanding as of the
Effective Time.
"GAAP" shall mean generally accepted accounting principles in effect from
time to time in the United States, applied on a consistent basis for the
relevant entity.
"Merrill Lynch" shall mean Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
"Net Worth" shall equal total consolidated assets of the Company minus
total consolidated liabilities of the Company, each as determined in
accordance with GAAP, as of the close of business on the Closing Date.
"Net Worth Target" shall mean $5 million.
"Parent Common Stock" shall mean shares of the common stock, no par
value, of Parent.
"Shareholder" shall mean each holder of any Company Capital Stock
immediately prior to the Effective Time.
"DEI Taxes" shall mean (i) all Taxes relating to any period (or portion
of any period) ending on or prior to the Closing Date of the Company or its
Subsidiaries including those attributable to their assets, operations or
employees for any period (or portion of any period) ending on or prior to
the Closing Date (not including any Tax incurred other than in the ordinary
course of business after the Effective Time on the Closing Date), including
without limitation any Taxes of the Company or any such Subsidiaries
arising as a result of the Company Merger or the Company's or any
Subsidiary of the Company during such period ceasing to be a member of a
consolidated, combined, or unitary group during such period, (ii) any
liability of the Company or any of its Subsidiaries that is attributable to
any consolidated, combined or unitary group of which the Company or any of
its Subsidiaries is a member prior to the Closing Date under Treas. Reg.
Section 1.1502-6 (or any comparable provision of foreign, state or local
law) or (iii) any liability of the Company or any of its Subsidiaries for
any period (or portion thereof) ending prior to the Effective Time under
any Tax sharing, Tax indemnity, Tax allocation or similar agreement or
arrangement entered into on or prior to the Effective Time, other than this
Agreement, or the Tax Sharing Agreement attached hereto as Exhibit E (the
Tax Sharing Agreement"); provided, however, that notwithstanding anything
in this Agreement to the contrary, DEI Taxes shall not include any Taxes
(i) for which Parent and Holding Company are required to indemnify DEI
pursuant to Section 7.7 hereof, or (ii) which Parent has agreed to share
pursuant to Section 5.21(a)(iii) hereof.
"Total Outstanding Company Shares" shall be the aggregate number of
shares of Company Capital Stock outstanding immediately prior to the
Effective Time.
ARTICLE II
Representations and Warranties of the Company and DEI
Each of the Company and DEI hereby, jointly and severally, represents and
warrants to Parent and Holding Company, subject to such exceptions as are
specifically disclosed in the disclosure schedule supplied by the Company and
DEI to Parent (the "Disclosure Schedule"), on the date hereof and as of the
Effective Time as though made at the Effective Time, as follows:
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2.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under Washington Law. The
Company has the corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified to do business
and in good standing as a foreign corporation in each jurisdiction in which
the failure to be so qualified would have a Material Adverse Effect. Each of
the Subsidiaries (as defined in Section 2.2 below) of the Company is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation and has the corporate or other applicable power
to own its properties and to carry on its business as now being conducted.
Each of the Subsidiaries is duly qualified to do business and in good standing
in each jurisdiction outside of the jurisdiction of its formation in which the
failure to be so qualified would have a Material Adverse Effect. For all
purposes of this Agreement, the term "Material Adverse Effect" means any
change, event or effect that is materially adverse to the business, assets
(including intangible assets), financial condition, or results of operations
of the entity referred to, together with its subsidiaries, taken as a whole
("Material Adverse Effect"). The Company has delivered a true and correct copy
of its Amended and Restated Articles of Incorporation and Amended and Restated
Bylaws, each as amended to date, and has delivered a true and correct copy of
the charter or other organizational documents of each of its Subsidiaries,
each as amended to date, to Parent.
2.2 Subsidiaries. Except as set forth in Section 2.2 of the Disclosure
Schedule, the Company does not have, and has never had, any subsidiaries and
does not otherwise own, and has not otherwise owned, any shares in the capital
of or any interest in, or control of, directly or indirectly, any corporation,
partnership, association, joint venture or other business entity. The entities
set forth in Section 2.2 of the Disclosure Schedule are, except as otherwise
set forth in such section of the Disclosure Schedules hereinafter occasionally
referred to individually as a "Subsidiary" and, collectively, as the
"Subsidiaries." Section 2.2 of the Disclosure Schedule also sets forth or
references the form and percentage interest of the Company in the Subsidiaries
and, to the extent that a Subsidiary set forth thereon is not wholly owned by
the Company, lists the other person, persons, entity or entities who have an
interest in such Subsidiary and references the percentage of such interest.
2.3 Company Capital Structure.
(a) The authorized capital stock of the Company consists of 250,000,000
shares of authorized Class A Common Stock of which 57,316,042 shares are
issued and outstanding as of the date hereof and 80,000,000 shares of
authorized Class B Common Stock, of which 39,869,348 shares are issued and
outstanding as of the date hereof. As of the Effective Time, the number of
outstanding shares of Company Capital Stock shall not exceed 97,185,390
shares, except for such number of shares issued pursuant to Company Options
after the date hereof and through to the Effective Time. As of the date
hereof, the Company Capital Stock is held by the persons and in the amounts
set forth in Section 2.3(a) of the Disclosure Schedule. All outstanding shares
of Company Capital Stock are duly authorized, validly issued, fully paid and
non-assessable and not subject to preemptive rights created by statute, the
Amended and Restated Articles of Incorporation or Amended and Restated Bylaws
of the Company or any agreement to which the Company is a party or by which it
is bound and have been issued in compliance with federal and state securities
laws. There are no declared or accrued unpaid dividends with respect to any
shares of the Company's Capital Stock. The Company has no other capital stock
authorized, issued or outstanding.
(b) Except for the Company's Option Plans, the Company has never adopted or
maintained any stock option plan or other plan providing for equity
compensation of any person. The Company has reserved 86,000,000 shares of
Company Common Stock for issuance to employees and consultants pursuant to the
Option Plans of which options to purchase 18,639,114 shares of Company Capital
Stock have been issued as of the date hereof of which 10,003,812 shares remain
subject to options unexercised as of the date hereof. On June 13, 1998, the
Company's Board of Directors granted options to purchase 1,084,450 shares of
Class A Common Stock to the individuals indicated on Section 2.3(b) of the
Disclosure Schedule. Except as set forth on Section 2.3(b) of the Disclosure
Schedule, there is no outstanding Company Capital Stock which is subject to
vesting or Company Options. Section 2.3(b) of the Disclosure Schedule sets
forth the name of the holder of any Company Capital Stock subject to vesting,
the number of shares of Company Capital Stock subject to vesting and the
vesting schedule for such Company Capital Stock, including the extent vested
as of the most recent practicable date, and
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sets forth the name of the holder of any Company Options, the number of shares
of Company Capital Stock subject to such Company Option and the vesting
schedule for such Company Option, including the extent vested to date. There
are no options, warrants, calls, rights, commitments or agreements of any
character, written or oral, to which the Company or any Subsidiary is a party
or by which it is bound obligating the Company or any Subsidiary to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of the capital stock of the Company or
interests in any Subsidiary, as the case may be, or obligating the Company or
any Subsidiary to grant, extend, accelerate the vesting of, change the price
of, otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement which are not set forth on Schedule 2.3(b). There are
no outstanding or authorized stock appreciation, phantom stock, profit
participation, or other similar rights with respect to the Company or any
Subsidiary. Except as contemplated by this Agreement, to the Company's and
DEI's Knowledge, there are no voting trusts, proxies, or other agreements or
understandings with respect to the voting stock of the Company or any
Subsidiary. For purposes of this Agreement, "Knowledge" shall mean actual
knowledge of the person (which in the case of a corporation shall mean only
the executive officers or directors of such corporation and which, in the case
of the Company, shall be deemed to be each of the following persons: Thomas
Phillips, Patrick Naughton, Michael Slade, Curt Blake, and Barbara Thompson,
after reasonable investigation; provided, however, that Knowledge shall not
constitute a representation or warranty that such investigation has in fact
been made and, for such purposes, "reasonable investigation" shall mean
inquiry of or consultation with the directors and executive officers of the
respective party but no other independent investigation.
2.4 Authority. Each of the Company and DEI has all requisite power and
authority to enter into this Agreement and any Transaction Agreements (as
hereinafter defined) to which it is a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and any Transaction Agreements to which it is a party and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of the Company and DEI, and no
further action is required on the part of the Company or DEI to authorize the
Agreement, any Transaction Agreements to which it is a party and the
transactions contemplated hereby and thereby, subject only to the approval of
this Agreement by the Shareholders. DEI has granted and delivered to Parent
irrevocable proxies, and such proxies are sufficient to permit Parent to
approve the Company Merger and all other matters required to be approved by
the Company's Shareholders in connection herewith; provided, however, that
such proxies shall not limit DEI's ability to vote for directors of the
Company. This Agreement and the Merger have been approved unanimously by the
Board of Directors of the Company. This Agreement and any Transaction
Agreements to which the Company or DEI is a party have been duly executed and
delivered by the Company or DEI, as the case may be, and, assuming the due
authorization, execution and delivery by the other parties hereto and thereto,
constitute the valid and binding obligation of the Company and DEI, as the
case may be, enforceable in accordance with their respective terms, except as
such enforceability may be limited by principles of public policy and subject
to the laws of general application relating to bankruptcy, insolvency and the
relief of debtors and to rules of law governing specific performance,
injunctive relief or other equitable remedies. The "Transaction Agreements"
shall mean all of the agreements executed and delivered in connection with the
transactions contemplated hereby by Parent, the Company, DEI and certain
affiliates of the Company and DEI (as defined in Rule 12b-2 promulgated under
the Securities Exchange Act of 1934, as amended) (the "Affiliates") and dated
as of the date hereof, including, without limitation, the ABCNews/Starwave
Management and Services Agreement, the ESPN/Starwave Management and Services
Agreement, the Representation Agreement by and among ESPN/Starwave Partners,
Starwave Corporation and Parent and the Representation Agreement by and among
ABC/Starwave Partners, Starwave Corporation and Parent (such Representation
Agreements, the "Representation Agreements").
2.5 No Conflict. Except as set forth in Section 2.5 of the Disclosure
Schedule, the execution and delivery of this Agreement and any Transaction
Agreements to which the Company or DEI is a party by either the Company or
DEI, as the case may be, do not, and the performance and consummation of the
transactions contemplated hereby and thereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse
of time, or both), or give rise to a right of termination, cancellation,
modification or
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acceleration of any obligation or loss of any benefit under (any such event, a
"Conflict") (i) any provision of the Articles or Certificate of Incorporation
or Bylaws of the Company, or DEI, (ii) any material mortgage, indenture,
lease, contract or other agreement or instrument, permit, concession,
franchise or license to which the Company, any Subsidiary, or DEI or any of
their material properties or assets are subject, or (iii) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company,
any Subsidiary, or DEI or their respective material properties or assets.
2.6 Consents. Except as set forth in Section 2.6 of the Disclosure Schedule,
no consent, waiver, approval, order or authorization of, or registration,
declaration or filing with any Governmental Body is required by or with
respect to the Company any Subsidiary, or DEI in connection with the execution
and delivery of this Agreement and any Transaction Agreements to which the
Company, or DEI is a party or the consummation of the transactions
contemplated hereby and thereby, except for (i) such consents, waivers,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable securities laws thereby, (ii) the filing of
the Merger Agreement with the Secretary of State of the State of Washington,
(iii) any applicable filings required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (iv) the approval of the
Merger by the Company's Shareholders and (v) any other such filings or
approvals as may be required under Washington State Law. For purposes of this
Agreement, "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi- governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or entity and any court or
other tribunal).
2.7 Company Financial Statements and Controls.
(a) Section 2.7 of the Disclosure Schedule sets forth the Company's audited
consolidated balance sheet as of September 28, 1997 and the related audited
consolidated statements of income and cash flows for the nine-month periods
ended September 28, 1997 and the twelve-month period ended December 31, 1996
(the "Year-End Financials") and the Company's unaudited consolidated balance
sheets as of March 31, 1998, and the related unaudited consolidated statements
of income and cash flows for the six months ended March 31, 1998 (the "Interim
Financials"). Except as otherwise set forth in Section 2.7 of the Disclosure
Schedule, the Year-End Financials and the Interim Financials have been
prepared in accordance with GAAP applied on a basis consistent throughout the
periods indicated and are consistent with each other. The Year-End Financials
and Interim Financials present fairly the consolidated financial condition and
consolidated operating results of the Company and any consolidated
Subsidiaries as of the dates and during the periods indicated therein, subject
in the case of the Interim Financials, to normal year-end adjustments, which
will not be material in amount. The Company's unaudited consolidated balance
sheet as of March 31, 1998 included in the Interim Financials shall be
hereinafter referred to as the "Current Balance Sheet."
(b) The Company and each of its Subsidiaries maintains a system of internal
accounting controls sufficient to provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability.
2.8 No Undisclosed Liabilities. Except (i) as reflected in the Current
Balance Sheet, or (ii) with respect to any matter arising in the ordinary
course of business consistent with past practices since March 31, 1998, the
Company and its Subsidiaries have no liability, indebtedness, obligation, or
claim of any type, whether accrued, absolute, contingent, matured, unmatured
or other, which individually or in the aggregate are required to be reflected
or reserved against on the consolidated balance sheet of the Company and its
consolidated Subsidiaries in accordance with GAAP or that, individually or in
the aggregate, would have a Material Adverse Effect on the Company.
2.9 No Changes. Except as set forth in Section 2.9 of the Disclosure
Schedule or as contemplated by this Agreement or the Transaction Agreements,
since March 31, 1998 to the date of this Agreement, there has not been,
occurred or arisen:
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(a) amendments or changes to the Amended and Restated Articles of
Incorporation or Amended and Restated Bylaws of the Company, or to the
charter or other organizational documents of any Subsidiary;
(b) capital expenditure or commitment by the Company or any Subsidiary,
exceeding $100,000 individually or $500,000 in the aggregate;
(c) destruction of, damage to or loss of any material assets of the
Company or any Subsidiary (whether or not covered by insurance);
(d) change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by the Company or any
Subsidiary;
(e) revaluation exceeding $100,000 individually or $500,000 in the
aggregate by the Company or any Subsidiary of any of its assets;
(f) declaration, setting aside or payment of a dividend or other
distribution with respect to the Company's capital stock or any direct or
indirect redemption, purchase or other acquisition by the Company of its
capital stock;
(g) material increase in the salary, bonuses or other payment or
compensation payable or to become payable by the Company or any Subsidiary
to any of its officers, directors, employees or consultants, other than
routine increases in the ordinary course of business consistent with past
practices;
(h) sale, lease, license or other disposition of any of the assets or
properties with a value of $100,000 or more of the Company or any
Subsidiary or any creation of any security interest in such assets or
properties, in each case, other than in the ordinary course of business
consistent with past practices;
(i) loan by the Company or any Subsidiary to any person or entity, or the
incurring by the Company or any Subsidiary of any indebtedness (other than
trade payables or other ordinary course liabilities consistent with past
practices), guaranteeing by the Company or any Subsidiary of any
indebtedness (other than in the ordinary course of business), issuance or
sale of any debt securities of the Company or any Subsidiary or
guaranteeing of any debt securities of others;
(j) waiver or release of any right or claim with a value of $100,000 or
more individually or $500,000 or more in the aggregate of the Company or
any Subsidiary, including any write-off or other compromise of any account
receivable of the Company or any Subsidiary;
(k) issuance or sale, or contract to issue or sell, by the Company or any
of its Subsidiaries of any shares of its capital stock or other equity
interests or securities exchangeable, convertible or exercisable therefor,
or any securities, warrants, options or rights to purchase any of the
foregoing, except for options to purchase capital stock of the Company
granted to employees of the Company, which such issuance has been described
in Section 2.3(b) of the Disclosure Schedule;
(l) any event or condition of any character that has had a Material
Adverse Effect on the Company; or
(m) negotiation or agreement by the Company, any of its Subsidiaries or
any officer or employees thereof to do any of the things described in the
preceding clauses (a) through (l) (other than negotiations with Parent and
its representatives regarding the transactions contemplated by this
Agreement and the Transaction Agreements).
2.10 Tax Matters.
(a) Tax Definitions.
(i) "Tax" or, collectively, "Taxes", means (i) any and all federal,
state, local and foreign taxes, assessments and other governmental charges,
duties, impositions and liabilities, including taxes based upon or measured
by gross receipts, income, profits, sales, use and occupation, and value
added, ad valorem, transfer, franchise, withholding, payroll, recapture,
employment, excise and property taxes, together with all interest,
penalties and additions imposed with respect to such amounts; (ii) any
liability for the payment of any amounts of the type described in clause
(i) as a result of being or ceasing to be a member of an affiliated,
consolidated, combined or unitary group for any period (including, without
limitation, any liability under
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Treas. Reg. Section 1.1502-6 or any comparable provision of foreign, state
or local law); and (iii) any liability for the payment of any amounts of
the type described in clause (i) or (ii) as a result of any express or
implied obligation to indemnify any other person or as a result of any
obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a
predecessor entity.
(ii) "Cash Payment Agreements" means the Promotional Services Agreement,
the License Agreement and the Promissory Note.
(iii) "Final Determination" means a determination as defined in section
1313(a) of the Code or any other event which finally and conclusively
establishes the amount of any liability for Taxes.
(iv) "Management" means the Chairman of the Board of Directors, Chief
Executive Officer, President, Chief Operating Officer, Chief Financial
Officer, and any other officer of a corporation having a comparable level
of decision-making responsibility.
(v) "Other Property or Money" means other property or money within the
meaning of section 351(b) and/or section 356 of the Code.
(vi) "Post-Closing Tax Period" means any Tax period (or portion thereof)
ending after the Closing Date.
(vii) "Pre-Closing Tax Period" means any Tax period (or portion thereof)
ending on or before the Closing Date.
(viii) "Taxing Authority" means any federal, state, local, foreign or
other body that imposes any Tax.
(b) Tax Returns and Audits. Except as set forth in Section 2.10(b) of the
Disclosure Schedule:
(i) As of the Effective Time, Company and Company Subsidiaries will have
prepared and timely filed (or caused to be prepared and timely filed) all
material (as to the Company) required federal, state, local and foreign
returns, estimates, information statements and reports required to be filed
(required federal, state, local and foreign returns, estimates, information
statements and reports relating to any person are collectively referred to
hereinafter as "Returns") relating to any and all Taxes concerning or
attributable to the Company and Company Subsidiaries or their operations
and such Returns shall be true and correct in all material respects and
have been completed in all material respects in accordance with applicable
law. Notwithstanding the foregoing, no representation is hereby made
regarding the size or availability of the net operating losses of the
Company or its Subsidiaries.
(ii) As of the Effective Time, the Company and Company Subsidiaries (A)
will have paid (or caused to be paid) all material (as to the Company)
Taxes the Company or any of its Subsidiaries is required to pay and will
have withheld (or caused to be withheld) with respect to employees of the
Company and Company Subsidiaries all federal and state income taxes, FICA,
FUTA and other Taxes required to be withheld, and (B) will have accrued on
the Current Balance Sheet all Taxes attributable to the operations of the
Company and Company Subsidiaries for the periods covered by the Current
Balance Sheet and will not have incurred any liability for Taxes for the
period from the date of the Current Balance Sheet to the Effective Time
other than in the ordinary course of business.
(iii) There has been no delinquency in the payment of any Tax with
respect to the Company, its Subsidiaries or their operations, nor is there
any Tax deficiency outstanding, assessed or proposed with respect to the
operations of the Company or its Subsidiaries, nor has DEI, the Company, or
its Subsidiaries executed any waiver of any statute of limitations on or
extending the period for the assessment or collection of any Tax relating
to the Company or its Subsidiaries.
(iv) No audit or other examination of any Return relating to Taxes with
respect to the Company is presently in progress, nor has the Company been
notified in writing of any request for such an audit or other examination.
(v) The Company and its Subsidiaries have made available to Parent or its
legal counsel, copies of all foreign, federal and state income and all
state sales and use Returns for the Company filed for all periods since its
inception.
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(vi) There are (and there will be immediately following the Effective
Time) no liens, pledges, charges, claims, restrictions on transfer,
mortgages, security interests or other encumbrances of any sort
(collectively, "Liens") on the assets of the Company or its Subsidiaries
relating to or attributable to Taxes other than Liens for Taxes not yet due
and payable or delinquent.
(vii) None of the Company's or its Subsidiaries' assets are treated as
"tax-exempt use property", within the meaning of Section 168(h) of the
Code.
(viii) The Company has not filed any consent agreement under Section
341(f) of the Code or agreed to have Section 341(f)(4) of the Code apply to
any disposition of a subsection (f) asset (as defined in Section 341(f)(4)
of the Code) owned by the Company.
(ix) Neither the Company nor any of its Subsidiaries is a party to any
Tax sharing, Tax indemnification or Tax allocation agreement nor does the
Company owe any amount under any such agreement, other than this Agreement
and the Tax Sharing Agreement.
(x) The Company is not, and has not been at any time, a "United States
Real Property Holding Corporation" within the meaning of Section 897(c)(2)
of the Code.
(c) Compensation Taxes. There is no contract, agreement, plan or arrangement
to which Company is a party as of the date of this Agreement, including but
not limited to the provisions of this Agreement, covering any service provider
or former service provider to the Company or any Subsidiary, which as a result
of the Mergers, could give rise to the payment of any amount that would not be
deductible pursuant to Sections 280G, 404 or 162(m) of the Code.
2.11 Restrictions on Business Activities. Except as set forth in Section
2.11 of the Disclosure Schedule, there is no material agreement (noncompete or
otherwise), commitment, judgment, injunction, order or decree to which the
Company is a party or otherwise binding upon the Company or its Subsidiaries
which has the effect of prohibiting any material current business practice of
the Company or its Subsidiaries, any material acquisition of property
(tangible or intangible) by the Company or its Subsidiaries or the conduct of
material business by the Company or its Subsidiaries. Without limiting the
foregoing, neither the Company nor its Subsidiaries has entered into any
material agreement under which the Company or its Subsidiaries is materially
restricted from selling, licensing or otherwise distributing any of its
material technology or products to or providing services to, customers or
potential customers or any class of customers, in any material geographic
area, during any material period of time or in any material segment of the
market. After the date hereof, with respect to each agreement listed on
Section 2.11 of the Disclosure Schedule, each of DEI and the Company agrees to
use commercially reasonable efforts (including using reasonable efforts to
cause its officers, divisions and affiliates) to modify or amend such
agreements as reasonably requested by Parent (provided such efforts shall not
include any material expenditures) and as reasonably necessary to eliminate
any conflict with the proposed business of Holding Company.
2.12 Title of Properties; Absence of Liens and Encumbrances; Condition of
Equipment.
(a) Neither the Company nor its Subsidiaries own(s) any real property, and
has never owned any real property. Section 2.12(a) of the Disclosure Schedule
sets forth a list of all real property currently leased by the Company or any
of its Subsidiaries. All such current leases are in full force and effect in
accordance with their respective terms, and neither the Company nor its
Subsidiaries is in material default under any of such leases.
(b) Except as set forth in Section 2.12(b) of the Disclosure Schedule, the
Company and its Subsidiaries have good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of their
material tangible properties and assets, real, personal and mixed, used or
held for use in their business, free and clear of any Liens, except (i) as
reflected in the Current Balance Sheet, (ii) for Taxes not yet due and payable
or delinquent, and (iii) where such imperfections of title and encumbrances,
if any, which are not material in character, amount or extent, and which do
not materially detract from the value, or materially interfere with the
present use, of the property subject thereto or affected thereby.
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(c) The Company and its Subsidiaries have valid and enforceable rights, free
and clear of any Liens (except Liens for Taxes not yet due and payable or
delinquent), of all advertising, hosting and content customer files and other
advertising, hosting and content customer information relating to advertising,
hosting and content of the Company's and its Subsidiaries' current and former
customers as are material for the conduct of the Company's business as
currently conducted (the "Customer Information").
2.13 Intellectual Property.
(a) For the purposes of this Agreement, the following terms have the
following definitions:
"Intellectual Property" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States
and foreign patents and applications therefor and all reissues, divisions,
renewals, extensions, provisionals, continuations and continuations-in-part
thereof; (ii) all inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information, know
how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights, copyrights
registrations and applications therefor and all other rights corresponding
thereto throughout the world; (iv) all trade names, logos, common law
trademarks and service marks; trademark and service mark registrations and
applications therefor and all goodwill associated therewith throughout the
world; (v) all databases and data collections and all rights therein
throughout the world; and (vi) all computer software including all source
code, object code, firmware, development tools, files, records and data,
all media on which any of the foregoing is recorded, all Web addresses,
sites and domain names, all rights of publicity and privacy, and (vii) any
similar, corresponding or equivalent rights to any of the foregoing and (x)
all documentation related to any of the foregoing.
"Company Intellectual Property" shall mean any Intellectual Property that
is owned by or exclusively licensed to the Company.
"Registered Intellectual Property" shall mean all United States,
international and foreign: (i) patents, patent applications (including
provisional applications); (ii) registered trademarks, applications to
register trademarks, intent-to-use applications, or other registrations or
applications related to trademarks; (iii) registered copyrights and
applications for copyright registration; (iv) any mask work registrations
and applications to register mask works; and (v) any other Company
Intellectual Property that is the subject of an application, certificate,
filing, registration or other document issued by, filed with, or recorded
by, any state, government or other public legal authority.
(b) Section 2.13(b) of the Disclosure Schedule lists all Registered
Intellectual Property owned by, or filed in the name of, the Company (the
"Company Registered Intellectual Property") and lists any proceedings or
actions before any court, tribunal (including the United States Patent and
Trademark Office (the "PTO") or equivalent authority anywhere in the world)
related to any of the Company Registered Intellectual Property Rights.
(c) Except as set forth in Section 2.13(c) of the Disclosure Schedule, each
item of Company Intellectual Property, including all Company Registered
Intellectual Property listed in Section 2.13(b) of the Disclosure Schedule and
all Intellectual Property licensed to the Company or any of its Subsidiaries,
is free and clear of any Liens, except for Liens for Taxes not yet due and
payable or delinquent and Liens that do not materially interfere with the
Company's use of Intellectual Property. Except as set forth in Section 2.13(c)
of the Disclosure Schedule, the Company (i) is the exclusive owner or has
valid and enforceable rights to use of all trademarks and trade names used in
connection with the operation or conduct of the business of the Company or any
of its Subsidiaries as currently conducted, including the sale of any products
or technology or the provision of any services by the Company or any of its
Subsidiaries and (ii) is the exclusive owner of or has valid and enforceable
rights to use, all copyrighted works that are Company or its Subsidiaries'
products or other works of authorship used in connection with the operation or
conduct of the business of the Company or any of its Subsidiaries as currently
conducted, including the sale of any products or technology or the provision
of any services by the Company or any of its Subsidiaries.
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(d) Except as set forth in Section 2.13(d) of the Disclosure Schedule and
except for any transfer, grants or authorizations that do not have a Material
Adverse Effect, the Company has not transferred ownership of or granted any
license of or right to use or authorized the retention of any rights to use
any Intellectual Property that is or was Company Intellectual Property, to any
other person.
(e) Except as set forth in Section 2.13(e) of the Disclosure Schedule, the
Company Intellectual Property constitutes all of the material Intellectual
Property used in and necessary to the conduct of the Company's and its
Subsidiaries' businesses as currently conducted by the Company and its
Subsidiaries, including, without limitation, the design, development,
distribution, manufacture, use, import, license and sale of the products,
technology and services of by the Company and its Subsidiaries (including
products, technology or services currently under development). Except as set
forth in Section 2.13(e) of the Disclosure Schedule, no person who has
licensed Intellectual Property to the Company or any of its Subsidiaries has
material ownership rights or license rights to improvements made by the
Company or any of its Subsidiaries in such Intellectual Property which has
been licensed to the Company or any of its Subsidiaries.
(f) Other than "shrink-wrap" and similar widely available commercial end-
user licenses, the contracts, licenses and agreements listed in Section
2.13(f) of the Disclosure Schedule include all material contracts, licenses
and agreements to which the Company or any of its Subsidiaries is a party with
respect to any Intellectual Property.
(g) Except as set forth in Section 2.13(g) of the Disclosure Statement, the
operation of the business of the Company and its Subsidiaries as it currently
is conducted by the Company and its Subsidiaries (including but not limited to
the design, development, distribution, use, import, manufacture, license and
sale of the products, technology or services (including products, technology
or services currently under development) of the Company or any of its
Subsidiaries does not infringe or misappropriate the Intellectual Property of
any person, violate the rights of any person (including rights to privacy or
publicity), or constitute unfair competition or trade practices under the laws
of any jurisdiction, and neither the Company nor any of its Subsidiaries has
received notice from any person claiming that such operation or any act,
product, technology or service (including products, technology or services
currently under development) of the Company or any of its Subsidiaries
infringes or misappropriates the Intellectual Property of any person or that
the Company or any of its Subsidiaries has engaged in unfair competition or
trade practices under the laws of any jurisdiction (nor does the Company or
DEI have Knowledge of any basis therefor).
(h) All necessary registration, maintenance and renewal fees in connection
with Company Registered Intellectual Property have been paid and all necessary
documents and certificates in connection with Company Registered Intellectual
Property have been filed with the relevant patent, copyright, trademark or
other authorities in the United States or foreign jurisdictions, as the case
may be, for the purposes of maintaining such Registered Intellectual Property
when commercially reasonable.
(i) Except as set forth in Schedule 2.13(i) of the Disclosure Schedule,
there are no material contracts, licenses or agreements between the Company
and any other person with respect to Company Intellectual Property under which
there is any material dispute to the Knowledge of the Company or DEI regarding
the scope of such agreement, or performance under such agreement including
with respect to any payments to be made or received by the Company thereunder.
(j) Except as set forth in Schedule 2.13(j) of the Disclosure Schedule, the
Company has no currently pending claim against any person for infringing or
misappropriating any Company Intellectual Property.
(k) Except as set forth in Section 2.13(k) of the Disclosure Schedule, no
Company Intellectual Property or product, technology or service of the Company
or any of its Subsidiaries which is material to the conduct of the business of
the Company or any of its Subsidiaries as currently conducted is subject to
any proceeding or outstanding decree, order, judgment, agreement or
stipulation that restricts in any material manner the use, transfer or
licensing thereof by the Company or may affect the validity, use or
enforceability of such Company Intellectual Property.
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(l) No (i) product, technology, service or publication of the Company or any
of its Subsidiaries (ii) material published or distributed by the Company or
any of its Subsidiaries is obscene, defamatory, or constitutes false
advertising or otherwise violates any law or regulation.
2.14 Agreements, Contracts and Commitments.
(a) Except as set forth in Sections 2.11, 2.13(f), or 2.14(a) of the
Disclosure Schedule, as of the date hereof, neither the Company nor any of its
Subsidiaries is a party to or is bound by:
(i) any fidelity or surety bond or completion bond,
(ii) any lease of personal property having a value individually in excess
of $50,000 individually or $100,000 in the aggregate,
(iii) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $100,000
individually or $500,000 in the aggregate,
(iv) any agreement, contract or commitment relating to the disposition or
acquisition of assets or any interest in any business enterprise, in each
case with a value of more than $100,000 individually or $500,000 in the
aggregate and occurring outside the ordinary course of the Company's or any
of its Subsidiaries' business,
(v) any mortgages, indentures, loans or credit agreements, security
agreements, guarantees, or other agreements or instruments relating to the
borrowing of money or extension of credit (other than between the Company
and DEI),
(vi) any purchase order or contract for the purchase of materials
involving in excess of $50,000 individually or $100,000 in the aggregate,
(vii) any material distribution, joint marketing or development
agreement, or
(viii) any other agreement, contract or commitment that involves $100,000
or more and is not cancelable without penalty within sixty (60) days.
(b) The Company and each of its Subsidiaries is in compliance in all
material respects with and has not, in any material respect, breached,
violated or defaulted under, or received notice that it has breached, violated
or defaulted in such manner under, any of the terms or conditions of any
agreement, contract, covenant, instrument, lease, license or commitment
required to be listed on Section 2.11, 2.13, or 2.14(a) of the Disclosure
Schedule (collectively a "Contract"), nor does the Company or DEI have
Knowledge of any event that would constitute such a breach, violation or
default with the lapse of time, giving of notice or both. Each Contract is in
full force and effect and, to the Knowledge of the Company and DEI, is not
subject to any material default thereunder by any party obligated to the
Company or its Subsidiaries pursuant thereto. The Company and each of its
Subsidiaries has obtained, or will obtain prior to the Closing Date, all
necessary consents, waivers and approvals of parties to any Contract as are
required thereunder in connection with the Mergers or for such Contracts to
remain in effect without material modification after the Closing. Following
the Effective Time, each of the Company and its Subsidiaries will be permitted
to exercise all of their respective rights under each Contract then in effect
without the payment of any additional amounts or consideration other than
ongoing fees, royalties or payments which the Company or its Subsidiaries
would otherwise be required to pay had the transactions contemplated by this
Agreement not occurred.
2.15 Interested Party Transactions. To DEI's and the Company's Knowledge, no
officer or director of the Company has directly or indirectly, (i) an interest
in any entity which furnishes or sells, services, products or technology that
are the same as any products, services, or technologies that the Company or
any of its Subsidiaries furnishes or sells and that constitute a material part
of the Company's or its Subsidiaries' business, or (ii) any interest in any
entity that purchases from or sells or furnishes to the Company or any of its
Subsidiaries any goods or services that are material in nature to the
Company's or its Subsidiaries' business or (iii) a beneficial interest in any
Contract; provided, that ownership of no more than five percent (5%) of the
outstanding voting stock of a corporation shall not be deemed an "interest in
any entity" for purposes of this Section 2.15.
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2.16 Governmental Authorization. Section 2.16 of the Disclosure Schedule
accurately lists each material consent, license, permit, grant or other
authorization issued to the Company and each of its Subsidiaries by a
Governmental Body (i) pursuant to which the Company or any of its Subsidiaries
currently operates or holds any interest in any of their properties or (ii)
which is required for the operation of its business or the holding of any such
interest, in each case the absence of which would have a Material Adverse
Effect (herein collectively called "Company Authorizations"). The Company
Authorizations are in full force and effect and constitute all Company
Authorizations required to permit the Company and its Subsidiaries to operate
or conduct its business or hold any interest in its properties or assets, in
each case except to the extent that would not result in a Material Adverse
Effect on the Company.
2.17 Litigation. Except as set forth in Section 2.17 of the Disclosure
Schedule, there is no action, suit or proceeding of any nature pending, or, to
the Company's or DEI's Knowledge, threatened, against the Company or any of
its Subsidiaries, their properties or any of their officers or directors, nor,
to the Knowledge of the Company or DEI, is there any reasonable basis
therefor. To the Company's and DEI's Knowledge, there is no investigation
pending or threatened against the Company or any of its Subsidiaries, their
properties or any of their officers or directors (nor, to the Knowledge of the
Company and DEI, is there any reasonable basis therefor) by or before any
Governmental Body.
2.18 Minute Books. The minutes of the Company made available to counsel for
Parent are the only minutes of the Company.
2.19 Environmental Matters.
(a) Hazardous Material. Each of the Company and its Subsidiaries has not:
(i) operated any underground storage tanks at any property that the Company
has at any time owned, operated, occupied or leased; or (ii) illegally
released any material amount of any substance that has been designated by any
Governmental Body or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, petroleum, and
urea-formaldehyde and all substances listed as hazardous substances pursuant
to the Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended, or defined as a hazardous waste pursuant to the United
States Resource Conservation and Recovery Act of 1976, as amended, and the
regulations promulgated pursuant to said laws (a "Hazardous Material"), but
excluding office and janitorial supplies used in the ordinary course of
business. No Hazardous Materials are present as a result of the deliberate
actions of the Company or any of its Subsidiaries in, on or under any
property, including the land and the improvements, ground water and surface
water thereof, that the Company has at any time owned, operated, occupied or
leased.
(b) Hazardous Materials Activities. The Company has not illegally
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials (excluding office and janitorial
supplies used in the ordinary course of business) in violation of any law in
effect on or before the Effective Time, nor has the Company or any of its
Subsidiaries illegally disposed of, transported, sold, or manufactured any
product containing a Hazardous Material (excluding office and janitorial
supplies used in the ordinary course of business) (any or all of the foregoing
being collectively referred to as "Hazardous Materials Activities").
(c) Permits. Each of the Company and its Subsidiaries currently holds all
material environmental approvals, permits, licenses, clearances and consents
(the "Environmental Permits") necessary for the conduct of the Company's
Hazardous Material Activities, respectively, and other businesses of the
Company and its Subsidiaries as such activities and businesses are currently
being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation proceeding,
amendment procedure, writ, injunction or claim is pending, or to the Company's
or DEI's Knowledge, threatened concerning any Environmental Permit, Hazardous
Material or any Hazardous Materials Activity of the Company or its
Subsidiaries. Neither the Company nor DEI has Knowledge of any fact or
circumstance which would reasonably
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be expected to involve the Company or any of its Subsidiaries in any
environmental litigation or impose upon the Company or any of its Subsidiaries
any environmental liability.
2.20 Brokers' and Finders' Fees; Third Party Expenses. The Company has not
incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with the Agreement or any transaction contemplated hereby.
2.21 Employee Benefit Plans; Compensation; Labor Matters.
(a) For purposes of this Section 2.21, the following terms shall have the
meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under common
control with the Company within the meaning of Section 414(b), (c), (m) or
(o) of the Code and the regulations thereunder, provided that DEI and its
Affiliates, other than the Company and its subsidiaries, shall not be
deemed an Affiliate of the Company for these purposes.
(ii) "Employee Plan" shall refer to any plan, program, policy, contract,
or agreement or other arrangement providing for bonuses, severance or
retention payments or benefits, termination pay, deferred compensation,
pensions, profit sharing, performance awards, stock or stock- related
awards, or fringe benefits, or other employee benefits of any kind, written
or otherwise, funded or unfunded, including without limitation, any plan
which is or has been maintained, contributed to, or required to be
contributed to, by the Company or any Affiliate for the benefit of any
"Employee" (as defined below), and pursuant to which the Company or any
Affiliate has or may have any material liability, contingent or otherwise;
and
(iii) "Employee" shall mean any current, former, or retired employee,
consultant, officer, or director of the Company or any of its Subsidiaries.
(iv) "Employee Agreement" shall refer to each employment, severance or
retention agreement or contract between the Company or any Affiliate and
any Employee;
(b) Schedule. Section 2.21(b) of the Disclosure Schedule contains an
accurate and complete list of each Employee Plan and each Employee Agreement.
The Company does not have any plan or commitment, whether legally binding or
not, to establish any new Employee Plan or Employee Agreement, to modify any
Employee Plan or Employee Agreement (except to the extent required by law or
to conform any such Employee Plan or Employee Agreement to the requirements of
any applicable law, or as required by this Agreement), or to enter into any
Employee Plan or Employee Agreement, nor does it have any intention or
commitment to do any of the foregoing.
(c) Documents. The Company has provided access to Parent to correct and
complete copies of each Employee Plan and each Employee Agreement including
all amendments thereto.
(d) Employee Plan/Employee Agreement Compliance. Except as set forth in
Section 2.21(d) of the Disclosure Schedules, (i) the Company has performed in
all material respects all obligations required to be performed by it under
each Employee Plan and Employee Agreement and each Employee Plan has been
established and maintained in material conformity with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
including ERISA and the Code; (ii) each Employee Plan intended to qualify
under Section 401(a) of the Code and each trust intended to qualify under
Section 501(a) of the Code has either received a favorable determination
letter with respect to each such Plan from the IRS or has remaining a period
of time under applicable Treasury regulations or IRS pronouncements in which
to apply for such a determination letter and make any amendments necessary to
obtain a favorable determination; (iii) there are no actions, suits or claims
pending, or, to the Knowledge of the Company or its Affiliates threatened or
anticipated (other than routine claims for benefits) against any Employee Plan
or against the assets of any Employee Plan; and (iv) there are no inquiries or
proceedings pending or, to the Knowledge of the Company or its Affiliates,
threatened by the IRS or DOL with respect to any Employee Plan.
(e) Pension Plans. The Company or any of its Affiliates does not now, nor
have they ever, maintained, established, sponsored, participated in, or
contributed to, any Employee Plan which is subject to Part 3 of Subtitle B of
Title I of ERISA, Title IV of ERISA or Section 412 of the Code.
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(f) Multi-Employer Plans. At no time has the Company or any of its
Affiliates contributed to or been requested to contribute to any Employee Plan
that is a "multi-employer plan" as defined in Section 3(37) of ERISA.
(g) No Post-Employment Obligations. No Employee Plan provides, or has any
liability to provide, life insurance, medical or other employee benefits to
any Employee upon his or her retirement or termination of employment for any
reason, except as may be required by statute, and except as may otherwise be
provided under any agreement listed on Section 2.21(b) of the Disclosure
Schedule, the Company has not represented, promised or contracted (whether in
oral or written form) to any Employee (either individually or to Employees as
a group) that such Employee(s) would be provided with life insurance, medical
or other employee welfare benefits upon their retirement or termination of
employment, except to the extent required by statute.
(h) Effect of Transaction. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an
event under any Employee Plan, Employee Agreement, trust or loan that will or
may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, stock option or restricted stock
vesting acceleration, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
(i) Employment Matters. Except as set forth in Section 2.22(i) of the
Disclosure Schedule, the Company (i) is in compliance in all material respects
with all material applicable laws, rules and regulations respecting
employment, employment practices, terms and conditions of employment and wages
and hours, in each case, with respect to Employees; (ii) has withheld all
amounts required by law or by agreement to be withheld from the wages,
salaries and other payments to Employees; (iii) is not liable for any arrears
of wages or any taxes or any penalty for failure to comply with any of the
foregoing; and (iv) is not liable for any payment to any trust or other fund
or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice).
(j) Labor. No work stoppage or labor strike against the Company or any of
its Subsidiaries is pending, or to the Knowledge of the Company or DEI,
threatened. Neither the Company nor any of its Subsidiaries is involved in or,
to the Company's or DEI's Knowledge threatened with any labor dispute,
grievance, or litigation relating to labor, safety or discrimination matters
involving any Employee, including, without limitation, charges of unfair labor
practices or discrimination complaints, which, if adversely determined, would,
individually or in the aggregate, result in any material liability to the
Company, any of its Subsidiaries, Parent or Sub. Neither the Company nor any
of its Subsidiaries has engaged in any unfair labor practices which could,
individually or in the aggregate, directly or indirectly result in any
material liability to the Company, any of its Subsidiaries, Parent, Sub or any
Affiliate. Neither the Company nor any of its Subsidiaries is presently a
party to, or bound by, any collective bargaining agreement or union contract
with respect to Employees and no collective bargaining agreement is being
negotiated by the Company or any of its Subsidiaries.
2.22 Insurance. As of the date hereof, the Company is insured against such
losses and risks and in such amounts as are customary in the business in which
it is engaged and the policies providing such insurance are in full force and
effect.
2.23 Compliance with Laws. The Company and each of its Subsidiaries has
complied in all material respects with, is not in material violation of, and
has not received any notices of material violation with respect to, any
material foreign, federal, state or local statute, law or regulation.
2.24 Warranties; Indemnities. Except for the warranties and indemnities
contained in (i) those contracts and agreements set forth in Section 2.13, and
2.14 of the Disclosure Schedule and (ii) the Company's "shrink wrap"
commercial end-user license agreements, neither the Company nor any Subsidiary
has given any warranties or indemnities relating to products or technology
sold or licensed or services rendered by the Company or any Subsidiary.
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2.25 Ownership of Parent Stock. None of DEI, its affiliates, Company or any
of their Subsidiaries or Affiliates beneficially owns as of the date hereof
any shares of Parent Capital Stock (other than immaterial amounts through
employee benefit plans of DEI or the Company over which neither DEI nor the
Company exercises any voting power).
2.26 Claims for Losses. DEI has no outstanding claims for Losses (as defined
in the Stock Purchase Agreement as such term is defined in Section 7.2 of this
Agreement) nor does it have any other action, suit or proceeding of any nature
pending, or to DEI's Knowledge, threatened against Company, their properties
or any of their officers or directors.
2.27 Capital Summary Statements. Schedule 2.27 of the Company Disclosure
Schedule sets forth the unaudited Capital Summary Statement of each holder of
a Partnership Interest (as such term is defined in each of the ABC
News/Starwave and ESPN/Starwave Partnership Agreements dated as of March 28,
1997 (the "Partnership Agreements") as of May 31, 1998 (the "Capital Summary
Statement")). (The partnerships formed under such Partnership Agreements are
referred to herein as the "Partnerships".) The Capital Summary Statement
presents accurately the allocation of profits and loss among the capital
accounts of the Partnership Interest holders since inception and is correct in
all material respects. The Capital Summary Statement reflects an allocation of
losses of 60% to the Company and 40% to the other partner, in each case. Also
such allocations of profit and loss have been properly made in accordance with
the Partnership Agreements.
ARTICLE III
Representations and Warranties of Parent
Parent represents and warrants to the Company and DEI, subject to such
exceptions as are specifically disclosed in the Disclosure Schedule supplied
by Parent to DEI and the Company (the "Parent Disclosure Schedule"), as of the
date hereof as follows:
3.1 Organization, Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State
of California. Holding Company is, and the Merger Subsidiaries will be as of
the Effective Time, corporations duly organized, validly existing and in good
standing under the laws of their respective jurisdictions of incorporation.
Each of Parent and its Subsidiaries has the corporate power to own its
properties and to carry on its business as now being conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified would have a Material Adverse Effect on Parent.
Parent has delivered a true and correct copy of the Articles of Incorporation
and Bylaws of Parent, as amended to date, to counsel for the Company and DEI.
Each of the Subsidiaries as defined in Section 3.2 below of Parent is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation and has the corporate or other applicable power
to own its property and to carry on its business as now being conducted. Each
of the Subsidiaries is duly qualified to do business and is in good standing
each jurisdiction outside of the jurisdiction of its formation of which the
failure to be so qualified would have a Material Adverse Effect. Parent has
made available the true and correct copy of the charter and by laws or other
organizational document of each of its Subsidiaries, each as amended to date,
to the Company.
3.2 Parent Subsidiaries. Except as set forth in Section 3.2 of Parent
Disclosure Schedule, Parent does not have, and has never had, any
subsidiaries, in each case that would be required to be listed as a
"Subsidiary" in exhibits to the periodic reports of Parent under the Exchange
Act. The entities set forth in Section 3.2 of Parent Disclosure Schedule are
hereinafter occasionally referred to individually as a "Parent Subsidiary"
and, collectively as the "Parent Subsidiaries." Section 3.2 of Parent
Disclosure Schedule also sets forth the form and percentage interest of Parent
in the Parent Subsidiaries and, to the extent that a Parent Subsidiary set
forth thereon is not wholly owned by Parent, lists the other person or
persons, or entity or entities, who have an interest in such Parent Subsidiary
and the percentage of such interest.
3.3 Authority; No Conflict; Consents. Each of Parent and Parent Subsidiaries
has all requisite corporate power and authority to enter into this Agreement
and the Transaction Agreements to which it is a party and to
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consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Transaction Agreements and the consummation
of the transactions contemplated hereby and thereby have been duly authorized
by all necessary corporate action on the part of Parent and Parent
Subsidiaries, and no further action is required on the part of Parent or
Parent Subsidiaries to authorize the Agreement, any Transaction Agreements to
which it is a party and the transactions contemplated hereby and thereby,
subject only to the approval of this Agreement by Parent's shareholders. This
Agreement, the Transaction Agreements and the Merger have been approved by the
Board of Directors of Parent. This Agreement and the Transaction Agreements to
which Parent or Parent Subsidiaries is a party have been duly executed and
delivered by Parent or Parent Subsidiaries, as the case may be, and, assuming
the due authorization, execution and delivery by the other parties hereto and
thereto, constitute the valid and binding obligations of Parent and Parent
Subsidiaries, enforceable in accordance with their respective terms, except as
such enforceability may be limited by principles of public policy and subject
to the laws of general application relating to bankruptcy, insolvency and the
relief of debtors and to rules of law governing specific performance,
injunctive relief or other equitable remedies. The execution and delivery by
each of Parent and Parent Subsidiaries, as the case may be, of this Agreement
and the Transaction Agreements do not, and the performance and consummation of
the transactions contemplated hereby and thereby will not, result in any
Conflict with (i) any provision of the Articles or Certificate of
Incorporation, Bylaws or other organizational documents of Parent or Parent
Subsidiary, (ii) any material mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise or license to which
Parent or any Parent Subsidiary, or any of their properties or assets, are
subject, or (iii) any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Parent or any Parent Subsidiary or their
respective properties or assets. No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with any Governmental
Body is required by or with respect to Parent or any Parent Subsidiaries in
connection with the execution and delivery of this Agreement and any
Transaction Agreements to which Parent or Parent Subsidiaries are a party or
the consummation of the transactions contemplated hereby and thereby, except
for (i) the filing of the Articles of Merger for the Company Merger with the
Secretary of State of the State of Washington and the Agreement of Merger, for
the Parent Merger with the Secretary of State of the State of California, (ii)
such consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws, (iii) any applicable filings required under the HSR Act, (iv)
the approval of the Merger by Parent's shareholders and (v) any other such
filings or approvals as may be required under Washington Law.
3.4 Parent Capital Structure. The authorized capital stock of Parent
consists of 50,000,000 shares of Common Stock, no par value, of which
31,414,015 shares were issued and outstanding as of June 12, 1998, and
5,000,000 shares of undesignated Preferred Stock, no par value, of which no
shares are issued or outstanding. All such shares of Parent have been duly
authorized, and all such issued and outstanding shares have been validly
issued, are fully paid and nonassessable and not subject to preemptive rights
created by statute, the Articles or Certificate of Incorporation or Bylaws of
Parent or any agreement to which Parent is a party or by which it is bound,
and have been issued in compliance with federal and state securities laws.
There are no declared or accrued unpaid dividends with respect to any shares
of Parent's capital stock. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or other similar rights
with respect to Parent or Parent Subsidiaries. Except as contemplated by this
Agreement, to Parent's Knowledge, there are no voting trusts, proxies or other
agreements or understandings with respect to the voting stock of Parent or
Parent Subsidiaries.
3.5 SEC Documents; Parent Financial Statements. Parent has furnished the
Company with a true and complete copy of all of its filings with the
Securities and Exchange Commission (the "SEC") since January 1, 1997 (the "SEC
Documents"). Each of the SEC Documents when filed, was true and correct and
did not omit to state any material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading in each case, except as superseded
in any subsequent filings. The SEC Documents contain an audited consolidated
balance sheet of Parent as of December 31, 1997 and the related audited
consolidated statements of income and cash flow for the year then ended and
Parent's unaudited consolidated balance sheet as of March 31, 1998 filed as an
exhibit to Parent's Current Report
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on Form 8-K, dated as of May 22, 1998 (the "Parent Balance Sheet"), and the
related unaudited consolidated statements of income and cash flow for the
three-month period then ended (collectively, the "Parent Financials"). The
Parent Financials have been prepared in accordance with GAAP applied on a
basis consistent throughout the periods indicated and are consistent with each
other. The Parent Financials present fairly the consolidated financial
condition and consolidated operating results and cash flows of the Parent as
of the dates and during the periods indicated therein, subject, in the case of
unaudited statements, to normal year-end adjustments, which will not be
material in amount. The Parent and each of its Parent Subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain asset
accountability.
3.6 No Undisclosed Liabilities. Except (i) as reflected in the Parent
Balance Sheet, (ii) as set forth on Section 3.6 to the Parent Disclosure
Schedules, or (iii) with respect to any matter arising in the ordinary course
of business consistent with past practices since March 31, 1998, Parent and
Parent Subsidiaries have no liability, indebtedness, obligation, expense,
claim, deficiency, guarantee or endorsement of any type, whether accrued,
absolute, contingent, matured, unmatured or other, which individually or in
the aggregate are required to be reflected or reserved against on the
consolidated balance sheet of Parent and Parent Subsidiaries in accordance
with GAAP, or that, individually or in the aggregate, would have a Material
Adverse Effect. In addition, since March 31, 1998, there has not been any
declaration, setting aside or payment of a dividend or other distribution with
respect to Parent's capital stock or any material change in accounting methods
practices by Parent or any Parent Subsidiary.
3.7 No Material Adverse Effect. Since the date of the Parent Balance Sheet,
there has not occurred any event or condition of any character that has had a
Material Adverse Effect on Parent.
3.8 Brokers' and Finders' Fees. Except for those fees payable to Merrill
Lynch & Co. as financial advisor to Parent, neither Parent nor Parent
Subsidiary has incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
3.9 Litigation. Except as set forth on Section 3.9 of the Parent Disclosure
Schedule, there is no action, suit or proceeding of any nature pending, or, to
the Parent's Knowledge, threatened, against the Parent or any of Parent
Subsidiaries, their properties or any of their officers or directors, nor, to
the Knowledge of the Parent, is there any reasonable basis therefor. To the
Parent's Knowledge, there is no investigation pending or threatened against
Parent or any of its Subsidiaries, their properties or any of their officers
or directors (nor, to the Knowledge of the Parent, is there any reasonable
basis therefor) by or before any Governmental Body. No Governmental Body has
at any time challenged or questioned the legal right of Parent or any of
Parent's Subsidiaries to conduct its operations as presently or previously
conducted.
3.10 Taxes.
(a) Tax Returns and Audits.
(i) As of the Effective Time, Parent and Parent Subsidiaries will have
prepared and timely filed (or caused to be prepared and timely filed) all
material (as to Parent) required federal, state, local and foreign Returns,
relating to any and all Taxes concerning or attributable to the Parent and
Parent Subsidiaries or their operations and such Returns shall be true and
correct in all material respects and have been completed in all material
respects in accordance with applicable law. Notwithstanding the foregoing,
no representation is hereby made regarding the size or availability of the
net operating losses of Parent or the Parent Subsidiaries;
(ii) As of the Effective Time, Parent and Parent Subsidiaries (A) will
have paid (or caused to be paid) all material (as to Parent) Taxes that
Parent or any of Parent's Subsidiaries is required to pay and will have
withheld (or caused to be withheld) with respect to employees of the Parent
and Parent Subsidiaries all federal and state income taxes, FICA, FUTA and
other Taxes required to be withheld, and (B) will have
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accrued on the Parent Financials, all Taxes attributable to the operations
of the Parent and Parent Subsidiaries for the periods covered by the Parent
Financials and will not have incurred any liability for Taxes for the
period from the date of the Parent Balance Sheet to the Effective Time
other than in the ordinary course of business;
(iii) There has been no delinquency in the payment of any Tax with
respect to Parent, any Parent Subsidiaries, or their operations, nor is
there any Tax deficiency outstanding, assessed or proposed with respect to
the operations of Parent or the Parent Subsidiaries, nor has Parent or the
Parent Subsidiaries executed any waiver of any statute of limitations on or
extending the period for the assessment or collection of any Tax relating
to the Parent or Parent Subsidiaries;
(iv) No audit or other examination of any Return relating to Taxes with
respect to the Parent is presently in progress, nor has Parent been
notified in writing of any request for such an audit or other examination;
(v) There are (and there will be immediately following the Effective
Time) no Liens on the assets of the Parent or Parent Subsidiaries relating
to or attributable to Taxes other than Liens for Taxes not yet due and
payable or delinquent;
(vi) Neither Parent nor any of the Parent Subsidiaries is a party to any
Tax sharing, Tax indemnification or Tax allocation agreement nor does
Parent or any of the Parent Subsidiaries owe any amount under any such
agreement, other than this Agreement and the Tax Sharing Agreement;
(vii) Parent has not filed any consent agreement under Section 341(f) of
the Code or agreed to have Section 341(f)(4) of the Code apply to any
disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by Parent or a Parent Subsidiary.
(viii) Parent and its Subsidiaries have made available to Company or its
legal counsel, copies of all foreign, federal and state income and all
state sales and use Returns for Parent filed for all periods since its
inception.
(b) Compensation Taxes. There is no contract, agreement, plan or arrangement
to which Parent is a party as of the date of this Agreement, including but not
limited to the provisions of this Agreement, covering any service provider or
former service provider to the Parent or any Parent Subsidiary, which as a
result of the Mergers, could give rise to the payment of any amount that would
not be deductible pursuant to Sections 280G, 404 or 162(m) of the Code.
3.11 Employee Benefit Plans; Compensation.
(a) For purposes of this Section 3.11, the following terms shall have the
meanings set forth below:
(i) As used in this Section 3.11, "Affiliate" shall mean any other person
or entity under common control with Parent within the meaning of Section
414(b), (c), (m) or (o) of the Code and the regulations thereunder.
(ii) As used in this Section 3.11, "Employee Plan" shall refer to any
plan, program, policy, contract, agreement or other arrangement providing
for bonuses, severance or retention payments or benefits, termination pay,
deferred compensation, pensions, profit sharing, performance awards, stock
or stock-related awards or fringe benefits of any kind, written or
otherwise, funded or unfunded, including without limitation, any plan which
is or has been maintained, contributed to, or required to be contributed
to, by the Parent or any Affiliate for the benefit of any "Employee" (as
defined below), and pursuant to which the Parent or any Affiliate has or
may have any material liability, contingent or otherwise; and
(iii) As used in this Section 3.11, "Employee" shall mean any current,
former, or retired employee, consultant, officer, or director of Parent or
any Parent Subsidiary.
(iv) As used in this Section 3.11, "Employee Agreement" shall refer to
each employment, severance, retention, agreement or contract between the
Parent or any Affiliate and any Employee;
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(b) Employee Plan Compliance. (i) Parent has performed in all material
respects all obligations required to be performed by it under each Employee
Plan and Employee Agreement and each Employee Plan and Employee Agreement has
been established and maintained in material conformity with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
including ERISA and the Code; (ii) each Employee Plan intended to qualify
under Section 401(a) of the Code and each trust intended to qualify under
Section 501(a) of the Code has either received a favorable determination
letter with respect to each such Plan from the IRS or has remaining a period
of time under applicable Treasury regulations or IRS pronouncements in which
to apply for such a determination letter and make any amendments necessary to
obtain a favorable determination; (iii) there are no actions, suits or claims
pending, or, to the Knowledge of Parent or its Affiliates threatened or
anticipated (other than routine claims for benefits) against any Employee Plan
or against the assets of any Employee Plan; (iv) each Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to the Company, any of its
Subsidiaries, Parent, Parent Subsidiary or any Affiliate (other than ordinary
administration expenses typically incurred in a termination event); and (v)
there are no inquiries or proceedings pending or, to the Knowledge of the
Parent or its Affiliates, threatened by the IRS or DOL with respect to any
Employee Plan.
(c) Pension Plans. Parent or any of its Affiliates does not now, nor have
they ever, maintained, established, sponsored, participated in, or contributed
to, any Employee Plan which is subject to Part 3 of Subtitle B of Title I of
ERISA, Title IV of ERISA or Section 412 of the Code.
(d) Multi-Employer Plans. At no time has Parent or any of its Affiliates
contributed to or been requested to contribute to any Employer Plan that is a
"multi-employer plan" as defined in Section 3(37) of ERISA.
(e) No Post-Employment Obligations. No Employee Plan provides, or has any
liability to provide, life insurance, medical or other employee benefits to
any Employee upon his or her retirement or termination of employment for any
reason, except as may be required by statute, and has not represented,
promised or contracted (whether in oral or written form) to any Employee
(either individually or to Employees as a group) that such Employee(s) would
be provided with life insurance, medical or other employee welfare benefits
upon their retirement or termination of employment, except to the extent
required by statute.
(f) Effect of Transaction. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an
event under any Employee Plan, Employee Agreement, trust or loan that will or
may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, stock option or restricted stock
vesting acceleration, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
(g) Employment Matters. Parent (i) is in compliance in all material respects
with all material applicable laws, rules and regulations respecting
employment, employment practices, terms and conditions of employment and wages
and hours, in each case, with respect to Employees; (ii) has withheld all
amounts required by law or by agreement to be withheld from the wages,
salaries and other payments to Employees; (iii) is not liable for any arrears
of wages or any taxes or any penalty for failure to comply with any of the
foregoing; (iv) is not liable for any payment to any trust or other fund or to
any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees.
(h) Labor. No work stoppage or labor strike against Parent or Parent
Subsidiaries is pending, or to the Knowledge of the Parent, threatened. Parent
Subsidiaries is not involved in, or to its Knowledge threatened with any labor
dispute, grievance, or litigation relating to labor, safety or discrimination
matters involving any Employee, including, without limitation, charges of
unfair labor practices or discrimination complaints, which, if adversely
determined, would, individually or in the aggregate, result in any material
liability to the Parent or Parent Subsidiaries. Parent has not engaged in any
unfair labor practices which could, individually or in the aggregate, directly
or indirectly result in any material liability to the Parent, Parent
Subsidiaries or any Affiliate. None of Parent or any Parent Subsidiaries is
presently a party to, or bound by, any collective bargaining
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agreement or union contract with respect to Employees and no collective
bargaining agreement is being negotiated by Parent.
3.12 Compliance with Laws. Parent and Parent Subsidiaries have complied in
all material respects with, are not in violation of, and have not received any
notices of violation with respect to, any material foreign, federal, state or
local statute, law or regulation.
3.13 Agreements, Contract, Commitments. Parent and each Parent Subsidiary is
in compliance in all material respects with and has not, in any material
respects, breached, violated or defaulted under or received notice that it has
breached, violated or defaulted in such manner under, any of the terms or
conditions of any agreement, contract, covenant, instrument, lease, license or
commitment that is included in any Securities Act or Exchange Act filing as a
"Material Contract" (collectively "Parent Contracts"), nor does Parent have
Knowledge of any event that would cause such a breach, violation or default
with the lapse of time, giving of notice or both. Each Parent Contract is in
full force and effect and, to the Knowledge of Parent, is not subject to any
material default thereunder by any party obligated to Parent or Parent
Subsidiaries pursuant thereto. Parent and each Parent Subsidiary has obtained,
or will obtain prior to Closing Date, all necessary consents, waivers and
approvals of parties to any Parent Contract as are required thereunder in
connection with the Mergers or for such Contracts to remain in effect without
material modification after the Effective Time.
3.14 Intellectual Property.
(a) For purposes of this Agreement, the following terms have the following
definitions:
"Parent Intellectual Property" shall mean any Intellectual Property owned
by or exclusively licensed to Parent (including, without limitation, Patent
Number 5,751,956 ("Method and Apparatus for Redirection of Server External
Hyper-Link References") (the "Click-On Patent").
(b) Section 3.14(b) of the Parent Disclosure Schedule lists any proceedings
or actions before any court, tribunal (including the PTO or equivalent
authority anywhere in the world) related to any of the Registered Intellectual
Property of Parent.
(c) Except as set forth in Section 3.14(c) of the Parent Disclosure
Schedule, each item of Parent Intellectual Property, and all Intellectual
Property licensed to Parent or any of its Subsidiaries, is free and clear of
any Liens, except for Liens for Taxes not yet due and payable or delinquent
and Liens that do not materially interfere with the Parent's use of
Intellectual Property. Except as set forth in Section 3.14(c) of the Parent
Disclosure Schedule, Parent (i) is the exclusive owner or has valid and
enforceable rights to use all trademarks and trade names used in connection
with the operation or conduct of the business of Parent or any of the Parent
Subsidiaries as currently conducted, including the sale of any products or
technology or the provisions of any services by Parent or any of the Parent
Subsidiaries and (ii) is the exclusive owner of or has valid and enforceable
rights to use all copyrighted works that are Parent or the Parent Subsidiaries
products or any works of authorship used in connection with the operation or
conduct of the business of the Parent or any of the Parent Subsidiaries as
currently conducted, including the sale of any products or technology or the
provision of any services by the Parent or any of the Parent Subsidiaries.
(d) Except as set forth in Section 3.14(d) of the Parent Disclosure Schedule
and except for any transfers, grants or authorizations that do not have
Material Adverse Effect, Parent has not transferred ownership of or granted
any license of or the right to use or authorized the retention of any rights
to use any Intellectual Property that is or was Parent Intellectual Property,
to any other person.
(e) Parent has valid and enforceable rights in all of the material
Intellectual Property used in and necessary to the conduct of Parent's and its
Subsidiaries' businesses as currently conducted by Parent and its
Subsidiaries. No person who has licensed Intellectual Property to Parent or
any of its Subsidiaries has material ownership rights or license rights to
improvements made by Parent or any of its Subsidiaries in such Intellectual
Property which has been licensed to Parent or any of its Subsidiaries.
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(f) Except as set forth in Section 3.14(f) of the Parent Disclosure
Schedule, the operation of the business of Parent and Parent Subsidiaries as
it currently is conducted does not infringe or misappropriate the Intellectual
Property of any person, violate the rights of any person (including rights to
privacy or publicity), or constitute unfair competition or trade practices
under the law of any jurisdiction, and neither Parent nor any of Parent
Subsidiaries has received notice from any person claiming that such operation
or any act, product, technology or service (including products, technology
services currently under development) of Parent or any of Parent Subsidiaries
infringes or misappropriate the Intellectual Property of any person or that
the Parent or any of its Subsidiaries has engaged in unfair competition or
trade practices under the laws of any jurisdiction (nor does Parent have
Knowledge of any basis therefor).
(g) To Parent's Knowledge, there is no prior art that would compromise the
validity of the Click-On Patent under any subsection of 35 U.S.C. Section 102.
Parent has no Knowledge of any public knowledge or use anywhere, by anyone, of
the subject matter disclosed in the Click-On Patent before the invention date.
Parent has no Knowledge of the subject matter disclosed in the Click-On Patent
having been patented or described anywhere in a printed publication by anyone
before the invention date. Parent has no Knowledge of the subject matter
disclosed in the Click-On Patent having been in public use or on sale
anywhere, by anyone, before February 22, 1995.
(h) All necessary registration, maintenance and renewal fees in connection
with Registered Intellectual Property of Parent have been paid and all
necessary documents and certificates in connection with Parent Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign jurisdictions,
as the case may be, for the purposes of maintaining such Registered
Intellectual Property when commercially reasonable.
(i) There are no material contracts, licenses or agreements between Parent
and any other person with respect to Parent Intellectual Property under which
there is any material dispute to the Knowledge of Parent regarding the scope
of such agreement, or performance under such agreement including with respect
to any payments to be made or received by Parent thereunder.
(j) Parent has no currently pending claim against any person for infringing
or misappropriating any Parent Intellectual Property.
(k) No Parent Intellectual Property or product, technology or service of
Parent or any of its Subsidiaries which is material to the conduct of the
business of Parent or any of its Subsidiaries as currently conducted is
subject to any proceeding or outstanding decree, order, judgment, agreement or
stipulation that restricts in any material manner the use, transfer or
licensing thereof by Parent or may affect the validity, use or enforceability
of such Parent Intellectual Property.
3.15 Real Property. Neither Parent nor any Parent Subsidiary owns any real
property nor has it ever owned any real property.
3.16 Interested Party Transactions. To Parent's Knowledge, no executive
officer or director of Parent is a party to any transactions required to be
disclosed under Item 404 of Regulation S-K of the Securities Act that have not
been disclosed in the SEC Documents.
3.17 Restrictions on Business Activities. Except as set forth in the Parent
Disclosure Schedule, there is no material agreement (noncompete or otherwise),
commitment, judgment, injunction, order or decree to which Parent is a party
or otherwise binding upon Parent or its Subsidiaries which has the effect of
materially prohibiting any material current business practice of Parent or its
Subsidiaries, any material acquisition of property (tangible or intangible) by
Parent or its Subsidiaries or the conduct of material business by Parent or
its Subsidiaries. Without limiting the foregoing, neither Parent nor its
Subsidiaries has entered into any material agreement under which Parent or its
Subsidiaries is materially restricted from selling, licensing or otherwise
distributing any of its material technology or products to or providing
services to, customers or potential
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customers or any class of customers, in any material geographic area, during
any material period of time or in any material segment of the market.
ARTICLE IV
Conduct Prior to the Effective Time
4.1 Conduct of the Parties.
(a) Conduct of Business of the Company and its Subsidiaries. Except as
otherwise contemplated by this Agreement, the Transaction Agreements and the
other agreements by and between Parent and DEI or their Affiliates of even
date herewith and the several transactions contemplated hereby and thereby,
during the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, each of
the Company and DEI agrees (except to the extent that Parent shall otherwise
have previously consented in writing), to carry on the Company's and its
Subsidiaries' respective businesses in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted, to pay the debts and
Taxes of the Company and its Subsidiaries when due (unless such debts and
Taxes are the subject of a dispute that the Company is actively seeking to
resolve), to pay or perform other obligations when due (unless such
obligations are the subject of a dispute that the Company is actively seeking
to resolve), and, to the extent consistent with such businesses, use their
reasonable efforts consistent with past practice and policies to preserve
intact the Company's and its Subsidiaries' present business organizations,
keep available the services of the Company's and its Subsidiaries' present
officers and key employees and preserve the Company's and its Subsidiaries'
relationships with customers, suppliers, distributors, licensors, licensees,
and others having business dealings with it, all with the goal of preserving
the Company's and its Subsidiaries' goodwill and ongoing businesses at the
Effective Time; provided, however, that neither the Company nor DEI shall be
deemed in breach of this Section 4.1 because of attrition, if any, among the
Company employees which may occur as a result of the transactions contemplated
hereby, so long as each of the Company and DEI use all reasonable efforts to
retain such employees at the Company. Except as expressly contemplated by this
Agreement or as set forth in Section 4.1 of the Disclosure Schedule, neither
the Company nor any Subsidiary shall, without the prior written consent of
Parent pursuant to a request made in accordance with the notice provisions set
forth in Section 9.1 of this Agreement (which written consent will be granted
or denied within seventy two (72) hours of receipt of such notice by Parent,
provided that any failure to reply within such time period will be deemed as
non-consent, and which consent will not be unreasonably withheld).
(i) Other than in the ordinary course of business, consistent with past
practices, sell or enter into any material license agreement with respect
to the Company Intellectual Property with any person or entity or buy or
enter into any material license agreement with respect to the Intellectual
Property of any person or entity;
(ii) Other than in the ordinary course of business, consistent with past
practices, sell or transfer to any person or entity any material rights to
the Company Intellectual Property;
(iii) Other than in the ordinary course of business, consistent with past
practices, enter into or materially amend any Contract pursuant to which
any other party is granted marketing or distribution rights of any type or
scope with respect to any material products or technology of the Company or
any Subsidiary, it being understood that the granting of exclusive rights
to any third party shall not be considered practices in the ordinary course
of business.
(iv) Materially amend or otherwise materially modify (or agree to do so),
except in the ordinary course of business, or intentionally violate the
terms of, any of the Contracts set forth or described in the Disclosure
Schedule;
(v) Settle any litigation for an amount in excess of $100,000 in any
single case;
(vi) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock or any other equity interests, as applicable, or split,
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combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities or any other equity interests of the
Company, as applicable, in respect of, in lieu of or in substitution for
shares of capital stock of the Company or any other equity interests, as
applicable, or repurchase, redeem or otherwise acquire, directly or
indirectly, any shares of the capital stock of the Company or any
Subsidiary or other equity interests as applicable, of any Subsidiary (or
options, warrants or other rights exercisable therefor);
(vii) Other than the Company's issuance of approximately 1,100,000
options to employees of the Company in accordance with the resolutions of
the Company's Board adopted on June 13, 1998 and any other grants of
options to purchase Company Common Stock (with an exercise price equal to
fair market value of the Company Stock at the date of option grant) granted
to employees in the ordinary course of business consistent with past
practices, issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase
of, any shares of its capital stock or any other equity interests, as
applicable, or securities convertible into, or subscriptions, rights,
warrants or options to acquire, or other agreements or commitments of any
character obligating it to issue or purchase any such shares or any other
equity interests of the Company or any of its Subsidiaries, as applicable,
or other convertible securities of the Company or any of its Subsidiaries.
(viii) Cause or permit any amendments to its Articles or Certificate of
Incorporation or Bylaws, or any amendments to its other organizational
documents;
(ix) Acquire or agree to acquire by merging or consolidating with, or by
purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or except in the ordinary course
otherwise acquire or agree to acquire any assets, in each case involving an
investment in excess of $100,000, individually or $500,000 in the
aggregate;
(x) Without limiting any other provisions of clause 4.1(a)(i) above,
sell, lease, license or otherwise dispose of any of its properties or
assets, except in the ordinary course of business and consistent with past
practices, and except in the case of properties or assets of less than
$100,000 individually or $500,000 in the aggregate;
(xi) Except for advances and short-term loans provided by DEI or its
Affiliates to fund operating losses incurred in the ordinary course of
business consistent with past practice (whether evidenced by a written
instrument (which the Company may execute at any time) or only reflected on
the financial statements (including without limitation the Closing Balance
Sheet, if then outstanding) and books and records of the Company) incur any
indebtedness for borrowed money or guarantee any such indebtedness or issue
or sell any debt securities or guarantee any debt securities of others
except for obligations not exceeding $100,000 individually or $500,000 in
the aggregate;
(xii) Grant any loans to others or purchase debt securities of others or
materially amend the terms of any outstanding loan agreement to others;
(xiii) Grant any severance, retention, or termination pay (i) to any
director or officer or (ii) to any other Employee except in each case
payments made pursuant to standard written agreements outstanding on the
date hereof and disclosed in the Disclosure Schedule or payments not
exceeding $250,000 in the aggregate after the date hereof;
(xiv) Adopt any Employee Plan, or enter into any Employee Agreement, pay
or agree to pay any special bonus or special remuneration to any director
or employee, or increase the salaries or wage rates of its Employees other
than routine increases and promotions in the ordinary course of business,
consistent with past practices;
(xv) Revalue any of its assets with a value in excess of $100,000
individually or $500,000 in the aggregate, including without limitation
writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business;
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(xvi) Except with respect to Taxes, pay, discharge or satisfy, in an
amount in excess of $100,000 (in any one case) or $500,000 (in the
aggregate), any claim, liability or obligation (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the payment, discharge
or satisfaction in the ordinary course of business of liabilities;
(xvii) Except with respect to Tax Returns to be filed for the taxable
year ending September 30, 1997, (i) make or change any material election in
respect of Taxes relating to the operations of the Company and its
Subsidiaries, or, (ii) adopt or change any accounting method in respect of
Taxes except as required by law;
(xviii) Other than in the ordinary course of business consistent with
past practice, enter into any strategic alliance;
(xix) Accelerate the vesting schedule of any of the outstanding Company
Options or Company Capital Stock;
(xx) Hire any material number of employees or terminate any of the
Company's key employees, or encourage employees to resign;
Take, or agree to take, any of the actions described in Sections 4.1(a)
through (w) above, or any other action that would prevent the Company from
performing or cause the Company not to perform its covenants hereunder.
(b) Conduct of Business of the Parent. Except as otherwise contemplated by
this Agreement, the Transaction Agreements and the other agreements by and
between Parent and DEI or its affiliates of even date herewith and the several
transactions contemplated hereby and thereby, Parent shall conduct its
business in accordance with the terms and conditions as described in the
Governance Agreement entered into of even date herewith. Except as otherwise
contemplated by this Agreement, the Transaction Agreements and the other
agreements by and between Parent and DEI and/or their Affiliates of even date
herewith and the several transactions contemplated hereby and thereby, during
the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement or the Effective Time, Parent agrees (except
to the extent that the Company shall otherwise have previously consented in
writing), to carry on Parent's and its Subsidiaries' respective businesses in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay the debts and Taxes of Parent and its
Subsidiaries when due (unless such debts and Taxes are the subject of a
dispute that Parent is actively seeking to resolve), to pay or perform other
obligations when due (unless such obligations are the subject of a dispute
that Parent is actively seeking to resolve), and, to the extent consistent
with such businesses, use their reasonable efforts consistent with past
practice and policies to preserve intact Parent's and its Subsidiaries'
present business organizations, keep available the services of Parent's and
its Subsidiaries' present officers and key employees and preserve Parent's and
its Subsidiaries' relationships with customers, suppliers, distributors,
licensors, licensees, and others having business dealings with it, all with
the goal of preserving Parent's and its Subsidiaries' goodwill and ongoing
businesses at the Effective Time.
4.2 No Solicitation.
(a) From and after the date hereof, the Company and DEI shall not, and shall
not authorize or permit any of their respective parent corporations,
subsidiaries or officers, directors, employees, accountants, counsel,
investment bankers, financial advisors and other representatives
(collectively, their "Representatives") to, directly or indirectly, solicit,
initiate or encourage (including by way of furnishing non-public information)
or take any other action to facilitate knowingly any inquiries or the making
of any proposal which constitutes or may reasonably be expected to lead to an
Acquisition Proposal (as defined herein) in respect of the Company or any of
its Subsidiaries, from any person or entity, or engage in any discussion or
negotiations relating thereto or enter into any agreement with any person
providing for or contemplating any such Acquisition Proposal; provided,
however, that notwithstanding any other provision hereof, (1) the Company and
DEI may comply with applicable securities laws and regulations and (2) after a
Section 4.2 Notice (as defined below), if any, has been delivered to the
Company by Parent, and prior to the time the Company's stockholders shall have
voted to approve this Agreement, the Company may:
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(i) engage in discussions or negotiations with a third party who (without
any solicitation, initiation, or encouragement, directly or indirectly, by
the Company or its Representatives after the date hereof) seeks to initiate
such discussions or negotiations, and may furnish such third party
information concerning the Company and its business, properties and assets
if and only to the extent that:
(1) (a) the third party has first made an Acquisition Proposal to
acquire at least 65% of the consolidated assets or outstanding voting
power of the Company's securities that is financially superior to the
Company Merger and the transactions contemplated in connection with the
Company Merger and not subject to any financing condition, as
determined in good faith in each case by the Company's board of
directors after consultation with its financial advisors (a "Company
Superior Proposal"), and (b) the Company's board of directors shall
conclude in good faith, after considering applicable provisions of
state law, after consultation with outside counsel that such action is
consistent with its fiduciary duties under applicable law, and
(2) prior to furnishing such information to or entering into
discussions or negotiations with such person or entity, the Company (y)
provides prompt notice to Parent to the effect that it is furnishing
information to or entering into discussions or negotiations with such
person or entity and (z) receives from such person or entity an
executed confidentiality agreement in reasonably customary form on
terms not materially more favorable to such person or entity than the
terms contained in the Confidentiality Agreement between Parent and
TWDC; and/or
(ii) recommend to its shareholders that they accept a Company Superior
Proposal from a third party, provided that the conditions set forth in
clauses 4.2(a)(i)(1)and 4.2(a)(i)(2) above have been satisfied and, prior
to entering into a definitive agreement providing for a Company Superior
Proposal, this Agreement is terminated pursuant to Section 8.1(i) or
8.1(j), as applicable.
(b) From and after the date hereof, Parent shall not, and shall not
authorize or permit any of its subsidiaries or officers, directors, employees,
accountants, counsel, investment bankers, financial advisors and other
representatives (collectively, its "Representatives") to, directly or
indirectly, solicit, initiate or encourage (including by way of furnishing
non-public information) or take any other action to facilitate knowingly any
inquiries or the making of any proposal which constitutes or may reasonably be
expected to lead to an Acquisition Proposal (as defined herein) in respect of
Parent or any of its Subsidiaries from any person or entity, or engage in any
discussion or negotiations relating thereto or enter into any agreement with
any person providing for or contemplating any Acquisition Proposal; provided,
however, that notwithstanding any other provision hereof, Parent may (1)
comply with applicable securities laws and regulations, including without
limitation the Exchange Act (and Rule 14e-2 promulgated under the Exchange Act
with regard to a tender or exchange offer), and (2) prior to the time its
stockholders shall have voted to approve this Agreement, Parent may:
(i) engage in discussions or negotiations with a third party who (without
any solicitation, initiation, or encouragement, directly or indirectly, by
Parent or its Representatives after the date hereof) seeks to initiate such
discussions or negotiations, and may furnish such third party information
concerning the party and its business, properties and assets if and only to
the extent that:
(1) (a) the third party has first made an Acquisition Proposal to
acquire at least 65% of the consolidated assets or outstanding voting
power of Parent's securities that is financially superior to the
Mergers and the transactions contemplated in connection with the
Mergers and not subject to any financing condition, as determined in
good faith in each case by Parent's board of directors after
consultation with its financial advisors (a "Parent Superior
Proposal"), and (b) Parent's board of directors shall conclude in good
faith, after considering applicable provisions of state law, after
consultation with outside counsel that such action is necessary for the
board of directors to act in a manner consistent with its fiduciary
duties under applicable law, and
(2) prior to furnishing such information to or entering into
discussions or negotiations with such person or entity, Parent (y)
provides a Section 4.2 Notice (as defined below) and (z) receives from
such person or entity an executed confidentiality agreement in
reasonably customary form on terms
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not materially more favorable to such person or entity than the terms
contained in the Confidentiality Agreement between Parent and TWDC;
and/or
(ii) recommend to its stockholders that they accept a Parent Superior
Proposal from a third party, provided that the conditions set forth in
clauses 4.2(b)(i)(1) and 4.2(b)(i)(2) above have been satisfied and, prior
to entering into a definitive agreement providing for a Parent Superior
Proposal, this Agreement is terminated pursuant to Section 8.1(g) or
8.1(h), as applicable.
(c) Each party shall immediately cease and terminate any existing
solicitation, initiation, encouragement, activity, discussion or negotiation
with any party or parties conducted heretofore by the party or its
Representatives with respect to any Acquisition Proposal. Each party hereto
shall notify the other party orally (if possible) and in writing of any
Acquisition Proposal with respect to it or any other transaction, the
consummation of which would reasonably be expected to prevent or materially
interfere with or materially delay the Merger (including the material terms
and conditions of any such Acquisition Proposal and the identity of the person
making it), promptly, but in any event within 72 hours, after actual knowledge
thereof by any such party's directors, executive officers, counsel or
individuals representing it as its investment bankers or financial advisors.
In the event that Parent delivers confidential information to a third party
and/or enters into discussions or negotiations with a third party pursuant to
Section 4.2(b)(1), Parent shall, 24 hours prior to such delivery or
discussions or negotiations deliver a notice to the Company regarding such
fact (a "Section 4.2 Notice"; a Section 4.2 Notice will also be deemed to have
been given upon occurrence of any of the events specified in clauses (x), (y)
or (z) of Section 8.1(g)).
As used in this Section 4.2, "Acquisition Proposal" shall mean:
(i) a bona fide proposal or offer (other than by another party hereto)
for a tender or exchange offer for the securities of the Company or Parent,
as the case may be, or
(ii) a bona fide proposal or offer (other than by another party hereto)
for a merger, consolidation or other business combination involving an
acquisition of the Company or Parent, as the case may be, or any material
subsidiary of the Company or Parent, as the case may be, or
(iii) any proposal to acquire in any manner a substantial equity interest
in or a substantial portion of the assets of the Company or Parent, as the
case may be, or any material subsidiary of the Company or Parent, as the
case may be.
4.3 No HSR Violation. During the period from the date of this Agreement and
until the earlier of the termination of this Agreement pursuant to its terms
or the Effective Time, no party hereto shall be required to take any action
that would cause a violation of the HSR Act.
ARTICLE V
Additional Agreements
5.1 Registration Statement; Preparation of Joint Proxy Statement
(a) As soon as practicable after the execution of this Agreement, Parent and
the Company shall jointly prepare and cause to be filed with the SEC
preliminary proxy materials constituting the Joint Proxy Statement of Parent
and the Company for the solicitation of approval of the respective
shareholders of Parent and the Company of this Agreement, the Mergers (in the
case of Parent) and the Company Merger (in the case of the Company) and the
transactions contemplated hereby. Parent shall also prepare and cause to be
filed with the SEC the Form S-4 Registration Statement, in which the Joint
Proxy Statement will be included as a prospectus, with respect to those shares
of Holding Company Common Stock issuable in the Mergers. Each of Holding
Company, Parent, Company and DEI shall use all reasonable efforts to cause the
Form S-4 Registration Statement and the Joint Proxy Statement to comply with
applicable law and the rules and regulations promulgated by the SEC, to
respond promptly to any comments of the SEC or its staff and to have the Form
S-4
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Registration Statement declared effective under the Securities Act as promptly
as practicable after it is filed with the SEC and Parent shall use all
reasonable efforts to cause the Joint Proxy Statement to be mailed to Parent's
shareholders and the Company's shareholders, as promptly as practicable after
the Form S-4 Registration Statement is declared effective under the Securities
Act; provided, however, that if any of the Representation Agreements is duly
terminated prior to the Effective Time by Parent, Parent shall have the
unilateral right, exercisible in its sole discretion, to elect not to submit
the this Agreement and the transactions contemplated hereby to a vote of
Parent's shareholders without being deemed in breach of any obligation under
this Agreement and without payment of any fees or penalties hereunder
(provided that Parent shall otherwise remain subject to the terms and
conditions of this Agreement, including without limitation Section 8.3
hereof), and the Company may terminate this Agreement. Each of the parties
hereto shall promptly furnish to the other party all information concerning
itself, its shareholders and its affiliates that may be required or reasonably
requested in connection with any action contemplated by this Section 5.1. If
any event relating to Holding Company, Parent, DEI or the Company occurs, or
if Holding Company, Parent, DEI or the Company becomes aware of any
information, that should be disclosed in an amendment or supplement to the
Form S-4 Registration Statement or the Joint Proxy Statement, then Holding
Company, Parent, DEI or the Company, as applicable, shall inform the other
thereof and shall cooperate with each other in filing such amendment or
supplement with the SEC and, if appropriate, in mailing such amendment or
supplement to the stockholders of Parent and the Company. The Joint Proxy
Statement shall include the recommendations of the Boards of Directors of
Parent and the Company in favor of the Agreement and the Mergers, as
applicable, and the transactions contemplated hereby; provided that the
respective recommendations of the Boards of Directors may not be included or
may be withdrawn if the Parent Board of Directors or the Company Board of
Directors has recommended a Superior Proposal or Company Superior Proposal, as
the case may be, in accordance with the terms of Section 4.2 (it being
understood that nothing herein shall limit the Company's and Parent's
obligations to hold and convene their respective shareholder meetings promptly
and as provided in this Agreement).
(b) Prior to the Effective Time, Parent shall use reasonable efforts to
obtain all regulatory approvals needed to ensure that the Holding Company
Common Stock to be issued in the Mergers: (i) will be registered or qualified
under the securities law of every jurisdiction of the United States in which
any registered holder of the Company Common Stock or Parent Common Stock who
is receiving shares of registered Holding Company Common Stock has an address
of record or be exempt from such registration; and (ii) will be approved for
quotation at the Effective Time on the Nasdaq National Market; provided,
however, that neither Parent nor Holding Company shall, pursuant to the
foregoing, be required (A) to qualify to do business as a foreign corporation
in any jurisdiction in which it is now qualified, or (B) to file a general
consent to service of process in any jurisdiction with respect to matters
unrelated to the issuance of Holding Company Common Stock pursuant hereto.
(c) Parent, DEI and the Company (in respect of the information respectively
supplied by it) agree that: (i) none of the information to be supplied by it
or its Affiliates for inclusion in the Form S-4 Registration Statement will,
at the time the Form S-4 Registration Statement becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading; (ii) none of the information to be supplied by it or
its Affiliates for inclusion in the Joint Proxy Statement will, at the time
the Joint Proxy Statement is mailed to the stockholders of Parent and the
Company, or as of the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; and (iii) as to
matters respecting it and its Joint Proxy Statement and the Form S-4 will
comply as to form in all material respects with the provisions of the
Securities Act and the Exchange Act, as applicable, and the rules and
regulations promulgated by the SEC thereunder, except that no covenant
representation or warranty is made by Parent with respect to statements made
or incorporated by reference therein based on information supplied by the
Company or DEI for inclusion or incorporation by reference in the Joint Proxy
Statement and no covenant, representation or warranty is made by the Company
or DEI with respect to statements made or incorporated by reference therein
based on information supplied by Parent for inclusion or incorporation by
reference in the Joint Proxy Statement.
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5.2 Shareholder Meetings.
(a) The Company shall promptly after the date hereof take all action
necessary in accordance with applicable law and its Articles of Incorporation
and Bylaws to hold and convene a meeting of the Company's shareholders (the
"Company Shareholders' Meeting") on the date of a Parent Shareholders' Meeting
or prior thereto if it so chooses. Except as required by the SEC or applicable
court order, the Company shall not postpone or adjourn (other than for the
absence of a quorum) the Company Shareholders' Meeting without the consent of
Parent. It is understood and intended by the parties hereto that the Voting
Agreement and the irrevocable proxies delivered to Parent by DEI are
sufficient for Parent to approve the transactions contemplated hereby by the
Company's stockholders, and neither DEI nor the Company shall in any way
challenge the validity, enforceability or effectiveness of the Voting
Agreement or proxies. Subject to Section 5.1(a), the Company and DEI shall
take all other action necessary or advisable to secure the vote or consent of
shareholders required by applicable law to effect the Mergers and the
transactions contemplated hereby (the "Required Company Shareholder Vote").
(b) Parent shall promptly after the date hereof take all action necessary in
accordance with applicable law and its Articles of Incorporation and Bylaws to
hold and convene a meeting of Parent's shareholders (the "Parent Shareholders'
Meeting"). Except as required by the SEC or applicable court order, Parent
shall not postpone or adjourn (other than for the absence of a quorum) the
Parent Shareholders' Meeting without the consent of the Company. Parent shall
not in any way challenge the validity, enforceability or effectiveness of the
voting agreements entered into by shareholders of Parent in connection with
the Mergers. Subject to Section 5.1(a), Parent shall take all other action
necessary or advisable to secure the vote or consent of shareholders required
by applicable law to effect the Mergers and the transactions contemplated
hereby (the "Required Parent Shareholder Vote").
5.3 Cooperation; Access to Information. Upon reasonable prior notice, the
Company and Parent shall afford the other party and its respective
accountants, counsel and other representatives, reasonable access during
normal business hours during the period prior to the Effective Time to all of
its properties, books, contracts, commitments and records, all other
information concerning its business, properties and personnel (subject to
restrictions imposed by applicable law) as the first party may reasonably
request and all its key employees. Upon reasonable prior notice Company and
Parent agree to provide each other and its respective accountants, counsel and
other representatives copies of internal financial statements (including by
returns and supporting documentation) promptly upon request. No information or
knowledge obtained in any investigation pursuant to this Section 5.3 shall
affect or be deemed to modify any representation or warranty contained herein
or the conditions to the obligations of the parties to consummate the Merger.
5.4 Confidentiality. Each of the parties hereto hereby agrees that the
information obtained in any investigation pursuant to Section 5.4, or pursuant
to the negotiation and execution of this Agreement or the effectuation of the
transactions contemplated hereby shall be governed by the terms of the
Confidential Disclosure Agreement effective as of on or about February 17,
1998, and that the Company, its officers, directors, employees, agents and
representatives agree to be bound by the terms thereof by virtue of DEI's
execution thereof.
5.5 Expenses.
(a) Except as set forth in Section 5.5(b) and Section 8.3, whether or not
the Merger is consummated, all fees and expenses incurred in connection with
the Merger including, without limitation, all legal, accounting, financial
advisory, consulting and all other fees and expenses of third parties ("Third
Party Expenses") incurred by a party in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the
transactions contemplated hereby, shall be the obligation of the respective
party incurring such fees and expenses, provided, however that Parent and DEI
shall share equally in all fees and expenses, other than Third Party Expenses,
incurred in relation to filing of the Form S-4 Registration Statement and
printing the Joint Proxy Statement (including any preliminary materials
related thereto). Without limiting the foregoing, but subject to Section
8.3(c), Parent agrees to pay the fees and expenses of Merrill Lynch in
connection with the transactions contemplated hereby.
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(b) In the event that the Merger is consummated, DEI agrees to pay at the
Closing those Third Party Expenses of the Company and DEI and their Affiliates
that have been incurred on or prior to the Closing Date.
5.6 Public Disclosure. Parent, DEI and the Company shall consult with each
other before issuing any press release or otherwise making any public
statements with respect to this Agreement or the Merger or the transactions
contemplated hereby or thereby and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by law, The Nasdaq Stock Market, or any listing agreement with a
national securities exchange.
5.7 Consents. The Company, DEI and Parent shall use their best efforts to
obtain the consents, waivers, assignments and approvals under any of their
respective material contracts as may be required in connection with the
Mergers so as to preserve all rights of, and benefits to, the Company and
Parent thereunder.
5.8 FIRPTA Compliance. On the Closing Date, the Company shall deliver to
Parent a properly executed statement in a form reasonably acceptable to Parent
for purposes of satisfying Parent's obligations under Treasury Regulation
Section 1.1445-2(c)(3).
5.9 Reasonable Efforts. Subject to the terms and conditions provided in this
Agreement, each of the parties hereto shall use commercially reasonable
efforts to take promptly, or cause to be taken, all actions, and to do
promptly, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated hereby, to obtain all necessary waivers, consents
and approvals and to effect all necessary registrations and filings and to
remove any injunctions or other impediments or delays, legal or otherwise, in
order to consummate and make effective the transactions contemplated by this
Agreement for the purpose of securing to the parties hereto the benefits
contemplated by this Agreement; provided that none of DEI, the Company nor
Parent shall be required to agree to any divestiture by any of them or any of
their respective subsidiaries or affiliates of shares of capital stock or of
any business, assets or property of any of them or any of their subsidiaries
or affiliates, or the imposition of any material limitation on the ability of
any of them to conduct their businesses or to own or exercise control of such
assets, properties and stock.
5.10 Notification of Certain Matters. Each of the Company, DEI and Parent
shall give prompt notice to the other party of (i) the occurrence or non-
occurrence of any event, the occurrence or non-occurrence of which is likely
to cause any representation or warranty of any party contained in this
Agreement to be untrue or inaccurate at or prior to the Effective Time and
(ii) any failure of either Parent, the Company or DEI, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 5.10 shall not limit or otherwise affect any
remedies available to the party receiving such notice. No disclosure by the
Company or DEI, on the one hand, or Parent, on the other, pursuant to this
Section 5.10, however, shall be deemed to amend or supplement the Disclosure
Schedule or prevent or cure any misrepresentations, breach of warranty or
breach of covenant.
5.11 Voting Agreements. DEI has delivered to Parent, concurrently with the
execution of this Agreement, an executed Voting Agreement substantially in the
form attached hereto as Exhibit D (the "Voting Agreement") together with an
irrevocable proxy. In addition, certain Parent shareholders have delivered to
DEI, concurrently with the execution of this Agreement, an executed voting
agreement.
5.12 Director Nominees. The Company and DEI shall have the right to select
as its nominees three persons to serve as members of the Board of Directors of
Holding Company (such persons, or any replacement persons, the "Nominees") and
Parent shall cause the Nominees to be appointed to the Board of Directors of
Holding Company (to the extent they so consent) as of the Effective Time.
5.13 Non-Competition. Parent, Holding Company and DEI agree to be bound by
the non-competition provisions set forth in Annex I hereto and incorporated
herein.
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5.14 Regulatory Filings; Reasonable Efforts. As soon as may be reasonably
practicable, Parent and DEI each shall file with the United States Federal
Trade Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice ("DOJ") Notification and Report Forms relating to the
transactions contemplated herein as required by HSR, as well as comparable
pre-merger notification forms required by the merger notification or control
laws and regulations of any applicable jurisdiction, as agreed to by the
parties. Parent, DEI and Company each shall promptly (a) supply the other with
any information which may be required in order to effectuate such filings and
(b) supply any additional information which reasonably may be required by the
FTC, the DOJ or the competition or merger control authorities of any other
jurisdiction and which the parties may reasonably deem appropriate.
5.15 Additional Documents and Further Assurances. Each party hereto, at the
request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary
or desirable for effecting completely the consummation of this Agreement and
the transactions contemplated hereby.
5.16 Employees. Upon and after the Effective Time, subject to the applicable
eligibility and other requirements of such plans, each of the employees of the
Surviving Corporation shall be eligible for the benefit plans and arrangements
available to employees of Holding Company.
5.17 Form S-8. Holding Company agrees to file, no later than thirty (30)
days after the Closing, a registration statement on Form S-8 covering the
shares of Holding Company Common Stock issuable pursuant to outstanding
options granted under the applicable stock option plans of Parent and the
Company. The Company shall cooperate with and assist Holding Company in the
preparation of such registration statement.
5.18 Director Action with Respect to Option Plans. Prior to the Effective
Time, the Board of Directors of the Company shall take such actions as shall
ensure that Company Options outstanding under the Option Plans do not have
their vesting accelerated as a result of the consummation of the Mergers and
the transactions contemplated hereby and thereby.
5.19 Directors' Insurance and Indemnification. The Holding Company will
indemnify each director of Parent and the Company as of the Effective Time
(individually an "Indemnified Party" and collectively the "Indemnified
Parties"), to the fullest extent permitted under applicable law. The rights
under this Section 5.19 are in addition to rights that an Indemnified Party
may have under the Articles of Incorporation, Bylaws, other similar
organizational documents of Parent, the Company, or any of its Subsidiaries or
applicable law. The rights under this Section 5.19 are contingent upon the
occurrence of, and will survive consummation of, the transactions contemplated
hereby and are expressly intended to benefit each Indemnified Party. DEI
hereby agrees to indemnify and hold Holding Company and each of its
Subsidiaries harmless, and reimburse Holding Company upon demand for any and
all amounts paid to or on behalf of an Indemnified Party who was, at the date
hereof, or following the date hereof at any time prior to the Effective Time,
a director of the Company, other than Michael Slade.
5.20 Stock Listing. Parent will use reasonable efforts to list prior to the
Effective Time on the Nasdaq National Market, subject to official notice of
issuance, the shares of Holding Company Common Stock to be issued hereunder.
5.21 Certain Tax Matters.
(a) Return Filing; Information Sharing.
(i) DEI shall prepare and file, or cause to be prepared and filed, with
the appropriate governmental authority all Returns relating to Taxes
required to be filed (with extensions) by or with respect to the Company
and its Subsidiaries on or prior to the Closing Date. DEI shall prepare (or
cause to be prepared) and the Parent shall timely file (or cause to be
timely filed), all Returns relating to Taxes of the Company or any of its
Subsidiaries with respect to periods (or portions thereof) ending on or
prior to the Closing Date that are required to be filed after the Closing
Date.
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(ii) DEI and Parent agree that they will, and will cause their affiliates
to, make available all such information, employees and records of or
relating to the Company and its Subsidiaries as either party may request
with respect to matters relating to Taxes (including, without limitation,
the right to make copies of such information and records) and will
cooperate with respect to all matters relating to Taxes (including, without
limitation the filing of Returns, the filing of an amended Return, audits,
and proceedings). Unless requested by DEI, neither Holding Company, Parent
nor their subsidiaries nor the Company nor any Subsidiary thereof shall
file (or permit to be filed) any amended Return with respect to the Company
or any Subsidiary thereof for any period (or portion thereof) ending on or
prior to the Closing Date without obtaining the prior written consent of
DEI and neither Holding Company, Parent nor their subsidiaries nor the
Company nor any Subsidiary thereof shall, with respect to Taxes relating to
(i) a period (or portion thereof) ending on or prior to the Effective Time
or (ii) any matter that is the subject of this Agreement or any of the
Transaction Agreements, unless, however, there has been a Final
Determination to the contrary relating to such position or matter, take (or
permit to be taken by any affiliate) any position, initiate (or permit to
be initiated) any claim or otherwise take (or fail to take) any action that
could reasonably be expected to adversely affect DEI or its affiliates with
respect to such Taxes. Following the Effective Time, nothing in this
Agreement shall be construed to prevent Holding Company, Parent, any Parent
Subsidiary, the Company or its Subsidiaries from deducting to the maximum
extent permitted by law amounts required to be paid in cash under the
Promotional Services Agreement, the License Agreement and the
Representation Agreement.
(iii) Notwithstanding any other provision of this Agreement, all
transfer, registration, stamp, documentary, sales, use and similar Taxes
(including, but not limited to, all applicable real estate transfer or
gains Taxes and stock transfer Taxes), any penalties, interest and
additions to such Taxes incurred in connection with this Agreement and the
Merger contemplated hereby shall be the responsibility of and be shared
equally by Parent and DEI. DEI and Parent shall cooperate in the timely
making of all filings, Returns, reports and forms as may be required in
connection therewith.
(iv) If any of Holding Company, Parent, the Company or any subsidiary or
affiliate of the foregoing thereof receives any written notice from any Tax
authority proposing any audit or adjustment to any Tax relating to the
Company or any Subsidiary thereof for which DEI or any affiliate thereof
may be liable under this Agreement, Parent, the Company or such subsidiary
shall give prompt written notice thereof to DEI, which notices shall
describe in detail each proposed adjustment. In the event DEI receives
notice of Taxes for which Parent may be liable, DEI shall provide similar
notice to Parent or Holding Company.
(v) Parent, the Company and DEI shall furnish and Parent and Holding
Company shall each use their reasonable efforts to cause officers,
directors and employees of Parent or Holding Company holding or
representing 5% or more of the outstanding stock of Parent to furnish
special counsel to DEI and counsel to Parent with one or more certificates
dated as of the Closing Date signed on behalf of it by one or more of its
officers having authority to sign such certificates and containing such
true and correct statements as may reasonably be requested to enable
special counsel to DEI and counsel to Parent to render the opinions
described in Sections 6.2(a) and 6.3(a), provided, however, that in
connection with such certificates neither Parent nor Holding Company shall
be required to ascertain the intent (but must disclose actual knowledge) of
any Parent shareholder who is not an officer, director or employee of
Holding Company or Parent.
(vi) Holding Company, Parent, the Company and DEI agree to report (and
cause to be reported by their affiliates) any item attributable to a
transaction that occurs on the Closing Date but after the Closing (other
than any transaction in the ordinary course of business) in accordance with
the "next day rule" contained in Treas. Reg. Section 1.1502-76(b).
(vii) Parent and Holding Company grant to DEI and its duly appointed
representatives the sole right to negotiate, resolve, settle or contest any
audit of or claim for Tax with respect to which DEI may have to indemnify
Parent or any affiliate under this Agreement and Parent and Holding Company
agree to cooperate and cause their affiliates to cooperate and take all
actions requested by DEI with respect to the foregoing. If DEI does not
assume the defense of any such claim for Taxes after receiving written
notice of the same
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from Parent or Holding Company, Holding Company may defend the same in such
manner as it may deem appropriate.
(viii) Holding Company, Parent and DEI agree to furnish or cause to be
furnished to each other, upon request, as promptly as practicable, such
information and assistance relating to Holding Company, Parent and their
Affiliates (including without limitation any partnership in which either
owns directly or indirectly any interest), and the Company as is reasonably
necessary for the filing of all Tax Returns, and the making of any election
related to Taxes, the preparation for any audit by any Taxing Authority,
and the prosecution or defense of any claim, suit or proceeding relating to
any Tax Return. Holding Company, Parent and DEI will cooperate with each
other in the conduct of any audit or other proceeding related to Taxes and
all other Tax matters relating to the Holding Company, Parent and the
Company, and each will execute and deliver such powers of attorney and
other documents as are necessary to carry out the intent of this Section
5.21 (viii).
(b) Tax Covenants. Unless there has been a Final Determination to the
contrary (or DEI and Holding Company otherwise agree in writing), DEI, the
Company, Holding Company, and Parent covenant and agree, for all Tax purposes
including all Tax Returns and any Tax controversies, to (and to cause any
affiliate or successor to their assets or businesses to) take each of the
positions set forth below (and not to take any position inconsistent
therewith):
(i) The Company Merger (i) will qualify as a reorganization described in
section 368(a) of the Code and/or (ii) when taken together with the Parent
Merger, will qualify as a transfer of the stock of the Company to Holding
Company governed by section 351 of the Code.
(ii) The Parent Merger (i) will qualify as a reorganization under Section
368(a) of the Code and/or (ii) when taken together with the Company Merger,
will qualify as a transfer of the stock of Parent to Holding Company
governed by section 351 of the Code.
(iii) Except for cash received in lieu of fractional shares, none of the
consideration received by DEI or any non-dissenting shareholder of the
Company in the Company Merger will be treated as Other Property or Money.
(iv) Except for cash received in lieu of fractional shares, none of the
consideration received by Parent's non-dissenting stockholders in the
Parent Merger will be treated as Other Property or Money.
(v) Except for cash received in lieu of fractional shares, no income,
gain or loss will be recognized by Holding Company, TWDC (or any other
affiliate thereof, including without limitation DEI, the Company and Merger
Sub B), or any non-dissenting shareholder of the Company with respect to
the exchange of Company Common Stock for Holding Company Common Stock in
the Company Merger.
(vi) Except for cash received in lieu of fractional shares, no income,
gain or loss will be recognized by Parent, its non-dissenting shareholders,
or Merger Sub A with respect to the exchange of Parent Common Stock for
Holding Company Common Stock in the Parent Merger.
(vii) None of the consideration in either the Company Merger or the
Parent Merger will be paid or issued for services.
(viii) Unless Holding Company and DEI agree to the contrary, except with
respect to interest payments pursuant to the Promissory Note, no income,
deduction, gain or loss will be recognized with respect to the issuance,
exercise or satisfaction of the Holding Company Common Stock, Holding
Company Warrants or the Promissory Note (e.g., the parties agree that the
Promissory Note will not be issued with any original issue discount as
defined in section 1273 of the Code.)
(c) Additional "Tax Covenants". Parent and, upon the consummation of the
Mergers contemplated hereby, Holding Company covenants, jointly and severally,
to DEI (and with respect to 5.21(c)(viii), DEI also covenants to Parent):
(i) No stock or securities (including, without limitation, options or
warrants (other than warrants issued to TWDC pursuant to the Common Stock
and Warrant Purchase Agreement and options issued to
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Employees pursuant to Section 5.21 hereof)) will be issued to any person or
entity other than TWDC, DEI and the shareholders of Parent and the Company
in connection with the Transaction.
(ii) Management of each of Parent and Holding Company has no plan or
intention for (and will not permit) Holding Company to issue any stock
other than Holding Company Common Stock in (or in connection with) the
Transaction.
(iii) Management of each of Parent and Holding Company has no plan or
intention for (and will not permit in connection with the Transaction)
Holding Company to redeem or otherwise acquire in connection with the
Transaction any of the Holding Company Common Stock to be issued in the
Transaction (other than stock repurchased from terminated employees in the
ordinary course of business.)
(iv) Management of each of Parent and Holding Company has no plan or
intention to cause (and will not permit in connection with the Transaction)
Parent or the Company to be liquidated for U.S. Federal income tax purposes
or merged with any other entity.
(v) Management of each of Parent and Holding Company has no plan or
intention to terminate the existence of Holding Company or to merge Holding
Company with any other corporation (and will not permit the occurrence of
any such event in connection with the Transaction).
(vi) Management of each of Parent and Holding Company has no plan or
intention for (and will not permit) in (or in connection with) the
Transaction, Holding Company to dispose of all or any portion of the stock
of either Parent or the Company (including, without limitation, via
merger).
(vii) Following the Transaction, the Management of each of Parent and
Holding Company will cause (i) Parent to continue its historic business or
use a significant portion of its historic business assets in a business of
Parent and (ii) the Company to continue its historic business or use a
significant portion of its historic business assets in a business of the
Company.
(viii) None of DEI, Holding Company, Parent or any of their subsidiaries
has taken (or will take) any action including, without limitation, any
action inconsistent with any representation, warranty, or covenant made
pursuant to Sections 6.2(a) and 6.3(a) hereof or has any knowledge of any
fact or circumstance that is reasonably likely to prevent (i) the Parent
Merger from qualifying as (x) a reorganization described in section 368(a)
of the Code and/or (y) when taken together with the Company Merger, a
transfer of property to Holding Company by the shareholders of Parent
governed by section 351 of the Code and/or (ii) the Company Merger from
qualifying as (x) and reorganization described in section 368(a) of the
Code and/or (y) when taken together with the Parent Merger, as a transfer
of property to Holding Company by DEI governed by section 351 of the Code.
(d) Reporting. DEI, the Company, Parent and Holding Company agree to report
to the other any communication from or with the Internal Revenue Service or
any other Taxing Authority which relates in any way to the characterization of
the Transaction. Notwithstanding any such communication, Holding Company and
Parent covenant and agree to (and to cause any affiliate or successor to their
assets or businesses to) continue to take each of the positions specified in
Section 5.21(b) for all Tax purposes (unless there has been a Final
Determination contrary to such position). Without limiting the generality of
the foregoing, (i) each of DEI and Holding Company will file with its Federal
income tax return for the taxable year in which the Transfer is made (which
tax return shall be timely filed) the information required by Treas. Reg.
Section 1.351-3 and 1.368-3 and to provide each other upon request with a
statement to the effect that such party has complied with this requirement
after filing, and (ii) DEI shall have the opportunity to review and approve
any Tax return to be filed by Holding Company, the Company and/or Parent with
respect to the Transaction, such approval not to be unreasonably withheld.
DEI, the Company, Holding Company and Parent also will maintain such permanent
records as are required by Treas. Reg. (S)(S) 1.351-3(c) and 1.368-3.
(e) Protective Claims. Notwithstanding anything in this Section 5.21(e) to
the contrary, Holding Company will (and will cause any affiliate to) file
protective claims for refund if so requested in writing by DEI (and only if so
requested by DEI) based on any position contrary to the positions described in
Section 5.21(b), (i), (ii), (iii), (v) and (vii) (the "DEI Positions"). In
addition, Holding Company will (and will cause any affiliate to) use
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its best efforts to obtain any refund if so requested in writing by DEI (and
only if so requested by DEI) which may be available based on any position
contrary to the DEI Positions, and, upon receipt of any such refund, will
promptly remit any such amount (less any Taxes attributable to such refund)
and also taking into account any deduction attributable to any payment under
this Section 5.21(e) to DEI. DEI will have the right to control any
administrative or judicial proceeding relating to any such claim for refund,
and DEI will reimburse Holding Company for all reasonable cost relating to any
such claim.
(f) Tax Adjustment Payments. If a Final Determination is made contrary to
any of the DEI Positions, then (in addition to any other remedies which may be
available to DEI but without duplication thereof) Holding Company will pay to
DEI an amount equal to the excess of (a) the liability for the aggregate
amount of Taxes to which Parent, Holding Company, and their subsidiaries would
have been subject in each relevant jurisdiction had the DEI Positions been
sustained (and had Holding Company not been required to make any such payments
pursuant to this Section 5.21(f), over (b) the actual liability for such Taxes
for such periods assuming that the other positions set forth in Section
5.21(b) are sustained. Such payment (i) will not be treated as, or deemed to
be a payment of, Tax and (ii) will be due (subject to a 30-day grace period)
when, as and to the extent Parent or Holding Company derives an actual Tax
savings (including, without limitation, in the form of any refund or reduction
in Tax liability that would not have otherwise been available) as the result
of such excess; provided, however, that appropriate adjustments will be made
in the event that Tax savings are ultimately disallowed in a Final
Determination. If any payment required under this Section 5.21(f) is not made
on or before the above due date, then such payment will be made together with
interest at the rate per annum determined from time to time under section
6621(a)(2) of the Code compounded daily for the period from such due date to
the date on which the payment is actually made. Any dispute concerning the
calculation of payments due under this Section 5.21(f) will be resolved by a
nationally recognized accounting firm that is jointly selected and mutually
engaged by DEI and the non-DEI designated members of the Board of Directors of
Holding Company (the fees and expenses of which shall be shared equally by DEI
and Holding Company).
(g) Allocation of Income and Deductions. For purposes of this Agreement,
income, deductions, and other items will be allocated between the final Pre-
Closing Tax Period and Post-Closing Tax Period based on an actual closing of
the books of the business as of the close of business on the Closing Date. Any
amounts attributable to transactions not in the ordinary course of business
prior to the Closing will be allocated to the final Pre-Closing Tax Period and
amounts attributable to transactions not in the ordinary course of business
following the Closing will be allocated to the initial Post-Closing Tax
Period.
5.22 Non Solicitation of Company Employees. DEI agrees beginning on the date
hereof and continuing until the Effective Date, not to, without Parent's
consent, solicit the hiring of any person who is an employee of the company,
or induce any such person to discontinue his or her employment with the
Company.
5.23 Net Worth Test. At least two (2) business days prior to the Closing
Date, DEI and the Company shall deliver to Parent the Closing Balance Sheet.
DEI and the Company agree that if Estimated Net Worth is less than the Net
Worth Target, then DEI shall deliver to Holding Company at the Closing by
cashier's check or wire transfer in immediately available funds the amount by
which Estimated Net Worth is less than the Net Worth Target (the "Net Worth
Payment"). DEI and the Parent agree that (i) if Net Worth is less than the
lesser of (A) the Net Worth Target and (B) Estimated Net Worth, Holding
Company shall be entitled to recover the amount of such deficit from DEI as a
Loss in accordance with the procedures set forth in Article VII and (ii) if
the Net Worth exceeds the Estimated Net Worth, the Holding Company shall
reimburse DEI the amount of such excess, provided that the amount of such
reimbursement plus the Estimated Net Worth shall not exceed the Net Worth
Target. Following the Closing, Holding Company shall deliver to DEI a
statement indicating the Net Worth and, upon request, a calculation thereof in
reasonable detail.
5.24 Compliance with Laws. For a period of six months following the
Effective Time, Holding Company agrees with DEI that it will not knowingly
fail to comply with applicable employment laws.
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5.25 Share and Warrant Ownership. Parent and Holding Company hereby
represent, warrant and agree, jointly and severally, that, if the transactions
contemplated by this Agreement and the Common Stock Warrant and Purchase
Agreement between Parent and DEI of even date herewith (the "Purchase
Agreement") were consummated as of the date of this Agreement, then (i) the
shares of Holding Company Common Stock that would be acquired by DEI pursuant
to this Agreement, coupled with the shares of Holding Company Stock that would
be acquired by The Walt Disney Company ("TWDC") pursuant to the Purchase
Agreement, would represent, as of the date of this Agreement, in the
aggregate, at least 42.75% of all outstanding shares of Holding Company Stock
and at least 38.45% of all outstanding shares of Holding Company Common Stock
on a fully diluted basis (i.e., assuming the conversion, exchange or exercise
of all securities that are convertible, exchangeable or exercisable for shares
of Holding Company Common Stock, excluding the Warrant acquired by TWDC
pursuant to the Purchase Agreement) as of the date of this Agreement, and (ii)
the Warrant would represent, as of the date hereof, the right to acquire a
number of shares of Holding Company Common Stock that, when coupled with the
shares referred to in clause (i) hereof, would represent as of the date of
this Agreement at least 50.10% of all outstanding shares of Holding Company
Common Stock on a fully diluted basis (i.e., assuming the conversion, exchange
or exercise of all securities that are convertible, exchangeable or
exercisable for shares of Holding Company Common Stock, including, without
limitation, the Warrant) as of the date of this Agreement assuming for
purposes of the percentage calculations set forth in the foregoing clauses (i)
and (ii) that there are only (x) 88,550,088 shares of Company Common Stock
outstanding as of the date of this Agreement and held by DEI, and (y)
107,189,202 shares of Company Common Stock outstanding on a fully diluted
basis (assuming the conversion, exchange or exercise of all Company Options)
and further assuming the truth and accuracy of the representations and
warranties set forth in Section 2.3 hereof. Any breach of the foregoing
representation, warranty and agreement shall be remedied by the issuance,
without additional consideration (the consideration therefor being deemed part
of the original consideration payable by TWDC under the Purchase Agreement, by
Holding Company of additional shares of Holding Company Common Stock or
additional Warrants, to the extent necessary to increase TWDC's and DEI's
aggregate percentage ownership of Holding Company to the amounts and as of
such date specified in clauses (i) and (ii), respectively. This
representation, warranty and agreement shall survive and continue until the
eighteen (18) month anniversary of the Effective Time.
5.26 Parent Option Grants. Prior to the Effective Time, without the written
consent of DEI, Parent shall not issue any options, warrants or other rights
to acquire Parent Common Stock, other than employee stock options and rights
to acquire shares in accordance with employee stock purchase plans in the
ordinary course of business, consistent with past practice.
5.27 ABC News/Starwave Partners. Following the date hereof, subject to the
mutual, reasonable approval of Parent and DEI and provided that Parent and DEI
mutually agree that ABC News/Starwave Partners will continue to lease space
from DEI's affiliate, ABC, Inc., then ABC News/Starwave Partners will enter
into an arms-length lease with ABC, Inc. for such amount of space as the
parties hereto deem reasonable. The parties hereto acknowledge that, until
such lease is entered into (or until the parties determine that ABC
News/Starwave Partners shall locate alternative space), ABC News/Starwave
Partners shall continue to lease the space it currently occupies at ABC, Inc.
at reasonable rates consistent with past practice.
5.28 Funding of Ventures. From the date hereof through the Effective Time or
the termination of this Agreement, the Company agrees that it shall promptly
fund, and DEI agrees that it shall cause its Affiliates, ABC, Inc. and ESPN,
to promptly fund the capital accounts of ABC News/Starwave Partners and
ESPN/Starwave Partners, respectively, in accordance with past practice and the
Partnership Agreements pertaining to such partnerships (it being understood
that in past practice, both partners have contributed their appropriate share
of the capital requirements in accordance with the Partnership Agreements).
5.29 Third Party Agreements. DEI will cause the AOL/ABC News Short Form
Agreement, dated as of March 5, 1997, as amended on June 4, 1998, to terminate
and be of no further force and effect no later than November 30, 1998 with no
liability to Parent or Holding Company. Parent agrees that, although DEI will
be
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required to indemnify Parent for any breach of this covenant, no such breach
shall be the basis for not closing the transactions contemplated hereby.
5.30 Adoption of Option and Employee Stock Purchase Plans. At the Effective
Time, Holding Company shall assume all stock option and employee stock
purchase plans of Parent.
ARTICLE VI
Conditions to the Merger
6.1 Conditions to Obligations of Each Party. The respective obligations of
each party to this Agreement to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions:
(a) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Mergers shall be in effect, nor shall
any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any
of the foregoing be pending; nor shall there be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Mergers, which makes the consummation of the Mergers
illegal. All waiting periods under the HSR Act relating to the transactions
hereby will have expired or terminated early.
(b) Shareholder Approval. This Agreement shall have been approved and
adopted, and the Mergers shall have duly approved, by the requisite vote
under applicable law, by the shareholders of Parent and the Company.
(c) Listing. The shares of Holding Company Common Stock to be issued in
the Merger to the Shareholders shall have been approved for listing
(subject to notice of issuance) on the Nasdaq National Market.
(d) Effectiveness of Registration Statement. The Form S-4 Registration
Statement shall have become effective in accordance with the provisions of
the Securities Act, and no stop order shall have been issued by the SEC
with respect to the Form S-4 Registration Statement and no similar
proceeding in respect of the Joint Proxy Statement, shall have been
initiated or threatened in writing by the SEC.
(e) Transaction Agreements. The Transaction Agreements executed on the
date hereof shall be in full force and effect as of the Effective Time.
6.2 Conditions to Obligations of Company and DEI. The obligations of the
Company and DEI to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be
waived, in writing, exclusively by the Company and DEI:
(a) Tax Opinion. DEI shall have received the opinion of Dewey Ballantine
LLP, special counsel to DEI, substantially in the same form as the Tax
opinion described in Section 6.3(a), and based upon reasonably requested
representation letters of DEI, the Holding Company, and Parent and their
officers, directors, and employees dated the Closing Date, which opinion
shall be reasonably satisfactory to DEI, to the effect that the Company
Merger will be treated as a reorganization described in section 368(a) of
the Code and/or, when taken together with the Parent Merger, will be
treated as a transfer of property to Holding Company by DEI governed by
section 351 of the Code.
(b) Representations, Warranties and Covenants. The representations and
warranties of Parent in this Agreement shall be true and correct in all
material respects on and as of the Effective Time as though such
representations and warranties were made on and as of such time, except for
such inaccuracies as individually or in the aggregate would not have a
Material Adverse Effect on Parent, and each of Parent and Holding Company
shall have performed and complied in all material respects with all
covenants and obligations of this Agreement required to be performed and
complied with by then as of the Effective Time.
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(c) No Material Adverse Effect. No Material Adverse Effect with respect
to Parent shall have occurred since the date of this Agreement and no
events or circumstances have occurred since the date hereof that would have
a Material Adverse Effect on Parent (except for any Material Adverse Effect
that shall have been cured without such cure resulting or reasonably being
expected to result in a Material Adverse Effect on Parent). (For purposes
of this Article VI, it shall be deemed a "Material Adverse Effect" on
Parent if there shall be in effect a preliminary injunction or permanent
injunction issued by a court of competent jurisdiction against Parent
preventing Parent from generally using or materially limiting the ability
of Parent to generally use Intellectual Property that is both material to
and necessary for the conduct of Parent's business as currently conducted
(taken as a whole), and the prior pendency of a temporary restraining order
in respect of such Intellectual Property which is no longer in effect shall
be deemed not to be a "Material Adverse Effect" on Parent for purposes of
this Article VI.)
(d) Certificate of Parent and Holding Company. The Company and DEI shall
have been provided with a certificate executed on behalf of Parent and
Holding Company by its President and Chief Executive Officer to the effect
that, as of the Effective Time, the conditions set forth in Sections 6.3(a)
and 6.2(b) and (c) have been met.
6.3 Conditions to the Obligations of Parent and Holding Company. The
obligations of Parent and Holding Company to consummate and effect this
Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, exclusively by Parent:
(a) Tax Opinion. Parent shall have received the opinion of Wilson Sonsini
Goodrich & Rosati, special counsel to Parent, substantially in the same
form as the Tax opinion described in Section 6.2(a), and based upon
reasonably requested representation letters of DEI, the Holding Company,
and Parent and their officers, directors, and employees dated the Closing
Date, which opinion shall be reasonably satisfactory to Parent, to the
effect that the Parent Merger will be treated as a reorganization described
in section 368(a) of the Code and/or, when taken together with the Company
Merger, as a transfer of property to Holding Company by holders of Parent
Common Stock governed by section 351 of the Code.
(b) Representations, Warranties and Covenants. The representations and
warranties of the Company and DEI in this Agreement shall be true and
correct in all material respects on and as of the Effective Time as though
such representations and warranties were made on and as of the Effective
Time, except for such inaccuracies as individually or in the aggregate
would not have an Material Adverse Effect on the Company, and each of the
Company and DEI shall have performed and complied in all material respects
with all covenants and obligations of this Agreement required to be
performed and complied with by them as of the Effective Time.
(c) No Material Adverse Effect. No Material Adverse Effect with respect
to the Company shall have occurred since the date of this Agreement and no
events or circumstances have occurred since the date hereof that would have
a Material Adverse Effect on the Company (except for any Material Adverse
Effect that shall have been cured without such cure resulting or reasonably
being expected to result in a Material Adverse Effect on the Company). (For
purposes of this Article VI, it shall be deemed a "Material Adverse Effect"
on the Company if there shall be in effect a preliminary injunction or
permanent injunction issued by a court of competent jurisdiction against
the Company preventing the Company from generally using or materially
limiting the ability of the Company to generally use Intellectual Property
that is both material to and necessary for the conduct of the Company's
business as currently conducted (taken as a whole), and the prior pendency
of a temporary restraining order in respect of such Intellectual Property
which is no longer in effect shall be deemed not to be a "Material Adverse
Effect" on the Company for purposes of this Article VI.)
(d) Third Party Consents. Any and all consents, waivers, assignments and
approvals listed in Section 2.5 of the Disclosure Schedule (other than
those whose failure to obtain, individually or in the aggregate, would not
have a Material Adverse Effect on the Company or the Holding Company) shall
have been obtained.
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(e) Certificate of the Company and DEI. Parent shall have been provided
with a certificate executed on behalf of DEI by its Chief Financial Officer
and executed on behalf of the Company by its President and Chief Executive
Officer to the effect that, as of the Effective Time the conditions set
forth in Sections 6.2(a) and 6.3(b) and (c) have been met.
(f) Net Worth Payment. Parent shall have received from DEI and the
Company on or prior to the Closing Date the Closing Balance Sheet,
certified as to correctness by DEI and the Company; and DEI shall have
delivered to Holding Company the Net Worth Payment pursuant to Section
5.23.
ARTICLE VII
Survival of Representations and Warranties; Indemnification
7.1 Survival of Representations and Warranties. The representations and
warranties made by the Company and DEI in this Agreement or in any instrument
delivered pursuant to this Agreement shall terminate on the eighteen (18)
month anniversary of the Closing Date; provided, however, that the
representations, warranties, covenants, promises and agreements made by any
party to this Agreement relating or pertaining to any Tax or Returns related
to Taxes, whether made pursuant to this Agreement or any instrument required
under this Agreement other than those representations and warranties made
pursuant to Section 3.10 hereof (which shall terminate upon the Effective
Time) shall survive until sixty (60) days following the expiration of the
applicable statute of limitations (taking into account all extensions). The
representations and warranties made by Parent and Holding Company contained
herein or in any instrument delivered pursuant to this Agreement (other than
with respect to certificates relating to the Tax opinions described in
Sections 6.2(a) and 6.3(a) hereof, which shall survive until 60 days following
the expiration of the applicable statute of limitations taking into account
all extensions) shall terminate and be of no further force or effect at the
Effective Time, and following the Effective Time, notwithstanding the
following sentence, no party shall have any recourse whatsoever against Parent
or Holding Company in respect of any such representation and warranty (other
than with respect to certificates relating to the tax Opinions described in
Sections 6.2(a) and 6.3(a) hereof). The covenants, promises and agreements of
Parent shall survive the Effective Time, whether made pursuant to this
Agreement or any instrument required under this Agreement. No party hereto
makes any representation or warranty other than those representations and
warranties set forth in this Agreement.
7.2 Indemnification.
(a) From and after the Effective Time, DEI agrees to indemnify and hold
Parent, Holding Company, and their respective officers, directors, employees,
agents and affiliates harmless against all claims, losses, liabilities,
damages, deficiencies, costs and expenses, including reasonable attorneys'
fees and expenses of investigation and defense (hereinafter individually a
"Loss" and collectively "Losses") incurred by Holding Company, Parent, its
officers, directors, employees, agents or affiliates (including the Surviving
Corporation) directly or indirectly as a result of (i) any inaccuracy or
breach of a representation or warranty of the Company or DEI contained in this
Agreement, (ii) any failure by the Company (on or prior to the Effective Time)
or DEI (at any time) to perform or comply with any covenant contained in this
Agreement, including, without limitation, Section 5.23 hereof, or (iii) DEI
Taxes to the extent not accrued on the Closing Balance Sheet; provided,
however, that DEI shall be liable under Section 7.2 (a)(i) only to the extent
that Losses incurred exceed $3 million (the "Threshold") in which case DEI
will be liable for the amount of all such Losses in excess of the Threshold up
to an aggregate of $350 million (the "Cap"); provided, however, with respect
to the matters set forth in Sections 7.2(a)(ii) and (a)(iii) the Threshold
shall not be applicable. In addition, to the extent that Losses are incurred
that result solely from the inaccuracies or breaches of representations and
warranties of the Company or DEI arising solely from facts and circumstances
occurring following the date hereof (but only to the extent that such Losses
do not result from a breach by DEI or the Company of any representation or
warranty made as of the date hereof, or a breach of any obligations under this
Agreement, and only to the extent not relating to facts and circumstances
occurring on or prior to the date hereof), the right to indemnification under
this Section 7.2 for such Losses ("Post-Signing Losses") shall be subject to a
separate and additional threshold of $1 million, which
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will be used first prior to using the $3 million Threshold, and DEI's
obligation to indemnify in respect of such Post-Signing Losses shall commence
only to the extent that such Post-Signing Losses exceed the sum of $1 million
plus the portion of the $3 million Threshold unused by other Losses, and then,
only for the amount of such Losses in excess of the sum of $1 million plus the
unused portion of the $3 million Threshold; provided, however that DEI's
obligation to indemnify with respect to such Losses shall be aggregated with
all other Losses resulting from the matters set forth in Section 7.2(a)(i)
and, together with such Losses, shall be subject to the Cap. Furthermore,
without regard to any threshold, DEI shall pay to Holding Company in
immediately available funds, upon demand by Holding Company the amounts, if
any, by which Net Worth is less than the lesser of (1) Estimated Net Worth and
(2) the Net Worth Target. DEI shall not have any right of contribution from
the Company with respect to any Loss claimed. Nothing herein shall limit the
liability of the Company or DEI for any willful breach of any representation,
warranty or covenant if the Merger does not occur.
(b) Notwithstanding the foregoing, DEI hereby waives any right to seek
indemnification from the Company for any Losses as such term is defined in
that certain Stock Purchase Agreement dated as of March 28, 1997 by and
between the Company, Paul G. Allen and DEI (the "Stock Purchase Agreement")
pursuant to Section 5.1 of the Stock Purchase Agreement, and hereby forever
releases the Company from any and all past and present claims, actions, suits,
and proceedings of any nature pending or threatened against the Company,
whether or not in connection with the Stock Purchase Agreement, other than
intercompany accounts in the amounts reflected in the books and records of the
Company.
7.3 Claims Against DEI for Indemnification. Upon receipt by DEI of a
certificate signed by any officer of Holding Company or Parent (an "Officer's
Certificate"): (A) stating that Parent or Holding Company has paid or properly
accrued Losses for which indemnification may be sought under Section 7.2 and
(B) specifying in reasonable detail the individual items of Losses included in
the amount so stated, the date each such item was paid or properly accrued and
the nature of the misrepresentations, breach of warranty or covenant to which
such items is related, DEI shall, unless DEI shall timely object in writing to
such claim or claims made in such Officer's Certificate pursuant to the
provisions of Section 7.4, deliver to Holding Company as promptly as
practicable, cash in an amount equal to such Losses. To the extent that DEI
indemnifies Holding Company for any accrued Loss, and such accrued Loss is
ultimately determined to exceed the amounts required by GAAP, Holding Company
shall promptly return such amount to DEI.
7.4 Resolution of Conflicts; Arbitration.
(i) In case DEI shall object in writing to any claim or claims made in any
Officer's Certificate within thirty (30) days after delivery of such Officer's
Certificate, DEI and Holding Company shall attempt in good faith to agree upon
the rights of the respective parties with respect to each of such claims. If
DEI and Holding Company should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties.
(ii) If no such agreement can be reached after good faith negotiation,
either Holding Company or DEI may demand arbitration of the matter pursuant to
this Section 7.4 unless the amount of the damage or Loss is at issue in
pending litigation with a third party, in which event arbitration shall not be
commenced until such amount is ascertained or both parties agree to
arbitration; and in either such event the matter shall be settled by
arbitration conducted by one arbitrator mutually agreeable to Holding Company
and DEI. In the event that within forty-five (45) days after submission of any
dispute to arbitration, Holding Company and DEI cannot mutually agree on one
arbitrator, Holding Company and DEI shall each select one arbitrator, and the
two arbitrators so selected shall select a third arbitrator. The arbitrator or
arbitrators, as the case may be, shall set a limited time period and establish
procedures designed to reduce the cost and time for discovery while allowing
the parties an opportunity, adequate in the sole judgement of the arbitrator
or majority of the three arbitrators, as the case may be, to discover relevant
information from the opposing parties about the subject matter of the dispute.
The arbitrator or a majority of the three arbitrators, as the case may be,
shall rule upon motions to compel or limit discovery and shall have the
authority to impose sanctions, including attorneys' fees and costs, to the
extent as a competent court of law or equity, should the arbitrators or a
majority of the three arbitrators, as the case may be, determine that
discovery was sought without substantial justification or that discovery was
refused or objected to without
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substantial justification. The decision of the arbitrator or a majority of the
three arbitrators, as the case may be, as to the validity and amount of any
claim in such Officer's Certificate shall be binding and conclusive upon the
parties to this Agreement. Such decision shall be written and shall be
supported by written findings of fact and conclusions which shall set forth
the award, judgment, decree or order awarded by the arbitrator(s).
(iii) Judgment upon any award rendered by the arbitrator(s) may be entered
in any court having jurisdiction. Any such arbitration shall be held in Santa
Clara County, California, under the rules then in effect of the American
Arbitration Association. The arbitrator(s) shall determine how all expenses
relating to the arbitration shall be paid, including without limitation, the
respective expenses of each party, the fees of each arbitrator and the
administrative fee of the American Arbitration Association.
7.5 Third-Party Claims. Promptly after the receipt by any party hereto of a
notice of any claim, action, suit or proceeding of any third party (a "Third
Party Claim") which may be subject to indemnification hereunder, such party
(the "Indemnified Party") shall give written notice of such claim to the party
obligated to provide indemnification hereunder (the "Indemnifying Party"),
stating the nature and basis of such claim and the amount thereof, to the
extent known. Failure of the Indemnified Party to give such notice shall not
relieve the Indemnifying Party from any liability which it may have on account
of this indemnification or otherwise, except to the extent that the
Indemnifying Party is actually prejudiced thereby. The Indemnifying Party
shall be entitled to participate in the defense of and, if it agrees
unconditionally to indemnify the Indemnified Party for any and all Losses
incurred as a result of such Third Party Claim, to assume the defense of such
claim, action, suit or proceeding with counsel selected by the Indemnifying
Party and approved by the Indemnified Party (such approval not to be
unreasonably withheld). Upon the election by the Indemnifying Party to assume
the defense of, or otherwise contest, such claim, action, suit or proceeding,
the Indemnifying Party shall not be liable for any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof, although the Indemnified Party shall have the right to participate in
the defense thereof and to employ counsel, at its own expense. Notwithstanding
the foregoing, the Indemnifying Party shall be liable for the reasonable fees
and expenses of counsel employed by the Indemnified Party, if and only to the
extent that (i) the Indemnifying Party has not employed counsel or counsel
reasonably acceptable to the Indemnified Party to assume the defense of such
action within a reasonable time after receiving notice of the commencement of
the action, (ii) the employment of counsel and the amount reimbursable
therefor by the Indemnified Party has been authorized in writing by the
Indemnifying Party, or (iii) there is an actual conflict of interests between
the Indemnifying Party and the Indemnified Party. The parties shall use
commercially reasonable efforts to minimize Losses from claims by third
parties and shall act in good faith in responding to, defending against,
settling or otherwise dealing with such claim, notwithstanding any dispute as
to liability as between the parties under this Article VII. The parties shall
also cooperate in any such defense, give each other reasonable access to all
information relevant thereto and use commercially reasonable efforts to make
employees and other representatives available on a mutually convenient basis
to provide additional information and explanation of any material provided in
connection therewith. No claim by a third party may be settled by the
Indemnifying Party without the written consent of the Indemnified Party (which
consent shall not be unreasonably withheld), except in the event that the
settlement involves (i) the payment of money only, for which the Indemnified
Party is totally indemnified by the Indemnifying Party, and (ii) the
unconditional release from all related liability of the Indemnified Party.
This section 7.5 shall not apply to disputes relating to Taxes.
7.6 Exclusive Remedy. Following the Effective Time, except with respect to
any knowing or intentional or fraudulent breaches of the representations and
warranties of the Company or DEI contained in this Agreement, the sole and
exclusive remedy of Holding Company for any claim for breaches of
representation and warranties of the Company or DEI arising under this
Agreement shall be the indemnification provided in this Article VII.
7.7 Indemnification For Taxes. Parent and Holding Company agree to indemnify
and hold DEI and its affiliates harmless from and against (a) any and all
Taxes, expenses, costs and other damages attributable in whole or in part to
any breach of any (i) representation, warranty, covenant, agreement or promise
contained in the Certificates delivered pursuant to Section 6.2(a) hereof, or
(ii) any agreement, covenant or promise made by Parent and/or Holding Company
in this Agreement, any Transaction Agreement, or in any instrument delivered
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pursuant to such agreements, in each case that relate to Taxes, (b) Taxes
attributable to any action or transaction occurring on the Closing Date after
the Effective Time, other than in the ordinary course of business, or (c)
Taxes attributable to the Company or any Subsidiary thereof with respect to
any period or portion thereof commencing after the Closing.
ARTICLE VIII
Termination, Amendment and Waiver
8.1 Termination. This Agreement may be terminated and the Mergers abandoned
at any time prior to the Effective Time:
(a) by mutual consent of DEI, the Company and Parent;
(b) by Parent or the Company if: (i) the Effective Time has not occurred
by December 31, 1998 provided, however, that the right to terminate this
Agreement under this Section 8.1(b)(i) shall not be available to any party
(who, in the case of the Company, shall include DEI) whose action or
failure to act has been a principal cause of or resulted in the failure of
the Mergers to occur on or before such date and such action or failure to
act constitutes a material breach of this Agreement; (ii) there shall be a
final nonappealable order of a federal or state court in effect preventing
consummation of the Mergers; or (iii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to
the Mergers by any Governmental Body that would make consummation of the
Mergers illegal;
(c) by Parent or the Company if (i) the Parent Shareholders' Meeting
(including any adjournments or postponements thereof) shall have been held
and completed and Parent's shareholders shall have taken a final vote on
the matters set forth in Section 5.2(b) hereof, and (ii) such matters shall
not have been approved at such meeting by the required Parent Shareholder
Vote (provided, further, that the right to terminate this Agreement under
Section 8.1(c) shall not be available to Parent or the Company where the
failure to obtain the required Parent Shareholder Vote shall have been
caused by the action or failure to act of such party and such action or
failure to act constitutes a material breach by such party of this
Agreement);
(d) by Parent or the Company if there shall be any governmental action
taken, or any statute, rule, regulation or order enacted, promulgated or
issued or deemed applicable to the Mergers by any Governmental Body, which
would: (i) prohibit Holding Company's ownership or operation of any
material portion of the business of the Company or (ii) compel Holding
Company or the Company to dispose of or hold separate all or a material
portion of the business or assets of the Company or Holding Company as a
result of the Mergers;
(e) by Parent if it is not in material breach of its obligations under
this Agreement and there has been a breach of any representation, warranty
or covenant contained in this Agreement on the part of the Company or DEI,
or if any representation or warranty on the part of the Company or DEI
shall have become untrue, in either case such that the condition set forth
in Sections 6.3(b) would not be satisfied as of the time of such breach or
as of the time such representation or warranty shall have become untrue and
such inaccuracy in such representation or warranty or breach shall not have
been cured within thirty (30) calendar days after written notice to the
Company and DEI; provided, however, that, no cure period shall be required
for a breach which by its nature cannot be cured;
(f) by the Company or DEI if neither the Company nor DEI is in material
breach of their respective obligations under this Agreement and there has
been a breach of any representation, warranty or covenant contained in this
Agreement on the part of Parent, or if any representation or warranty of
Parent shall have become untrue, in either case such that the condition set
forth in Section 6.2(b) would not be satisfied as of the time of such
breach or as of the time such representation or warranty shall have become
untrue and such inaccuracy in such representations and warranties or such
breach shall not have been cured within thirty (30) calendar days after
written notice to Parent; provided, however, that no cure period shall be
required for a breach which by its nature cannot be cured;
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(g) by the Company, prior to obtaining the Required Parent Shareholder
Vote and after receipt by Parent of an Acquisition Proposal for Parent, if
(x) by the end of the third business day following (but not including) the
day the Company notifies Parent that it wishes the Board of Directors of
the Parent to publicly reaffirm its recommendation to stockholders of
Parent to vote for the Mergers, the Board of Directors of Parent fails to
so publicly reaffirm; or (y) by the later of the end of (A) the tenth
business day following the public announcement of an Acquisition Proposal
for Parent or (B) the third business day following (but not including) the
day the Company notifies Parent that it wishes the Board of Directors of
the Parent to publicly reject such publicly announced Acquisition Proposal,
the Board of Directors of Parent fails to publicly reject such Acquisition
Proposal; or (z) the Board of Directors of Parent shall have changed its
recommendation to its shareholders to vote in favor of approval of the
transactions contemplated hereby;
(h) by Parent, prior to obtaining the Required Parent Shareholder Vote
upon five days' prior notice to the Company (the "Parent Superior Proposal
Notice"), if, as a result of a Parent Superior Proposal by a party other
than the Company or any of its Affiliates, the board of directors of Parent
determines in good faith, after considering applicable provisions of state
law, after consultation with outside counsel that acceptance of the Parent
Superior Proposal is necessary for the board of directors to act in a
manner consistent with its fiduciary duties under applicable law; provided,
however, that the board of directors of Parent, in making any such
determination, shall have considered all concessions which have then been
offered by the Company (it being understood that prior to any such
termination Parent shall, and shall cause its respective financial and
legal advisors to, negotiate with the Company to make such adjustments in
the terms and conditions of this Agreement in favor of Parent as would
induce Parent to proceed with a transaction with the Company rather than
consummation of an Acquisition Proposal made by a third party).
Notwithstanding the foregoing, prior to or contemporaneous with any
termination under Section 8.1(h) Parent must pay to the Company in
immediately available funds the fees required to be paid pursuant to
Section 8.3(a) hereof. In addition, Parent agrees that it shall not
terminate this Agreement pursuant to this Section 8.1(h) at any time prior
to 180 days after the date of this Agreement nor at any time prior to five
days after the Company's receipt of a Parent Superior Proposal Notice in
respect of the Parent Superior Proposal to be accepted;
(i) by Parent, prior to obtaining the Required Company Shareholder Vote
and after receipt by the Company of an Acquisition Proposal for the
Company, if (x) by the end of the third business day following (but not
including) the day Parent notifies the Company that it wishes the Board of
Directors of the Company to publicly reaffirm its recommendation to
stockholders of the Company to vote for the Mergers, the Board of Directors
of the Company fails to so publicly reaffirm; or (y) by the later of the
end of (A) the tenth business day following the public announcement of an
Acquisition Proposal for the Company or (B) the third business day
following (but not including) the day Parent notifies the Company that it
wishes the Board of Directors of the Company to publicly reject such
publicly announced Acquisition Proposal, the Board of Directors of the
Company fails to publicly reject such Acquisition Proposal; or (z) the
Board of Directors of the Company shall have changed its recommendation to
its shareholders to vote in favor of approval of the transactions
contemplated hereby;
(j) by the Company, prior to obtaining the Required Company Shareholder
Vote, upon five days' prior notice to Parent (the "Company Superior
Proposal Notice"), if, as a result of a Company Superior Proposal by a
party other than Parent or any of its Affiliates, the Board of Directors of
the Company determines in good faith, after considering applicable
provisions of state law, after consultation with outside counsel that
acceptance of the Company Superior Proposal is consistent with its
fiduciary duties under applicable law; provided, however, that the board of
directors of the Company, in making any such determination, shall have
considered all concessions which have then been offered by Parent (it being
understood that prior to any such termination the Company shall, and shall
cause its respective financial and legal advisors to, negotiate with Parent
to make such adjustments in the terms and conditions of this Agreement in
favor of the Company as would induce the Company to proceed with a
transaction with Parent rather than consummation of an Acquisition Proposal
made by a third party).
Notwithstanding the foregoing, prior to or contemporaneous with any
termination under Section 8.1(j) the Company must pay to Parent in
immediately available funds the fees required to be paid pursuant to
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Section 8.3(c) hereof. In addition, the Company agrees that it shall not
terminate this agreement pursuant to this Section 8.1(j) at any time prior
to 180 days after the date of this Agreement nor at any time prior to five
days after Parent's receipt of a the Company Superior Proposal Notice in
respect of the Company Superior Proposal to be accepted.
(k) by the Company, provided that neither it nor DEI is in breach of this
Agreement, in the event that the Form S-4 Registration Statement has not
been declared effective by the SEC on or prior to the day that is 60
calender days following the day, if any, Parent receives initial written
comments from the SEC in respect of the disclosures set forth therein
(tolled for any period of Federal government strike or extraordinary
shutdown that affects the SEC);
(l) by the Company, provided that neither it nor DEI is in breach of this
Agreement, if there shall be in effect a preliminary injunction or
permanent injunction issued by a court of competent jurisdiction against
Parent preventing Parent from generally using or materially limiting the
ability of Parent to generally use Intellectual Property that is both
material to and necessary for the conduct of Parent's business as currently
conducted (taken as a whole); or
(m) by Parent, provided that it is not in breach of this Agreement, if
there shall be in effect a preliminary injunction or permanent injunction
issued by a court of competent jurisdiction against the Company preventing
the Company from generally using or materially limiting the ability of the
Company to generally use Intellectual Property that is both material to and
necessary for the conduct of the Company's business as currently conducted
(taken as a whole).
Where action is taken to terminate this Agreement pursuant to this Section
8.1, it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
8.2 Effect of Termination. In the event of termination of this Agreement as
provided in Section 8.1 and subject to the payment of any amounts due under
Section 8.3, this Agreement shall forthwith become void and there shall be no
liability or obligation on the part of Holding Company, Parent, Sub, DEI or
the Company, or their respective officers, directors or shareholders, provided
that each party shall remain liable for any willful breaches of such party's
covenants hereunder or intentional or willful breaches of such party's
representations and warranties hereunder (other than in the case of Parent,
Section 3.17, for which Parent shall bear no liability) prior to its
termination; provided further that the provisions of Sections 5.4, 5.5, 8.3
and Article IX of this Agreement shall remain in full force and effect and
survive any termination of this Agreement.
8.3 Termination Fees.
(a) If this Agreement is terminated by (i) the Company as a result of a
breach of Section 4.2(b) by Parent, or (ii) by the Company pursuant to its
rights under Section 8.1(g), or (iii) by Parent pursuant to its rights under
Section 8.1(h), Parent shall pay to the Company a fee of $17 million, plus the
amount of any documented out-of-pocket expenses incurred by the Company and
its Affiliates in connection with the negotiation and preparation of this
Agreement and the Transaction Agreements and any other ancillary agreements
executed and delivered in connection with the transactions contemplated hereby
and thereby (including fees of counsel and accountants) up to the date of such
termination up to a maximum aggregate of $1.5 million (collectively,
"Expenses") in cash minus any amounts as may have been previously paid by such
party pursuant to this Section 8.3.
(b) If :
(i) this Agreement is terminated by a party pursuant to Section 8.1(c)
following a failure of the shareholders of Parent to grant the necessary
approvals described in Section 5.2; and
(ii) prior to such meeting of the shareholders of Parent (and following
the date hereof), there shall have been publicly announced an Acquisition
Proposal involving Parent (whether or not such Acquisition Proposal shall
have been rejected or shall have been withdrawn prior to the time of such
termination or of the shareholders' meeting); and
(iii) within 12 months of any such termination described in clause (b)(i)
above, Parent becomes a majority-owned subsidiary of the offeror of such
Acquisition Proposal or an Affiliate thereof or accepts a
48
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written offer to consummate or consummates an Acquisition Proposal with
such offeror or Affiliate thereof which would result in the acquisition of
50% or more of the voting power of Parent (a "Majority Acquisition
Proposal");
then Parent, upon the signing of a definitive agreement relating to such
Majority Acquisition Proposal, or, if no such agreement is signed then at
the closing (and as a condition of the closing) of Parent becoming such a
subsidiary or of such Majority Acquisition Proposal, shall pay to the
Company a fee of $17 million plus Expenses, minus any amounts as may have
been previously paid by such party pursuant to this Section 8.3.
(c) If this Agreement is terminated by (i) Parent as a result of a breach of
Section 4.2(a) by the Company, or (ii) by Parent pursuant to its rights under
Section 8.1(i), or (iii) by the Company pursuant to its rights under Section
8.1(j), the Company shall pay to Parent a fee of $17 million, plus the amount
of any documented out-of-pocket expenses incurred by Parent and its Affiliates
in connection with the negotiation and preparation of this Agreement and the
Transaction Agreements and any other ancillary agreements executed and
delivered in connection with the transactions contemplated hereby and thereby
(including fees of counsel and accountants) up to the date of such termination
up to a maximum aggregate of $1.5 million in cash minus any amounts as may
have been previously paid by such party pursuant to this Section 8.3.
(d) Expenses. The parties agree that the agreements contained in this
Section 8.3 are an integral part of the transactions contemplated by this
Agreement. No termination by a party of this Agreement under this Article VIII
shall be effective unless and until all fees required to be then paid by such
party pursuant to Section 8.3 hereof shall have been received in immediately
available funds by the other party. Notwithstanding anything to the contrary
contained in this Section 8.3, if one party fails to pay to the other any fee
due under Sections 8.3(a) or (b) or (c) within the time required under Section
8.1(h) or 8.1(j), if applicable, or within 5 business days of the event giving
rise to the payment of such fees in all other cases, in addition to any
amounts paid or payable pursuant to such sections, the defaulting party shall
pay the out-of-pocket costs and expenses (including reasonable legal fees and
expenses) in connection with any action, including the filing of any lawsuit
or other legal action, taken to collect payment together with interest on the
amount of any unpaid fee at the publicly announced prime rate of Citibank N.A.
from the date such fee was required to be paid. The fees and expenses set
forth in this Section 8.3 shall not be the exclusive remedy available against
any party that willfully breaches this Agreement.
8.4 Amendment. This Agreement may be amended by the parties hereto at any
time by execution of an instrument in writing signed on behalf of Parent, Sub,
DEI and the Company.
8.5 Extension; Waiver. At any time prior to the Effective Time, Parent and
Sub, on the one hand, and the Company and DEI, on the other hand, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed on behalf of
such party.
ARTICLE IX
General Provisions
9.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
messenger or courier service, or mailed by registered or certified or
overnight mail (return receipt requested) or sent via facsimile (with
acknowledgment of complete transmission) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice), provided, however, that notices sent by mail will not be deemed given
until received:
49
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(a) if to Holding Company, Parent or Sub, to:
Infoseek
1399 Moffett Park Drive
Sunnyvale, CA 94089
Attention: Harry M. Motro, President
Andrew E. Newton, Esq.
Telephone No: (408) 543-6000
Facsimile No: (408) 734-9350
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attention: David J. Segre, Esq.
Attention: Marty W. Korman, Esq.
Telephone No.: (650) 493-9300
Facsimile No.: (650) 493-6811
(b) if to the Company, to
Starwave, Inc.
c/o DEI
500 South Buena Vista Street
Burbank, California 91521
Attention: Lawrence J. Shapiro
Telephone No.: (818) 560-4370
Facsimile No.: (818) 563-4160
(c) if to DEI, to:
DEI
500 South Buena Vista Street
Burbank, CA 91521
Attention: Lawrence J. Shapiro
Telephone No.: (818) 560-4370
Facsimile No.: (818) 563-4160
with copies to:
O'Melveny & Myers
400 S. Hope Street
Los Angeles, CA 90071-2899
Attention: C. James Levin, Esq.
Telephone No.: (213) 669-6578
Facsimile No.: (213) 669-6407
Dewey Ballantine LLP
1775 Pennsylvania Avenue N.W.
Washington, DC 20006
Attention: Joseph M. Pari
9.2 Interpretation. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
50
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9.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.4 Entire Agreement; Assignment. This Agreement, the Exhibits hereto, the
Transaction Agreements, the Confidentiality Agreement, and the documents and
instruments and other agreements among the parties and/or their Affiliates
hereto referenced herein or entered into in connection herewith: (a)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings both
written and oral, among the parties with respect to the subject matter hereof;
(b) are not intended to confer upon any other person any rights or remedies
hereunder; and (c) shall not be assigned (other than by operation of law)
without the written consent of the other party. The obligations of the parties
hereto shall be binding on the respective legal successor and assigns to the
parties and the successors in interest of all or substantially all of the
business of the respective parties.
9.5 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
9.6 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or
equity upon such party, and the exercise by a party of any one remedy will not
preclude the exercise of any other remedy.
9.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
9.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefor, waive the application of any law, regulation, holding or rule
of construction providing that ambiguities in an agreement or other document
will be construed against the party drafting such agreement or document.
9.9 Attorneys Fees. If any action or other proceeding relating to the
enforcement of any provision of this Agreement is brought by any party hereto,
the prevailing party shall be entitled to recover reasonable attorneys' fees,
costs and disbursements (in addition to any other relief to which the
prevailing party may be entitled).
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IN WITNESS WHEREOF, Holding Company, Parent, the Company and DEI have caused
this Agreement to be signed, all as of the date first written above.
Infoseek Corporation Starwave Corporation
/s/ Harry M. Motro /s/ Kevin A. Mayer
By: _________________________________ By: _________________________________
Name: Harry M. Motro Name: Kevin A. Mayer
Title:President and Chief Title:Vice President
Executive Officer
Infoseek Corporation Disney Enterprises, Inc.
/s/ Harry M. Motro /s/ John R. Ball
By: _________________________________ By: _________________________________
Name: Harry M. Motro Name: John R. Ball
Title:President and Chief Title:Vice President
Executive Officer
[SIGNATURE PAGE TO REORGANIZATION AGREEMENT]
52
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EXHIBIT 4
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
by and between
INFOSEEK CORPORATION
a Delaware Corporation
and
THE WALT DISNEY COMPANY
a Delaware Corporation
June 18, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Issuance and Sale of the Securities...................................................... 1
1.1 Issuance and Sale of Common Stock and Warrants........................................... 1
1.2 Sale Closing............................................................................. 2
1.3 Sale Closing Deliveries.................................................................. 2
2. Representations and Warranties of the Company..................................................... 3
2.1 Organization, Standing and Power......................................................... 3
2.2 Authority................................................................................ 3
2.3 Representations and Warranties Contained in the Merger Agreement......................... 4
3. Representations and Warranties of the Purchaser................................................... 4
3.1 Organization and Standing................................................................ 4
3.2 Authority................................................................................ 4
3.3 No Conflicts............................................................................. 4
3.4 Brokers' and Finder's Fees............................................................... 5
3.5 Purchase Entirely for Own Account........................................................ 5
3.6 Accredited Investor; Investment Experience............................................... 5
3.7 Restricted Securities.................................................................... 5
3.8 Governance Agreement..................................................................... 6
3.9 Legends.................................................................................. 6
4. Conditions to the Issuance and Sale of the Securities............................................. 6
4.1 Conditions to Obligations of the Parties................................................. 6
4.2 Additional Conditions of Purchaser's Obligations at Sale Closing......................... 7
4.3 Additional Conditions of the Company's Obligations at the Sale Closing................... 7
5. Additional Agreements............................................................................. 8
5.1 Conduct of Company Prior to Closing...................................................... 8
5.2 Confidentiality.......................................................................... 8
5.3 Expenses. .............................................................................. 8
5.4 Public Disclosure........................................................................ 8
5.5 Regulatory Filings; Reasonable Efforts................................................... 8
5.6 Additional Documents and Further Assurances.............................................. 9
6. Termination....................................................................................... 9
7. Miscellaneous..................................................................................... 9
7.1 Survival of Warranties................................................................... 9
7.2 Transfer, Successors and Assigns......................................................... 9
7.3 Governing Law............................................................................ 9
7.4 Counterparts............................................................................. 9
7.5 Titles and Subtitles; Headings........................................................... 9
7.6 Notices.................................................................................. 9
</TABLE>
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
Page
----
<S> <C>
7.7 Attorneys' Fees.......................................................................... 11
7.8 Amendments and Waivers................................................................... 11
7.9 Severability............................................................................. 11
7.10 Entire Agreement......................................................................... 11
7.11 Remedies................................................................................. 11
7.12 Extension; Waiver........................................................................ 11
7.13 Mutual Drafting.......................................................................... 11
</TABLE>
EXHIBITS
EXHIBIT A FORM OF WARRANT
EXHIBIT B FORM OF PROMISSORY NOTE
EXHIBIT C FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT D FORM OF TAX SHARING AGREEMENT
<PAGE>
EXHIBIT 4
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT (the "AGREEMENT") is made
as of June 18, 1998 by and between Infoseek Corporation, a Delaware corporation
(the "COMPANY") and The Walt Disney Company, a Delaware corporation (the
"PURCHASER").
WITNESSETH
WHEREAS, Company and Disney Enterprises, Inc., a Delaware corporation
("DEI") and a subsidiary of Purchaser, have entered into that certain Agreement
and Plan of Reorganization by and among DEI, the Company, Infoseek Corporation,
a California corporation ("INFOSEEK") and Starwave Corporation ("STARWAVE"), a
Washington corporation, of even date herewith (the "MERGER AGREEMENT") pursuant
to which, among other things, certain transactions contemplated therein,
including the execution of this Agreement, are contemplated.
WHEREAS, upon the terms and subject to the conditions set forth herein, the
Company wishes to issue and sell to the Purchaser, and the Purchaser wishes to
purchase from the Company, two million six hundred forty-two thousand
(2,642,000) newly issued shares of Common Stock of the Company, no par value
(the "SHARES") and a warrant to purchase fifteen million seven hundred twenty
thousand (15,720,000) shares of Common Stock of the Company in substantially the
form attached hereto as EXHIBIT A with terms and conditions as set forth therein
(the "WARRANT") which Warrant shall be subject to the restrictions on exercise
contained therein and contain an exercise price determined in accordance with
the terms of the Warrant, in exchange for the Cash Consideration (as defined
herein) payable in cash at the Sale Closing (as defined herein) and the Note
Consideration (as defined herein) to be delivered at the Sale Closing.
WHEREAS, the Company and the Purchaser desire to make certain
representations and warranties in connection with the transactions contemplated
hereby.
NOW, THEREFORE, in consideration of the foregoing premises, the
representations and warranties, covenants and other agreements hereinafter set
forth, the mutual benefits to be gained by the performance thereof, and other
good and valuable consideration, the receipt and legal sufficiency of which are
hereby acknowledged and accepted, the parties hereto hereby agree as follows:
1. ISSUANCE AND SALE OF THE SECURITIES.
1.1 ISSUANCE AND SALE OF COMMON STOCK AND WARRANTS. On the
Sale Closing Date and effective as of the Sale Closing (each as defined in
SECTION 1.2 hereof), upon the terms and subject to the conditions of this
Agreement, the Company shall issue and sell to the Purchaser, and the Purchaser
shall purchase from the Company, the Shares and the Warrant in exchange for an
aggregate purchase price of (a) cash consideration equal to the product of (i)
two million six hundred forty-two thousand (2,642,000) and (ii) the Price Per
Share (the "CASH CONSIDERATION") and (b) a
<PAGE>
promissory note in the principal amount of one hundred thirty-nine million
dollars ($139,000,000) (the "NOTE CONSIDERATION") in the form attached hereto as
EXHIBIT B with terms and conditions as set forth therein. The Shares and the
Warrant shall hereinafter be referred to collectively as the "SECURITIES." The
"PRICE PER SHARE" shall be equal to $26.50.
1.2 SALE CLOSING. Subject to the satisfaction or waiver of the conditions
set forth in Section 4 hereof and effective upon the Closing (as such term is
defined in the Merger Agreement), the consummation of the transactions
contemplated hereby pursuant to the terms and provisions hereof (the "SALE
CLOSING") shall take place simultaneously with the Closing at the offices of
Wilson Sonsini Goodrich & Rosati, Professional Corporation, located at 650 Page
Mill Road, Palo Alto, California, unless another place or time is agreed to in
writing by the Company and the Purchaser. The date upon which the Sale Closing
occurs shall be referred to herein as the "SALE CLOSING DATE."
1.3 SALE CLOSING DELIVERIES.
(a) PURCHASER. At the Sale Closing, on the terms and subject to
the conditions set forth herein and in reliance on the representations and
warranties, covenants and other agreements set forth herein, the Purchaser
shall deliver, or cause to be delivered, to the Company each of the
following:
(i) the Cash Consideration payable by wire transfer of
immediately available funds to an account or accounts designated in
writing by the Company;
(ii) the Note Consideration; and
(iii) such other agreements, instruments, certificates and
other documents as may be necessary or reasonably appropriate to
effectuate completely the transactions contemplated hereby.
(b) COMPANY. At the Sale Closing, on the terms and subject to
the conditions set forth herein and in reliance on the representations and
warranties, covenants and other agreements set forth herein, the Company
shall deliver, or cause to be delivered, to the Purchaser each of the
following:
(i) a certified copy of the Company's current Certificate
of Incorporation as filed with the Secretary of State of Delaware and
a Certificate of Good Standing for the Company from the Secretary of
State of Delaware;
(ii) an executed copy of the certificate signed by the
Chief Executive Officer of the Company described in Section 4.2(c);
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<PAGE>
(iii) certificate(s) representing the Shares, validly
executed by the appropriate duly authorized officers of the Purchaser
registered in the name of the Purchaser or any Purchaser Controlled
Corporation as such term is defined in that certain Governance
Agreement by and among the Company, Infoseek, DEI and the Purchaser of
even date herewith (the "GOVERNANCE AGREEMENT");
(iv) the executed Warrant;
(v) a Registration Rights Agreement by and between the
Company and the Purchaser (the "REGISTRATION RIGHTS AGREEMENT") and
Tax Sharing Agreement by and between the Company and the Purchaser
(the "TAX SHARING AGREEMENT") substantially in the forms attached
hereto as EXHIBIT C and EXHIBIT D, respectively, duly executed by the
parties thereto; and
(vi) such other agreements, instruments, certificates and
other documents as may be necessary or reasonably appropriate to
effectuate completely the transactions contemplated hereby.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Purchaser as follows:
2.1 ORGANIZATION, STANDING AND POWER. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Company has the corporate power to own its properties
and to carry on its business as now being conducted and is duly qualified to do
business and is in good standing in each jurisdiction in which the failure to be
so qualified would have a Material Adverse Effect (as such term in defined in
the Merger Agreement) on the ability of the Company to consummate the
transactions contemplated hereby. The Company has made available a true and
correct copy of the Certificate of Incorporation and Bylaws of the Company, as
amended to date, to counsel for the Purchaser.
2.2 AUTHORITY. The Company has all requisite corporate power and
authority to enter into this Agreement and, upon the Sale Closing, the Warrant
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and, upon the Sale Closing, the Warrant
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of the
Company, and no further action is required on the part of Parent to authorize
the Agreement, the Warrant and the transactions contemplated hereby and thereby,
subject only to the approval of this Agreement by the Company's stockholders.
This Agreement has been duly executed and delivered by the Company and
constitutes or, in the case of the Warrant, when executed will constitute, a
valid and binding obligation of the Company, enforceable in accordance with
their respective terms, except as such enforceability may be limited by
principles of public policy and subject to the laws of general application
relating to bankruptcy, insolvency and the relief of debtors and to rules of law
governing specific performance, injunctive relief or other equitable remedies.
The execution and delivery by the Company of this Agreement and, upon the Sale
Closing, the Warrant do not, and the performance
-3-
<PAGE>
and consummation of the transactions contemplated hereby and thereby will not
result in any conflict with (i) any provisions of its Certificate of
Incorporation or Bylaws, (ii) any mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise or license to which the
Company is subject or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or its properties or
assets. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Body (as such term is
defined in the Merger Agreement) is required by or with respect to the Company
in connection with the execution and delivery of this Agreement or the Warrant
or the consummation of the transactions contemplated hereby or thereby, except
(x) such consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws, and (y) any applicable filings required under the HSR Act (as
such term is defined in the Merger Agreement).
2.3 REPRESENTATIONS AND WARRANTIES CONTAINED IN THE MERGER AGREEMENT.
The Company herein makes the representation and warranties made in Sections 3.2,
3.4, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12 and 3.15 of the Merger Agreement
as if such Representations and Warranties were set forth in this Agreement, each
as qualified by the Parent Disclosure Schedule provided in connection with the
Merger Agreement, and each using the defined terms as set forth in the Merger
Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants to the Company that:
3.1 ORGANIZATION AND STANDING. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
3.2 AUTHORITY. The Purchaser has all requisite power and authority
to enter into this Agreement, to perform its obligations hereunder, and to
consummate the transactions contemplated hereby. The execution and delivery by
the Purchaser of this Agreement, the performance by the Purchaser of its
obligations hereunder, and the consummation by the Purchaser of the transactions
contemplated hereby, have been duly authorized by all necessary corporate action
on the part of the Purchaser. This Agreement has been duly executed and
delivered by the Purchaser, and constitutes the valid and binding obligation of
the Purchaser enforceable against it in accordance with the terms hereof, except
as such enforceability may be limited by principles of general application
relating to bankruptcy, insolvency, creditor's rights, and the relief of
debtors, and rules of law governing specific performance, injunctive relief or
other equitable remedies.
3.3 NO CONFLICTS. The execution and delivery by the Purchaser of
this Agreement, the performance by the Purchaser of its obligations hereunder,
and the consummation by the Purchaser of the transactions contemplated hereby,
will not (i) give rise to any conflict, violation, default, termination,
cancellation, modification, acceleration or loss under (A) any provision of the
Restated Certificate of Incorporation or Bylaws of the Purchaser, or (B) any
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Purchaser or its properties
-4-
<PAGE>
or assets, other than any such conflicts, violations, defaults, terminations,
cancellations, modifications, accelerations or losses which would not have a
material adverse effect on the ability of the Purchaser to consummate the
transactions contemplated hereby, or (ii) violate any order, injunction,
judgment, ruling, law or regulation of any governmental authority applicable to
the Purchaser or any of its properties or assets. No consent, approval, order or
authorization of, or registration, declaration or filing with, any governmental
authority or any third party, including, without limitation, a party to any
agreement with the Purchaser, is required by or with respect to the Purchaser in
connection with the execution and delivery by the Purchaser of this Agreement,
the performance by the Purchaser of its obligations hereunder, and the
consummation by the Purchaser of the transactions contemplated hereby, except
for (x) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state and federal
securities and antitrust laws and (y) such other consents, authorizations,
filings, approvals and registrations which if not obtained or made would not
have a material adverse effect on the ability of the Purchaser to consummate the
transactions contemplated hereby.
3.4 BROKERS' AND FINDER'S FEES. The Purchaser has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or any similar charges in connection with this
Agreement, or the consummation of the transactions contemplated hereby.
3.5 PURCHASE ENTIRELY FOR OWN ACCOUNT. Securities to be acquired by
the Purchaser will be acquired for investment for the Purchaser's own account,
not as a nominee or agent, and not with a view to the resale, distribution or
offering of any part thereof, and the Purchaser has no present intention of
selling, granting any participation in, or otherwise distributing the same. The
Purchaser does not presently have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Securities.
3.6 ACCREDITED INVESTOR; INVESTMENT EXPERIENCE. The Purchaser has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the prospective investment in the
Securities, it is able to bear the economic consequences thereof, and it
qualifies as an "accredited investor" as such term is defined in Rule 501 of
Regulation D promulgated under the Securities Act. Purchaser is experienced in
evaluating and investing in securities of emerging publicly traded high
technology companies and acknowledges that it can bear the economic risk of its
investment. Purchaser is a "U.S. Person" as that term is defined in the
Internal Revenue Code of 1986, as amended, and has not been formed for the
specific purpose of acquiring the Securities.
3.7 RESTRICTED SECURITIES. Purchaser understands that the Securities
have not been, and will not be, registered under the Securities Act or any state
securities ("BLUE SKY") law, by reason of a specific exemption from the
registration provisions of the Securities Act and the applicable Blue Sky laws,
which depend upon, among other things, the bona fide nature of the investment
intent and the accuracy of such Purchaser's representations as expressed herein.
Such Purchaser understands that as such the Securities are characterized as
"restricted securities" under the
-5-
<PAGE>
Securities Act and that under the Securities Act and applicable regulations such
Securities may be resold without registration under the Securities Act only in
certain limited circumstances. In this connection, such Purchaser represents
that it is familiar with Rule 144 promulgated under the Securities Act, as
presently in effect, and understands the resale limitations imposed thereby and
by the Securities Act.
3.8 GOVERNANCE AGREEMENT. The Securities shall be subject to the
restrictions contained in the Governance Agreement.
3.9 LEGENDS. It is understood that the Securities, and any
securities issued in respect thereof or exchange therefor, may bear one or all
of the following legends:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF REGISTRATION OR AN EXEMPTION THEREFROM. THE COMPANY MAY REQUIRE AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT THAT A PROPOSED TRANSFER OR SALE
IS IN COMPLIANCE WITH THE ACT, EXCEPT THAT NO SUCH OPINION SHALL BE REQUIRED FOR
TRANSFERS OR SALES PURSUANT TO REGISTRATION UNDER THE ACT. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER
MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDERS OF RECORD OF
THIS SECURITY TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE
OFFICES OF THE CORPORATION."
(b) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO CERTAIN RESTRICTIONS ON TRANSFER AND VOTING CONTAINED IN A GOVERNANCE
AGREEMENT WHICH MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
OF RECORD OF THIS SECURITY TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL
OFFICES OF THE CORPORATION."
(c) Any legend required by the laws of the State of Delaware or
the State of California, including any legend required by the California
Department of Corporations.
(d) Any legend required by the Blue Sky laws of any other state
to the extent such laws are applicable to the shares represented by the
certificate so legended.
4. CONDITIONS TO THE ISSUANCE AND SALE OF THE SECURITIES.
4.1 CONDITIONS TO OBLIGATIONS OF THE PARTIES. The respective
obligations of each party to this Agreement shall be subject to the satisfaction
at or prior to the Sale Closing Date of the following conditions:
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<PAGE>
(a) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint
or prohibition preventing the consummation of the transactions
contemplated by this Agreement shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign,
seeking any of the foregoing be pending; nor shall there be any action
taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the sales contemplated hereby, which
makes the consummation of such sales unlawful, void, voidable or
unenforceable under applicable law, rules and regulations of any
governmental authority, domestic or foreign.
(b) GOVERNMENT APPROVALS. The Company and Purchaser shall have
obtained all other authorizations, consents, orders and approvals
required from or of, or declarations or filings with, or expirations
of waiting periods imposed by, any Governmental Body required for the
consummation of the transactions contemplated by this Agreement.
(c) GOVERNANCE AGREEMENT. The Governance Agreement shall
continue to be in full force and effect.
(d) STOCKHOLDER APPROVAL. This Agreement and the Warrant shall
have been approved and adopted, and the issuance of the securities
shall have been duly approved, by the requisite vote under applicable
law, by the shareholders of Infoseek, a California corporation.
4.2 ADDITIONAL CONDITIONS OF PURCHASER'S OBLIGATIONS AT SALE CLOSING.
The obligations of the Purchaser to the Company under this Agreement are
additionally subject to the fulfillment on or before the Closing, of each of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true in all
material respects on and as of the Sale Closing Date with the same
effect as though such representations and warranties had been made on
and as of the Sale Closing Date.
(b) PERFORMANCE. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on
or before the Sale Closing Date.
(c) OFFICER'S CERTIFICATE. The Company shall have provided a
certificate signed by the Chief Executive Officer of the Company to
the effect that the conditions contained in Sections 4.2(a) and 4.2(b)
have been met.
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<PAGE>
(d) MERGER COMPLETED. The conditions of DEI's obligations in the
Merger Agreement shall have been satisfied or waived and the Merger (as defined
in the Merger Agreement) shall have been effected.
4.3 ADDITIONAL CONDITIONS OF THE COMPANY'S OBLIGATIONS AT THE SALE
CLOSING. The obligations of the Company to the Purchaser under this Agreement
are subject to the fulfillment, on or before the Sale Closing, of each of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Purchaser contained in Section 3 shall be true in all material
respects on and as of the Sale Closing Date with the same effect as though such
representations and warranties had been made on and as of the Sale Closing Date.
(b) MERGER COMPLETED. The conditions of the Company's obligations in
the Merger Agreement shall have been satisfied or waived and the Merger (as
defined in the Merger Agreement) shall have been effected.
5. ADDITIONAL AGREEMENTS.
5.1 CONDUCT OF COMPANY PRIOR TO CLOSING. The Company agrees that it
shall not take any action inconsistent with Infoseek obligations under
subsection 4.1(b) of the Merger Agreement.
5.2 CONFIDENTIALITY. Both parties hereby agree that the information
obtained in any investigation pursuant to Section 5.3 of the Merger Agreement,
or pursuant to the negotiation and execution of this Agreement or any of the
transactions contemplated hereby shall be governed by the terms of the
Confidential Disclosure Agreement effective as of on or about February 17, 1998
by and between the Purchaser and Infoseek.
5.3 EXPENSES. Except as expressly set forth in the Merger Agreement
and the Registration Rights Agreement, whether or not this Agreement and the
transactions contemplated hereby are consummated, all expenses incurred by party
in connection with the transactions contemplated by this transactions
contemplated hereby, including without limitation, all legal, accounting,
financial advisory, consulting and all other fees and expenses of third parties
("THIRD PARTY EXPENSES") incurred by a party in connection with the negotiation
and effectuation of the terms and conditions of this Agreement and the
transactions contemplated hereby, shall be the obligation of the respective
party incurring such fees and expenses.
5.4 PUBLIC DISCLOSURE. The Company and the Purchaser shall consult
with each other and DEI and Starwave (and in accordance with Section 5.6 of the
Merger Agreement) before issuing any press release or otherwise making any
public statements with respect to the Merger Agreement, the Merger (as such
term is defined in the Merger Agreement), this Agreement or any of the
transactions contemplated by the foregoing and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law, the Nasdaq Stock
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<PAGE>
Market (as such term is defined in the Merger Agreement), or any listing
agreement with a national securities exchange.
5.5 REGULATORY FILINGS; REASONABLE EFFORTS. The Company and the
Purchaser will participate in and assist in the preparation of the filings and
actions contemplated by Section 5.14 of the Merger Agreement, including with
respect to the transactions contemplated herein. The parties hereto each shall
promptly (a) supply DEI and Starwave and each other with any information which
may be required to effectuate such filings and (b) supply any additional
information which reasonably may be required by the FTC, the DOJ, or the
competition or merger control authorities of any other jurisdiction and which
the parties may reasonably deem appropriate.
5.6 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party hereto,
at the request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
6. TERMINATION. This Agreement shall terminate and the transactions
contemplated hereby abandoned at any time prior to the Closing if the Merger
Agreement is terminated pursuant to its terms, in such case the termination of
this Agreement shall be as of the time of such termination.
7. MISCELLANEOUS.
7.1 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the Company and the Purchasers contained in or made pursuant to
this Agreement shall not survive the execution and delivery of this Agreement
and the Sale Closing and shall in no way be affected by any investigation of the
subject matter thereof made by or on behalf of the Purchaser or the Company.
7.2 TRANSFER, SUCCESSORS AND ASSIGNS. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.3 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
7.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
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<PAGE>
7.5 TITLES AND SUBTITLES; HEADINGS. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement. The table of contents and headings
contained in this Agreement are for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement, or any of the
terms and provisions hereof.
7.6 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by a recognized
commercial overnight delivery service, or mailed by registered or certified mail
(return receipt requested) or sent via facsimile (with acknowledgment of
complete transmission) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(i) if to the Purchaser, to: The Walt Disney Company
500 South Buena Vista Street
Burbank, CA 91521
Attention: General Counsel
Telephone No.: (818) 560-7707
Facsimile No.: (818) 563-1766
with a copy to: The Walt Disney Company
500 South Buena Vista Street
Burbank, CA 91521
Attention: Chief Financial Officer
Telephone No.: (818) 560-6977
Facsimile No.: (818) 846-8726
with a copy to: O'Melveny & Myers LLP
400 S. Hope Street
Los Angeles, CA 90071
Attention: C. James Levin, Esq.
Telephone No.: (213) 430-6578
Facsimile No.: (213) 430-6407
with a copy to: Dewey Ballentine LLP
1775 Pennsylvania Avenue, N.W.
Washington, D.C. 20006-4605
Attention: Joseph M. Pari, Esq.
Telephone No.: (202) 862-4516
Facsimile No.: (202) 862-1093
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<PAGE>
(ii) if to the Company, to: Infoseek Corporation
1399 Moffett Park Drive
Sunnyvale, CA 94089
Attention: Andrew E. Newton, Esq.
Telephone No: (408) 543-6000
Facsimile No: (408) 734-9350
with a copy to: Wilson Sonsini Goodrich & Rosati,
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304-1050
Attn: David J. Segre, Esq.
Telephone: (650) 493-9300
Facsimile: (650) 493-6911
7.7 ATTORNEYS' FEES. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
7.8 AMENDMENTS AND WAIVERS. Any term of this Agreement
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Purchaser.
Any amendment or waiver effected in accordance with this Section shall be
binding upon each transferee of any Securities, each future holder of all such
Securities, and the Company.
7.9 SEVERABILITY. In the event that any provision of this
Agreement or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further agree
to replace such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
7.10 ENTIRE AGREEMENT. This Agreement and the exhibits hereto,
together with that certain Governance Agreement between the Company and the
Purchaser of even date herewith, the Warrant, the Note, the Registration Rights
Agreement and the Tax Sharing Agreement, constitute the entire Agreement between
the parties hereto pertaining to the purchase of the Securities.
7.11 REMEDIES. The Purchaser and the Company agree that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Agreement and each hereby agrees to waive
the defense in any action for specific performance that a remedy at law would be
adequate. Accordingly, it is agreed that the Company or the Purchaser, as the
case may be, shall be entitled to an injunction, restraining order or other
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<PAGE>
equitable relief to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of competent
jurisdiction in the United States or any state thereof. Such remedies shall be
cumulative and non-exclusive and shall be in addition to any other rights and
remedies the parties may have under the Agreement.
7.12 EXTENSION; WAIVER. At any time, the Purchaser and the Company
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations of the other party hereto, (ii) waive any inaccuracies in
the representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
7.13 MUTUAL DRAFTING. Both parties waive the application of any law,
resolution, holding or rule of construction providing that ambiguities in an
agreement or other document will be construed against the party drafting such
agreement or document.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Common Stock and Warrant
Purchase Agreement as of the date first above written.
COMPANY:
INFOSEEK CORPORATION
By: /s/ Harry M. Motro
------------------------------------------
Harry M. Motro
President and Chief Executive Officer
PURCHASER:
THE WALT DISNEY COMPANY
By: /s/ John R. Ball
------------------------------------------
John R. Ball
Vice President
[COMMON STOCK AND WARRANT PURCHASE AGREEMENT]
<PAGE>
EXHIBIT A
FORM OF WARRANT
<PAGE>
EXHIBIT B
FORM OF PROMISSORY NOTE
<PAGE>
EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE>
EXHIBIT D
FORM OF TAX SHARING AGREEMENT
<PAGE>
EXHIBIT 5
THE WALT DISNEY COMPANY
PROMISSORY NOTE
US$139,000,000.00
Date: November 18, 1998
FOR VALUE RECEIVED, The Walt Disney Company, a Delaware corporation,
("Maker") hereby absolutely and unconditionally promises to pay to the order of
Infoseek Corporation, a Delaware corporation or its successors and assigns
("Payee") in immediately available funds the principal amount of One Hundred
Thirty-Nine Million United States Dollars ($139,000,000.00) (the "Principal
Sum") on the payment schedule set forth herein, together with accrued and unpaid
interest on the principal balance thereof outstanding from time to time, at the
rate hereinafter provided.
1. REPAYMENT.
(a) The Principal Sum and interest on this Note at the rate provided
in Section 2 hereof shall be paid in twenty (20) quarter-annual installments
consisting of (i) Six Million Nine Hundred Fifty Thousnd Dollars ($6,950,000) in
payment of such portion of the principal balance plus (ii) all accrued and
unpaid interest to the date of such payment, the first such installment becoming
payable on the three month anniversary of the date hereof, and each subsequent
installment becoming due and payable on each subsequent three month anniversary
of the prior payment, together with all accrued and unpaid interest on such
installment calculated from the date hereof at the rate provided in Section 2 of
this Note, and with the final payment due on the fifth anniversary of the date
hereof ("Final Payment Date"). Provided, however, that if payment shall be due
on a Saturday, Sunday or United States legal holiday (a "Non-Business Day"),
then payment will be due on the next day immediately following that is not a
Non-Business Day.
(b) This Note may be repaid, in whole or in part, at any time without
premium or penalty together with accrued and unpaid interest calculated to the
date of repayment. Repayment shall be applied first to interest accrued and
payable and then to the outstanding principal balance of the Principal Sum.
2. INTEREST.
This Note shall bear interest on the balance of the Principal Sum then
outstanding at a rate per annum equal to six and one-half percent (6.50%),
calculated without compounding; additional interest on any amounts outstanding
after the Final Payment Date shall accrue at a compounded annual rate of eight
percent (8.00%).
<PAGE>
3. METHOD AND PLACE OF PAYMENT.
All payments of the Principal Sum and interest pursuant hereto shall
be made by wire transfer in United States Dollars in immediately available funds
of the United States. All payments shall be made to Payee at the wire transfer
location described in EXHIBIT A attached hereto.
Anything in this Note to the contrary notwithstanding, it is expressly
stipulated and agreed that the intent of Payee and Maker is to comply at all
times with all usury and other laws relating to this Note. If the laws of the
State of California would now or hereafter render usurious, or are revised,
repealed or judicially interpreted so as to render usurious, any amount called
for under this Note, or contracted for, charged or received with respect to the
loan evidenced by this Note, or if any prepayment by Maker results in Maker
having paid any interest in excess of that permitted by law, then it is Maker's
and Payee's express intent that all excess amounts theretofore collected by
Payee be credited to the principal balance of this Note (or, if this Note has
been paid in full, refunded to Maker), and the provisions of this Note
immediately be deemed reformed and the amounts therefor collectible hereunder
reduced, without the necessity of execution of any new document, so as to comply
with the then applicable law, but so as to permit the recovery of the fullest
amount otherwise called for hereunder. In the event Maker pays any interest on
this Note and it is determined that such rate was in excess of the then-legal
maximum interest rate, then the portion of the interest payment representing an
amount in excess of the then-legal maximum interest rate shall be deemed a
payment of principal and applied against the principal of the Note.
4. DEFAULTS AND REMEDIES.
(a) An "Event of Default" with respect to this Note occurs:
(i) if Maker defaults in the payment of the Principal Sum or any
installment thereof or interest thereon when the same becomes due and payable in
accordance with Section 1 above and remains in default for fifteen (15) days
following written notice of such default by Payee to Maker;
(ii) Maker files any petition or action for relief under any
bankruptcy, reorganization, insolvency or moratorium law, or any other law for
the relief of, or relating to, debtors, now or hereafter in effect, or makes any
assignment for the benefit of creditors, or takes any corporate action in
furtherance of any of the foregoing; or
(iii) An involuntary petition is filed against Maker (unless such
petition is dismissed or discharged within sixty (60) days), under any
bankruptcy statute now or hereafter in effect, or a custodian, receiver,
trustee, assignee for the benefit of creditors (or other similar official) is
appointed to take possession, custody, or control of any property of Maker
(unless such appointment is rescinded or removed within sixty (60) days).
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<PAGE>
(b) Upon the occurrence and during the continuation of any Event of
Default, (in addition to any other rights and remedies Payee may have
hereunder), Payee may by written notice of default to Maker declare all or a
portion of the entire amount outstanding under this Note as due and payable
immediately, without regard to the payment schedule set forth in Section 1.
(c) Maker agrees to pay all collection expenses, court costs and
reasonable attorneys' fees and disbursements that are incurred in connection
with the successful collection under or enforcement of this Note.
5. WAIVER.
(a) Except as otherwise specifically provided in this Note, Maker
hereby waives presentment, demand, notice, protest, and all other demands and
notice in connection with the delivery, acceptance, performance or enforcement
of this Note.
(b) No failure or delay on the part of Payee in exercising any of its
rights, powers or privileges hereunder shall operate as a waiver thereof, nor
shall a single or partial exercise thereof preclude any other or further
exercise of any right, power or privilege. The remedies provided herein are
cumulative and are not exclusive of any remedies provided by law.
(c) This Note may be amended, waived or discharged only with the
written consent of Payee and Maker.
6. GOVERNING LAW; JURISDICTION.
THIS NOTE IS MADE AND DELIVERED AND SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT
TO THE CONFLICTS OF LAW PRINCIPALS THEREOF. Each of Maker and Payee irrevocably
and unconditionally (i) agrees that any action or proceeding against it seeking
specific performance or other equitable relief or other remedy arising out of
this Note shall be brought only in an appropriate court located in the State of
California, (ii) submits to the jurisdiction and venue of the courts referred to
above in connection with any such action or proceeding and (iii) consents to the
service of process outside the territorial jurisdiction of the courts referred
to above in any such action and proceeding by delivery of copies thereof by
overnight courier or certified mail to its address as specified in Section 8
hereof.
7. SEVERABILITY.
Whenever possible, each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by, or invalid under, applicable law,
such provision shall be ineffective only to the extent of such
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<PAGE>
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Note.
8. NOTICES.
All notices and other communications provided hereunder shall be in
writing or by facsimile and addressed, delivered or transmitted
(1) if to Maker, to: The Walt Disney Company
500 South Buena Vista Street
Burbank, CA 91521
Attention: General Counsel
Telephone No.: (818) 560-7707
Facsimile No.: (818) 563-1766
with a copy to: The Walt Disney Company
500 South Buena Vista Street
Burbank, CA 91521
Attention: Chief Financial Officer
Telephone No.: (818) 560-6977
Facsimile No.: (818) 846-8726
with a copy to: O'Melveny & Myers LLP
400 S. Hope Street
Los Angeles, CA 90071-2899
Attention: C. James Levin, Esq.
Telephone No.: (213) 430-6578
Facsimile No.: (213) 430-6407
with a copy to: Dewey Ballentine, L.L.P.
1775 Pennsylvania Avenue
Washington D.C. 20006-4605
Attention: Joseph M. Pari, Esq.
Telephone No.: (202) 862-4516
Facsimile No.: (202) 862-1093
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<PAGE>
(2) if to Payee, to: Infoseek Corporation
1399 Moffett Park Drive
Sunnyvale, CA 94089
Attention: Andrew E. Newton, Esq.
Telephone No: (408) 543-6000
Facsimile No: (408) 734-9350
with a copy to: Wilson Sonsini Goodrich & Rosati,
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304-1050
Attn: David J. Segre, Esq.
Telephone: (650) 493-9300
Facsimile: (650) 493-6911
or at such other address or facsimile number as may be designated by such party
in a notice to the other party. Any notice, if mailed and properly addressed
with postage prepaid or if properly addressed and sent by a nationally
recognized prepaid overnight courier service, shall be deemed given when
received; any notice, if transmitted by facsimile, shall be deemed given when
transmitted and confirmed by telephone call to the recipient at the number
specified herein.
9. NO ASSIGNMENT.
Neither this Note nor any of the rights, interests or obligations
hereunder may be assigned, by operation of law or otherwise, in whole or in
part, by the Maker without the prior written consent of the holder except in
connection with an assignment in whole to a successor corporation to the Maker
provided that such successor corporation acquires all or substantially all of
the Maker's property and assets and the holder's rights hereunder are not
impaired. Neither this Note nor any of the rights, interests or obligations
hereunder may be assigned, in whole or in part, by Payee except by operation of
law to a successor corporation.
"MAKER"
THE WALT DISNEY COMPANY
a Delaware corporation
By: /s/ DAVID K. THOMPSON
------------------------------------
Name: David K. Thompson
----------------------------------
Title: Senior Vice President
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<PAGE>
EXHIBIT A
WIRE TRANSFER INSTRUCTIONS
<PAGE>
EXHIBIT 6
THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUED UPON EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
NO. TWDC-1 INFOSEEK CORPORATION
November 18, 1998
COMMON STOCK WARRANT
This certifies that The Walt Disney Company (the "Investor" or the
"Original Holder"), or its registered assigns, is entitled, upon the terms and
subject to the conditions and restrictions on exercise hereinafter set forth,
at any time (subject to Section 2 below) on or after the date hereof and at or
prior to 11:59 pm., Pacific Time, on November 18, 1998 (the "Expiration
Time"), but not thereafter, to acquire from Infoseek Corporation, a Delaware
corporation (the "Company"), in whole or from time to time in part, up to
Fifteen Million Seven Hundred Twenty Thousand (15,720,000) fully paid and
nonassessable shares of Common Stock of the Company ("Warrant Stock") at a
purchase price per share equal to the Exercise Price as defined herein. Such
number of shares, type of security and Exercise Price are subject to
adjustment as provided herein, and all references to "Warrant Stock" and
"Exercise Price" herein shall be deemed to include any such adjustment or
series of adjustments.
1. EXERCISE OF WARRANT
As to Shares which are exercisable pursuant to Section 2 and in accordance
with the terms of this Warrant, the purchase rights represented by this Warrant
are exercisable by the registered holder hereof, in whole or in part, at any
time and from time to time at or prior to the Expiration Time by the surrender
of this Warrant and a Notice of Exercise form attached hereto duly executed to
the office of the Company at 1399 Moffett Park Drive, Sunnyvale, California
94089 (or such other office or agency of the Company as it may designate by
notice in writing to the registered holder hereof at the address of such holder
appearing on the books of the Company), and upon payment of the Exercise Price
(as defined below) for the shares thereby purchased (by wire transfer to the
order of the Company at the time of exercise in an amount equal to the purchase
price of the shares thereby purchased); whereupon the holder of this Warrant
shall receive from the Company one or more stock certificates (as reasonably
requested by the holder) in proper form representing the number of shares of
Warrant Stock so purchased, and a new Warrant in substantially identical form
and dated as of such exercise for the purchase of that number of shares of
Warrant Stock equal to the difference, if any, between the number of shares of
Warrant Stock subject hereto and the number of shares of Warrant Stock as to
which this Warrant is so exercised. Provided that all the terms of this Warrant
have been complied with, the holder of this Warrant shall be deemed to be the
record and beneficial owner of shares receivable upon exercise from and after
the time that this Warrant, Notice of Exercise and the Exercise Price are
delivered to the Company pursuant to this paragraph.
<PAGE>
2. VESTING
This Warrant shall become exercisable pursuant to the following schedule:
(i) thirty-three and one-third percent (33 1/3%) of the Warrant Stock, upon the
one year anniversary of the date of issuance of the Warrant set forth above,
(ii) an additional thirty-three and one-third percent (33 1/3%) of the Warrant
Stock upon the second anniversary of the date of issuance of the Warrant set
forth above; and (iii) the remainder of the Warrant Stock upon the third
anniversary of the date of issuance of the Warrant set forth above. Each of the
first, second and third anniversaries of the date of issuance shall be referred
to as a "Vesting Date." Notwithstanding the foregoing, in the event of a
Standstill Termination Event (as such term is defined in the Governance
Agreement, dated as of June 15, 1998 by and between the Original Holder, Disney
Enterprises, Inc. and the Company (the "Governance Agreement")), the Warrant
shall become immediately exercisable for all of the Warrant Stock and the
"Vesting Date" for any of the Warrant Stock not already exercisable shall be the
date of such Standstill Termination Event.
3. EXERCISE PRICE
The Exercise Price per share for each of the shares of Warrant Stock for
which the Warrant becomes exercisable at each Vesting Date (upon such Vesting
Date, the "Vested Price") shall be equal: (i) to one hundred twenty percent
(120%) of the Current Market Price or (ii) if the Common Stock of the Company is
not quoted on Nasdaq or is not listed on a Market, the Exercise Price shall be
the fair market value of a share of Common Stock as determined by a unanimous
vote of the Board of Directors of the Company within forty-five (45) days
following delivery of Notice of Exercise (the "Board Determination Period"). The
determination of the Board of Directors shall be final and binding. If the Board
of Directors is unable to unanimously agree on the fair market value or if the
Board Determination Period expires, the fair market value shall be determined by
a Selected Appraiser (as defined herein), who shall determine the fair market
value of the Common Stock in accordance with recognized valuation techniques
within 60 days following the expiration of the Board Determination Period. For
purposes of this Warrant, "Current Market Price" means the average of the
closing sale prices for the Common Stock of the Company on the Nasdaq National
Market ("Nasdaq") (or any other stock exchange or national market on which the
Company's Common Stock is primarily traded (a "Market")) for the thirty (30)
trading days prior to such Vesting Date. For purposes of this Agreement, the
"Selected Appraiser" shall be any investment banking firm of national reputation
as mutually agreed by the Company and the holder of this Warrant at the time of
exercise, such agreement not to be unreasonably withheld. Upon mutual agreement
of the Selected Appraiser, such Selected Appraiser's determination shall be
final and binding. The fees and expenses of such Selected Appraiser shall be
borne equally by the Company and the holder. If the parties are unable to agree
on a Selected Appraiser within 30 days, then each of the Company and the holder
of this Warrant at the time of exercise shall be entitled to retain their own
appraiser, which appraiser shall be any investment banking firm of national
reputation, to value the shares in accordance with recognized valuation methods.
In such case the Exercise Price shall be the average of the two valuations
obtained by the Company and the holder and such determination shall be final and
binding, and each party shall bear the costs of their respective appraiser.
Notwithstanding anything to the contrary herein, in no event shall the Exercise
Price per share exceed fifty dollars ($50.00) (the "Maximum Price"), as adjusted
pursuant to Section 12.
4. ISSUANCE OF SHARES
Certificates evidencing the shares purchased hereunder shall be delivered
to the holder hereof within a reasonable time (in no event exceeding seven (7)
days) after the date on which this Warrant shall have been
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exercised in accordance with the terms hereof. The Company hereby represents and
warrants that all shares of Warrant Stock which may be issued upon the exercise
of this Warrant will, upon such exercise, be duly and validly authorized and
issued, fully paid and nonassessable and free from all taxes, liens and charges
in respect of the issuance thereof (other than liens or charges created by or
imposed upon the holder of the Warrant Stock).
5. CHARGES, TAXES AND EXPENSES
Issuance of certificates for shares of Warrant Stock upon the exercise of
this Warrant shall be made without charge to the holder hereof for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued in the name of the holder of this Warrant or
in such name or names as may be directed by the holder of this Warrant;
provided, however, that in the event certificates for shares of Warrant Stock
are to be issued in a name other than the name of the holder of this Warrant,
subject to Section 8 below, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof.
6. NO RIGHTS AS SHAREHOLDERS
This Warrant does not entitle the holder hereof to any voting rights or
other rights as a shareholder of the Company prior to the exercise hereof.
7. REGISTRATION RIGHTS
The Warrant Stock issuable upon exercise of this Warrant shall be entitled
to the registration rights set forth in that certain Registration Rights
Agreement by and among the Company, the Original Holder and Disney Enterprises,
Inc.
8. TRANSFERABILITY
Subject to the provisions of the Common Stock and Warrant Purchase
Agreement dated of even date herewith by and between the Company and the
Original Holder and the Governance Agreement, prior to the Expiration Time and
subject to compliance with applicable laws (including federal and state
securities laws), this Warrant and all rights hereunder are transferable by the
holder hereof, in whole or in part, at the office or agency of the Company
referred to in Section 1 hereof only to any subsidiary of the Original Holder,
provided that the Original Holder owns no less than eighty percent (80%)
(directly or indirectly, including without limitation, through any other entity)
of the voting power represented by the outstanding capital stock of such
subsidiary. Any such transfer shall be made upon surrender of this Warrant
together with, if applicable, the Assignment Form attached hereto properly
endorsed. Any transfer not in compliance with this Section 8 shall be deemed
void by the Company.
THIS WARRANT AND ANY SHARES OF WARRANT STOCK ISSUED UPON EXERCISE OF THIS
WARRANT ARE SUBJECT TO RESTRICTIONS ON TRANSFER SET FORTH IN A GOVERNANCE
AGREEMENT BETWEEN, AMONG OTHERS, THE COMPANY AND THE ORIGINAL HOLDER HEREOF. A
COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND
WILL BE FURNISHED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY BY THE
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HOLDER OF RECORD OF THIS WARRANT OR THE SHARES OF WARRANT STOCK ISSUED UPON
EXERCISE OF THIS WARRANT.
9. EXCHANGE AND REGISTRY OF WARRANT
This Warrant is exchangeable, upon the surrender hereof by the registered
holder at the above-mentioned office or agency of the Company, for a new Warrant
in substantially identical form and dated as of such exchange. The Company shall
maintain at the above-mentioned office or agency a registry showing the name and
address of the registered holder of this Warrant. This Warrant may be
surrendered for exchange, transfer, exercise, in accordance with its terms, at
such office or agency of the Company, and the Company shall be entitled to rely
in all respects, prior to written notice to the contrary, upon such registry.
10. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT
On receipt by the Company of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and in
case of any such loss, theft or destruction of this Warrant, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of any such mutilation, on surrender and cancellation of such
Warrant, the Company will execute and deliver to the holder, in lieu thereof, a
new warrant in substantially identical form, dated as of the date of such
cancellation and reissuance.
11. SATURDAYS, SUNDAYS AND HOLIDAYS
If the last or appointed day for the taking of any action or the expiration
of any right required or granted herein shall be a Saturday or a Sunday or shall
be a legal holiday, then such action may be taken or such right may be exercised
on the next succeeding business day.
12. ADJUSTMENT TO NUMBER AND TYPE OF SECURITIES, EXERCISE PRICE
The type and number of securities of the Company issuable upon exercise of
this Warrant, the Maximum Price, and the Vested Price for each share of Warrant
Stock for which this Warrant becomes exercisable are subject to adjustment and
termination as set forth below:
(a) STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any time
the Company shall (i) declare a dividend or otherwise make a distribution to the
holders of its Common Stock in the form of additional shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a larger number of
shares of Common Stock, or (iii) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock, then the number of shares of
Warrant Stock for which this Warrant is exercisable shall be adjusted as
follows:
(A) the number share of shares of Warrant Stock for which this Warrant
is exercisable shall be adjusted to equal the number of shares of
Warrant Stock for which this Warrant is exercisable immediately before
the occurrence of any such event multiplied by fraction, (1) the
numerator of which is the total number of shares of Common Stock
outstanding immediately after the
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occurrence of such event and (2) the denominator of which is the total
number of shares of Common Stock outstanding immediately before the
occurrence of such event; and
(B) the Vested Price and the Maximum Price shall be adjusted to equal
the Vested Price and Maximum Price, respectively, in effect
immediately before the occurrence of such event multiplied by a
fraction (1) the numerator of which is the total number of shares of
Warrant Stock for which this Warrant is exercisable immediately before
the adjustment and (2) the denominator of which is the total number of
shares of Warrant Stock for which this Warrant is exercisable
immediately after the adjustment.
(b) RECLASSIFICATION, CONSOLIDATION OR MERGER. In case of any
reclassification or change of outstanding securities of the class issuable upon
exercise of this Warrant (other than a change in or implementation of a par
value, or as a result of a subdivision or combination), or in case of any
consolidation or merger of the Company with or into another corporation or other
entity, other than a merger with another corporation or other entity in which
the Company is a continuing corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise of
this Warrant, or in case of any sale of all or substantially all of the assets
of the Company, the Company, or such successor or purchasing corporation, as the
case may be, shall execute a new Warrant providing that the holder of this
Warrant shall have the right to exercise such new Warrant and procure upon such
exercise, in lieu of each share of Warrant Stock theretofore issuable upon
exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change,
consolidation, merger or sale by a holder of one share of Warrant Stock. Such
new Warrant shall provide for adjustments provided for in this Section 12. The
provisions of this subsection (b) shall similarly apply to successive
reclassification, change, consolidations, mergers and sales.
(c) CERTAIN OTHER DIVIDENDS AND DISTRIBUTIONS. With respect to any
securities which are of the same class and series as any Warrant Stock for which
this Warrant is exercisable pursuant to Section 2 hereof, if at any time the
Company shall fix a record date for the purpose of determining the holders of
such securities entitled to receive any dividend or other distribution
(including any such distribution made in connection with a consolidation or
merger, but excluding any distribution referred to in subparagraph (b) above) of
(i) any evidence of indebtedness, shares of its capital stock (including any
securities convertible into such securities but excluding Common Stock for which
an adjustment is made pursuant to Section 12(a)) or any other securities or
property of any nature whatsoever, or (ii) any warrants or other rights to
subscribe for or purchase any evidence of its indebtedness, any shares of its
stock (including any securities convertible into such securities but excluding
Common Stock for which an adjustment is made pursuant to Section 12(a)) or any
other of its securities or its property of any nature whatsoever (other than
normal cash dividends or cash distributions permitted under applicable law),
then the number of shares of Warrant Stock for which this Warrant is
exercisable, the Maximum Price and the related Vested Price shall be adjusted as
follows:
(A) the number of shares of Warrant Stock for which this Warrant
is exercisable shall be adjusted to equal the number of shares of
Warrant Stock for which this Warrant is exercisable immediately
prior to such distribution or dividend multiplied by a fraction,
(1) the numerator of which shall be either (i) the Current Market
Price per share of Warrant Stock on such record date or (ii) if
the Warrant Stock is not quoted on Nasdaq or is not listed on a
Market, the fair market value determined in accordance with the
procedures set forth in clause (ii) of paragraph 3 hereof, and (2)
the denominator of
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which shall be either (i) the Current Market Price per share of
the Warrant Stock on such record date or (ii) if the Warrant Stock
is not quoted on Nasdaq or is not listed on a Market, the fair
market value determined in accordance with the procedures set
forth in clause (ii) of paragraph 3 hereof, minus the amount
allocable to one share of the Warrant Stock of the fair value (as
determined in good faith by the Board of Directors of the Company
and, unless waived by the holder hereof, supported by an opinion
from an investment banking firm of nationally recognized standing
approved by the Holder, which approval shall not be unreasonably
withheld) of any and all such evidences of indebtedness, shares of
stock, other securities or property or warrants or other
subscription or purchase rights so distributable; and
(B) the Vested and Maximum Price shall be adjusted to equal the
Vested Price and Maximum Price, respectively, in effect
immediately before the occurrence of any such event multiplied by
a fraction, (1) the numerator of which is the total number of
shares of Warrant Stock for which the Warrant is exercisable
immediately before the adjustment, and (2) the denominator of
which is the total number of shares of Warrant Stock for which
this Warrant is exercisable immediately after the adjustment;
PROVIDED THAT (i) a reclassification of the Warrant Stock (other
than a change in par value from par value to no par value or from
no par value to par value) into shares of Warrant Stock and shares
of any other class of stock shall be deemed a distribution by the
Company to the holders of its Warrant Stock of such shares of such
other class of stock within the meaning of this subparagraph (c)
and, (ii) if the outstanding shares of Warrant Stock shall be
changed into a larger or smaller number of shares of Warrant Stock
as a part of such reclassification, such change shall be deemed a
subdivision or combination, as the case may be, of the outstanding
shares of Warrant Stock within the meaning of subparagraph (a).
(d) CERTIFICATE AS TO ADJUSTMENTS. In case of any adjustment in the
Exercise Price, Maximum Price or number and type of securities issuable on the
exercise of this Warrant, the Company will promptly give written notice thereof
to the holder of this Warrant in the form of a certificate, certified and
confirmed by an officer of the Company, setting forth such adjustment and
showing in reasonable detail the facts upon which such adjustment is based.
(e) FRACTIONAL INTERESTS. In computing adjustments under this Section
12, fractional interests in Common Stock shall be taken into account by rounding
up to the nearest whole number of shares.
(f) WHEN ADJUSTMENT TO BE MADE. No adjustment in the Maximum Price or
the Exercise Price shall be required by this Section 12 if such adjustment
either by itself or with other adjustment not previously made would require an
increase or decrease of less than one percent (1%) in such price. Any such
adjustment representing a change of less than such minimum amount which is
postponed shall be carried forward and made as soon as such adjustment, together
with other adjustments required by this Section 12 and not previously made,
would result in a minimum adjustment. Notwithstanding the foregoing, any
adjustment carried forward shall be made no less than ten Business Days prior to
the Termination Date. All calculations under this Section 12 shall be made to
the nearest cent. For the purposes of any adjustment, any specified event shall
be deemed to have occurred at the close of business on the date of its
occurrence.
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(g) WHEN ADJUSTMENTS NOT REQUIRED. If the Company shall fix a record
date for the purpose of determining the holders of its Common Stock entitled to
receive a dividend or distribution and shall, thereafter and before the
distribution to stockholders thereof legally abandon its plan to pay or deliver
such dividend or distribution then thereafter no adjustment shall be required by
reason of the taking of such record and any such adjustment previously made in
respect thereof shall be rescinded and annulled.
(h) In addition, the Company acknowledges that the Original Holder is
entitled to certain rights to maintain its percentage ownership of the Company
as set forth in Section 3.1 of the Governance Agreement.
13. NOTICES OF RECORD DATE, ETC.
In the event of:
(a) any taking by the Company of a record of the holders of any
securities issuable upon exercise of this Warrant for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right,
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, or any transfer of all or
substantially all the assets of the Company to, or consolidation or merger of,
the Company with or into any person,
(c) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company, or
(d) any proposed issue or grant by the Company to the holders of any
securities issuable upon exercise of this Warrant of any shares of stock of any
class or any other securities, or any right or warrant to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities,
then, and in each such event, the Company will mail to the holder hereof a
notice specifying (i) the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, (ii) the date on which any
such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as to which the holders of record of
Warrant Stock shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up, (iii) the amount and character of any
stock or other securities, or rights or warrants with respect thereto, proposed
to be issued or granted, the date of such proposed issue or grant and the
persons or class of persons to whom such proposed issue or grant is to be
offered or made, and (iv) in reasonable detail, the facts, including the
proposed date, concerning any other such event. Such notice shall be delivered
to the holder hereof at least twenty (20) days prior to the date therein
specified.
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14. REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to the holder hereof that:
(a) during the period this Warrant is outstanding, the Company will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of Warrant Stock upon the exercise of this
Warrant;
(b) the issuance of this Warrant shall constitute full authority to
the Company's officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the shares of
Warrant Stock issuable upon exercise of this Warrant;
(c) the Company has all requisite legal and corporate power to execute
and deliver this Warrant, to sell and issue the Warrant Stock hereunder and to
carry out and perform its obligations under the terms of this Warrant;
(d) all corporate action on the part of the Company, its directors and
shareholders necessary for the authorization, execution, delivery and
performance of this Warrant by the Company, the authorization, sale, issuance
and delivery of the Warrant Stock issuable upon exercise of the Warrant, the
grant of registration rights as provided herein and the performance of the
Company's obligations hereunder has been taken;
(e) the Warrant Stock, when issued in compliance with the provisions
of this Warrant will be validly issued, fully paid and nonassessable, and free
of any liens or encumbrances created by or through the Company, and will be
issued in compliance with all applicable federal and state securities laws; and
(f) the issuance of the Warrant Stock will not be subject to any
preemptive rights, rights of first refusal or similar rights other than those
granted to the Original Holder in the Governance Agreement.
15. COOPERATION
The Company will not, by amendment of its Certificate of Incorporation or
through any reorganization, recapitalization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Company, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holder of the Warrant against impairment.
16. MISCELLANEOUS
(a) REMEDIES. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Warrant and hereby agrees to waive the defense in any action
for specific performance that a remedy at law would be adequate. Accordingly,
it is agreed that the holder of this Warrant shall be entitled to an injunction,
restraining order or other equitable relief to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court
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of competent jurisdiction in the United States or any state thereof. Such
remedies shall be cumulative and non-exclusive and shall be in addition to any
other rights and remedies the parties may have under the Agreement.
(b) SEVERABILITY. If the event that any provision of this Warrant or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this Warrant
will continue in full force and effect and the application of such provision to
other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such
void or unenforceable provision of this Warrant with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of such void or unenforceable provision.
(c) SUCCESSORS AND ASSIGNS. Subject to the provisions of paragraph 8
hereof, this Warrant shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties, including without limitation and
without the need for an express assignment.
17. GOVERNING LAW
THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED
WHOLLY WITHIN SUCH STATE.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officers.
Dated: November 18, 1998 INFOSEEK CORPORATION
By: /s/ Harry M. Motro
------------------
Harry M. Motro
President and Chief Executive Officer
Attest:
/s/ Andrew E. Newton
____________________
Andrew E. Newton
Secretary
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FORM OF
NOTICE OF EXERCISE
To: INFOSEEK CORPORATION
(1) The undersigned hereby elects to purchase _________________ shares of
Common Stock of Infoseek Corporation pursuant to the terms of the attached
Warrant, and has tendered herewith payment of the purchase price in full by wire
transfer.
(2) Please issue a certificate or certificates representing said shares in
the name of the undersigned.
(3) The undersigned represents that the aforesaid shares are being acquired
for the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares, except in
compliance with applicable federal and state securities laws and that the
aforesaid shares are subject, if applicable, to the Governance Agreement between
Infoseek Corporation, Disney Enterprises, Inc. and The Walt Disney Company dated
as of June 15, 1998.
(4) The undersigned accepts such shares, subject to the terms relating to
registration rights under the Registration Rights Agreement dated as of
______________, 1998.
____________________ __________________________________
(Date) (Signature)
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ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required
information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to
__________________________________________________________
(Please Print)
who, by signature below, is confirmed to be a subsidiary of the Original Holder
(as defined in the Warrant) such that the Original Holder owns no less than
eighty percent (80%) of the voting power represented by the outstanding capital
stock of the subsidiary and whose address is____________________________________
(Please Print)
____________________________
Dated:_____________________________________________
Holder's Signature:________________________________
Holder's Address:__________________________________
___________________________________________________
Guaranteed Signature:___________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
<PAGE>
EXHIBIT 7
GOVERNANCE AGREEMENT
BY AND
AMONG
INFOSEEK CORPORATION
A DELAWARE CORPORATION,
DISNEY ENTERPRISES, INC.,
A DELAWARE CORPORATION
AND
THE WALT DISNEY COMPANY,
A DELAWARE CORPORATION
<PAGE>
GOVERNANCE AGREEMENT
This Governance Agreement (hereinafter the "Agreement") is made as of June
18, 1998, by and among Disney Enterprises, Inc., a Delaware corporation ("DEI"),
The Walt Disney Company, a Delaware corporation ("TWDC") (DEI and TWDC are
together referred to herein as the "Purchaser" and for all purposes hereunder
are treated as a single person), and Infoseek Corporation, a Delaware
corporation (the "Company" which term, during the Interim Period, shall be
deemed to refer to Infoseek Corporation, a California corporation, the parent
corporation of the Delaware corporation until the Effective Time). This
Agreement shall be effective on the date hereof; provided, however, that this
Agreement shall terminate in its entirety, and be of no further force and effect
in the event that the Merger Agreement (as defined in Article I below)
terminates pursuant to Section 8 thereof.
A. The Company and DEI have executed the Merger Agreement and entered into
those certain Transaction Agreements (as defined in the Merger Agreement);
B. The Company and the Purchaser desire, in connection with the
consummation of the several transactions contemplated by the Merger Agreement,
to make certain covenants and agreements with one another pursuant to this
Agreement;
C. It is a mutual condition to the execution of the Merger Agreement that
the Purchaser and the Company shall have entered into this Agreement.
NOW THEREFORE, in consideration of the covenants and promises set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
ARTICLE I
DEFINITIONS
For the purpose of this Agreement, the following terms shall have the
meanings specified with respect thereto below:
"Affiliate" shall have the meaning set forth in Rule 12b-2 of the rules and
regulations promulgated under the Exchange Act; provided, however, that for
purposes of this Agreement, the Purchaser and its Affiliates, on the one hand,
and the Company and its Affiliates, on the other, shall not be deemed to be
"Affiliates" of one another.
"Beneficially Own" or "Beneficial Ownership" shall have the meaning set
forth in Rule 13d-3 of the rules and regulations promulgated under the Exchange
Act.
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"Change in Control of the Company" shall mean any of the
following: (i) a merger, consolidation or other business combination or
transaction to which the Company is a party if the shareholders of the Company
immediately prior to the effective date of such merger, consolidation or other
business combination or transaction, as a result of such share ownership, have
Beneficial Ownership of voting securities representing less than 50% of the
Total Current Voting Power of the surviving corporation following such merger,
consolidation or other business combination or transaction; (ii) an acquisition
by any person, entity or 13D Group of direct or indirect Beneficial Ownership of
Voting Stock of the Company representing 25% or more of the Total Current Voting
Power of the Company; (iii) a sale of all or substantially all the assets of the
Company; or (iv) a liquidation or dissolution of the Company.
"Change in Control of the Purchaser" shall mean, with respect to either of
TWDC or DEI, any of the following: (i) a merger, consolidation or other business
combination or transaction to which such person is a party if the shareholders
of such person immediately prior to the effective date of such merger,
consolidation or other business combination or transaction have Beneficial
Ownership of voting securities representing less than 50% of the Total Current
Voting Power of the surviving corporation following such merger, consolidation
or other business combination or transaction; (ii) an acquisition by any person,
entity or 13D Group of direct or indirect Beneficial Ownership of voting
securities of such person representing 50% or more of the Total Current Voting
Power of such person; (iii) a sale of all or substantially all the assets of
such person; or (iv) a liquidation or dissolution of such person.
"Closing" shall have the meaning set forth in the Merger Agreement.
"Company Competitor" shall mean Yahoo! Inc., Lycos, Inc., Excite, Inc.,
Netscape Communications Corporation, Microsoft Corporation, CNET, America
Online, Inc. or any of their respective Affiliates, or any successor thereto.
"Company Common Stock" shall mean shares of the Common Stock of the
Company.
"Company Controlled Corporation" shall mean a corporation of which the
Company owns not less than 80% of the outstanding voting power entitled to vote
in the election of directors of such corporation.
"Company Acquisition Issuance Notice" shall have the meaning set forth in
Section 3.1(c)(i).
"Company Financing Issuance Notice" shall have the meaning set forth in
Section 3.1(b)(i).
"Company's Notice" shall have the meaning set forth in Section 3.1(c)
below.
"Company's Other Issuance Notice" shall have the meaning set forth in
Section 3.1(d).
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"Disinterested Board Approval" shall mean the affirmative vote or written
consent of a majority of the Disinterested Directors duly obtained in accordance
with the applicable provisions of the Company's bylaws and applicable law.
"Disinterested Director" means, during the Standstill Period, a member of
the Board of Directors of the Company who is not a Purchaser Director and, after
the Standstill Period, a member of the Board of Directors of the Company who is
an Independent Director.
"Disinterested Shareholder" shall mean any shareholder of the Company who
is not the Purchaser or an Affiliate of the Purchaser or a member of a 13D
Group in which the Purchaser or an Affiliate of the Purchaser is also a member.
"Disinterested Shareholder Approval" shall mean the affirmative vote or
written consent of greater than 50% of the Total Current Voting Power of all
Disinterested Shareholders duly obtained in accordance with the applicable
provisions of the Company's bylaws and applicable law.
"Effective Time" shall have the meaning set forth in the Merger Agreement.
"Estimated Purchase Price" shall have the meaning set forth in Section
3.1(b).
"Event Requiring Disinterested Board Approval" shall mean: (i) any
amendment to the Company's bylaws or Certificate of Incorporation, (ii) any
transaction between the Company (or any Affiliate of the Company) and the
Purchaser (or any Affiliate of the Purchaser), except with respect to the
several transactions contemplated by the various agreements between the Company
and the Purchaser entered into on the date hereof, which (a) requires payments
by any party in excess of $5 million or (b) contemplates a term equal to or in
excess of three years, (iii) adoption of a "poison pill" share purchase rights
plan by the Company, or any amendment of, or redemption or exchange of, rights
issued pursuant to any such plan provided that, such plan excludes from the
definition of "Acquiring Person" therein Purchaser and wholly owned (direct or
indirect) subsidiaries of the Purchaser so long as neither Purchaser nor any
Purchaser Affiliate has breached Section 2.1(a), (d), (e) or (f) of this
Agreement and so long as Purchaser Beneficially owns at least 5% of the Total
Current Voting Power, (iv) any transfer of any Shares or Non-Voting Convertible
Securities by the Purchaser to a Company Competitor in a private placement (as
opposed to a public offering), (v) during the Standstill Period, any transfer of
25% or more of the Voting Stock by the Purchaser in a private placement (as
opposed to a public offering) to any single person or 13D Group, (vi) commencing
a tender offer or exchange offer by Purchaser or any Affiliate of Purchaser (or
any 13D Group that includes Purchaser or any Affiliate of Purchaser) to purchase
or exchange for cash or other consideration any Voting Stock, except for a
Purchaser Tender Offer made (A) during a Third Party Tender Offer, or (B)
following a Standstill Termination Event so long as the cause of the Standstill
Termination Event was not a Purchaser Tender Offer, (vii) any of the events
described in Sections 2.1(d), 2.1(e) or 2.1(f) below, (viii) any termination by
the Purchaser (not the Company) of that certain License Agreement of even date
herewith between DEI and the Company (A) pursuant to Section 10.1(b) thereof, at
any time after a majority of
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the members of the Company's Board of Directors are Purchaser Directors, (B)
pursuant to Section 10.1(a) thereof if the event that causes Purchaser to have
the right to terminate pursuant to such Section 10.1(a) is (y) a transfer by
the Purchaser of Shares which results in a third party owning 25% or more of
the Total Current Voting Power of the Company (other than a transfer pursuant
to a Third Party Tender Offer whether for 25% of the Total Current Voting
Power or a greater or lesser amount) or (z) after a majority of the members of
the Company's Board of Directors are Purchaser Directors, an issuance of
shares of common stock by the Company which results in a third party owning
25% or more of the Total Current Voting Power of the Company, or (C) pursuant
to Section 10.1(c) thereof if the event that causes the Purchaser to have the
right to terminate pursuant to Section 10.1(c) is that the Purchaser, in its
capacity as a shareholder (and not as a creditor) of the Company, has applied
for or actively supported the appointment of a receiver for the Company or a
Company Controlled Corporation and such receiver has been appointed, (ix) a
transfer by the Purchaser of Shares which results in a third party owning 25%
or more of the Total Current Voting Power of the Company (other than a
transfer pursuant to Third Party Tender Offer whether for 25% of the Total
Current Voting Power or a greater or lesser amount) (x) during the Standstill
Period, or after the Standstill Period, unless the Purchaser owns 50% or more
of the Total Current Voting Power, any of items (i) through (iv) set forth as
an Event Requiring Disinterested Shareholder Approval, (xi) any dissolution or
liquidation of the Company or a Company Controlled Corporation, (xii)
voluntary filing of a petition for bankruptcy or receivership by the Company
or a Company Controlled Corporation, or the failure to oppose any other
person's petition for bankruptcy or any other person's action to appoint a
receiver of the Company or a Company Controlled Corporation, or (xiii) any
amendment, modification or waiver (including a termination other than in
accordance with the various termination provisions contained herein) of any of
the provisions of this Agreement.
"Event Requiring Disinterested Shareholder Approval" shall mean: (i) the
amendment of any portion of the Company's bylaws that effectuates therein the
provisions of Section 4.1 or 4.2 of this Agreement, (ii) a sale or disposition
of all or substantially all of the Company's assets, (iii) except with respect
to the several transactions contemplated by the various agreements between the
Company and the Purchaser entered into as of the date hereof, the issuance of
securities of the Company representing 20% or more of (a) the then Total
Outstanding Company Equity or (b) the then Total Current Voting Power of the
Company, or (iv) a merger, consolidation, or other reorganization of the Company
with or into Purchaser or any Affiliate of the Purchaser.
"Event Requiring Supermajority Board Approval" shall mean (i) any amendment
of the Company's bylaws or the Company's Certificate of Incorporation, (ii) a
Change in Control of the Company or any subsidiary of the Company, (iii) a sale
of more than 15% of the total assets of the Company or any subsidiary of the
Company, (iv) issuances of securities of the Company representing 15% or more of
the Total Current Voting Power, (v) the sale or issuance of any securities of
the Company for consideration of $200 million or more, (vi) transactions
involving expenditures of cash by the Company or any subsidiary or incurrence of
indebtedness by the Company or any subsidiary, in either case, in excess of $200
million, or (vii) appointment of a new Chief Executive Officer of the
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Company; provided that, during the Interim Period, the amount of consideration
set forth in clauses (v) and (vi) above shall be $25 million.
"Excess Directors" shall have the meaning set forth in Section 3.2(e).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, as of any date of determination, (i) in the case
of Company Common Stock, the average of the closing sale prices of Company
Common Stock during the 10 trading days immediately preceding such date of
determination on the principal U.S. or foreign securities exchange on which such
Company Common Stock is listed or, if such Company Common Stock is not listed or
primarily traded on any such exchange, the average of the closing sale prices or
the closing bid quotations of such security during the 10-day period preceding
such date of determination on Nasdaq or any comparable system then in use or, if
no such quotations are available, the fair market value of such security as of
such date of determination as determined in good faith by a majority of the
Independent Directors and (ii) in the case of property other than cash or a
security, the fair market value of such property on such date of determination
as determined in good faith by a majority of Independent Directors; provided,
however, if Purchaser disputes such determination, then the fair market value
shall be as determined by two Investment Banks, with one Investment Bank to be
selected by each of the Company and the Purchaser for such purpose. Each such
Investment Bank shall determine the fair market value and shall deliver its
written valuation to the Company and the Purchaser within thirty (30) days after
selection. In the event that such Investment Banks do not agree on the fair
market value, the fair market value shall be the average of the two valuations,
except that if the higher of the two valuations is greater than 100% of the
lower valuation, the Investment Banks shall select another Investment Bank of
similar qualifications who shall determine the fair market value independently
of such selection in accordance with the procedures specified in the foregoing
sentence. None of the Company, the Purchaser or the initial Investment Banks
shall provide the third Investment Bank with information regarding the valuation
of the initial Investment Banks. The valuation of the third Investment Bank
shall be arithmetically averaged with the two prior valuations and the valuation
farthest from the average of the three valuations shall be disregarded. The
fair market value shall be the average of the two remaining valuations. The
Company and the Purchaser shall each pay one-half of the expense of the
valuation.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Independent Director" shall mean a director of the Company (i) who is not
and has never been an officer or employee of the Company, any Affiliate of the
Company or of an entity that derived 10% or more of its revenues in its most
recent fiscal year from transactions involving the Company or any Affiliate of
the Company, (ii) who is not and has never been an officer or employee and is
not currently a director of Purchaser or any Affiliate of Purchaser or of an
entity that derived more than 10% of its revenues in its most recent fiscal year
from transactions involving Purchaser or any Affiliate of Purchaser and (iii)
who has no compensation, consulting or contracting arrangement with the Company,
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Purchaser or their respective Affiliates or any other entity such that a
reasonable person would regard such director as likely to be unduly influenced
by management of the Company or Purchaser, respectively, and shall, by
definition, not include any Purchaser Director.
"Interim Period" shall mean the period of time from the date first written
above until the Effective Time.
"Investment Bank" means any nationally recognized investment banking firm
that has not had any significant relationship with the Company or its Affiliates
or the Purchaser or its Affiliates in the last 12 months.
"Merger Agreement" shall mean that certain Agreement and Plan of
Reorganization by and among Starwave Corporation, a Washington corporation, and
the parties hereto except TWDC.
"Nasdaq" shall mean the Nasdaq Stock Market.
"New Securities" shall mean an issuance by the Company of Voting Stock or
Non-Voting Convertible Securities, excluding any such issuance (i) upon
exercise, conversion or exchange of any security convertible into or exercisable
or exchangeable for Voting Stock outstanding on the date of this Agreement
(including, but not limited to Non-Voting Convertible Securities issued under
the Company's 1996 Stock Option/Stock Issuance Plan), (ii) upon exercise of any
option, warrant or other right to acquire any Voting Stock or Non-Voting
Convertible Securities that was previously subject to the Purchaser's right to
maintain under Section 3.1 below, (iii) of Voting Stock and Warrants to
Purchaser in connection with the several transactions contemplated by the Merger
Agreement and Securities Purchase Agreement, or (iv) Securities issued pursuant
to the exercise by the Purchaser of its rights pursuant to Section 3.1 below.
"Non-Voting Convertible Securities" shall mean any securities of the
Company which are convertible into, exchangeable for or otherwise exercisable to
acquire Voting Stock of the Company, including convertible securities, warrants,
rights or options to purchase Voting Stock of the Company.
"Purchase Price" shall have the meaning set forth in Section 3.1(a) below.
"Purchaser Competitor" shall mean Time Warner Inc., NewsCorp, Viacom Inc.,
Sony Corporation, Seagrams/Universal, Dreamworks SKG, MGM, Polygram, CBS
Corporation, NBC, TCI Satellite Entertainment Inc., USA Networks Inc., America
Online, Inc., Microsoft Corporation and any of their respective Affiliates, or
any successor thereto.
"Purchaser Controlled Corporation" shall mean a corporation of which the
Purchaser owns not less than 80% of the outstanding voting power entitled to
vote in the election of directors of such corporation.
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"Purchaser Director" shall mean a member of the Board of Directors of the
Company who (i) is designated for such position by Purchaser in accordance with
Section 3.2 below, or (ii) is or has been an officer or employee of Purchaser or
any Affiliate of Purchaser or of an entity that derived more than 10% of its
revenues in its most recent fiscal year from transactions involving Purchaser or
any Affiliate of Purchaser, or (iii) has a compensation, consulting or
contracting arrangement with Purchaser or any of its Affiliates or any other
entity such that a reasonable person would regard such director as likely to be
unduly influenced by management of Purchaser.
"Purchaser's Acquisition Issuance Notice" shall have the meaning set forth
in Section 3.1(c)(ii).
"Purchaser's Financing Issuance Notice" shall have the meaning set forth in
Section 3.1(b)(ii).
"Purchaser's Pro Rata Portion" shall mean either (i) in the case of any
issuances of New Securities for cash consideration in the manner described in
Section 3.1(b) hereof, 43% of the number of New Securities, or (ii) in the case
of any issuance of New Securities for non-cash consideration in the manner
described in Section 3.1(c) hereof that number of New Securities that solves for
"X" according to the following formula: X/(the number of New Securities +
X)=43%.
"Purchaser Pro Rata Vote Threshold" means 43% of the Total Current Voting
Power.
"Purchaser Tender Offer" shall mean a bona fide public tender offer subject
to the provisions of Regulation 14D when first commenced within the meaning of
Rule 14d-2(a) of the rules and regulations under the Exchange Act, by the
Purchaser or any Affiliate of the Purchaser (or any 13D Group that includes
Purchaser or any Affiliate of Purchaser) to purchase or exchange for cash or
other consideration any Voting Stock and which consists of an offer to acquire
100% of the Total Current Voting Power of the Company then in effect (other than
Shares owned by the Purchaser or any Affiliate of the Purchaser) and is
conditioned (which condition may not be waived) on a majority of the shares of
Voting Stock held by Disinterested Shareholders being tendered and not withdrawn
with respect to such offer.
"Purchaser's Notice" shall have the meaning set forth in Section 3.1(c)
below.
"Response Notice" shall have the meaning set forth in Section 2.3(a)(ii)
below.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Purchase Agreement" shall mean that certain Common Stock and
Warrant Purchase Agreement, between the Company and TWDC.
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"Shares" shall mean any shares of Voting Stock that are Beneficially Owned
by the Purchaser, including any share of Voting Stock acquired upon exercise of
any Warrants, but specifically excluding any shares of Company Common Stock
subject to the Warrant or any other Non-Voting Convertible Securities that have
not yet been exercised, converted or exchanged for Voting Stock.
"Share Repurchase Price" shall have the meaning set forth in Section 2.5
below.
"Standstill Limit" shall mean 49.9% of the Total Current Voting Power.
"Standstill Period" shall mean the period beginning on the date hereof and
ending on the occurrence of a Standstill Termination Event.
"Standstill Reinstatement Event" shall mean the occurrence of either of the
following prior to the third anniversary of the Closing: (i) withdrawal or
termination of a Third Party Tender Offer at any time during which a Purchaser
Tender Offer is not then pending or (ii) withdrawal, termination, or material
alteration of a Purchaser Tender Offer other than an increase in price.
"Standstill Revised Limit" shall mean the percentage of the Total Current
Voting Power represented by all Shares held by the Purchaser as of the
occurrence of a Standstill Reinstatement Event.
"Standstill Termination Event" shall mean the earliest to occur of the
following: (i) the third anniversary of the Closing, (ii) a Change in Control
of the Company, (iii) a Third Party Tender Offer, (iv) a Purchaser Tender Offer,
or (v) any person who is not the Purchaser or an Affiliate of the Purchaser or
13D Group to which the Purchaser or an Affiliate of the Purchaser is a member
has acquired any Voting Stock which results in such person or 13D Group owning
or having the right to acquire more than 25% of the Total Current Voting Power
unless such acquisition of shares by such person or 13D Group was approved by
the Company's Board of Directors pursuant to Supermajority Board Approval;
provided however, that upon a Standstill Reinstatement Event, the Standstill
Termination Event shall be deemed not to have occurred and the Standstill Period
shall be deemed to be reinstated except that, upon the third anniversary of the
Closing, the Standstill Period shall be permanently terminated for all purposes
hereunder; and provided further that, upon a Standstill Reinstatement Event, if
the Standstill Revised Limit is greater than the Standstill Limit, then the
Standstill Revised Limit and not the Standstill Limit shall thereafter be deemed
the Standstill Limit for all purposes hereunder.
"Supermajority Board Approval" shall mean the affirmative vote of 75% or
more of the members of Company's Board of Directors; provided that, during the
Interim Period or at any time that Purchaser Beneficially Owns more than 25% of
the Total Current Voting Power of the Company and, notwithstanding that
Purchaser voted all shares Beneficially Owned by Purchaser in the most recent
election of members of the Board of Directors of the Company for all of the
designees of Purchaser to the Board of Directors of the Company (which number of
designees was the maximum number Purchaser was entitled to designate pursuant to
the provisions of Section 3.2(b)), the number of Purchaser Directors is fewer
than the number Purchaser is entitled to designate pursuant to the provisions
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of Section 3.2(b), a Supermajority Board Approval shall not be deemed to have
been obtained unless the written consent of Purchaser shall have been obtained
with respect to the Event Requiring Supermajority Board Approval.
"Third Party Tender Offer" shall mean a bona fide public tender offer
subject to the provisions of Regulation 14D when first commenced within the
meaning of Rule 14d-2(a) of the rules and regulations under the Exchange Act, by
a person or 13D Group (which is not made by and does not include any of the
Company, the Purchaser or any Affiliate of either of them) to purchase or
exchange for cash or other consideration any Voting Stock and which consists of
an offer to acquire 25% or more of the then Total Current Voting Power of the
Company.
"Total Current Voting Power" shall mean, with respect to any corporation
the total number of votes which may be cast in the election of members of the
Board of Directors of the corporation if all securities entitled to vote in the
election of such directors are present and voted.
"Total Outstanding Company Equity" shall mean the total number of shares of
outstanding capital stock of the Company, on a fully diluted basis assuming the
conversion, exchange or exercise of all outstanding securities, whether vested
or unvested, convertible, exchangeable or exercisable into or for Company Common
Stock.
"Transfer Notice" shall have the meaning set forth in Section 2.3(a)(i)
below.
"Voting Stock" shall mean shares of the Company Common Stock and any other
securities of the Company having the ordinary power to vote in the election of
members of the Board of Directors of the Company.
"Warrants" shall mean those certain warrants exercisable to purchase
Company Common Stock sold to TWDC pursuant to the Securities Purchase Agreement
and any warrants acquired by the Purchaser from the Company pursuant to the
exercise of Purchaser's rights under Section 3.1 below.
"Warrant Coverage" shall have the meaning set forth in Section 3.1(a)(ii)
below.
"Warrant Price" shall have the meaning set forth in Section 3.1(a)(ii)
below.
"Warrant Repurchase Price" shall have the meaning set forth in Section 2.5
below.
"13D Group" means any group of persons formed for the purpose of acquiring,
holding, voting or disposing of Voting Stock which would be required under
Section 13(d) of the Exchange Act, and the rules and regulations promulgated
thereunder, to file a statement on Schedule 13D pursuant to Rule 13d-1(a) or a
Schedule 13G pursuant to Rule 13d-1(c) with the SEC as a "person" within the
meaning of Section 13(d)(3) of the Exchange Act if such group beneficially owned
Voting Stock representing more than 5% of any class of Voting Stock then
outstanding.
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ARTICLE II
THE PURCHASER'S COVENANTS AND THE COMPANY'S RIGHTS
2.1 THE PURCHASER'S STANDSTILL OBLIGATIONS.
(a) Notwithstanding anything to the contrary contained herein and
only during the Standstill Period, none of the Purchaser, any Affiliate of the
Purchaser or any 13D Group of which Purchaser or any of its Affiliates is a
member shall, directly or indirectly, acquire or Beneficially Own Voting Stock
or authorize or make a tender offer, exchange offer or other offer therefor,
if the effect of such acquisition would be to increase the percentage of Total
Current Voting Power represented by all Shares Beneficially Owned by the
Purchaser (including any Shares acquired by the Purchaser pursuant to the
exercise of any Warrant but excluding any Shares that remain subject to the
Warrant) to more than the Standstill Limit, provided that, the foregoing shall
not prohibit the Purchaser and/or any of its Affiliates from making a
Purchaser Tender Offer during the Standstill Period that has been approved by
a majority of Disinterested Directors.
(b) The Purchaser shall not be deemed to have violated its
covenants under this Section 2.1 by virtue of any increase in the aggregate
percentage of the Total Current Voting Power of the Company represented by
Shares Beneficially Owned by the Purchaser or its Affiliates if such increase
is the result of a recapitalization of the Company, a repurchase of securities
by the Company or other actions taken by the Company or any of the Company's
Affiliates that have the effect of reducing the Total Current Voting Power.
(c) During the Standstill Period, the Purchaser shall notify the
Company of the Purchaser's acquisition of the Beneficial Ownership of Voting
Stock or Non-Voting Convertible Securities (other than pursuant to the
Securities Purchase Agreement, the Warrant or an exercise of Purchaser's rights
to maintain set forth in Article III of this Agreement) promptly after each such
acquisition and in any event not more than five (5) business days thereafter.
All of the Purchaser's acquisitions of Shares shall comply with applicable
federal and state securities laws and be subject to the provisions of this
Agreement.
(d) During the Standstill Period, the Purchaser shall not, without
first obtaining Disinterested Board Approval, solicit proxies with respect to
any Voting Stock, nor shall it become a "participant" in any "election
contest" (as such terms are used in Rule 14(a)-11 of Regulation 14A
promulgated under the Exchange Act) relating to the election of directors of
the Company. Purchaser shall not be deemed to be such "participant" merely by
reason of the membership of the Purchaser's Directors on the Company's Board
of Directors pursuant to the terms of this Agreement.
(e) During the Standstill Period, the Purchaser shall not, without
first obtaining Disinterested Board Approval, deposit any shares of Voting
Stock in a voting trust or, except as
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otherwise provided or contemplated herein (including Section 2.4 hereof), or
subject any Voting Stock to any arrangement or agreement with any third party
with respect to the voting of such Voting Stock.
(f) During the Standstill Period, the Purchaser shall not, without
first obtaining Disinterested Board Approval, join a 13D Group, partnership,
limited partnership, syndicate or other group, or otherwise act in concert with
any third person for the purpose of acquiring, holding, voting or disposing of
Voting Stock or Non-Voting Convertible Securities.
2.2 THE PURCHASER'S TRANSFER RESTRICTIONS.
(a) Unless the Purchaser Beneficially Owns less than 5% of the
Total Current Voting Power or until the Purchaser owns at least 90% of the
Total Current Voting Power, the Purchaser shall not, directly or indirectly,
sell, transfer, pledge, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise dispose of, any Shares or Non-Voting
Convertible Securities except: (i) to the Company; (ii) to a Purchaser
Controlled Corporation, so long as such Purchaser Controlled Corporation
agrees to hold such Shares subject to all of the provisions of Sections 2.1,
2.2, 2.3, 2.4 and 2.5 of this Agreement, and agrees to transfer such Voting
Stock to the Purchaser or another Purchaser Controlled Corporation if it
ceases to be a Purchaser Controlled Corporation; (iii) after the Standstill
Period, pursuant to a bona fide firmly underwritten public offering (which
underwriter or underwriters of such offering shall include, if requested by a
majority of the Disinterested Directors, an underwriter selected by a majority
of the Disinterested Directors) registered under the Securities Act; (iv)
after the Standstill Period, pursuant to a rights offering, dividend or other
pro rata distribution to the stockholders of the Purchaser; (v) after the
Standstill Period, pursuant to Rule 144 promulgated under the Securities Act
(including observance of the requirements of paragraph (f) of such rule,
whether or not otherwise applicable to such disposition); (vi) after the
Standstill Period, in private placement transactions exempt from the
registration requirements of the Securities Act; provided that if such private
placement transactions described in this subclause, directly or indirectly,
result in the transfer to any single person or 13D Group of 5% or more of the
Total Current Voting Power of the Company, such transfer shall be subject to
the provisions of Section 2.3 below; (vii) in response to a bona fide public
tender offer or exchange offer subject to Regulation 14D or Rule 13e-3
promulgated under the Exchange Act for cash or other consideration which is
made by or on behalf of the Company, or (viii) in response to a Third Party
Tender Offer (whether for 25% of the Total Current Voting Power or a greater
or lesser amount) which is not opposed by the Board of Directors of the
Company within the time such Board is required, pursuant to the rules and
regulations promulgated under the Exchange Act, to advise Company shareholders
of such Board's position on such offer, or (ix) in response to any Third Party
Tender Offer which, if successful, would result in such person or group owning
or having the right to acquire more than 50% of the Total Current Voting
Power.
(b) Notwithstanding the foregoing paragraph, unless the Purchaser
Beneficially Owns less than 5% of the Total Current Voting Power or until the
Purchaser owns at least 90% of the Total Current Voting Power, any sale,
transfer or other disposition that constitutes an Event Requiring
Disinterested
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Board Approval under subclause (iv) or (v) of the definition thereof shall be
prohibited, unless Disinterested Board Approval is first obtained in
connection with such proposed transfer. In addition, except in the case of a
bona fide offer or proposal that, if consummated, would result in a Change in
Control of the Company (in which event the following restrictions would
terminate), unless the Purchaser Beneficially Owns less than 5% of the Total
Current Voting Power or until the Purchaser owns at least 90% of the Total
Current Voting Power, the Purchaser agrees (i) not to transfer any Shares
acquired upon exercise of any Warrants for a one year period after the date of
the acquisition of such Shares, except to a Purchaser Controlled Corporation
or upon the occurrence of a Third Party Tender Offer as described in paragraph
(a) (vii), (viii) or (ix) above and (ii) not to transfer any Warrants except
to a Purchaser Controlled Corporation.
(c) No Transferee of the Shares or Non-Voting Convertible Securities
sold, transferred or otherwise disposed of by the Purchaser as permitted by
this Section 2.2 shall be bound (other than a Purchaser Controlled Corporation
after a transfer of shares in accordance with the provisions of (a)(ii) of
this Section) by the terms of this Agreement, nor shall such transferee be
entitled, in any manner whatsoever, to any rights afforded Purchaser under
this Agreement (other than a Purchaser Controlled Corporation after a transfer
of Shares in accordance with the provisions of (a)(ii) of this Section.)
(d) Any attempted sale, transfer or other disposition by Purchaser or
a Purchaser Controlled Corporation which is not in compliance with this
Section 2.2 shall be null and void.
2.3 THE COMPANY'S RIGHT OF FIRST REFUSAL.
(a) Unless the Purchaser Beneficially Owns Shares representing
less than 5% of the Total Current Voting Power or until the Purchaser owns at
least 90% of the Total Current Voting Power, prior to the Purchaser effecting
any sale, transfer or other disposition of Shares or Non-Voting Convertible
Securities pursuant to Section 2.2(a)(vi) above, the Company shall have a
first refusal right to purchase such Shares or Non-Voting Convertible
Securities on the following terms and conditions:
(i) The Purchaser shall give prior notice (the "Transfer
Notice") to the Company in writing of such intention, specifying the name of
the proposed purchaser or transferee, the number of Shares or Non-Voting
Convertible Securities proposed to be sold or transferred, the proposed price
therefor and the other material terms upon which such disposition is proposed
to be made.
(ii) The Company shall have the right, exercisable by
written notice given by the Company to the Purchaser within ten (10) business
days after receipt of such Transfer Notice (the "Response Notice"), to
purchase all, but not less than all the Shares or Non-Voting Convertible
Securities specified in such Transfer Notice for cash at the price per share
or, if consideration other than cash is specified in the Transfer Notice, in
an amount equal to the Fair Market Value of such non-cash consideration,
specified in the Transfer Notice.
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(iii) If the Company exercises its right of first refusal
hereunder, the Closing of the purchase of the Shares or Non-Voting Convertible
Securities with respect to which such right has been exercised shall take
place within sixty (60) calendar days after the Company gives the Response
Notice to the Purchaser or, if later, within 5 business days of the
determination of the Fair Market Value of any non-cash consideration. Upon
exercise of its right of first refusal, the Company and the Purchaser shall be
legally obligated to consummate the purchase and sale contemplated thereby and
shall use their best efforts to secure any approvals required in connection
therewith.
(iv) If the Company does not exercise its right of first
refusal hereunder within the time specified for such exercise, the Purchaser
shall be free, during the period of ninety (90) calendar days following the
expiration of such time for exercise, to sell the Shares or Non-Voting
Convertible Securities specified in such Transfer Notice to the proposed
purchaser or transferee specified in such Transfer Notice and on terms not
materially less favorable to the Purchaser than the terms specified in such
Transfer Notice.
(b) The Company may assign its right of first refusal hereunder
to any other person or persons except a Purchaser Competitor.
2.4 THE PURCHASER'S VOTING OBLIGATIONS.
(a) The Purchaser shall take such action as may be required so
that all shares of Voting Stock Beneficially Owned by the Purchaser are voted
for or cast in favor of: (i) during the Standstill Period, nominees to the
Board of Directors of the Company in accordance with this Agreement and the
joint recommendations of management of the Company and a majority of the
Disinterested Directors, (ii) increases in the authorized capital stock of the
Company and amendments to stock option plans and employee stock purchase
plans, in each case approved by the Company's Board of Directors, and (iii)
all matters approved by a majority of the Purchaser's Directors whether such
matters are submitted to a vote, action by written consent or other approval
of the holders of Voting Stock of the Company.
(b) Unless otherwise approved by a majority of the Disinterested
Directors, during the Standstill Period, on all matters submitted to the vote,
written consent or approval of the holders of Voting Stock other than those
matters set forth in clauses (i), (ii) or (iii) of paragraph (a) above, the
Purchaser shall take such action as may be required so that all Shares of Voting
Stock Beneficially Owned by the Purchaser which are in excess of the number of
Shares representing the Purchaser Pro Rata Voting Threshold are voted or cast on
all matters submitted to a vote, consent or other approval of the shareholders
of the Company on each such matter in the same proportion as the votes cast by
the Voting Stock held by the Disinterested Shareholders with respect to such
matters.
(c) Except as set forth in paragraphs (a) and (b) above, and in
Section 3.2(c) below, nothing in this Agreement shall preclude the Purchaser
from voting shares of Voting Stock which it Beneficially Owns in such manner as
the Purchaser determines, in its sole discretion, on any matter
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presented to the holders of Voting Stock for a vote, consent or other
approval; provided, however, that, in no event shall the Purchaser exercise
dissenter's rights under applicable law in connection with any merger,
consolidation or other reorganization which is approved by the Company's Board
of Directors and which is intended to qualify for pooling-of-interests
accounting treatment (to be reflected in a comfort letter from a nationally
recognized accounting firm in customary form) and in connection with any such
pooling-of-interests transaction, Purchaser hereby covenants to enter into a
standard affiliate lock-up agreement if requested by the Company, regardless
of the manner in which the Purchaser may have voted or cast Shares of Voting
Stock Beneficially Owned by the Purchaser with respect to such transaction.
(d) So long as the Purchaser Beneficially Owns at least 10% of
the Total Current Voting Power, the Purchaser, as the holder of Shares (or, if
applicable, any Purchaser Controlled Corporation), shall be present, in person
or by proxy, at all meetings of shareholders of the Company so that all shares
of Voting Stock held by the Purchaser (or such Purchaser Controlled
Corporation) may be counted for purposes of determining the presence of a
quorum at such meetings.
2.5 THE COMPANY'S REPURCHASE RIGHT. If at any time there is a Change in
Control of the Purchaser and Purchaser does not then Beneficially Own Shares
representing a majority of the then Total Current Voting Power of the Company,
then the Company shall have the right to purchase all, but not less than all, of
the Shares and the Warrants then owned by the Purchaser and its Affiliates, at
any time not to exceed sixty (60) days after Purchaser informs the Company in
writing of such Change in Control of the Purchaser, provided that, not later
than 10 business days after receipt of such notice, the Company notifies the
Purchaser in writing of its intent to exercise the right of repurchase under
this Section 2.5. The purchase price per share of such Shares shall be the Fair
Market Value thereof as of the date of occurrence of the Change in Control of
the Purchaser (the "Share Repurchase Price") and the purchase price for any
Warrant(s) shall be the purchase price of such Warrant(s) paid by Purchaser to
the Company for such Warrant(s) (the "Warrant Repurchase Price"). Payment of
the Share Repurchase Price and the Warrant Repurchase Price, as applicable,
shall be made by the Company in cash (by wire transfer) to the Purchaser within
the 60-day period specified above. The Company may not assign its right of
repurchase under this Section except to a Company Controlled Corporation.
ARTICLE III
THE COMPANY'S COVENANTS AND THE PURCHASER'S RIGHTS
3.1 THE PURCHASER'S RIGHTS TO MAINTAIN.
(a) IN GENERAL
(i) During the Standstill Period, provided that the
Purchaser Beneficially Owns at least 10% of the Total Outstanding Company
Equity, if the percentage interest of the Purchaser
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in the Total Outstanding Company Equity is or would be reduced at any time as
a result of an issuance of New Securities (as described in subsections (b),
(c) and (d) below), the Purchaser shall have the right to purchase for cash
the Purchaser's Pro Rata Portion, in whole or in part, at an aggregate
purchase price equal to the product of the price per share at which such New
Securities were or will be sold in such issuance (as determined in accordance
with subsection (b), (c)or (d) below, as applicable) multiplied by the
Purchaser's Pro Rata Portion or any part thereof (the "Purchase Price").
(ii) In addition, upon any issuance of New Securities,
and only if any of (A) the Purchaser purchases at least 15% of the Purchaser's
Pro Rata Portion from the Company or in the market in accordance with
paragraph (c)(iv) below, or (B) during the Standstill Period, the Purchaser
owns at least 35% of the Total Outstanding Company Equity or (C) after the
Standstill Period, the Purchaser owns at least 30% of the Total Outstanding
Company Equity, then the Purchaser shall also have the right to purchase for
cash a Warrant of the Company exercisable for such number of New Securities,
either (A) in the event of an issuance of New Securities in the manner
described in paragraph (b) of this Section, then equal to 15% of the New
Securities, or (B) in the event of an issuance of New Securities in the manner
described in paragraph (c) of this Section, then equal to 15% of the New
Securities plus that number of New Securities of the Purchaser's Pro Rata
Portion actually purchased by the Purchaser (either (A) or (B) as applicable,
the "Warrant Coverage"). Any such Warrant shall be in the form of the Warrants
purchased by the Purchaser pursuant to the Securities Purchase Agreement,
provided however, that any Warrants purchased hereunder shall be fully vested
and exercisable, and the per share exercise price for such New Securities
underlying such Warrant shall be equal to the price per share at which such
New Securities were sold in such issuance of such New Securities (as
determined in accordance with subsection (b), (c) or (d) below, as
applicable). In connection with the exercise of its rights under this
paragraph, Purchaser shall pay the Company in cash for any such Warrant an
amount determined by (A) the Company and the Purchaser or (B) an Investment
Bank mutually agreed upon by the Company and the Purchaser to be the fair
market value (based on a Black-Scholes option pricing model) of such Warrant
(the "Warrant Price"). If the Company and the Purchaser cannot agree on a
Warrant Price or Investment Bank within thirty (30) days after the Company's
receipt of the applicable Purchaser's Notice, then the Warrant Price shall be
determined (on a Black-Scholes option pricing model) by two Investment Banks,
with one Investment Bank to be selected by each of the Company and the
Purchaser for such purpose. Unless otherwise waived by the Company or the
Purchaser, respectively, the Investment Banks selected pursuant to the
preceding sentence shall not have had any significant relationship with the
Purchaser or the Company, respectively, during the prior twelve month period.
Each such Investment Bank shall determine fair market value by reference to
the Black-Scholes option pricing model and shall deliver its written valuation
to the Company and the Purchaser within thirty (30) days after selection. In
the event that such Investment Banks do not agree on the fair market value,
the fair market value shall be the average of the two valuations, except that
if the higher of the two valuations is greater than 100% of the lower
valuation, the Investment Banks shall select another Investment Bank of
similar qualifications who shall determine the fair market value independently
of such selection in accordance with the procedures specified in the foregoing
sentence. None of the Company, the Purchaser or the initial Investment Banks
shall provide the third Investment Bank with information regarding the
valuation of the initial Investment Banks. The
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valuation of the third Investment Bank shall be arithmetically averaged with
the two prior valuations and the valuation farthest from the average of the
three valuations shall be disregarded. The fair market value shall be the
average of the two remaining valuations. The Company and the Purchaser shall
each pay one-half of the expenses of the valuations.
(b) FINANCING ISSUANCES.
(i) No less than ten (10), and no more than thirty (30),
calendar days prior to the issuance and sale of any New Securities for cash
consideration in a financing transaction (which shall not include any
transaction specifically described in subsections (c) or (d) below), the
Company shall notify the Purchaser of the Company's intention to make such
issuance by written dated notice (the "Company's Financing Issuance Notice")
setting forth the number and type of New Securities, the calculation of the
Purchaser's Pro Rata Portion, the closing price of the Company Common Stock on
the prior trading day, and the Warrant Coverage.
(ii) Within seven (7) calendar days after receipt by the
Purchaser of the Company's Financing Issuance Notice, the Purchaser shall
notify the Company by written notice (the "Purchaser's Financing Issuance
Notice") stating whether the Purchaser desires to buy the Purchaser's Pro Rata
Portion, or any part thereof, for the Purchase Price and, if entitled to a
Warrant pursuant to paragraph (a)(ii)(A), (B) or (C) of this Section 3.1, the
Warrant for the Warrant Price. The closing price of the Company Common Stock
on Nasdaq or other securities exchange on which the Voting Stock is traded on
the date of the Purchaser's Financing Issuance Notice shall be the "Estimated
Purchase Price".
(iii) If the Company issues and sells the New Securities in
the financing transaction, then the Purchaser shall be obligated to purchase
(if it has elected to exercise its right to maintain in the Purchaser's
Financing Issuance Notice) the Purchaser's Pro Rata Portion (or part thereof)
for the Purchase Price and the Warrant for the Warrant Price (with such
Purchase Price and Warrant Price based on the price per share paid by the
ultimate investors in the financing); provided, however, that if a preliminary
"red herring" prospectus is filed and the Fair Market Value of the Company's
Common Stock is 10% greater than the Estimated Purchase Price as set forth in
the Purchaser's Financing Issuance Notice at the closing of Nasdaq or other
securities exchange on which the Voting Stock is traded on the date three (3)
trading days after such filing, the Purchaser shall be under no obligation to
purchase the Purchaser's Pro Rata Portion or the Warrant (even if it has
elected to purchase the Purchaser's Pro Rata Portion and/or the Warrant in the
Purchaser's Financing Issuance Notice) but shall have the right to buy the
Purchaser's Pro Rata Portion, or any part thereof, and/or the Warrant (as
applicable) if the Purchaser delivers a second Purchaser's Financing Issuance
Notice within five (5) calendar days after the end of the three-day trading
period set forth above, but the Purchaser shall then be committed in
accordance with its election detailed in such Purchaser's Financing Issuance
Notice. The closing of any purchases pursuant to this Section (b) shall take
place contemporaneously with such financing, subject to the provisions of
paragraph (e) below. If the Purchaser either (A) does not deliver a
Purchaser's Financing Issuance Notice within the time periods specified above
or (B) elects
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in the Purchaser's Financing Issuance Notice not to purchase the Purchaser's
Pro Rata Portion or any part thereof and/or the Warrant (as applicable), the
the Company shall not be obligated to sell to the Purchaser the Purchaser's
Pro Rata Portion, and/or the Warrant, as the case may be.
(c) ACQUISITION ISSUANCES.
(i) No less than ten (10) calendar days after the
issuance and sale of any New Securities for consideration consisting primarily
of non-cash consideration, the Company shall notify the Purchaser of the
Company's issuance by written dated notice (the "Company's Acquisition
Issuance Notice") setting forth the number and type of New Securities, the
calculation of the Purchaser's Pro Rata Portion, the Purchase Price, the
Warrant Coverage and the Warrant Price as calculated by the Company according
to a Black-Scholes Option Pricing Model. For purposes of this subsection (c),
the Purchase Price shall be based on the value of the New Securities to be
issued in the transaction as provided for in the principal agreement or
document governing the transaction (such as an acquisition agreement). If such
agreement does not provide a method for determining the value of the New
Securities to be issued or there is no such acquisition agreement, the
Purchase Price shall be determined based on the Fair Market Value (as defined
in Article I hereof) of the New Securities to be issued in the transaction.
(ii) Within seven (7) calendar days after receipt by the
Purchaser of the Company's Acquisition Issuance Notice, the Purchaser shall
notify the Company by written notice (the "Purchaser's Acquisition Issuance
Notice") stating whether the Purchaser desires to buy the Purchaser's Pro Rata
Portion or any part thereof for the Purchase Price and/or the Warrant, as
applicable, for the Warrant Price.
(iii) If the Purchaser either (A) does not deliver a
Purchaser's Acquisition Issuance Notice within the time specified above or (B)
elects in the Purchaser's Acquisition Issuance Notice not to purchase the
Purchaser's Pro Rata Portion (or any part thereof) and/or the Warrant (as
applicable), the Company shall not be obligated to sell to the Purchaser the
Purchaser's Pro Rata Portion or the Warrant.
(iv) The Purchaser may, at any time and from time to
time, in lieu of purchasing the Purchaser's Pro Rata Portion (or any part
thereof) from the Company as permitted under this Section (c), purchase on the
open-market such number of shares of Voting Stock as have the equivalent
equity interest as such Purchaser's Pro Rata Portion. In order to be entitled
to a Warrant pursuant to paragraph (a)(ii)(A) above with respect to any
particular issuance of New Securities pursuant to this Section (c), such open
market purchases must be made within sixty (60) calendar days from the date of
receipt of the Company's Acquisition Issuance Notice. Purchaser may elect to
purchase both from the Company and in the open market in its discretion in
connection with any equity issuance subject to the Standstill Limit during the
Standstill Period.
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(d) OTHER ISSUANCES.
(i) No more than ten (10) calendar days after each six-
month anniversary of the date of this Agreement (until the termination of the
Standstill Period), the Company shall notify the Purchaser of the number of
New Securities issued pursuant to the Company's employee stock plans, purchase
plans or otherwise during such six month period by written dated notice (the
"Company's Other Issuances Notice") setting forth the number and type of New
Securities (such number to be net of any New Securities returned to an option
plan), the calculation of the Warrant Coverage and the Warrant Price as
calculated by the Company according to a Black-Scholes option pricing model.
In the case of New Securities that are stock options issued pursuant to a
Company employee stock option plan, the Purchaser's right to maintain under
this subsection (d) shall relate to the Voting Stock underlying such stock
options and the Purchase Price of such Voting Stock shall be the weighted
average exercise price of such stock options regardless of the net effect of
any New Securities returned to an option plan.
(ii) Within five (5) business days after receipt by the
Purchaser of the Company's Other Issuances Notice, the Purchaser shall notify
the Company by written notice (the "Purchaser's Other Issuances Notice")
stating whether the Purchaser desires to buy the Warrant for the Warrant
Price. If the Purchaser elects to purchase the Warrant, the closing of such
transaction shall take place within three (3) business days after the
Company's receipt of such notice in accordance with subsection (e) below.
(e) CLOSING; OTHER MATTERS.
(i) The purchase and sale of any New Securities and
Warrants pursuant to this Section shall take place at the offices of the
Company set forth in this Agreement at 10:00 a.m. on the earlier of the: (A)
closing date specified in the applicable subsection of this Section or (B) the
third (3rd) business day following the expiration or early termination of all
waiting periods imposed on such purchase and sale by the HSR Act, or at such
other time and place as the Company and the Purchaser may agree; provided
however, that with respect to any Warrant that does not yet have a determined
fair market value in accordance with paragraph (a)(ii) of this Section, then
five (5) business days following the date of such determination or such other
time and place as the Company and the Purchaser may agree.
(ii) The Company and the Purchaser shall use their best
efforts to comply with all federal and state laws and regulations and Nasdaq
and stock exchange listing requirements applicable to any purchase and sale of
shares of New Securities and Warrants under this Section 3.1. The issuance of
such shares shall be subject to compliance with applicable laws and
regulations and requirements of Nasdaq and any applicable stock exchange.
(iii) Except as otherwise specifically provided herein,
upon receipt of the applicable Purchaser's Notice by the Company, the
Purchaser and the Company each shall be obligated, subject to the other terms
and conditions of this Agreement, to consummate the purchase and sale
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contemplated by this Section 3.1 and shall use their best efforts to secure
any approvals required in connection therewith.
(iv) In the event of any issuance of New Securities that
occurs following the date of this Agreement but prior to the Closing, the
Purchaser shall have the same rights with respect to the New Securities as are
set forth in this Section 3.1 (as if the Purchaser then owned all of the
Shares that it is expected to own as of the Closing), provided that the
Purchaser shall be entitled to provide the applicable Purchaser's Notice and
exercise its rights under this Section 3.1 at any time up to and including the
sixtieth (60th) day following the Closing.
(v) Any Shares or Warrants acquired by the Purchaser
hereunder, any Shares acquired upon exercise thereof, and all of Purchaser's
rights to maintain, shall be subject to all restrictions and obligations of
the Purchaser set forth elsewhere in this Agreement including, but not limited
to, Section 2.1 of this Agreement.
3.2 THE PURCHASER'S BOARD REPRESENTATION RIGHTS.
(a) As a condition to the Closing, (i) the bylaws of the
Company shall authorize eight (8) members of the Board of Directors of the
Company, and (ii) the three persons designated by the Purchaser pursuant to
Section 5.12 of the Merger Agreement shall have been elected to the Company's
Board of Directors.
(b) So long as the Purchaser Beneficially Owns at least 10% of
the Total Current Voting Power, the Company shall include in the slate of
nominees recommended by the Company's management to shareholders for election
as directors at any special or annual meeting of shareholders of the Company,
commencing with the first meeting of shareholders following the Closing, and
shall use its best efforts in all other respects to cause the election of,
that number of persons designated by the Purchaser equal to the greater of (i)
one, or (ii) that number determined by multiplying the then number of members
of the Board of Directors by the percentage of Total Current Voting Power of
the Company then owned by the Purchaser. If the calculation set forth in
clause (ii) of the preceding sentence results in a whole number plus a
fraction, the Purchaser shall only be permitted to designate such whole number
of persons; provided however, that if the Purchaser Beneficially Owns more
than 25% of the Total Current Voting Power of the Company and the Purchaser is
not entitled pursuant to the foregoing calculation to appoint more than 25% of
the members of the Board of Directors, then such fraction shall be rounded up
to the next nearest whole number for purposes of determining the number of
Purchaser designees on the Company's Board of Directors. The Company's Board
of Directors and management shall vote all shares for which the Company's
management or Board of Directors holds proxies or is otherwise entitled to
vote in favor of the election of such designee(s) of Purchaser. In the event
that any such Purchaser Director shall cease to serve as a director for any
reason (other than by virtue of Purchaser no longer being entitled to
designate such director pursuant to the provisions of this Section 3.2(b)),
the vacancy resulting thereby shall be filled by a designee of the Purchaser
and the Company's Board of Directors shall promptly take all actions necessary
to elect such designee of the
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Purchaser and, during any period in which such a vacancy remains open,
provided that the Purchaser has designated a nominee to fill such vacancy, the
Company's Board of Directors shall not, without the Purchaser's written
consent, take any action with respect to an Event Requiring Supermajority
Board Approval other than to elect Purchaser's designee to fill such vacancy.
(c) Notwithstanding anything to the contrary contained herein,
at any time during the Standstill Period, the Purchaser shall not be entitled,
and the Purchaser agrees not to cast votes for Purchaser Directors in excess
of the lesser of (i) the number of Purchaser Directors which the Purchaser is
entitled to elect pursuant to paragraph (b) above or (ii) 49.9% of the members
of the Board of Directors. Subject only to the immediately preceding clause,
nothing contained in this Agreement shall limit, restrict or prohibit the
Purchaser's right to vote all of the Shares (and any other voting securities
of the Company) Beneficially Owned by the Purchaser in favor of the
Purchaser's designees for the Company's Board of Directors under Section
3.2(b) hereof.
(d) In the event that the Purchaser's percentage Beneficial
Ownership of the Total Current Voting Power is reduced because of any issuance
of securities by the Company to which the Purchaser's rights set forth in
Section 3.1 do not apply, for a period of six months after the date of any
such issuance, Purchaser's Beneficial Ownership of the Total Current Voting
Power for purposes of paragraph (b) above shall be determined as if such
issuance had not occurred.
(e) During the Standstill Period, in the event that the number
of Purchaser Directors exceeds the number of designees that Purchaser is
entitled to designate pursuant to Section 3.2(b) (the "Excess Directors"),
Purchaser shall cause that number of Excess Directors to resign and not stand
for reelection in connection with any special or annual meeting of
stockholders of the Company.
3.3 SUPERMAJORITY BOARD RIGHTS. The Company shall not effectuate any
Event Requiring Supermajority Board Approval without first having obtained
Supermajority Board Approval; provided, however, that this section shall
terminate and be of no further force and effect in the event that Purchaser's
percentage Beneficial Ownership of the Total Outstanding Company Equity falls
below 10%.
ARTICLE IV
MUTUAL COVENANTS
4.1 EVENTS REQUIRING DISINTERESTED BOARD APPROVAL. Until such time as
the Purchaser owns 90% of the Total Current Voting Stock, no party hereto
(including any Affiliate of such party) shall effectuate an Event Requiring
Disinterested Board Approval without first having obtained Disinterested Board
Approval with respect to such event.
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4.2 EVENTS REQUIRING DISINTERESTED SHAREHOLDER APPROVAL. Until such
time as the Purchaser owns 90% of the Total Current Voting Stock, no party
hereto (including any Affiliate of such party) shall effectuate an Event
Requiring Disinterested Shareholder Approval without first having obtained
Disinterested Shareholder Approval with respect to such event; provided
however, that Disinterested Shareholder Approval shall not be required, if on
the record date for such approval of such Event Requiring Disinterested
Shareholder Approval, the Purchaser Beneficially Owns less than 25% of the
Total Current Voting Power.
4.3 AMENDMENT OF CHARTER DOCUMENTS. Not later than the Effective Time
(as defined in the Merger Agreement) of the Merger (as defined in the Merger
Agreement), the Board of Directors shall amend the Company's bylaws to carry out
the purposes of the provisions of Sections 4.1 and 4.2.
4.4 POISON PILL LIMITATION. Purchaser agrees that the Company may
adopt a "poison pill" share purchase rights plan, provided that such plan
excludes from the definition of "Acquiring Person" therein Purchaser and
wholly owned (direct or indirect) subsidiaries of the Purchaser so long as
neither Purchaser nor any Purchaser Affiliate has breached the provisions of
Section 2.1 (a), (d), (e) or (f) of this Agreement and so long as Purchaser
Beneficially Owns at least 5% of the Total Current Voting Power.
4.5 PURCHASER TENDER OFFER. Following the Standstill Period, Purchaser
and Purchaser's Affiliates (or any 13D Group that includes Purchaser or any
Affiliate of Purchaser) shall be entitled to commence a tender or exchange
offer to purchase or exchange for cash or other consideration any Voting Stock
provided that such offer is conditioned upon a majority of the shares of Voting
Stock held by Disinterested Shareholders tendering their shares of Voting Stock,
and provided further, that such offer may not be consummated unless a majority
of the shares of Voting Stock held by Disinterested Shareholders are tendered
and not withdrawn with respect to such tender or exchange offer.
ARTICLE V
MISCELLANEOUS
5.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of Delaware.
5.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by Purchaser and the Closings
of the transactions contemplated hereby.
5.3 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of, and be binding upon, the parties hereto and their respective successors
and assigns. Except as otherwise provided in this Agreement, this Agreement
may not be assigned by a party without the prior written consent of the other
party except by operation of law, in which case the assignee shall be subject
to all of the provisions of this Agreement.
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5.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the full
and entire understanding and agreement between the parties with-regard to the
subject hereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein. Except as expressly provided herein, neither
this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought,
including on behalf of the Company, Disinterested Director Approval.
5.5 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
or by telephone facsimile, addressed:
(f) If to the Purchaser, to:
The Walt Disney Company
500 South Buena Vista Street
Burbank, CA 91521
Attn: Chief Financial Officer and
Attn: General Counsel
(Telephone) (818) 560-4370
(Facsimile) (818) 563-4160
With a copy to:
O'Melveny & Myers LLP
400 S. Hope Street
Los Angeles, CA 90071
Attn: C. James Levin, Esq.
(Telephone) (213) 430-6578
(Facsimile) (213) 430-6407
With a copy to:
Dewey Ballantine LLP
1775 Pennsylvania Avenue
Washington DC 20006-4605
Attn: Joseph M. Pari
(Telephone) (202) 862-4516
(Facsimile) (202) 862-1093
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(g) If to the Company, to:
Infoseek Corporation
1399 Moffett Park Drive
Sunnyvale, CA 94089
Attn: Harry M. Motro, President & CEO
Attn: Andrew E. Newton, Esq.
(Telephone) (408) 543-6000
(Facsimile) (408) 734-9350
With a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
Two Palo Alto Square
Palo Alto, CA 94306
Attn: David J. Segre, Esq.
(Telephone) (650) 493-9300
(Facsimile) (650) 493-6811
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or 72
hours after the same has been deposited in a regularly maintained receptacle for
the deposit of the United States mail, addressed and mailed as aforesaid, or, if
sent by telephone facsimile, upon confirmation of receipt.
5.6 DELAYS OR OMISSIONS. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to a party
under this Agreement, shall impair any such right, power or remedy nor shall
it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring.
5.7 EXPENSES. Except as otherwise specifically provided, the Company
and Purchaser shall bear their own expenses incurred with respect to this
Agreement and the transactions contemplated hereby, provided, that the
Purchaser shall pay any filing fee required under the HSR Act arising out of
this Agreement or the transactions contemplated hereby, including any
issuances and sales of New Securities or Warrants pursuant to Purchaser's
rights to maintain set forth in Section 3.1 above.
5.8 SPECIFIC PERFORMANCE. The parties hereto acknowledge and agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached and that such damage would not be compensable in
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money damages and that it would be extremely difficult or impracticable to
measure the resultant damages. It is accordingly agreed that any party hereto
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of the Agreement and to enforce specifically the terms and
provisions hereof, in addition to any other remedy to which it may be entitled
at law or equity, and such party that is sued for breach of this Agreement
expressly waives any defense that a remedy in damages would be adequate and
expressly waives any requirement in an action for specific performance for the
posting of a bond by the party bringing such action.
5.9 FURTHER ASSURANCES. The parties hereto shall do and perform or
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments or
documents as any other party may reasonably request from time to time in order
to carry out the intent and purposes of this Agreement and the consummation of
the transactions contemplated hereby. Neither the Company nor the Purchaser
shall voluntarily undertake any course of action inconsistent with
satisfaction of the requirements applicable to them set forth in this
Agreement and each shall promptly do all such acts and take all such measures
as may be appropriate to enable them to perform as early as practicable the
obligations herein and therein required to be performed by them.
5.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be executed by fewer than all of the parties,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
5.11 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided, that no such severability shall be effective
if it materially changes the economic impact of this Agreement on any party.
5.12 CAPTIONS. Headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be relied upon in
construing this Agreement. Use of any gender herein to refer to any person
shall be deemed to comprehend masculine, feminine, and neuter unless the context
clearly requires otherwise.
5.13 ATTORNEYS' FEES. In any action at law or suit in equity in relation
to this Agreement, the prevailing party in such action or suit shall be entitled
to receive a reasonable sum for its attorneys' fees and all other reasonable
costs and expenses incurred in such action or suit.
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"COMPANY"
INFOSEEK CORPORATION
By /s/ Harry M. Motro
------------------------------
Name: Harry M. Motro
Title: President and CEO
"PURCHASER"
THE WALT DISNEY COMPANY
By /s/ John R. Ball
------------------------------
Name: John R. Ball
Title: Vice President
DISNEY ENTERPRISES, INC.
By /s/ John R. Ball
------------------------------
Name: John R. Ball
Title: Vice President
25
<PAGE>
EXHIBIT 8
REGISTRATION RIGHTS AGREEMENT
by and among
INFOSEEK CORPORATION
a Delaware Corporation,
DISNEY ENTERPRISES, INC.
a Delaware Corporation
and
THE WALT DISNEY COMPANY
a Delaware Corporation
November 18, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Certain Definitions............................................. 1
2. Registration.................................................... 2
2.1 Requested Registration................................. 2
2.2 Company Registration................................... 5
2.3 Expenses of Registration............................... 6
2.4 Registration Procedures................................ 6
2.5 Indemnification........................................ 10
2.6 Information by Purchaser............................... 12
2.7 Rule 144 Reporting..................................... 12
2.8 Transfer of Registration Rights........................ 13
2.9 Termination of Registration Rights..................... 13
3. Standoff Agreement.............................................. 13
4. Amendment....................................................... 14
5. Governing Law................................................... 14
6. Entire Agreement................................................ 14
7. Notices......................................................... 14
8. Remedies........................................................ 16
9. Severability.................................................... 16
10. Attorneys' Fees................................................. 16
11. Counterparts.................................................... 16
</TABLE>
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made as of
November 18, 1998 by and among Infoseek Corporation, a Delaware corporation (the
"Company"), Disney Enterprises, Inc., a Delaware corporation ("DEI") and The
Walt Disney Company, a Delaware Corporation (the "TWDC"). As used herein,
"Purchaser" shall mean TWDC and any "Purchaser Controlled Corporation" as that
term is defined in that certain Governance Agreement (as defined herein).
RECITALS
WHEREAS, the Company and the Purchaser have entered into that certain
Agreement and Plan of Reorganization by and among the Company, Infoseek
Corporation, a California corporation, DEI, and Starwave Corporation, a
Washington corporation, dated June 16, 1998 (the "Reorganization Agreement")
pursuant to which, among other things, certain transactions contemplated therein
shall be completed including the receipt by Purchaser of shares of the Company;
and
WHEREAS, the Company seeks to grant certain registration rights with
respect to the securities of the Company held by the Purchaser.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the Company and the Purchasers agree as follows:
1. CERTAIN DEFINITIONS.
As used in this Agreement, the following terms shall have the
following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act and the
Exchange Act (as defined herein).
"EFFECTIVE DATE" shall mean the date on which the transactions
contemplated by the Reorganization Agreement are consummated.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and rules and regulation of the
Commission thereunder, all as the case shall be in effect all at that time.
"GOVERNANCE AGREEMENT" shall mean that certain Governance Agreement by
and among TWDC, DEI and the Company;
"REGISTRABLE SECURITIES" means shares of Common Stock of the Company
held by the Purchaser, or its transferees pursuant to Section 2.8, whether
acquired through that certain Common Stock and Warrant Purchase Agreement (the
"Purchase Agreement") by and between the
<PAGE>
Company and TWDC of even date herewith, the Reorganization Agreement, upon
exercise of the Warrant purchased pursuant to the Purchase Agreement or
otherwise, PROVIDED, HOWEVER, such shares shall only be treated as Registrable
Securities if and so long as they have not been sold to or through a broker or
dealer or underwriter in a public distribution or a public securities
transaction and therefore are no longer "Restricted Securities" under the Act.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act or the Exchange Act, and the declaration or
ordering of the effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses, except Selling
Expenses (as defined below), incurred by the Company in complying with Sections
2.1, 2.2 and 2.4 hereof, including, without limitation, all registration,
qualification listing and filing fees, underwriters' expenses other than Selling
Expenses (as defined herein), "road show" expenses, printing expenses, escrow
fees, fees and disbursements of counsel for the Company, blue sky fees and
expenses, the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company) and the reasonable fees and
disbursements of one counsel for all shareholders selling securities pursuant to
such registration.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Purchaser and, except as set forth under "Registration Expenses", all
reasonable fees and disbursements of counsel for the Purchaser.
"SHELF REGISTRATION" shall mean a registration on Form S-3 (or any
successor thereto) or any other appropriate form pursuant to Rule 415 under the
Securities Act (or any successor rule that may be adopted by the Commission)
providing for the sale of Securities on a delayed or continuous basis.
2. REGISTRATION.
2.1 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. In case the Company shall receive
from the Purchaser a written request that the Company effect any registration,
qualification or compliance under the Securities Act or Exchange Act with
respect to a number of the shares of Registrable Securities, such that the
anticipated aggregate offering price, net of underwriting discounts and
commissions, is at least ten million dollars ($10,000,000) or, if less, all of
the Purchaser's remaining Registrable Securities, the Company will within 45
days of such request file such registration, qualification or compliance
(including, without limitation, appropriate qualification under applicable
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<PAGE>
blue sky or other state securities laws and appropriate compliance with
applicable regulations issued under the Securities Act and/or the Exchange Act
and any other governmental requirements or regulations) in the manner reasonably
requested by the Purchaser and as would permit or facilitate the sale and
distribution of all such Registrable Securities which are specified in such
request and the Company shall thereafter use its best efforts to cause such
registration, qualification or compliance to become effective.
(b) Notwithstanding anything in this Agreement to the contrary, the
Company shall not be obligated to take any action pursuant to this Section 2.1;
(i) prior to the earlier of (A) three (3) years after the
Effective Date and (B) the termination of the Standstill Period (as defined in
the Governance Agreement) except in the case of a pro rata distribution by TWDC
to its stockholders;
(ii) during the period starting with the date thirty (30) days
prior to the Company's reasonably estimated date of filing of, and ending on the
date ninety (90) days immediately following the effective date of, any
registration statement pertaining to securities offered by the Company (other
than a registration of securities on Form S-8 (as promulgated under the
Securities Act), a registration of securities on Form S-4, a registration of
securities in a Rule 145 (as promulgated under the Securities Act) transaction,
a registration of securities with respect to an employee benefit plan, or, a
Shelf Registration (including in each case pursuant to successor forms and
rules)), provided that the Company is actively employing in good faith its best
efforts to cause such registration statement to become effective and the
managing underwriter of such offering certifies in writing that the registration
of Registrable Securities would have in its reasonable estimation a material
adverse effect on the marketability of the offering for which such registration
statement was filed;
(iii) if the Company has already effected two such registrations
pursuant to subparagraph 2.1(a);
(iv) if the Company shall furnish to the Purchaser a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors, as determined by a majority vote thereof, it would be
seriously detrimental to the Company or its shareholders for a registration
statement to be filed in the near future, in which case the Company's obligation
to use best efforts to register, qualify or comply under this Section 2.1 shall
be deferred for a period not to exceed 60 days from the date of receipt of
written request from the Purchaser; provided that, the Company may not exercise
this deferral right more than once in any consecutive twelve-month period; or
(v) if the Company has effected one such registration pursuant
to Section 2.1 in the preceding year, such registration having been declared or
ordered effective and remained subject to the declaration of any Suspension
Periods (as defined in Section 2.4(e)) in compliance with Section 2.4(e)
effective until the earlier to occur of (x) 120 days, plus the number of days in
any Suspension Periods during such time, after such declaration or order of
effectiveness or
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<PAGE>
(y) the sale of all the securities offered pursuant to each such registration
or, if such offering consists of a Shelf Registration, such registration having
been declared or ordered effective and remained effective until the earlier to
occur of (a) 360 days, plus the number of days in any Suspension Periods during
such time, or (b) the sale of all the securities offered pursuant to each such
registration.
(c) FORM OF REGISTRATION; UNDERWRITING. The Purchaser shall determine
the method of distribution of the Registrable Securities covered by its request,
whether by means of an underwritten offering or any other lawful means, and the
Purchaser shall determine the form of the registration statement to be used in
connection therewith, whether an underwritten or non-underwritten offering on
Form S-1 or Form S-3, a Shelf Registration statement on Form S-3 providing for a
delayed or continuous offering of Registrable Securities, subject to the
Company's approval such approval, such approval not to be unreasonably withheld;
provided, however, that, in any event, the Company shall allow the Purchaser to
use a delayed or continuous offering if available, or any other lawful means
(provided that the Company meets the requirements for use of such form). In the
event the registration is proposed to be part of a firm commitment underwritten
public offering, the Purchaser shall so notify the Company and the Company
shall, together with the Purchaser, enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting,
subject to the Company's reasonable approval.
(d) A registration requested pursuant to this Section 2.1 shall not be
deemed to be effected for purposes of this Section 2.1 if it has not been
declared effective by the Commission or become effective in accordance with the
Securities Act and/or the Exchange Act and the rules and regulations thereunder
or its effectiveness has not been maintained for the applicable period required
hereunder.
(e) The Purchaser may, at any time prior to the effective date of the
Registration Statement relating to such registration, revoke such request by
providing a written notice to the Company revoking such request. In such event,
the Purchaser may, at its election, either (i) count such revoked registration
as one of the two available registrations under this Section 2.1, in which case
all Registration Expenses related thereto shall be paid by the Company, or (ii)
not count such revoked registration as one of the two available registrations
under this Section 2.1, in which case all Registration Expenses related thereto
shall be paid by the Purchaser.
(f) The Company shall not include any securities which are not
Registrable Securities in any Registration Statement filed pursuant to a demand
made under this Section 2.1 without the prior written consent of the Purchaser.
Without limitation of the foregoing, upon the Purchaser's request, the Company
shall comply with any request of the Purchaser for a registration under the
Securities Act or the Exchange Act in connection with a spin-off of Registrable
Securities to the Purchaser's stockholders.
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<PAGE>
2.2 COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time after three (3) years
after the Effective Date, the Company shall determine to register any of its
equity securities, either for its own account or the account of a security
holder or holders (other than the Purchaser), other than (i) a registration
relating solely to employee benefit plans, (ii) a registration relating solely
to a Rule 145 transaction, or (iii) a registration in which the only equity
security being registered is capital stock issuable upon conversion of
convertible (or exchange of exchangeable) debt securities which are also being
registered, the Company will:
(i) give to the Purchaser written notice thereof at least
twenty (20) days prior to the filing of a registration therefore; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
made within twenty (20) days after receipt of such written notice from the
Company, by the Purchasers.
(b) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, (i) the
Company shall so advise the Purchaser as a part of the written notice given
pursuant to Section 2.2(a)(i); (ii) the right of the Purchaser to registration
pursuant to Section 2.2 shall be conditioned upon the Purchaser's participation
in such underwriting and the inclusion of Registrable Securities in the
underwriting shall be limited to the extent provided herein; and (iii) the
Purchaser shall, together with the Company, enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by the Company.
(c) MARKETING CUT-BACK. Notwithstanding any other provision of
this Section 2.2, if the managing underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the managing
underwriter may limit the Registrable Securities to be included in such
registration to the extent such managing underwriter deems reasonably necessary.
The Company shall so advise the Purchaser of the number of shares of Registrable
Securities that may be included in the registration and underwriting. To
facilitate the allocation of shares in accordance with the above provisions, the
Company may round the number of shares allocated to the Purchaser to the nearest
100 shares. The foregoing notwithstanding, the Purchaser's right to participate
in the underwritten offering shall have priority over all other parties
exercising registration rights in connection with such offering other than the
Company.
(d) RIGHT TO WITHDRAW FROM REGISTRATION. If the Purchaser
disapproves of the terms of any such underwriting, the Purchaser may elect to
withdraw therefrom by written notice to the Company and the managing
underwriter. Any securities excluded or withdrawn from such underwriting shall
be withdrawn from such registration.
-5-
<PAGE>
(e) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 2.2 prior to the effectiveness of such registration whether or not the
Purchaser has elected to include securities in such registration.
(f) COMPANY REGISTRATION NOT DEMAND. A request by the Purchaser
to include Registrable Securities in a proposed offering pursuant to this
Section 2.2 will not be deemed to be a request for a demand registration
pursuant to Section 2.1.
2.3 EXPENSES OF REGISTRATION.
(a) The Registration Expenses incurred in connection with (i) two
(2) registrations pursuant to Section 2.1, and (ii) all registrations pursuant
to Section 2.2 shall be borne by the Company.
(b) Unless otherwise stated, all Selling Expenses relating to
securities registered on behalf of the Purchaser shall be borne by the
Purchaser.
2.4 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will keep the Purchaser advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof, and will:
(a) prepare and file with the Commission a Registration Statement
with respect to such Registrable Securities on a form, for which the Company
then qualifies, selected pursuant to Section 2.1(c) and use its best efforts to
cause such Registration Statement to become and remain effective;
(b) prepare and file with the Commission amendments and post-
effective amendments to such Registration Statement and such amendments to the
prospectus used in connection therewith as may be necessary to maintain the
effectiveness of such registration or as may be required by the rules,
regulations or instructions applicable to the registration form utilized by the
Company or by the Securities Act or the Exchange Act or the rules and
regulations thereunder necessary to keep such Registration Statement effective
for up to one hundred twenty (120) calendar days or three hundred sixty (360)
calendar days, in the case of a Shelf Registration, and cause the prospectus as
so supplemented to be filed pursuant to Rule 424 under the Securities Act, and
to otherwise comply with the provisions of the Securities Act and/or the
Exchange Act with respect to the disposition of all Registrable Securities
covered by such Registration Statement until the earlier of (i) such 120th or
360th calendar day, as the case may be, and (ii) such time as all Registrable
Securities covered by such Registration Statement have ceased to be Registrable
Securities; provided that a reasonable time before filing a Registration
Statement or prospectus, or any amendments or supplements thereto, the Company
will furnish to Purchaser, the managing underwriter and their respective counsel
for review and comment, copies of all documents proposed to be filed and will
not file any such documents to which any of them reasonably object prior to the
filing thereof;
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<PAGE>
(c) furnish to Purchaser such number of copies of such Registration
Statement and of each amendment and post-effective amendment thereto (in each
case including all exhibits), any prospectus or prospectus supplement and such
other documents as Purchaser may reasonably request in order to facilitate the
disposition of the Registrable Securities by Purchaser (the Company hereby
consenting to the use of the prospectus or any amendment or supplement thereto
in connection with such disposition);
(d) use commercially reasonable efforts to register or qualify such
Registrable Securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions as Purchaser reasonably
requests, and do any and all other acts and things which may be reasonably
necessary or advisable to enable Purchaser to consummate the disposition in such
jurisdictions of the Registrable Securities owned by Purchaser, except that the
Company will not for any such purpose be required to qualify generally to do
business as a foreign corporation, to subject itself to taxation or to consent
to general service of process in any such jurisdiction where, but for the
requirements of this paragraph, it would not be obligated to be so qualified or
to be so subject to taxation or to general service of process;
(e) notify Purchaser at any time (a "Suspension Period") when a
prospectus relating to any such Registrable Securities is required to be
delivered under the Securities Act and the Company has become aware that the
prospectus included in such Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, and prepare and furnish
to Purchaser a reasonable number of copies of an amendment to such Registration
Statement or related prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing; provided
that, the Company may not initiate Suspension Periods consisting of in excess of
ninety (90) days in the aggregate and the time during which such Registration
Statement shall remain effective pursuant to Section 2.4(b) will be extended by
the number of days that Purchaser is prevented from selling because it is unable
to deliver a prospectus.
(f) notify Purchaser at any time,
(i) when the prospectus or any prospectus supplement or post-
effective amendment has been filed, and, with respect to the Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus or for additional
information;
(iii) of the issuance by the Commission of any stop order of
which the Company or its counsel is aware or should be aware suspending the
effectiveness of the
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<PAGE>
Registration Statement or any order preventing the use of a related prospectus,
or the initiation or any threats of any proceedings for such purposes; and
(iv) of the receipt by the Company of any written notification
of the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction of the initiation or any threats of any proceeding for
that purpose;
(g) otherwise use commercially reasonable efforts to comply with all
applicable rules and regulations of the Commission, and make available to
Purchaser an earnings statement which shall satisfy the provisions of Section
11(a) of the Securities Act, provided that the Company will be deemed to have
complied with this Section 2.4(g) if it has satisfied the provisions of Rule 158
under the Securities Act;
(h) use commercially reasonable efforts to cause all such Registrable
Securities to be listed on any securities exchange or automated quotation system
on which the Company Common Stock is then listed, if such Registrable Securities
are not already so listed and if such listing is then permitted under the rules
of such exchange or automated quotation system, and to provide a transfer agent
and registrar for such Registrable Securities covered by such Registration
Statement no later than the effective date of such Registration Statement;
(i) enter into agreements (including underwriting agreements) and
take all other appropriate and reasonable actions in order to expedite or
facilitate the disposition of such Registrable Securities and in such
connection, whether or not an underwriting agreement is entered into and whether
or not the registration is an underwritten registration:
(i) make such representations and warranties to Purchaser and
the underwriters, if any, in form, substance and scope as are customarily made
by issuers to underwriters in comparable underwritten offerings;
(ii) use commercially reasonable efforts to obtain opinions of
counsel to the Company thereof (which counsel and opinions (in form, scope and
substance) will be reasonably satisfactory to the managing underwriters, if any,
and Purchaser) addressed to Purchaser and the underwriters, if any, covering the
matters customarily covered in opinions requested in comparable underwritten
offerings and such other matters as may be reasonably requested by Purchaser and
the managing underwriter, if any;
(iii) use commercially reasonable efforts to obtain "cold
comfort" letters and bring-downs thereof from the Company's independent
certified public accountants addressed to Purchaser and the underwriters, if
any, such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters by independent accountants in
connection with underwritten offerings;
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<PAGE>
(iv) if requested, provide indemnification in accordance with the
provisions and procedures of Section 2.5 to all parties to be indemnified
pursuant to said section; and
(v) deliver such documents and certificates as may be reasonably
requested by Purchaser and the managing underwriters, if any, to evidence
compliance with any customary conditions contained in the underwriting agreement
or other agreement entered into by the Company.
(j) cooperate with Purchaser and the managing underwriter or
underwriters or agents, if any, to facilitate, to the extent reasonable under
the circumstances, the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing the Registrable Securities to be
sold under such Registration Statement, and enable such Registrable Securities
to be in such denominations and registered in such names as the managing
underwriter or underwriters or agents, if any, or Purchaser may request;
(k) if reasonably requested by the managing underwriter or
underwriters or Purchaser, incorporate in a prospectus supplement or post-
effective amendment such information as the managing underwriters and Purchaser
agree should be included therein relating to the plan of distribution with
respect to such Registrable Securities, including without limitation information
with respect to the purchase price being paid by such underwriters and with
respect to any other terms of the underwritten offering of the Registrable
Securities to be sold in such offering and make all required filings of such
prospectus supplement or post-effective amendment as promptly as practicable
upon being notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment;
(l) provide Purchaser, any underwriter participating in any
disposition pursuant to such Registration Statement and any attorney, accountant
or other agent retained by Purchaser or underwriter (collectively, the
"Inspectors") reasonable access to appropriate officers of the Company and the
Company's subsidiaries to ask questions and to obtain information reasonably
requested by any such Inspector and make available for inspection all financial
and other records and other information, pertinent corporate documents and
properties of any of the Company and its subsidiaries and affiliates
(collectively, the "Records") as may be reasonably necessary to enable them to
exercise their due diligence responsibilities;
(m) in the event of the issuance of any stop order of which the
Company or its counsel is aware or should be aware suspending the effectiveness
of the Registration Statement or of any order suspending or preventing the use
of any related prospectus or suspending the qualification of any Registrable
Securities included in the Registration Statement for sale in any jurisdiction,
the Company will use its best efforts promptly to obtain its withdrawal; and the
period for which the Registration Statement will be kept effective will be
extended by a number of days equal to the number of days between the issuance
and withdrawal of any stop orders; and
(n) reasonably cooperate to make available members of senior
management of the Company to participate in any meetings and conferences or
"road shows" with
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<PAGE>
potential purchasers of the Registrable Securities as the underwriters (if any)
or the Purchaser may reasonably request, the parties recognizing that the
regular responsibilities of such managers will take priority over any such
activities.
2.5 INDEMNIFICATION.
(a) The Company will indemnify and hold harmless the Purchaser,
each of its officers, directors and partners, and each person controlling the
Purchaser within the meaning of Section 15 of the Securities Act, with respect
to which registration, qualification or compliance has been effected pursuant to
this Agreement, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, (commenced or threatened), arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, and will reimburse the Purchaser, each of its officers,
directors, and partners, and each person controlling the Purchaser, each such
underwriter and each person who controls any such underwriter, for any legal and
any other expenses reasonably incurred, as such expenses are incurred, in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission or alleged untrue
statement or omission, made in reliance upon and in conformity with written
information furnished to the Company by the Purchaser, controlling person or
underwriter specifically for use therein; provided, however, that the foregoing
indemnity agreement is subject to the condition that, insofar as it relates to
any such untrue statement, alleged untrue statement, omission or alleged
omission made in a preliminary prospectus on file with the Commission at the
time the registration statement becomes effective or the amended prospectus
filed with the Commission pursuant to Rule 424(b), such indemnity agreement
shall not inure to the benefit of: (1) the Purchaser to the extent that such
untrue statement, alleged untrue statement, omission or alleged omission is made
in reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by the Purchaser and stated to be
specifically for use therein; or (2) any underwriter, to the extent that such
untrue statement, alleged untrue statement, omission or alleged omission is made
in reliance on and in conformity with written information furnished to the
Company by an instrument duly executed by such underwriter and stated to be
specifically for use therein.
(b) The Purchaser will indemnify and hold harmless the Company, each
of its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, each of its officers, directors, and partners, and each person
controlling the Purchaser within the meaning of Section 15 of the Securities
Act, against all expenses, claims, losses, damages and liabilities (or actions
in respect thereof), including any of the
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foregoing incurred in settlement of any litigation (commenced or threatened),
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any such registration statement, prospectus,
offering circular or other document, or any amendment or supplement thereto,
incident to such registration, qualification or compliance, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and will reimburse the Company, the
Purchaser, such directors, officers, persons, underwriters or control persons
for any legal and any other expenses reasonably incurred, as such expenses are
incurred, in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by the Purchaser specifically for use therein.
Notwithstanding the foregoing, the liability of the Purchaser under this
subsection 2.6(b) shall be limited in an amount equal to the gross proceeds
received by the Purchaser from the sale of shares in such registration.
(c) Each party entitled to indemnification under this Section 2.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement, except to the extent the failure to give
such notice is prejudicial to an Indemnifying Party's ability to defend such
action, and provided further that an Indemnified Party shall have the right to
retain its own counsel, with the fees and expenses to be paid by the
Indemnifying Party, if representation of such Indemnified Party by the counsel
retained by the Indemnifying Party would be inappropriate due to actual or
potential differing interests between such Indemnified Party and any other party
represented by such counsel in such proceeding. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation.
(d) If the indemnification provided for in this Section 2.6 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any losses, claims, damages or liabilities referred to herein, the
Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such Indemnified Party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and of the Indemnified Party on the other
in connection with the violation(s) that resulted in such loss, claim, damage or
liability, as well as any other relevant equitable considerations. The
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<PAGE>
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by a court of law by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to prevent such statement or omission; provided,
that in no event shall any contribution by the Purchaser hereunder exceed the
proceeds from the offering received by the Purchaser.
(e) The obligations of the Company and the Purchaser under this
Section 2.6 shall survive completion of any offering of Registrable Securities
in a registration statement and the termination of this Agreement. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation;
provided, that no Indemnified Party shall consent to entry of any judgment or
enter into any settlement without the consent of Indemnifying Party.
(f) The provisions of this Section 2.5 will be in addition to any
liability which any Indemnifying Party may have to any Indemnified Party and
will survive the termination of this Agreement.
2.6 INFORMATION BY PURCHASER. The Purchaser, if included in any
registration, shall furnish to the Company such information regarding the
Purchaser, the Registrable Securities held by it and the distribution proposed
by the Purchaser as the Company may request in writing and as shall be required
in connection with any registration, qualification or compliance referred to in
this Agreement.
2.7 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the Commission which may at any time permit
the sale of the Restricted Securities to the public without registration, the
Company agrees to use commercially reasonable efforts after the Effective Date
to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, pursuant to the
reporting requirements of the Securities Act or the Exchange Act;
(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(c) So long as the Purchaser owns any Registrable Securities, to
furnish to the Purchaser forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
and of the Securities Act and the Exchange Act, a copy of the most recent annual
or quarterly report of the Company, and such other reports and documents of the
Company and other information in the possession of or reasonably obtainable by
the Company
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as the Purchaser may reasonably request in availing itself of any rule or
regulation of the Commission allowing the Purchaser to sell any such securities
without registration.
2.8 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company
to register securities granted to the Purchaser under Sections 2.1, 2.2 and 2.4
may not be transferred or assigned (in each case, by operation of law or
---
otherwise) to any transferee or assignee in connection with any transfer or
assignment of Registrable Securities by the Purchaser who is not a Purchaser
Controlled Corporation (as such term is defined in that certain Governance
Agreement by and among TWDC, DEI and the Company, of even date herewith).
2.9 TERMINATION OF REGISTRATION RIGHTS. The rights granted pursuant
to this Agreement shall terminate at such time as the Company has registered all
of the Purchaser's shares of Common Stock under the Securities Act, or the
Purchaser owns less than one percent (1%) of the outstanding Common Stock of the
Company.
2.10 SUBSEQUENT REGISTRATION RIGHTS. After the date of this
Agreement, the Company shall not, without the prior written consent of the
Purchaser, enter into any agreement with any holder or prospective holder of any
securities of the Company that would grant such holder registration rights
senior to those granted to the Purchaser hereunder.
3. STANDOFF AGREEMENT. In connection with any public offering of the
Company's Common Stock in connection with an effective registration statement
under the Securities Act, with respect to any shares of Common Stock owned by it
which are not being registered in the offering, the Purchaser agrees, upon the
request of the Company or the underwriters managing any under written offering
of the Company's securities, not to (1) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock of the Company or
any securities convertible into or exercisable or exchangeable for Common Stock
of the Company (whether such shares or any such securities are now owned by the
Purchaser or are hereafter acquired) in any public offering; provided that in
any such transaction not involving a public offering, Parent will effect such
transaction at such times and in such manner consistent with the price, market
conditions and with preserving an orderly trading market for the Company's
securities and such that no public short position in the Company's securities
will be created thereby, or (2) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of the Common Stock of the Company, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time, not to exceed ninety
(90) days (or such lesser period as officers or directors of the Company are so
restricted with respect to the transfer of shares of capital stock of the
Company held by them) after the effective date of the registration statement
relating thereto. The Purchaser further agrees that during any Suspension Period
(as defined in Section 2.4(e)), the Purchaser will not sell any Registrable
Securities pursuant to the Registration Statement until (i) such Purchaser is
advised in writing by the Company that the use of the applicable prospectus may
be resumed, (ii) the Purchaser
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<PAGE>
has received copies of any additional, supplemental or amended prospectus, if
applicable, and (iii) the Purchaser has received copies of any additional or
supplemental filings which are incorporated or deemed to be incorporated by
reference in such prospectus. The Purchaser agrees that the Company may instruct
its transfer agent to place stop-transfer notations in its records to enforce
the provisions of this Section 3.
4. AMENDMENT. Any provision of this Agreement may be amended or the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of
the Company and the Purchaser.
5. GOVERNING LAW. This Agreement and the legal relations between the
parties arising hereunder shall be governed by and interpreted in accordance
with the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
6. ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties regarding the matters set forth
herein. Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon the successors, assigns,
heirs, executors and administrators of the parties hereto.
7. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by a recognized
commercial overnight delivery service, or mailed by registered or certified mail
(return receipt requested) or sent via facsimile (with acknowledgment of
complete transmission) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
if to the Purchaser, to: The Walt Disney Company
500 South Buena Vista Street
Burbank, CA 91521
Attention: General Counsel
Telephone No.: (818) 560-7707
Facsimile No.: (818) 563-1766
with a copy to: The Walt Disney Company
500 South Buena Vista Street
Burbank, CA 91521
Attention: Chief Financial Officer
Telephone No.: (818) 560-6977
Facsimile No.: (818) 846-8726
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<PAGE>
with a copy to: O'Melveny & Myers LLP
400 S. Hope Street
Los Angeles, CA 90071
Attention: C. James Levin, Esq.
Telephone No.: (213) 430-6578
Facsimile No.: (213) 430-6407
with a copy to: Dewey Ballentine LLP
1775 Pennsylvania Avenue, N.W.
Washington, DC 20006-4605
Attention: Joseph M. Pari
Telephone No.: (202) 862-4516
Facsimile No.: (202) 862-1093
if to the Company, to: Infoseek Corporation
1399 Moffett Park Drive
Sunnyvale, CA 94089
Attention: Andrew E. Newton, Esq.
Telephone No: (408) 543-6000
Facsimile No: (408) 734-9350
with a copy to: Wilson Sonsini Goodrich & Rosati,
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304-1050
Attn: David J. Segre, Esq.
Telephone: (650) 493-9300
Facsimile: (650) 493-6911
8. REMEDIES. The Purchaser and the Company agree that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of this Agreement and each hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate. Accordingly, it is agreed that the Company or the Purchaser, as the
case may be, shall be entitled to an injunction, restraining order or other
equitable relief to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of competent
jurisdiction in the United States or any state thereof. Such remedies shall be
cumulative and non-exclusive and shall be in addition to any other rights and
remedies the parties may have under the Agreement.
9. SEVERABILITY. If the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to
replace such void or
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<PAGE>
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
10. ATTORNEYS' FEES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
12. THIRD PARTY BENEFICIARIES. There shall be no third party
beneficiaries to this Agreement except that any Purchaser Controlled Corporation
that owns any Registrable Securities shall be entitled to exercise the rights of
Purchaser hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
INFOSEEK CORPORATION
By: /s/ HARRY M. MOTRO
------------------------------------
Harry M. Motro
President and Chief Executive Officer
"TWDC"
THE WALT DISNEY CORPORATION
By: /s/ DAVID K. THOMPSON
------------------------------------
David K. Thompson
Senior Vice President
"DEI"
DISNEY ENTERPRISES, INC.
By: /s/ DAVID K. THOMPSON
------------------------------------
David K. Thompson
Senior Vice President
[REGISTRATION RIGHTS AGREEMENT]
<PAGE>
EXHIBIT 9
[Letterhead of The Walt Disney Company/Thomas O. Staggs]
July 14, 1998
Mr. Steven T. Kirsch
c/o Infoseek Corporation
1399 Moffet Park Drive, Suite 250
Sunnyvale, California 94089
Re: Right of First Offer
Dear Steven:
I refer to the Agreement and Plan of Reorganization of even date herewith
(the "Merger Agreement") among Infoseek Corporation, Disney Enterprises, Inc.,
and Starwave Corporation, together with the related transactions entered into
concurrently therewith. As used in this letter, "Infoseek" refers to Infoseek
Corporation, a Delaware corporation, and your "Shares" refer to all shares of
the common stock of Infoseek beneficially owned by you (or by any trust of which
you are the trustee) as of the Effective Time of the Merger (as defined in the
Merger Agreement) or acquired by you (or by any trust of which you are the
trustee) at any time thereafter.
The Walt Disney Company ("TWDC") and you have reached the following
agreement with respect to your Shares:
In the event that, at any time following the Effective Time and prior to
the fourth anniversary of the Effective Time, you elect to sell, in a single
transaction or a series of related transactions, Shares with an aggregate value
of $1,000,000 or more (based on the price offered to you for such Shares) (the
"Sale Shares"), then you will first offer to sell the Sale Shares to TWDC, and
TWDC will have the right to purchase all (but not less than all) of the Sale
Shares, subject to the following:
(i) Your offer will be made orally to the undersigned or, in his absence,
to TWDC's Chief of Corporate Operations, Sanford Litvack, or, in his
absence, to TWDC's Chief Strategic Officer, Peter Murphy, and will be
confirmed in writing by facsimile./1/ Your offer will include the
number of Sale Shares and the price offered to you for the Sale
Shares (the "Offer Price").
(ii) If the Offer Price is less than $10,000,000, TWDC will have two hours
from receipt of the facsimile confirmation to accept or reject the
offer. If the Offer Price is $10,000,000 or more, then you will make
the offer no
__________________________
/1/ The facsimile number for Mr. Staggs and Mr. Murphy is (818) 846-8726 and for
Mr. Litvack, (818) 563-1766.
<PAGE>
Mr. Steven T. Kirsch
July 14, 1998
Page 2
later than one hour prior to the closing of Nasdaq (or other
securities exchange on which the Company's Common Stock is traded),
and TWDC may accept or reject the offer at any time up to the
opening of Nasdaq (or such other securities market) on the next
trading day. TWDC will accept or reject your offer orally, with
written facsimile confirmation (to fax # 408-734-9350). TWDC's
failure to respond within the permitted time will be deemed a
rejection of your offer.
(iii) If TWDC accepts your offer, the closing of the sale will be held on
the third business day following TWDC's acceptance or, if later, on
the third business day following compliance with all requirements
of applicable antitrust or securities laws.
(iv) The purchase price for the Sale Shares will be the Offer Price and
will be paid in cash by wire transfer to an account designated by
you. To the extent the original offer includes non-cash
consideration, you and TWDC will either mutually agree on the fair
market value of the non-cash consideration or, if unable to agree,
will refer such determination to one or more investment banking
firms in the manner set forth in the definition of "Fair Market
Value" in the Governance Agreement of even date herewith (the
"Governance Agreement"), and TWDC and you will split the costs of
such investment banking firm(s). TWDC will pay cash equal to the
fair market value of any non-cash consideration.
(v) Upon TWDC's payment of the purchase price, you will deliver one or
more certificates representing the Sale Shares, duly endorsed for
transfer or accompanied by duly executed stock powers, free and
clear of any liens and encumbrances, other than those created by or
through TWDC.
TWDC agrees that the foregoing provisions will not apply to any transfer of
Shares by you to any immediate family member, to a trust established by you for
the benefit of your immediate family, as a charitable contribution, or pursuant
to a Purchaser Tender Offer (as defined in the Governance Agreement), provided
that the transferee of such Shares agrees in writing to be bound by the terms of
this letter agreement.
You represent that you have authority to enter into this letter agreement
and that it does not conflict with any other agreement, obligation, arrangement,
law, judgment or order applicable to you or to the Shares. You agree that this
letter agreement will be
<PAGE>
Mr. Steven T. Kirsch
July 14, 1998
Page 2
binding upon you and your successors and assigns and that it will be governed by
California law.
If the transactions contemplated by the Merger Agreement are not
consummated, this letter agreement will terminate upon termination of the Merger
Agreement.
If you agree with the foregoing, please so indicate by signing this letter
in the place provided below. Thank you.
Sincerely,
THE WALT DISNEY COMPANY
By:/s/ Thomas O. Staggs
--------------------
Thomas O. Staggs
Chief Financial Officer
Accepted and agreed as of the date first set forth above:
/s/ Steven T. Kirsch
- --------------------
Steven T. Kirsch
<PAGE>
EXHIBIT 10
A REQUEST FOR CONFIDENTIAL TREATMENT HAS BEEN FILED WITH THE COMMISSION
WITH RESPECT TO PORTIONS OF THIS EXHIBIT AND SUCH PORTIONS HAVE THEREFORE BEEN
OMITTED, AS INDICATED BY A BRACKETED ASTERISK [*], AND FILED SEPARATELY
WITH THE COMMISSION.
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (this "AGREEMENT") is entered into as of June 18, 1998 by
and between DISNEY ENTERPRISES, INC., a Delaware corporation ("LICENSOR") that
is a wholly-owned subsidiary of THE WALT DISNEY COMPANY, a Delaware corporation
("TWDC") and INFOSEEK CORPORATION, a California corporation ("LICENSEE");
provided that this Agreement shall only become effective upon the Effective
Time, as defined in and pursuant to that certain Agreement and Plan of
Reorganization, of even date herewith, by and among Licensee, Infoseek
Corporation, a Delaware corporation, Starwave Corporation., a Washington
corporation, and Licensor, and shall cease and be of no further force and effect
in the event that the Effective Time does not occur; and each of the parties
hereto agrees not to terminate, amend or otherwise alter this Agreement or waive
any of its rights hereunder at any time prior to immediately following the
Effective Time.
RECITALS
1. Pursuant to an agreement and plan of reorganization and merger and a stock
and warrant purchase agreement, each dated as of the date hereof (collectively,
the "ACQUISITION AGREEMENTS," Licensor and TWDC agreed to acquire approximately
a 43% interest in the outstanding voting equity of Licensee, subject to the
terms and conditions set forth in the Acquisition Agreements."
2. In connection with the execution of the Acquisition Agreements, Licensee
desires to develop the Portal Products (as defined below) and license the
Licensor Properties (as defined below) for use in and associated with the Portal
Products and Licensor desires to license the Licensor Properties for such uses,
on the terms and conditions specified herein.
3. Pursuant to a product management agreement, dated as of the date hereof
(the "PRODUCT MANAGEMENT AGREEMENT"), Licensor and Licensee agreed to a
mechanism for the management and governance of the Portal Products.
4. In the event of a termination of this Agreement in accordance with its
terms, Licensee has agreed to license to Licensor, and Licensor agrees to
license from Licensee, the Licensee Technology (as defined below) for the
purposes set forth below.
NOW, THEREFORE, in consideration of the agreements set forth herein, the parties
hereto agree as follows:
1. CERTAIN DEFINITIONS.
For purposes of this Agreement, the following terms have the indicated
meanings:
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<PAGE>
1.1. "ADVISORY COMMITTEE" means the committee currently comprised of the
Licensor Representative and the Licensee Representative, as set forth in the
Product Management Agreement.
1.2. "AFFILIATE" means with respect to any person, any person directly or
indirectly through one or more intermediaries controlling, controlled by or
under common control with such person. For purposes of this Section 1.2,
"CONTROL" shall mean ownership or control, directly or indirectly, of at least
50% of the outstanding stock or other voting rights entitled to elect directors
or if the person is not a corporation, the corresponding managing authority.
Notwithstanding the foregoing, in no event will Licensee be considered an
Affiliate of Licensor nor will Licensor be considered an Affiliate of Licensee.
1.3. "BROADBAND PRODUCTS" means programming that requires transmission at
data rates which would enable real time, full screen, full motion video at equal
to or better than NTSC broadcast resolution. Programming that does not require
transmission at such data rates but which is nevertheless transmitted at such
data rates is not considered to be "Broadband Products" for the purposes of this
definition.
1.4. "CONSUMER AND COMMERCIAL PRODUCTS" means goods and services that are
based on, incorporate or display the Licensor Properties, other than the Portal
Products. Examples of Consumer and Commercial Products include, without
limitation, hats and t-shirts; publications and TV shows.
1.5. "DERIVATIVE WORK" means: (A) without limitation, any computer
program, work product, service, improvement, supplement, modification,
alteration, addition, revision, enhancement, new version, new edition, remake,
sequel, translation, adaptation, design, plot, theme, character, story line,
concept, scene, audio-visual display, interface element or aspect, in any
medium, format, use or form whatsoever, whether interactive or linear and
whether now known or unknown, that is derived in any manner, directly or
indirectly, from any Licensor Property, or any part or aspect thereof, or that
uses or incorporates any Licensor Property, or any part or aspect thereof; (B)
any "derivative work" of any Licensor Property, or any part or aspect thereof,
as defined in the Copyright Law of the U.S., Title 17 U.S.C. (S) 101 et seq.
(the "COPYRIGHT LAW"); and (C) any material or documentation related to any of
the foregoing.
1.6. "INTELLECTUAL PROPERTY RIGHTS" means any and all (by whatever name or
term known or designated) tangible and intangible and now known or hereafter
existing (A) rights associated with works of authorship throughout the universe,
including but not limited to copyrights (including without limitation the sole
and exclusive right to prepare "derivative works" (as defined in the Copyright
Law) of the copyrighted work and to copy, manufacture, reproduce, distribute
copies of, modify, publicly perform and publicly display the copyrighted work
and all derivative works thereof), moral rights (including without limitation
any right to identification of authorship and any limitation on subsequent
modification) and mask-works, (B) rights in and relating to the protection of
trademarks, service marks, trade names, goodwill,
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<PAGE>
rights in packaging, rights of publicity and privacy, merchandising rights,
advertising rights and similar rights, (C) rights in and relating to the
protection of trade secrets and confidential information, (D) patents, designs,
algorithms and other industrial property rights and rights associated therewith,
(E) Web addresses, sites, and domain names, (F) other intellectual and
industrial property and proprietary rights (of every kind and nature throughout
the universe and however designated) relating to intangible property that are
analogous to any of the foregoing rights (including without limitation logos,
character rights, "rental" rights and rights to remuneration), whether arising
by operation of law, contract, license or otherwise, (G) registrations,
applications, renewals, extensions, continuations, divisions or reissues thereof
now or hereafter in force throughout the universe (including without limitation
rights in any of the foregoing), and (H) rights in and relating to the sole and
exclusive possession, ownership and use of any of the foregoing throughout the
universe, including without limitation the right to license and sublicense,
franchise, assign, pledge, mortgage, sell, transfer, convey, grant, gift over,
divide, partition and use (or not use) in any way any of the foregoing now or
hereafter (including without limitation any claims and causes of action of any
kind with respect to, and any other rights relating to the enforcement of, any
of the foregoing).
1.7. "LAWS" mean any and all applicable laws, rules and regulations,
including, but not limited to, local and national laws, rules and regulations,
and treaties pertaining to any of Licensee's activities in connection with this
Agreement.
1.8. "LICENSEE AFFILIATES" means Licensee and all of its Affiliates.
1.9. "LICENSEE REPRESENTATIVE" means the representative of Licensee on the
Advisory Committee.
1.10. "LICENSEE TECHNOLOGY" means all proprietary computer systems,
computer software (including all source code, object code, firmware, development
tools, files, records and data and all media on which any of the foregoing is
recorded), and all techniques, methods, applications and other technology that
Licensee owns, Controls or acquires, to the extent utilized within or for the
development, production, operation or distribution of the Portal Products during
the term hereof. For the purposes of this Section 1.10, "CONTROL" means the
ability to grant the licenses set forth herein without payment of royalties or
other consideration to third parties. In the event that any technology would be
considered to be Licensee Technology but for the obligation of the Licensee to
pay royalties or other consideration to a third party, then Licensor shall have
the right, at its option, to pay such royalties or other consideration and
include such technology in the definition of Licensee Technology.
1.11. "LICENSOR AFFILIATES" means Licensor and all of its Affiliates.
1.12. "LICENSOR COMPETITOR" means Dream Works, Time Warner, Comcast, News
Corp., Viacom, Sony, Seagrams/Universal, MGM, CBS, NBC, TCI, USA Networks, AOL,
Microsoft, Yahoo, Excite, Lycos and CNET, and their respective Affiliates and
successors.
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<PAGE>
1.13. "LICENSOR PROPERTIES" means (i) the brands, names, logos, trademarks
and service marks used in the Portal Products, (ii) the specifications (both
functional and design-oriented) and user interface mock-ups, prototype
development work, market research and business development planning work and
materials prepared by Starwave Corporation on a work-for-hire basis for Licensor
prior to the Effective Time, (iii) all URLs and other Web addresses, sites and
domain names owned, licensed or applied for, from time to time, by or on behalf
of Licensor for use in the Portal Products or otherwise used in the operation of
the Portal Products, and (iv) the copyrights in the design of all the Portal
Products user interfaces, and "derivative works" thereof, as defined in the
Copyright Law, prepared by or on behalf of Licensor or Licensee during the term
of this Agreement; provided, that Licensee brands, URLs and other Web addresses,
sites and domain names, names, trademarks, service marks and other marks
existing as of the date first written above and third party brands, URLs and
other Web addresses, sites and domain names, names, trademarks, service marks
and other marks shall not be considered to be Licensor Properties.
1.14. "LICENSOR REPRESENTATIVE" means the representative of Licensor on
the Advisory Committee.
1.15. "PORTAL PRODUCTS" means the internet portal service to be named "Go
Networks," or another name mutually agreed by the parties, to be developed and
produced by Licensee utilizing the Licensor Properties, including but not
limited to all channels, sub-channels, sections, sites, features, services,
utilities and applications relating thereto; provided, however, that "Portal
Products" shall not in any event include Broadband Products or Consumer and
Commercial Products.
1.16. "PROMOTIONAL SERVICE AGREEMENT" has the meaning specified in the
Recitals.
1.17. "STANDARDS" means the standards and practices for content and
advertising materials that appear on, or are reachable by direct links from, the
Portal Products but excluding directory listings and search results that direct
a viewer outside the Portal Products, as such standards and practices are agreed
to between Licensee and Licensor pursuant to the Product Management Agreement,
as amended or modified from time to time in accordance with the Product
Management Agreement.
1.18. "VENTURES" means ESPN/Starwave Partners, a New York General
Partnership (or its successor) and ABCNews/Starwave Partners, a New York
General Partnership (or its successor).
2. TERM.
The term of this Agreement shall commence as of the Effective Time and
shall continue in perpetuity, unless terminated earlier in accordance with
Section 10 hereof (the "TERM").
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3. GRANT OF RIGHTS BY LICENSOR.
Licensor grants to Licensee the exclusive (subject to Section 5 hereof),
perpetual (subject to Section 10 hereof), worldwide, irrevocable (except as
expressly set forth in Section 10.1), sublicensable (subject to Section 4
hereof) right and license to utilize, reproduce, distribute, and otherwise
exploit (i) the Licensor Properties, (ii) Derivative Works of the Licensor
Properties and (iii) any modifications or improvements to the Licensor
Properties, in the development, operation, production, marketing, promotion,
distribution, sale, license and other exploitation of the Portal Products; and
to (whether by Licensee or by a third party on behalf of Licensee) modify,
improve and prepare Derivative Works of, incorporating or based upon the
Licensor Properties. The right to distribute includes without limitation the
right to sell, market, transmit by any means whether now known or hereafter
devised, display, advertise and otherwise promote the Portal Products in
accordance with and subject to the terms and conditions of this Agreement. In
addition, for so long as the Product Management Agreement is in effect, the
foregoing license rights shall also be subject to the terms and conditions of
the Product Management Agreement. Licensee acknowledges and agrees that the
license granted under this Section 3 is limited to the Portal Products as
specifically defined in Section 1.15 and does not grant Licensee any rights or
licenses with respect to any other products or services. All rights not
specifically, expressly and/or exclusively granted by Licensor to Licensee are
hereby reserved by Licensor.
4. SUBLICENSE RIGHTS.
Licensee may sublicense any and all of the rights and licenses granted in
Section 3 above with respect to the Licensor Properties to the extent necessary
or convenient, as reasonably determined by the Licensee Representative after
consultation with the Licensor Representative. Licensee acknowledges and agrees
that this Section 4 is intended to permit Licensee to sublicense the Licensor
Properties solely for the Portal Products as specifically defined in Section
1.15 above and does not grant Licensee any rights or licenses with respect to
any other products or services. Notwithstanding the foregoing, (a) Licensee
shall not sublicense all or any part of the Licensor Properties to any Licensor
Competitor, and (b) Licensee shall require, as a condition to any permissible
sublicense, that each sublicensee shall be made aware of, and agree in writing
to comply with, the Standards as well as Licensor's Code of Conduct for
licensees, a copy of which is attached as Exhibit A hereto. Notwithstanding the
foregoing provisions of this Section 4, nothing in this Agreement will restrict
Licensee, without the consent of Licensor, from placing links that incorporate
Licensor Properties on any and all third party internet and intranet sites,
which links permit users to connect to the Portal Products from third-party
sites, subject to compliance by any such third party, as required by Licensor,
with the Standards.
5. LICENSOR RIGHTS TO LICENSOR PROPERTIES.
Licensor shall not, and shall not appoint, permit or license any third
party (including but not limited to Affiliates of the Licensor) to, use or
otherwise exploit the Licensor Properties for
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any purpose without the prior written consent of Licensee; provided, however,
that such consent shall not be unreasonably withheld if such use (a) is not
competitive with the Portal Products or any other products or services then
offered by Licensee or any of its Affiliates or the Ventures or anticipated to
be offered by Licensee set forth in the Annual Business Plan and Budget for the
Portal Products, or (b) would not otherwise be reasonably expected to have an
adverse impact on the business of the Portal Products, in each case, as
reasonably determined by the Licensee Representative in good faith, upon
consultation with the Licensor Representative. The parties agree that, without
limiting the generality of the foregoing, any internet portal service in any
other county or region is competitive with the Portal Products.
6. ROYALTIES AND PAYMENTS.
6.1 LICENSEE ROYALTIES.
(A) As used in this Section 6, the following words have the following
meanings. (i) "GOODS" means goods, securities, data, software, information or
other services other than Consumer and Commercial Products. (ii) "EXCLUDED
BUSINESSES" means Licensee's software sales and related services (such as
maintenance, support and training) and services that are unrelated to the Portal
Products (such as Web hosting). By way of example, sales of Licensee's Ultraseek
software product and related services are Excluded Businesses. (iii) "LICENSEE
NET REVENUE" means one-half (1/2) of the following: Licensee's revenue, less the
Licensee Revenue Exclusions and less the following deductions: (a) advertising
commissions; (b) credit card charges; (c) customs duties and taxes other than
taxes based upon Licensee=s income (e.g., sales, excise, withholding, and value-
added taxes); and (d) discounts, rebates, returns or credits, freight,
insurance, packaging, and other shipment expenses. In addition, in the event
that Licensee collects revenue with respect to the sale, license or other
distribution of Goods offered over the Portal Products as an agent or
distributor for the vendor, only the distributor or agency fee or commission
shall be included in the definition for "Licensee Net Revenue". (iv) "LICENSEE
REVENUE EXCLUSIONS" means (a) revenue attributable to Excluded Businesses, (b)
Licensor Royalties paid to Licensee under Section 6.2, and (c) any and all
revenue derived under each of the Partnership Agreements and the Management and
Services Agreements for the Ventures, including but not limited to revenue
derived from the Representation Agreements entered into between each of the
Ventures and Starwave Corporation. (v) "LICENSOR LICENSE REVENUE" means any
license fees and royalties received by Licensor to the extent attributable to
licensing of Consumer and Commercial Products. (vi) "LICENSOR NET REVENUE" means
revenue (other than Licensor License Revenue) received by Licensor to the extent
attributable to any Consumer and Commercial Products, less the following
deductions: (a) advertising commissions; (b) credit card charges; (c) customs
duties and taxes other than taxes based upon Licensor's income (e.g., sales,
excise, withholding, and value-added taxes); and (d) discounts, rebates, returns
or credits, freight, insurance, packaging, and other shipment expenses.
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(B) As payment for the rights granted by Licensor hereunder, Licensee
shall pay Licensor royalties (the "LICENSEE ROYALTIES") equal to two percent
(2%) of Licensee Net Revenue in any fiscal year.
(C) Notwithstanding the foregoing provisions of this Section 6, (i)
Licensee shall not be obligated to pay Licensor any Licensee Royalties and
Licensee Royalties shall not be earned or accrued until the completion of the
first full Licensee fiscal year in which there are positive earnings before
interest, taxes and amortization ("EBITA") excluding EBITA attributable to
Licensee Revenue Exclusions, and (ii) Licensee Royalty payments in any fiscal
year shall not exceed fifteen percent (15%) of EBITA in such fiscal year
excluding EBITA attributable to Licensee Revenue Exclusions.
6.2 LICENSOR ROYALTIES. If Licensor produces or sublicenses the
production of Consumer and Commercial Products under the terms of this
Agreement, Licensor shall pay Licensee royalties ("LICENSOR ROYALTIES) equal to
a percentage of the Licensor Net Revenue and Licensor License Revenue in any
fiscal year attributable to any Consumer and Commercial Products as follows.
For Licensor Net Revenue, the percentage shall be (i) [*] for Consumer and
Commercial Products that are sold or distributed through the Portal Products and
(ii) [*] for Consumer and Commercial Products that are sold or distributed by
any other means. For Licensor License Revenue, the percentage shall be [*] for
Consumer and Commercial Products that are sold or distributed through the Portal
Products and [*] for Consumer and Commercial Products that are sold or
distributed by any other means. An example of a calculation of Licensor
Royalties under this Section 6.2 is set forth in Exhibit C.
6.3 PAYMENT.
(A) Licensee Royalties for a fiscal year are due and payable to Licensor
within forty-five (45) days after the end of such fiscal year.
(B) Licensor Royalties for a fiscal year are due and payable to Licensee
within forty-five (45) days after the end of such fiscal year.
6.4 PAYMENT FORMS/TAXES. All payments due to Licensor hereunder shall be
made by wire transfer to an account notified to Licensee. Licensor shall be
responsible for any and all taxes that are payable with respect to payments made
to Licensor hereunder and Licensor shall indemnify and hold harmless Licensee
from and against all damages, costs, losses, liabilities and expenses arising
out of or relating to nonpayment of such taxes. All payments due to Licensee
hereunder shall be made by wire transfer to an account notified to Licensor.
Licensee shall be responsible for any and all taxes that are payable with
respect to payments made to Licensor hereunder and Licensor shall indemnify and
hold harmless Licensee from and against all
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damages, costs, losses, liabilities and expenses arising out of or relating to
nonpayment of such taxes.
6.5 PERIODIC STATEMENTS. Licensee shall deliver to Licensor, within forty-
five (45) days after the end of each calendar quarter of the Term, income
statements for the Portal Products for the prior calendar quarter (that reflect
the calculation of Licensee Net Revenue), together with royalty reports and
traffic reports for such quarter. In addition, in each twelve (12) month period
during the Term, Licensee shall provide Licensor with a statement signed by
Licensee's external auditors certifying the accuracy of all royalty reports
provided hereunder. Licensor shall deliver to Licensee, within forty-five (45)
days after the end of each calendar quarter of the Term, income statements for
any Consumer and Commercial Products for the prior calendar quarter (that
reflect the calculation of Licensor Net Revenue and Licensor License Revenue),
together with royalty reports for such quarter. In addition, in each twelve (12)
month period during the Term, Licensor shall provide Licensee with a statement
signed by Licensor's external auditors certifying the accuracy of all royalty
reports provided hereunder.
6.6 AUDITS. Each party (the "Payor Party") agrees to retain, for three
(3) years after the Term, accurate records of all transactions relating to this
Agreement. No more than one time in any twelve (12) month period, during the
Term and for a period of three (3) years thereafter, the other party (the "Payee
Party") shall have the right, during the Payor Party's normal business hours
upon at least fifteen (15) business days prior notice to the Payor Party, to
have an independent auditor mutually agreed upon by the parties examine and make
extracts of all such records that relate to the revenue of the products subject
to Royalties hereunder, subject to reasonable confidentiality protections with
respect to information disclosed by the Payor Party. If any audit pursuant to
this Section 6.6 detects a shortfall in calculation of Royalties paid to the
Payee Party, the Payee Party shall pay interest, at a rate of ten percent (10%)
per annum (or, if less, the maximum rate permitted by law) from the date due, on
any unpaid amount. In addition, if in an audit of the Payee Party's records it
is determined that there is a shortfall of ten percent (10%) or more in the
amount of Royalties for the period which is the subject of such audit, the Payor
Party shall reimburse the Payee Party for reasonable out-of-pocket costs of the
audit and any overpayment discovered in the course of such audit shall be
refunded by the Payee Party to the Payor Party.
7. OWNERSHIP OF PROPRIETARY RIGHTS.
7.1 LICENSOR OWNERSHIP. Licensee acknowledges that, except for the license
expressly granted in this Agreement, Licensee has not acquired and will not
acquire any right, interest or title to the Licensor Properties by reason of
this Agreement or through the exercise of any rights in the Licensor Properties
granted to Licensee hereunder. Licensee further acknowledges that all
proprietary rights in the Licensor Properties and the good will associated
therewith are solely owned by and belong to Licensor, and that all additional
goodwill associated with the Licensor Properties created through the use thereof
by Licensee shall inure to the sole benefit of Licensor. As between Licensor
and Licensee and its permitted sublicensees, Licensor
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shall be considered the creator of the Licensor Properties, and all rights in
the Licensor Properties shall be the property of Licensor. In addition, Licensee
hereby grants, assigns and conveys to Licensor any and all rights Licensee may
now have or may be deemed to have in the future with respect to the Licensor
Properties, or any portion thereof. Licensee agrees not to register or attempt
to register any brand, names, marks, or other elements of the Licensor
Properties as a trademark, service mark, Internet domain name, trade name, or
any similar trademarks or name, with any domestic or foreign governmental or
quasi-governmental authority which would be likely to cause confusion with any
of the Licensor Properties.
7.2 LICENSEE OWNERSHIP. Licensor shall not acquire any right, interest,
or title to the Licensee Technology or any derivative works thereof (as defined
in the Copyright Law) through the exercise of any rights granted to Licensor
hereunder. As between Licensee and Licensor, Licensee shall be considered the
creator of the Licensee Technology and such derivative works, and all rights in
the Licensee Technology and such derivative works, including without limitation
the copyrights in and to the Licensee Technology and such derivative works,
shall be the property of Licensee. In addition, Licensor hereby grants, assigns
and conveys to Licensee any and all rights Licensor may now have or may be
deemed to have in the future with respect to the Licensee Technology and such
derivative works, including without limitation, any copyright to the Licensee
Technology and such derivative works, or any portion thereof.
8. PROTECTION OF PROPRIETARY RIGHTS.
8.1. CONTROL MEASURES. Each party shall implement adequate control
measures to protect Licensor's Intellectual Property Rights and to cooperate in
the other party's efforts to protect such Intellectual Property Rights. Neither
party shall commit any act or omit to take any act or permit any act to be taken
or not to be taken that would cause any of the Licensor Properties to vest in
the public domain anywhere in the United States and Canada.
8.2. MARKS AND NOTICES. Licensee shall use all brands, names and marks
included within the Licensor Properties in the form stipulated by Licensor, and
shall include such trademark and copyright notices as Licensor may request in
connection with Licensee's use of the Licensor Properties hereunder, and
Licensee shall place, as Licensor shall reasonably direct, such copyright and
trademark notices within the Portal Products. Other than as set forth in this
Agreement, Licensee shall make no use of the Licensor Properties or of any
designation confusingly similar to any of the Licensor Properties without the
prior written consent of Licensor.
8.3. DISNEY. Except as set forth in this Agreement, neither Licensee nor
any Licensee Affiliate or other party shall acquire any right under this
Agreement to use, and Licensee shall not use, and shall not knowingly allow or
assist any Licensee Affiliate or other party to use, (A) the name "Disney"
(either alone or in conjunction with or as a part of any other word, name or
phrase) or (B) any Licensor Property or any other fanciful character or design,
any music or any Intellectual Property Right of any Licensor Affiliate (i) in
any advertising, publicity or
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promotion or other disclosure, (ii) in any in-house publication, (iii) to
express or imply any endorsement of the Portal Products, Licensee, or any of its
products or services, or (iv) in any other manner or for any purpose whatsoever
(whether or not similar to any of the foregoing).
8.4 NOTICE OF INFRINGEMENT. Each party shall promptly report to the
other party if an officer of such party becomes aware of (a) any infringement of
any of such other party's Intellectual Property Rights by any third party, (b)
any infringement by any such third party of any right granted hereunder and (c)
any unauthorized copying or distribution of the Portal Products or any component
thereof (including without limitation any artwork or music contained therein) by
any third party.
8.5 ENFORCEMENT.
(A) Licensor shall have the right, in its discretion after consultation
with Licensee, to maintain and enforce Licensor's Intellectual Property Rights
in the Licensor Properties against third parties and to employ attorneys and
institute and defend actions and proceedings and take any other appropriate
steps to protect all of Licensor's rights and interests in and to the Licensor
Properties and every portion thereof, at Licensor's expense. Licensor shall
settle, compromise in good faith, or in any other manner dispose of any matter,
claim, action or proceeding and satisfy any judgment that may be rendered in any
manner as Licensor in its sole discretion may determine; provided, however, that
Licensee shall have the right to participate in the defense and/or settlement of
any such matter, claim, action or proceeding with counsel of its own choosing,
at Licensee's expense, and Licensor shall not enter into any settlement which
may require Licensee to admit liability or have an adverse impact on Licensee,
without Licensee's prior written approval. Licensor shall have the right to
recoup from any recovery its costs and expenses incurred in enforcing the
Licensor Properties. Any remaining amounts after recoupment of such costs and
expenses shall be divided equally between Licensee and Licensor within thirty
(30) days of receipt thereof. Licensee shall have the right to examine
Licensor's records with respect to the computation of such costs and expenses
and the amount of any recovery obtained by Licensor during Licensor's normal
business hours upon fifteen (15) business days prior notice and subject to
reasonable confidentiality protections for information disclosed.
(B) In the event that Licensor informs Licensee of its election not to
maintain or enforce Licensor's Intellectual Property Rights in the Licensor
Properties against third parties, or fails to maintain or enforce such
Intellectual Property Rights within a reasonable period of time after
notification by Licensee of infringing activity and request by Licensee to do
so, then Licensor agrees that Licensee shall have the right to employ attorneys
and institute and defend actions and proceedings and take any other appropriate
steps to protect all of Licensor's rights and interests in and to the Licensor
Properties and every portion thereof, at Licensee's expense. Licensee shall
settle, compromise in good faith or in any other manner dispose of any matter,
claim, action or proceeding and satisfy any judgment that may be rendered in any
manner as Licensee may determine after consultation with Licensor; provided,
however, that Licensor shall
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have the right to participate in the defense and/or settlement of any such
matter, claim, action or proceeding with counsel of its own choosing, at
Licensor's expense, and Licensee shall not enter into any settlement which may
require Licensor to admit liability or have an adverse impact on Licensor,
without Licensor's prior written approval. Licensee shall have the right to
recoup from any recovery its costs and expenses incurred in enforcing the
Licensor Properties. Any remaining amounts after recoupment of such costs and
expenses shall be divided equally between Licensee and Licensor within thirty
(30) days of receipt thereof. Licensor shall have the right to examine
Licensee's records with respect to the computation of such costs and expenses
and the amount of any recovery obtained by Licensee during Licensee's normal
business hours upon fifteen (15) business days prior notice and subject to
reasonable confidentiality protections for information disclosed. Licensor shall
take all such actions as may be necessary or convenient under the laws of any
jurisdiction to give Licensee the benefit of the rights granted in this Section
8.5(b), including the execution of documents and instruments and, if necessary,
naming Licensor as a party in legal action.
8.6. QUALITY. Licensee agrees to maintain a consistent level of quality
of the Portal Products substantially equal to that found in Licensee's existing
internet services, and further agrees to maintain a level of quality in
connection with its use of the Licensor Properties that is consistent with
general industry standards. Licensee acknowledges that Licensor shall
periodically monitor Licensee's use of the Licensor Properties in connection
with the Portal Products.
9. REPRESENTATIONS, WARRANTIES, LIMITATIONS AND INDEMNIFICATION.
9.1. REPRESENTATIONS AND WARRANTIES OF LICENSEE. Licensee represents and
warrants that (A) it has the right, power and authority to enter into this
Agreement and to fully perform its obligations under this Agreement; and (B) the
making of this Agreement by it does not violate any agreement existing between
it and any other person or entity.
9.2. INDEMNIFICATION BY LICENSEE. Licensee shall defend, at its sole
expense, any claim, suit or proceeding brought against Licensor by any third
party (A) which if true would be any breach of any of the representations,
warranties or agreements made by Licensee under this Agreement, or (B) a claim
that the Licensee Technology when used as permitted in Exhibit A violates or
infringes any copyright of any third party (each, a "LICENSOR CLAIM").
Licensee shall pay any damages and costs finally awarded against Licensor and/or
any settlement amounts entered into with respect to such Licensor Claim;
provided that (a) Licensor shall promptly notify Licensee of any Licensor Claim
for which indemnification is sought pursuant to this Section 9.2 by Licensor and
Licensee shall be provided with a copy of each communication, notice or other
action relating to said claim; (b) Licensee shall have the right to assume sole
authority to conduct the trial or settlement of such claim or any negotiations
related thereto at Licensee's expense and (c) Licensor shall have provided
Licensee with all information and assistance reasonably requested by Licensee in
connection with such claim or suit. If it is
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adjudicatively determined, or if Licensee believes, that the Licensee Technology
infringes any Intellectual Property Right, or if the license or use of the
Licensee Technology, or any part thereof, is, as a result, enjoined, then
Licensee may, at its election, option and expense: (i) replace the Licensee
Technology or part thereof, with other noninfringing suitable technology; or
(ii) modify the Licensee Technology or part thereof to become noninfringing.
Licensee will not be liable for any costs or expenses incurred without its prior
written authorization. Notwithstanding the foregoing provisions of this Section
9.2, Licensee shall have no liability for (i) any infringement claims alleging
infringement by any completed equipment or any assembly, circuit, combination,
method or process in which any of the Licensee Technology may be used but not
covering the Licensee Technology standing alone; or (ii) any modification of the
Licensee Technology, or part thereof, (unless such modification was made by or
at the written request of Licensee) where such infringement would not have
occurred but for such modifications; or (iii) any suits or proceedings covered
under Section 9.6 below. Licensee shall keep Licensor informed of, and consult
with Licensor in connection with the progress of each Licensor Claim; and
Licensee shall not have any right, without Licensor's written consent, to settle
any Licensor Claim if such settlement arises from or is part of any criminal
action, suit or proceeding or contains an acknowledgment of any liability on the
part of any Licensor Affiliate. Licensor shall have the right, in its absolute
discretion, to employ at its own expense attorneys of its own choice and subject
to the foregoing, to participate in the defense of any Licensor Claim.
9.3. REPRESENTATIONS AND WARRANTIES OF LICENSOR. Licensor represents and
warrants that (A) it has the right, power and authority to enter into this
Agreement and to fully perform its obligations under this Agreement and (B) the
making of this Agreement by it does not violate any agreement existing between
it and any other person or entity and (C) as of the Effective Time, Licensor is
a wholly owned subsidiary of TWDC.
9.4. DISCLAIMER OF WARRANTIES. Except for the express warranties set
forth in this Section 9, neither party makes any warranties, express, implied,
statutory or otherwise, with respect to the subject matter hereof. THE PARTIES
SPECIFICALLY DISCLAIM THE IMPLIED WARRANTIES OF MERCHANTABILITY, NONINFRINGEMENT
AND FITNESS FOR A PARTICULAR PURPOSE.
9.5. LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE
UNDER OR IN CONNECTION WITH THIS AGREEMENT FOR ANY LOSS OF PROFIT OR ANY OTHER
INCIDENTAL, CONSEQUENTIAL, SPECIAL, EXEMPLARY, PUNITIVE OR OTHER INDIRECT
DAMAGES OF ANY NATURE, FOR ANY REASON, INCLUDING WITHOUT LIMITATION THE BREACH
OF THIS AGREEMENT EVEN IF A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. THE FOREGOING PROVISIONS OF THIS SECTION 9.4 WILL NOT OPERATE TO LIMIT
EITHER PARTY'S OBLIGATIONS EXPRESSLY ASSUMED IN SECTIONS 9.2 AND 9.6.
9.6. INDEMNIFICATION BY LICENSOR. Licensor shall defend, at its sole
expense, any claim, suit or proceeding brought against Licensee by a third party
insofar as such suit or
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proceeding shall be based upon a claim (A) that if true would be a breach of the
representations, warranties or agreements made by Licensor under this Agreement,
or (B) a claim that the Licensor Properties or any modifications made by
Licensor to the Licensee Technology or part thereof (unless any such
modification was made by or at the written request of Licensee) where such
infringement would not have occurred but for such modification, violate or
infringe any copyright of such third party. Licensor shall pay any damages and
costs finally awarded against Licensee, and/or settlement amounts agreed to with
respect to any such claim, provided that: (A) Licensor shall have been promptly
notified of the suit or claim by Licensee and provided with a copy of each
communication, notice or other action relating to said claim; (B) Licensor shall
have the right to assume sole authority to conduct the trial or settlement of
such claim or any negotiations related thereto at Licensor's expense; and (c)
Licensee shall have provided Licensor all information and assistance reasonably
requested by Licensor in connection with such claim or suit. Subject to the
foregoing, Licensee shall have the right, at its own expense and in its absolute
discretion, to employ attorneys of its own choice and to participate in the
defense and/or settlement of any claim, suit or proceeding covered under this
Section 9.6.
10. TERMINATION.
10.1. TERMINATION BY LICENSOR. Licensor shall have the right to
immediately terminate this Agreement upon written notice to Licensee in the
event of the occurrence of one or more of the following:
(A) At the date of the consummation of an acquisition by any person or
group (within the meaning of Rule 13d-5(b)(1) promulgated under the Securities
Exchange Act of 1934) of 25% or more of the then-outstanding voting equity of
Licensee; provided, however, that in the event that such acquisition constitutes
a "Triggering Event" (as defined in Section 1 of the "poison pill" share
purchase rights plan of Licensee) and the Licensee does not redeem the share
purchase rights under the plan, the foregoing percentage shall be calculated
assuming that the share purchase rights that would be issued as a result of such
Triggering Event are exercised in full pursuant to the "flip-in" provisions of
Section 11(a)(ii) of such plan as of immediately prior to such acquisition.; or
(B) If Licensee fails to use commercially reasonable efforts to spend
(including but not limited to promotional spending) the Investment Amount (as
defined below) for the Portal Products (i) by more than fifteen percent (15%) in
each of two consecutive fiscal years and (ii) by more than twenty five percent
(25%) in the aggregate for that two year period; provided, however, that
Licensor's right to terminate this Agreement under this Section 10.1(b) shall
terminate upon the earlier to occur of the following after the first three (3)
full fiscal years: (x) after Licensee's EBITA (as defined in Section 6) less
EBITA attributable to Licensee Revenue Exclusions has been positive for two (2)
consecutive fiscal years and (y) ten (10) years after the date first set forth
above. As used in this Section 10.1(b), the "INVESTMENT AMOUNT" is the
investment amount for a fiscal year approved by a unanimous vote of the Advisory
Committee. The parties have agreed on the following initial Investment Amounts
for the first three fiscal
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years: (A) $40,500,000 in the first full fiscal year, (B) $58,300,000 in the
second full fiscal year and (C) $64,800,000 in the third full fiscal year. If
(i) in any of the first three full fiscal years after the date hereof, the
Investment Amount is not approved by a unanimous vote of the Advisory Committee
by the last day of the preceding fiscal year, then, until a new Investment
Amount is approved, the corresponding year of the initial Investment Amounts set
forth above will remain in effect and (ii) after the first three years, if an
Investment Amount for any fiscal year is not approved by a unanimous vote of the
Advisory Committee by the last day of the preceding fiscal year, then, until a
new Investment Amount is approved, the Investment Amount for the immediately
preceding fiscal year will remain in effect (or, if no Investment Amount is
approved in the first three years, the last year of the initial Investment
Amount will remain in effect), and in each case in clause (ii), increased in an
amount equal to 50% of the increase in the projected revenue growth for the
Portal Products between the current fiscal year and the subsequent fiscal year,
provided, that, if such projected revenue growth is a negative number, such
aggregate amount shall be increased in an amount equal to the percentage
increase or decrease in the Consumer Price Index for Urban Wage Earners and
Clerical Workers [All Urban Consumers], U.S. City Average (1982-84=100]
Unadjusted, all items index, published by the Bureau of Labor Statistics, United
States Department of Labor (the "CPI Factor") for the preceding twelve-month
period. In the event that the Advisory Committee cannot agree on a projected
revenue growth for the Portal Products for a particular fiscal year, the
Investment Amount for such fiscal year shall be increased in an amount equal to
the actual growth rate in revenue for the Portal Products between the prior two
fiscal years. If such growth rate is a negative number, such Investment Amount
shall be adjusted by the CPI Factor. In each year, the Investment Amount
adjusted as provided above shall be the baseline for any adjustments for the
subsequent year.; or
(C) In the event that Licensee files a petition in bankruptcy through a
decision of the majority of Licensee's Disinterested Directors (as defined in
that certain Governance Agreement by and between the parties of even date
herewith) or is adjudged bankrupt or is placed in the hands of a receiver.
(D) Except as expressly provided in this Section 10.1, Licensor shall
have no right to terminate this Agreement or the rights or licenses set forth
herein.
10.2. TERMINATION BY LICENSEE. Licensee shall have the right to
immediately terminate this Agreement upon written notice to Licensor in the
event that Licensor makes any assignment for the benefit of creditors or files a
petition in bankruptcy or is adjudged bankrupt or becomes insolvent or is placed
in the hands of a receiver.
10.3 GRANT OF LICENSE OF LICENSEE TECHNOLOGY. In the event of and
effective upon the effective date of termination of this Agreement by Licensor
pursuant to Section 10.1(a), (b) or (c) above, Licensee grants to Licensor the
license set forth in Exhibit B on the terms and conditions set forth in Exhibit
B.
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10.4. EFFECT OF TERMINATION. Sixty (60) days after the effective date of
termination pursuant to Section 10.1, all rights granted to Licensee under or
pursuant to this Agreement shall terminate. The following provisions of this
Agreement shall survive expiration or termination of this Agreement for any
reason: 5, 7, 8, 9, 10.3, 10.4, and 11.
11. GENERAL PROVISIONS.
11.1. NOTICES. All notices which either party is required or may desire
to serve upon the other party shall be in writing, addressed to the party to be
served as follows:
(A) if to Licensor:
The Walt Disney Company
500 South Buena Vista Street
Burbank, California 91521
Attention: Thomas O. Staggs
Telephone: (818) 560-6977
Facsimile: (818) 846-8726
with a copy to:
Buena Vista Internet Group
500 S. Buena Vista Street
Burbank, California 91521
Attention: Jake Winebaum
Telephone: (818) 623-3300
Facsimile: (818) 623-3304
(B) if to Licensee:
Infoseek Corporation
1399 Moffett Park Drive
Sunnyvale, California 94089
Attention: Harry M. Motro, President
Andrew E. Newton, Esq.
Telephone: (408) 543-6000
Facsimile: (408) 734-9350
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(C) with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attention: David J. Segre
Telephone: (650) 493-9300
Facsimile: (650) 496-7556
Any such notice may be served by courier, facsimile (provided oral
confirmation of receipt is immediately obtained or a hard copy is concurrently
sent by national overnight delivery service) or national overnight delivery
service. Notice shall be deemed served upon personal or courier delivery or
upon the date sent.
11.2. ENTIRE AGREEMENT. This Agreement, together with the exhibits
attached hereto constitutes the complete understanding and agreement between
Licensor and Licensee with respect to the transactions contemplated herein.
11.3. WAIVER. No waiver of any provision of this Agreement or relating
thereto shall be effective, except pursuant to a written instrument signed by
the party waiving compliance.
11.4. NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement is intended
or shall be construed to give any person, other than the parties hereto, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein.
11.5. ASSIGNMENT. This Agreement may not be assigned by a party hereto,
by operation of law or otherwise, without the other party's prior written
consent, in its sole discretion; provided, however, that either party may assign
this Agreement to its parent corporation or any entity of which its parent owns
at least 80% of the voting equity.
11.6. FURTHER ASSURANCES. Licensee agrees to do and perform all such
further acts and things and shall execute and deliver such other agreements,
certificates, instruments and documents necessary or that Licensor may deem
advisable in order to carry out the intent and accomplish the purposes of this
Agreement and to evidence, perfect or otherwise confirm Licensor's Licensee's
rights hereunder.
11.7. SEVERABILITY. If any of the provisions of this Agreement shall be
adjudged by a court of competent jurisdiction to be void, such provision shall
apply with such modifications as may be necessary to make it valid and
effective.
11.8. GOVERNING LAW, FORUM AND JURISDICTION. This Agreement shall be
governed by the laws of the State of California without giving effect to
principles of conflicts of law. Any action arising out of or relating to this
Agreement shall be filed only in the courts of the State of
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California for the County of Los Angeles, or the United States District Court
for the Central District of California. The parties hereby consent and submit to
the personal jurisdiction of such courts for the purposes of litigating any such
action.
11.9. REMEDIES. Except as expressly provided herein, either party hereto
shall have all rights and remedies available to it in the event of a breach of
this Agreement by the other party, including without limitation the right to
seek specific performance of the terms hereof and injunctive relief in respect
of any such breach by the other party. All remedies provided for herein shall
be cumulative, and the exercise of any particular remedy by a party shall not
limit or preclude the exercise of any other remedy available to such party.
IN WITNESS WHEREOF, the duly authorized representatives of each of the parties
hereto have executed this Agreement as of the day and year first written above.
DISNEY ENTERPRISES, INC. INFOSEEK CORPORATION
/s/ Kevin A. Mayer /s/ Harry M. Motro
- ------------------------- ---------------------------
Name: Kevin A. Mayer Name: Harry M. Motro
Title: Sr. Vice President Title: President and CEO
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EXHIBIT B
TERMS OF LICENSE OF LICENSEE TECHNOLOGY
1. GRANT OF LICENSE.
(A) Licensee grants to Licensor and its Affiliates a nonexclusive,
nontransferable, royalty-free, perpetual right to utilize the Licensee
Technology (along with the source code and related documentation which shall be
delivered to Licensor within ten (10) days of the effective date of this
license) solely in the development, production, operation and distribution of
the Portal Products (as such service may be operated by Licensor and its
Affiliates), to the extent that Licensee owns or controls such Licensee
Technology as of the effective date of termination of this Agreement by Licensor
under Section 10.1(a), (b) or (c) and to the extent that the Licensee Technology
is actually being utilized by Licensee in the development, production or
distribution of Portal Products within one year before such date. For purposes
of this Section 1(a), "control" means the ability to grant the licenses set
forth herein without payment of royalties or other consideration to third
parties; provided, that if any technology would be included in the definition of
Licensee Technology but for the obligations of Licensee to pay such royalties or
other consideration, Licensor shall be entitled to pay such royalties or other
consideration and include such technology in the license granted herein.
(B) Licensor agrees that it will not: (i) sublicense the Licensee
Technology (except as necessary for the development of the Portal Products, in
which case Licensor agrees that it will not sublicense the Licensee Technology
to any competitors of Licensee); (ii) decompile, disassemble, reverse engineer
or otherwise attempt to derive source code from the Licensee Technology, in
whole or in part; (iii) modify or prepare derivative works of the Licensee
Technology, except to the extent necessary or desirable for the production,
distribution, operation, development and exploitation of the Portal Products
(and such derivative works shall be owned by Licensor); (iv) copy the Licensee
Technology (except for one (1) copy to be used by Licensor for back up purposes
only); or (v) use the Licensee Technology for the benefit of or on behalf of any
third party or otherwise on a service bureau basis. As used in this Section
1(b), "competitor" means Yahoo, Excite, Lycos, CNET, Netscape, Microsoft and
America Online and their respective Affiliates and successors and any other
entity a substantial portion of whose revenue is derived from internet or
intranet search and directory activities.
(C) Licensor shall have the right to fully integrate the Licensed
Technology into the Portal Products.
(D) All rights not specifically and/or expressly granted by Licensee to
Licensor are hereby reserved by Licensee.
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2. MAINTENANCE AND SUPPORT.
(A) For so long as Licensor pays to Licensee the consideration required
under Section 2(b) below but in no event more than five (5) years after the
effective date of this license, the rights granted in Section 1 above shall
include all "Upgrades" to the Licensee Technology. For purposes of this
section, "Upgrades" shall mean updates and enhancements to the Licensee
Technology which are prepared by or for Licensee for commercial use and not for
testing.
(B) In consideration for the right to such Upgrades, Licensor agrees to
pay to Licensee royalty rates which are as favorable as those then offered to
any third party, and further agrees to similar terms and conditions as those
agreed to by the most favorably treated third party; provided however, that if
Licensee does not offer any or all or any such Upgrades to the Licensee
Technology for license to any third party, the license granted hereunder shall
be offered at fair market rates, as reasonably determined by the parties based
on the license rates for similar technology.
(C) Unless agreed in writing by the parties, this Agreement does not
include, and Licensee shall have no obligation to provide to Licensor, any
support or technical assistance.
3. TERMINATION.
(A) If either party materially breaches any material term or condition of
this Agreement and fails to remedy such breach within a period of thirty (30)
days after written notice of such breach is given to it by the other party, such
other party may terminate this Agreement immediately upon written notice.
(B) In the event of termination of this Agreement, (i) all rights and
licenses granted herein shall automatically terminate, (ii) Licensor shall ship
to Licensee, within thirty (30) days, all tangible items in its possession which
contain any Licensee Technology and shall promptly erase all copies of the
Licensee Technology from computer memory, and (iii) Licensor shall cease to
utilize any Licensee Technology.
4. CONFIDENTIALITY. Licensor agrees to keep confidential all Licensee
Technology, not to use any Licensee Technology except as set forth herein, and
not to disclose any Licensee Technology to any third party (except as necessary
in connection with a permitted sublicense, subject to confidentiality provisions
and the right of Licensee to audit such third party's compliance with such
confidentiality provisions). Without limiting the foregoing, Licensor shall use
at least the same degree of care which it uses to prevent the disclosure of its
own confidential information of like importance (which, in the case of source
code, is of the utmost importance) to prevent the disclosure of Licensee
Technology. Licensor shall promptly notify Licensee of any actual or suspected
misuse or unauthorized disclosure of Licensee Technology.
5. DISCLAIMER OF LIABILITY. IN NO EVENT SHALL LICENSEE BE LIABLE UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR THE LICENSE FOR ANY
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LOSS OF PROFIT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, EXEMPLARY, PUNITIVE OR OTHER
INDIRECT DAMAGES OF ANY NATURE FOR ANY REASON, INCLUDING WITHOUT LIMITATION
BREACH OF THIS AGREEMENT AND EVEN IF LICENSEE HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
6. DISCLAIMER OF WARRANTIES. LICENSEE MAKES NO WARRANTIES, EXPRESS,
IMPLIED, STATUTORY OR OTHERWISE WITH RESPECT TO THE LICENSEE TECHNOLOGY AND
LICENSEE SPECIFICALLY DISCLAIMS THE IMPLIED WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT.
7. REPRESENTATIONS AND WARRANTIES. The provisions of Section 9 apply to
this Exhibit B.
8. MISCELLANEOUS. The provisions of Section 11 apply to this Exhibit B.
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EXHIBIT 11
PRODUCT MANAGEMENT AGREEMENT
THIS PRODUCT MANAGEMENT AGREEMENT (this "Agreement") is entered into as of
June 18, 1998 by and between Disney Enterprises, Inc., a Delaware corporation,
("Disney") and Infoseek Corporation, a California corporation ("Infoseek");
provided that, this Agreement shall only become effective upon the Effective
Time, as defined in and pursuant to that certain Agreement and Plan of
Reorganization (the "Merger Agreement"), of even date herewith, by and among
Infoseek Corporation, a Delaware corporation, Starwave Corporation, a Washington
corporation, and Disney and shall cease and be of no further force and effect in
the event that the Effective Time does not occur; and provided further that,
each of the parties hereto agrees not to terminate, amend or otherwise alter
this Agreement, or waive any of its rights hereunder, at any time prior to
immediately following the Effective Time.
RECITALS
1. Pursuant to the Merger Agreement and a stock and warrant purchase
agreement, each dated as of the date hereof (collectively, the "Acquisition
Agreements"), Disney has agreed to acquire approximately a 43% interest in the
voting equity of Infoseek, subject to the terms and conditions set forth in the
Acquisition Agreements.
2. Pursuant to a license agreement, dated as of the date hereof (the "License
Agreement"), Disney has agreed to license to Infoseek the Licensor Properties
for the development, operation, production, distribution, sale, license and
other exploitation of the Portal Products.
3. In connection with the execution of the Acquisition Agreements and the
License Agreement, Disney and Infoseek have agreed to enter into agreements,
effective as of the Effective Time, with respect to, among other matters, (a)
the management and governance of the Portal Products, and (b) the establishment
of content and advertising standards and practices for the Portal Products, as
well as other services and products of Disney and Infoseek.
THEREFORE, for good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, Disney and Infoseek hereby agree as follows:
1. ADVISORY COMMITTEE.
The parties agree that this Agreement, and the rights and obligations of
the parties hereunder shall become effective on the Effective Time.
Capitalized terms not defined herein shall have the meanings set forth in
the License Agreement.
(a) GENERAL. As of the Effective Time, Infoseek and Disney will
respectively appoint the Infoseek CEO and the Chairman of Buena Vista
Internet Group as the sole members (the "Infoseek Member" and the
"Disney Member" respectively) of an advisory committee (the "Advisory
Committee"). Each of Infoseek and Disney will have the right to
replace its designee on the Advisory
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Committee; provided, that Infoseek and Disney agree to consult with
each other prior to any such replacement. Any such replacement will be
with an officer of Infoseek or Disney, or their respective Affiliates,
of similar responsibilities and experience, to the extent possible.
The Advisory Committee will meet at least every two months. For
purposes of this Agreement, "Affiliate" shall mean, with respect to
any person, any person directly or indirectly through one or more
intermediaries controlling, controlled by or under common control with
such person. Notwithstanding the foregoing, for purposes of this
Agreement, Infoseek shall not be considered as an Affiliate of Disney
and Disney shall not be considered as an Affiliate of Infoseek. Except
as expressly provided in Section 1(b)(iii) below, decisions of the
Advisory Committee shall be made by unanimous agreement of the Disney
Member and the Infoseek Member.
(b) RESPONSIBILITIES. The Advisory Committee will have the following
responsibilities:
(i) PORTAL PRODUCTS. The Advisory Committee will have overall
management responsibility for the Portal Products, will make all
significant business decisions relating to the Portal Products
and will participate regularly in the overall supervision,
direction and control of the Portal Products. Notwithstanding the
foregoing, it is understood and agreed that decisions with
respect to Infoseek-branded only search and directory services
shall not be required to be discussed by the Advisory Committee
and Infoseek shall control all decision making relating to such
search and directory services; provided, that Infoseek agrees
that the policy of standards and practices for the Infoseek
services (attached as Exhibit B-3) shall be subject to the terms
of Section 3.
(ii) OVERALL RELATIONSHIP. The Advisory Committee will be responsible
for coordinating the overall day-to-day relationship between
Disney and Infoseek with respect to all agreements and
arrangements between the companies, other than as related to the
Infoseek Stock and the Warrants (as defined in the Acquisition
Agreements). For example, the Advisory Committee would discuss
hosting, technology, marketing, and ad sales relationships
between (x) Disney and its Affiliates and (y) Infoseek and its
Affiliates that may occur between the parties that are not
related to the Portal Products, the partnership between an
Affiliate of Starwave Corporation ("Starwave") and a Disney
Affiliate (the "ABC News Venture") or the partnership between a
Starwave Affiliate and a Disney Affiliate (the "ESPN Venture").
Notwithstanding the foregoing, matters that are not related to
online services or sites owned or controlled by Disney and its
Affiliates will not be required to be discussed by the Advisory
Committee.
(iii) TIE-BREAKING VOTES. While the parties agree that the Advisory
Committee will meet and discuss all issues concerning the matters
over
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which they are responsible in good faith, in the following
situations, subject to Sections 2(c) and (d), a tie-breaking vote
(i.e., providing either the Disney Member or the Infoseek Member
with final decision making authority) will be provided as
follows: (A) the tie-breaking vote will reside with the Disney
Member with respect to the Portal Products, in all matters
concerning brand, name, logo and URL-branding issues as used in
Portal Products as well as the approval of each Annual Marketing
Plan (as defined in Section 2(c)), but in all events excluding
matters set forth in the Promotional Services Agreement, dated as
of the date hereof, between American Broadcasting Companies, Inc.
and Infoseek and further excluding matters concerning budgets,
spending requirements, revenue and operating income targets or
similar matters; provided, that the use of the tie breaking vote
by the Disney Member must be exercised in a manner that the
Disney Member intends in good faith is in the best interests of
the Portal Products, (B) the tie-breaking vote will reside with
the Disney Member with respect to the content and advertising
guidelines, as referenced in Section 3, in all matters relating
to any changes, modifications, interpretations or waivers of such
guidelines, (C) the tie-breaking vote will reside with the
Infoseek Member with respect to all matters concerning product
development, production, operation, distribution, advertising
sales, the execution of the Annual Marketing Plan or otherwise
relating to the day-to-day operations of the Portal Products
(except as expressly specified in clauses (A) and (B) above. The
parties, the Infoseek Member and the Disney Member (and the
Advisory Committee) agree to comply with the provisions of
Section 3 in taking any action with respect to the Portal
Products.
(c) TRAFFIC. Every six months, the Advisory Committee will check the
traffic flow between the individual services of Disney and its
Affiliates (including ESPN.com and ABC News.com) (collectively, the
"Disney Sites") and the Portal Products (including referrals to and
from Infoseek's search and directory product). If there is an overall
imbalance in traffic between any such individual Internet site or
service and the Portal Products, or if there is an overall imbalance
in traffic between the Disney Sites (in the aggregate) and the Portal
Products, the members of the Advisory Committee agree to work in good
faith to balance traffic by modifying such individual service or as
otherwise agreed, including without limitation, bridge pages and
adjustment of links.
(d) OTHER AGREEMENTS. Disney agrees, to and to cause its Affiliates to,
use good faith efforts to use Starwave Corporation or Infoseek for
hosting all of Disney and its Affiliates' online services at market
rates. Disney and Infoseek agree, and agree to cause their respective
Affiliates to, use good faith efforts to standardize navigation,
technology, advertising sales, user registration and privacy standards
across all Disney-owned, Disney Affiliate-owned, and Infoseek-owned
online services and products.
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2. PORTAL PRODUCTS.
(a) APPOINTMENT OF GENERAL MANAGER. The day-to-day operations of the
Portal Products will be managed by a general manager (the "General
Manager"). Infoseek will be entitled to nominate the General Manager.
Any nomination must be approved by a unanimous vote of the Advisory
Committee; provided, that if three successive nominees are not
approved, the Infoseek Member shall have the sole right of approval
for the subsequent nominee. At least one of the nominees will not be a
current or former Infoseek employee at the time of nomination. This
process will be repeated in the event of any replacement of a General
Manager. Infoseek agrees to use its good faith efforts to nominate
well qualified, "best available" candidates as General Manager
candidates. The General Manager will report to the Advisory Committee.
Either the Disney Member or the Infoseek Member will have the power to
dismiss the General Manager, after consultation in good faith with the
other. The General Manager shall be an employee of Infoseek or its
Affiliates.
(b) DUTIES OF GENERAL MANAGER. Subject to and without limiting the
provisions of Sections 1(b)(i) and 1(b)(iii) above, the General
Manager will implement the Initial Business Plan (as defined in
Section 2(c)) and subsequent Annual Business Plans and Budgets and
shall exercise control over the day-to-day operations of the Portal
Products, including editorial tactics, editorial strategy and creative
development, production (technical or otherwise), distribution,
merchandising, advertising sales and marketing and promotion.
(c) BUSINESS PLAN. Prior to the date hereof, Disney and Infoseek have
agreed on an initial three year business plan for the Portal Products
(the "Initial Business Plan"), attached hereto as Exhibit A. At least
thirty (30) days prior to the beginning of each fiscal year (ending
September 30) during the Term, the General Manager shall prepare for
the unanimous approval of the Advisory Committee an annual update to
the initial business plan and an annual budget (collectively, the
"Annual Business Plan and Budget") for the subsequent fiscal year
utilizing the categories and methods established in the Initial
Business Plan (i.e., investment commitments, revenue and operating
income targets), as well as an annual marketing plan for the Portal
Products (the "Annual Marketing Plan").
(d) ROLLOVER. If (i) in any of the first three years after the date
hereof, an Annual Business Plan and Budget is not approved by a
unanimous vote of the Advisory Committee by the last day of the
preceding fiscal year, then, until a new Annual Business Plan and
Budget is approved, the corresponding year of the Initial Business
Plan will be effective and (ii) after the first three years, if an
Annual Business Plan and Budget for any fiscal year are not approved
by a unanimous vote of the Advisory Committee by the last day of the
preceding fiscal year, then, until a new Annual Business Plan and
Budget is approved, the Annual Business Plan and Budget for the
immediately preceding fiscal year will remain in effect (or, if no
Annual Business Plan and Budget is approved in the first three
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years, the last year of the Initial Business Plan will remain in
effect), and in each case in clause (ii), increased in an amount equal
to 50% of the increase in the projected revenue growth for the Portal
Products between the current fiscal year and the subsequent fiscal
year, provided, that, if such projected revenue growth is a negative
number, such aggregate amount shall be increased in an amount equal to
the percentage increase or decrease in the Consumer Price Index for
Urban Wage Earners and Clerical Workers [All Urban Consumers], U.S.
City Average (1982-84 = 100) Unadjusted, all items index, published by
the Bureau of Labor Statistics, United States Department of Labor (the
"CPI Factor") for the preceding twelve-month period. In the event that
the Advisory Committee cannot agree on projected revenue growth for
the Portal Products for a particular fiscal year, the Annual Business
Plan and Budget for such fiscal year shall be increased in an amount
equal to fifty percent (50%) of the actual growth rate in revenues for
the Portal Products between the two prior fiscal years. If such growth
rate is a negative number, such Annual Business Plan and Budget shall
be adjusted by the CPI Factor. In each year, the Annual Business Plan
and Budget as adjusted as provided above shall be the baseline for any
adjustments for the subsequent year. The above provision to increase
the Annual Business Plan and Budget by the projected revenue growth
for the Portal Products shall only be effective for a five year period
beginning at the Effective Time; thereafter, if the Advisory Committee
does not approve an Annual Business Plan and Budget, the Annual
Business Plan and Budget for the prior year shall be adjusted by the
CPI Factor. For clarification purposes, the limitation of the
projected revenue growth factor to a five (5) year period shall
expressly not apply to the License Agreement which, by its terms, does
not so limit the application of the projected revenue growth factor.
(e) PLACEMENT OF DISNEY SERVICES. Infoseek agrees that the following
online services owned or controlled by Disney and its Affiliates shall
be included within the Portal Products and shall receive the most
prominent placement within the appropriate channels, services, sites
and categories (collectively, "Components") of the Portal Products and
Infoseek Services: (i) the online service produced and distributed
pursuant to the ESPN Agreement (the "ESPN Service") will be the most
prominent featured online service within the sports Component of the
Portal Products and Infoseek Services, (ii) the online service
produced and distributed pursuant to the ABC News Agreement (the "ABC
News Service") will be the most prominent featured online service
within the news Component of the Portal Products and Infoseek
Services, (iii) the Disney kids and family services (i.e., Disney.com,
Disney's Daily Blast and Family.com) (the "Disney Kids/Family
Service") will be the most prominent featured services within the
family or kids Component of the Portal Products and Disney's Internet
Guide will be featured on the family or kids Component of the Portal
Products and Infoseek Services, (iv) the ABC.com service (the "ABC
Service") will be the most prominent featured service within the
entertainment Component of the Portal Products and Infoseek Services,
(v) all Disney specialty retail shopping/commerce online services
(e.g., Disney Store, ESPN Store, ABC
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Store as opposed to SportsMart, which would not be considered as a
specialty retailer) shall be featured within the appropriate
Components of the shopping/commerce services of the Portal Products
and Infoseek Services and the Disney Travel Store shall be a featured
service within the appropriate Components of the Portal Products and
Infoseek Services. For all other services developed, produced or owned
by Disney and its Affiliates, Infoseek and Disney agree to negotiate
in good faith to include such service within the appropriate Component
of the Portal Products and Infoseek Services. In addition, to the
extent that the main home page, personalized pages or other similar
pages of the Portal Products and Infoseek Services includes links,
banners, or third party content, then links, banners (excluding ad
banners) or content provided by the services referenced in clauses (i)
to (iv) above shall be afforded equally prominent placement. For
purposes of this Agreement, "most prominent placement" and "most
prominent featured service" shall mean, at a minimum (1) an above the
fold placement (i.e., visible to an end user without scrolling or
navigation on a 640 by 480 pixel page) of a feature, icon or link on
the first page of the relevant Component (i.e., the sports Component
within the Portal Products), which feature, icon or link shall be at
least equal in size to the largest feature, icon or link featured on
such first page (excluding ad banners), (2) that the content, brand,
icons, and links of Disney-controlled services shall be placed within
the appropriate Components of the Portal Products with the largest
size on the same page (excluding ad banners). For example and without
limitation, on the first page seen by viewers of each section of the
sports Component (e.g., sports home page, sports news page, scores
pages, teams page, league page, information pages, etc.) such page
will include a link to ESPN.com (to the extent that such page contains
any links to content pages) that is the largest in size. If there is a
headline or scores box for sports or news headlines or scores on a
page, ABC News headlines and ESPN headlines and scores shall appear as
the first headlines/scores in the appropriate boxes. To the extent
that any such page includes content (e.g., sports headlines,
columnists, polls, scores, specialized league information), ESPN.com
content shall have most prominent placement on any such page, subject
to availability of appropriate content (i.e., if ESPN.com does not
have original content on high school football, if there is a sport
page featuring high school football, such page shall not be required
to feature content from ESPN.com). The placement and other obligations
of Infoseek hereunder shall cease with respect to the ESPN Service
and/or the ABC News Service on the end of the term of their respective
Partnership Agreements of even date herewith, including renewals, if
any (provided, however, that if either Partnership Agreement is
terminated by ESPN Partner or ABC Partner pursuant to Section 11.3(c)
of such Partnership Agreement, Infoseek's obligations under Sections
2(e) and 2(f) hereof shall continue in effect for the earlier of (i)
remaining term of the respective Partnership Agreement or (ii) one (1)
year).
(f) PLACEMENT OF INFOSEEK. Disney agrees to integrate Infoseek's search
and directory technology and service links into all of its owned and
controlled online
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services to the extent features of such type are integrated into the
services, as mutually agreed by the parties. The appropriate Infoseek
utility, icons, links and banners (including those branded with the
names and brands of the Portal Products) shall receive the most
prominent placement (excluding ad banners) on all pages within such
services where Disney determines to include search and directory
services. In addition, to the extent that Infoseek decides to provide
most prominent placement to any other Disney sites or services, Disney
agrees to provide Infoseek with most prominent placement for the
appropriate Infoseek search utilities, links and banners on all pages
within such services that Disney determines to include search and
directory. Navigational elements that will allow the user to access
the Portal Products within one click will be available on all pages of
all Disney Services referenced in Section 3(e) above. If such
navigational elements include search and directory, such services will
be supplied by Infoseek. For purposes of Sections 3(e) and 3(f),
"Disney" shall include Disney Enterprises, Inc. and its Affiliates.
(g) SERVICE STANDARDS. Infoseek agrees to provide the Portal Products
with services (including but not limited to web ops, ad sales,
customer service and general and administrative support) of the same
quality, reliability, availability and such other standards of
performance as it provides to any of its other services with similar
traffic activity and complexity.
3. CONTENT AND ADVERTISING STANDARDS.
Attached as Exhibits B-1, B-2 and B-3 are the written policy of standards
and practices for content and advertising which will apply to the Portal
Products, the ESPN Venture and the ABC News Venture and Infoseek, respectively.
Disney agrees that the policy for the Portal Products will also apply to all
other Disney-branded or owned internet services and Infoseek agrees that such
policy will also apply to all other Infoseek-branded or owned internet services;
provided, however, that the foregoing policy shall not apply to search results
that direct a viewer outside of the Portal Products. Disney agrees that the
policies for the Portal Products shall not be more restrictive than the policies
applied to any internet services or sites owned and operated by Disney or any
of its Affiliates. The Disney Member will have the sole ability, acting
reasonably and in good faith and after consultation with the Infoseek Member, to
approve changes in the attached written policies for the ESPN Venture, ABC News
Venture and the Portal Products, regardless of Disney's percentage ownership of
Infoseek Stock. Any change in the policy as applicable to Infoseek-branded or
owned internet services (without including the ESPN Venture, the ABC News
Venture or the Portal Products) will be subject to approval by the Advisory
Board as long as Disney owns at least 10% or more of the then-outstanding shares
of Infoseek stock.
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4. REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION.
(a) INFOSEEK REPRESENTATIONS AND WARRANTIES. Infoseek represents and
warrants to Disney that (a) it has the right, power and authority to
enter into this Agreement and fully to perform its obligations under
this Agreement; (b) the making of this Agreement by it does not
violate any agreement existing between it and any other person or
entity; (c) it complies, and at all times shall comply, with all
applicable laws, rules and regulations in effect at the time services
are performed pursuant to this Agreement pertaining to the subject
matter hereof; and (d) it shall not exercise any of the rights granted
to it under or pursuant to this Agreement in a manner that shall
violate any applicable law, rule or regulation.
(b) INFOSEEK INDEMNIFICATION OBLIGATIONS. Infoseek agrees to, and shall,
indemnify, defend and hold harmless Disney and its Affiliates and
their respective directors, shareholders, officers, agents, employees,
successors and assigns from and against any and all claims, demands,
suits, judgments, damages, costs, losses, expenses (including
reasonable attorneys' fees and expenses) and other liabilities arising
from actions brought by third parties in connection with or related
to, directly or indirectly, any breach or alleged breach of any of the
representations or warranties made by it under Section 4(a) of this
Agreement, provided, that Disney gives Infoseek full control over the
defense (including any settlements) of any such claim; and Disney
provides Infoseek with full information and reasonable assistance, at
Infoseek's expense. Infoseek shall keep Disney informed of, and
consult with Disney in connection with the progress of such litigation
or settlement and (i) Infoseek shall not have any right, without
Disney's written consent, to settle any such claim if such settlement
arises from or is part of any criminal action, suit or proceeding or
contains a stipulation to or admission or acknowledgment of, any
liability or wrongdoing (whether in contract, tort or otherwise) on
the part of any Disney Affiliate, and (ii) Disney shall promptly
notify Infoseek of any such claim
(c) DISNEY REPRESENTATIONS AND WARRANTIES. Disney represents and warrants
that (a) it has the right, power and authority to enter into this
Agreement and fully to perform its obligations under this Agreement;
(b) the making of this Agreement by it does not violate any agreement
existing between it and any other person or entity; (c) it complies,
and at all times shall comply, with all applicable laws, rules and
regulations in effect at the time services are performed pursuant to
this Agreement pertaining to the subject matter hereof; and (d) it
shall not exercise any of the rights granted to it under or pursuant
to this Agreement in a manner that shall violate any applicable law,
rule or regulation.
(d) DISNEY INDEMNIFICATION OBLIGATIONS. Disney agrees to, and shall,
indemnify, defend and hold harmless Infoseek and its Affiliates, and
its directors, shareholders, officers, agents, employees, successors
and assigns from and against any and all claims, demands, suits,
judgments, damages, costs, losses, expenses (including reasonable
attorneys' fees and expenses) and other liabilities
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arising from actions brought by third parties, in connection with or
related to, directly or indirectly, any breach or alleged breach of
the representations or warranties made by it under Section 4(c) of
this Agreement. Infoseek shall promptly notify Disney of any such
claim; Disney gives Infoseek full control over the defense (including
any settlements) of such claim; and Infoseek provides Disney with full
information and reasonable assistance, at Disney's expense; provided
however, that (i) Disney shall keep Infoseek informed of and consult
with Infoseek in connection with the progress of such litigation or
settlement; and (ii) Disney shall not have any right, without
Infoseek's written consent, to settle any such claim if such
settlement arises from or is part of any criminal action, suit or
proceeding or contains a stipulation to or admission or acknowledgment
of, any liability or wrongdoing (whether in contract, tort or
otherwise) on the part of Infoseek.
5. TERM AND TERMINATION.
(a) TERM. The term of this Agreement shall commence as of the Effective
Time and shall continue as long as Disney and its Affiliates own any
shares of Infoseek stock.
(b) TERMINATION. Without prejudice to any other rights or remedies
available to the parties, Disney and Infoseek shall each have the
right, in its sole discretion, to terminate this Agreement upon
written notice to the other in the event of the occurrence of one or
more of the following:
(i) In the event that Licensee files a petition in bankruptcy through
a decision of the majority of Licensee's Disinterested Directors
(as defined in the Governance Agreement by and between the
parties dated the date hereof) or is adjudged bankrupt or is
placed in the hands of a receiver; or
(ii) The other party breaches any material term or provision of this
Agreement and fails to cure such breach within sixty (60) days
after the non-breaching party delivers written notice thereof to
the other party stating what actions are required to cure such
breach or indicating that such breach is incapable of being
cured; provided, that the alleged breaching party shall use its
best efforts to timely cure such breach.
(c) INJUNCTIVE RELIEF. Each party acknowledges and agrees that the other
party may be irreparably harmed by any material breach of this
Agreement by it. Therefore, each party agrees that in the event that
it breaches any of its obligations hereunder, the other parties in
addition to all other remedies available to it under this Agreement,
or at law or in equity, shall be entitled to seek all forms of
injunctive relief including decrees of specific performance, without
showing or proving that it sustained any actual damages and without
posting bond.
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6. GENERAL PROVISIONS.
(a) NOTICES. All notices which either party is required or may desire to
serve upon another party shall be in writing and addressed as follows:
(i) if to Disney :
The Walt Disney Company
500 South Buena Vista Street
Burbank, California 91521
Attention: Thomas O. Staggs
Telephone: (818) 560-6977
Facsimile: (818) 846-8726
with a copy to:
Buena Vista Internet Group
500 S. Buena Vista Street
Burbank, California 91521
Attention: Jake Winebaum
Telephone: (818) 623-3300
Facsimile: (818) 623-3304
(ii) if to Infoseek:
Infoseek Corporation
1399 Moffett Park Drive
Sunnyvale, California 94089
Attention: Harry M. Motro, President
Andrew E. Newton, Esq.
Telephone: (408) 543-6000
Facsimile: (408) 734-9350
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attention: David J. Segre
Telephone: (650) 493-9300
Facsimile: (650) 496-7556
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Any such notice may be served personally or by mail (postage prepaid),
facsimile (provided oral confirmation of receipt is immediately
obtained and a hard copy is concurrently sent by internationally
commercially recognized overnight delivery service), internationally
commercially recognized overnight delivery service (such as Federal
Express or D.H.L.) or courier. Notice shall be deemed served upon
personal delivery or upon actual receipt. Any party may change the
address to which notices are to be delivered by written notice to the
other parties served as provided in this Section 6(a).
(b) ENTIRE AGREEMENT. This Agreement, together with the Exhibits
attached hereto and hereby incorporated herein by reference,
constitutes the complete, final and exclusive understanding and
agreement between the parties with respect to the transactions
contemplated, and supersedes any and all prior or contemporaneous oral
or written representation, understanding, agreement or communication
between the parties concerning the subject matter hereof.
(c) AMENDMENTS. All amendments or modifications of this Agreement shall
be binding upon the parties so long as the same shall be in writing
and executed by each of the parties hereto.
(d) WAIVERS. No waiver of any provision of this Agreement or any rights
or obligations of any party hereunder shall be effective, except
pursuant to a written instrument signed by the party waiving
compliance, and any such waiver shall be effective only in the
specific instance and for the specific purpose stated in such writing.
(e) NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement is intended
or shall be construed to give any person, other than the parties
hereto, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
(f) ASSIGNMENT. No party shall, directly or indirectly, assign this
Agreement to any third party, except that either party may assign this
Agreement to its parent corporation or any entity of which its parent
owns at least 80% of the voting equity.
(g) HEADINGS. The section and subsection headings and captions appearing
in this Agreement are inserted only as a matter of convenience and
shall not be given any legal effect.
(h) SEVERABILITY. If any restriction, covenant or provision of this
Agreement shall be adjudged by a court of competent jurisdiction to be
void as going beyond what is reasonable in all the circumstances for
the protection of the interests of the party seeking to enforce such
restriction, covenant or provision, such restriction, covenant or
provision shall apply with such modifications as may be necessary
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to make it valid and effective. In the event that any provision of
this Agreement should be found by a court of competent jurisdiction to
be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained
shall not in any way be affected or impaired thereby.
(i) GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California without giving effect to principles of conflicts
of law. Any action arising out of or relating to this Agreement shall
be filed only in the courts of the State of California for the County
of Los Angeles or the United States District Court for the Central
District of California. The parties hereby consent and submit to the
personal jurisdiction of such courts for the purposes of litigating
any such action.
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IN WITNESS WHEREOF, the duly authorized representatives of each party have
executed this Agreement as of the day and year first written above.
DISNEY ENTERPRISES, INC. INFOSEEK CORPORATION
By: /s/ Kevin A. Mayer By: /s/ Harry M. Motro
------------------ ------------------
Name: Kevin A. Mayer Name: Harry M. Motro
Title: Sr. Vice President Title: President and CEO
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EXHIBIT 12
A REQUEST FOR CONFIDENTIAL TREATMENT HAS BEEN FILED WITH THE COMMISSION
WITH RESPECT TO PORTIONS OF THIS EXHIBIT AND SUCH PORTIONS HAVE THEREFORE BEEN
OMITTED, AS INDICATED BY A BRACKETED ASTERISK [*], AND FILED SEPERATELY WITH THE
COMMISSION.
PROMOTIONAL SERVICE AGREEMENT
THIS PROMOTIONAL SERVICE AGREEMENT (this "AGREEMENT") is entered into as of
June 17, 1998 by and between AMERICAN BROADCASTING COMPANIES, INC., a New York
corporation ("ABC") and INFOSEEK CORPORATION, a California corporation
("INFOSEEK"); provided that, this Agreement shall only become effective upon the
Effective Time, as defined in and pursuant to that certain Agreement and Plan of
Reorganization, of even date herewith, by and among Infoseek Corporation, a
California corporation, ICO Holding Company, a Delaware corporation, Starwave
Corporation, a Washington corporation, and Disney Enterprises, Inc., a Delaware
corporation and shall cease and be of no further force and effect in the event
that the Effective Time does not occur; and provided further that, each of the
parties hereto agrees not to terminate, amend or otherwise alter this Agreement,
or waive any of its rights hereunder, at any time prior to immediately following
the Effective Time.
RECITALS
1. Pursuant to a license agreement, dated as of the date hereof (the "License
Agreement"), Disney Enterprises, Inc. ("DEI") has agreed to license to Infoseek
certain names, brands, URLs, and associated intellectual property for the
development, production and operation by Infoseek of an internet portal service
named "Go Networks" or another name, including all brands, trademarks, names,
sections, sites, features and applications relating thereto (the "Portal
Products").
2. In connection with the development, production and operation by Infoseek of
the Portal Products, ABC has agreed to provide certain promotional services and
has agreed to cause certain of its affiliated entities to provide certain other
promotional services, on the terms and conditions set forth herein, and Infoseek
agrees to accept and pay for such promotional services, on the terms and
conditions set forth herein.
THEREFORE, for good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, ABC and Infoseek hereby agree as follows:
1. AMOUNTS. Infoseek agrees to purchase from ABC, and ABC agrees to
provide to Infoseek, promotional services for the Portal Products in the amount
of $165,000,000, over the five year period after the Effective Date (as defined
in Section 4(a)); provided, however, that (i) Infoseek and ABC agree that under
no circumstances shall the amounts required to be paid by Infoseek for
promotional services in an Annual Period exceed the amount set forth in the
Annual Marketing Plan for such promotional services without Infoseek's consent,
and (ii) the amounts set forth for such promotional services in the Annual
Marketing Plan for the Annual Period shall be no less than $25,000,000 or
greater than $41,000,000, with the exact amount within such range at Infoseek's
option, notwithstanding DEI's tie-breaking control with respect to the Annual
Marketing Plan. For the avoidance of doubt and without limiting the foregoing,
with respect to any Annual Period, under no circumstances shall ABC bill
Infoseek in an amount that exceeds the amount set forth in the Annual Marketing
Plan for such Annual Period,
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without Infoseek's prior written consent. Infoseek agrees to pay ABC for the
promotional services from traditional media sources on ABC's customary payment
terms for the applicable media source. With respect to non-traditional media
sources, the parties agree to match the required payment dates of the most
similar traditional media source. The Annual Marketing Plan shall have the
meaning set forth in and shall be prepared and approved in accordance with the
terms and conditions of the Product Management Agreement, dated as of the date
hereof between DEI and Infoseek (the "Product Management Agreement"). "Annual
Period" shall mean the twelve (12) month period mutually agreed upon and
included within the Annual Marketing Plan notwithstanding DEI's tie-breaking
control with respect to the Annual Marketing Plan, or if no such period is set
forth in the Annual Marketing Plan, the twelve (12) month period commencing upon
the first date promotional services are provided by ABC to Infoseek hereunder,
and each one year period thereafter. Notwithstanding the foregoing, the
promotional obligations of ABC are subject to the current agreement between ABC
and America Online, Inc., dated March 5, 1998, as amended, which shall not be
renewed.
2. MENU AND RATES. The promotional services will be derived from
traditionally available media sources and non-traditional media sources.
(a) TRADITIONAL MEDIA SOURCES. For purposes of this Agreement,
promotion from traditional media sources shall mean promotion that, from time to
time, may be commercially available for any particular media source, generally
on a rate card basis. Attachment A lists those traditional media sources
available as of the date of this Agreement for providing promotional services
hereunder. The estimated average representative rates (inclusive of standard
agency commissions, if applicable) for the traditional media sources are also
set forth on Attachment A. ABC acknowledges that it shall be responsible for the
payment of standard and customary agency commissions, if necessary. Infoseek
acknowledges that such rates are representational in nature and the exact rates
will depend on, with respect to any particular media source, availability,
market conditions, frequency of use and other factors. ABC agrees that the rates
charged to Infoseek for the use of any particular promotional service (e.g., a
specific prime time program or magazine issue) will reflect average rates for
the purchase of the same or a similar promotion or advertisement paid by a
similarly situated third party (i.e., a party that purchases the same or similar
promotions or advertisements as may be purchased by Infoseek, in approximately
the same amounts, and having a similar amount of overall spending on traditional
media sources and non-traditional media sources at ABC.)
(b) NON-TRADITIONAL MEDIA SOURCES. For purposes of this Agreement,
promotion from non-traditional media sources shall mean promotion that is not
commercially available at the date hereof for any particular media source. As a
general principle, the rates for promotion from non-traditional media sources
shall be based on the rates then available for related traditional media
sources, with such rates adjusted by the duration factor and the value factor,
if applicable, and the co-branding factor, if applicable, as set forth on
Attachment B. The duration factor is a comparison of the length of a particular
promotion from a non-traditional media source as compared with the length of a
corresponding promotion available from a traditional media source. Infoseek
acknowledges that the duration factor does not necessarily reflect the exact
timed amount of any particular promotion and that promotions for
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any particular non-traditional media source may be of longer or shorter duration
yet will retain the same duration factor. [*] On the six month anniversary of
the Effective Date and each year thereafter, Infoseek shall be entitled to
request a review of the duration factors for any particular category of
promotion. ABC agrees to act as promptly as possible to complete such review,
with assistance from Infoseek. ABC and Infoseek agree that if, as a result of
such review, the parties reasonably determine that the actual amount of
promotional time for a particular category is less or greater than reflected by
the duration factor for that category of promotion, the parties will adjust that
duration factor appropriately. The duration factor review shall only be
available for request by Infoseek one time in any twelve month period. The value
factor is a measure of the relative value of a promotion from any specific non-
traditional media source (e.g., a specific prime time program) as compared to a
corresponding promotion available from the same or similar traditional media
source (i.e., the same program or a program with an equivalent rate card). With
respect to all promotions for the Portal Products that also promote an ABC or
Disney-branded online service (e.g., ESPN.com, ABC News.com. ABC.com,
Disney.com), as set forth on Attachment B, a co-branding factor shall apply
(after application of the duration factor and the value factor). ABC agrees to
co-brand all promotions for ESPN.com and ABC News.com in non-traditional media
sources with promotions for the Portal Products; provided that in-program
mentions which, for practical or creative reasons, in ABC's good faith
judgement, preclude any such mentions are not required to be co-branded and
further provided that inadvertent failures to co-brand shall not be a breach of
this provision. Attachment C establishes a priority list for promotions
available from non-traditional media sources, as selected by ABC and approved by
Infoseek. From time to time during the term of this Agreement, ABC may, in its
discretion, amend the first column of Attachment B to include additional
categories (i.e., new promotional sources) or temporarily restrict access to a
particular category due to unavailability, remove any particular category due to
the sale or disposition of the underlying media assets or the end of a "one-
time" promotional opportunity (e.g., an event at Disney World). Any other
amendments to Attachment B (i.e., to the value factors or duration factors) or
to Attachment C shall require the mutual agreement of ABC and Infoseek.
(c) MIX. Infoseek agrees to purchase, and ABC agrees to provide, (i)
up to twenty five percent (25%) (with the percentage at Infoseek's option) of
the annual aggregate amount for promotional services from promotion made
available by ABC from traditional media sources and (ii) at least seventy-five
percent (75%) of the annual aggregate amount for promotional services from
promotion made available by ABC from non-traditional media sources. With
respect to the promotions made available from non-traditional media sources,
Infoseek and ABC agree that at least seventy percent (70%) of such promotions
shall be those identified as an "A" priority on Attachment C, and that no more
than fifteen percent (15%) of such promotions shall be those identified as a "C"
priority on Attachment C.
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(d) CREATIVE CONTROLS. Subject to the approvals of the Advisory
Committee, Infoseek shall be entitled to creative control and approval over all
promotional materials produced for traditional media sources (which materials
shall be prepared at Infoseek's cost). With respect to promotional materials
produced for non-traditional media sources, Infoseek may develop suggested tag
lines, artwork and logo templates for such sources and ABC shall consider such
tag lines, artwork, and logo templates in good faith; provided, that Infoseek
acknowledges and agrees that the use of any such suggested tag lines and artwork
will remain at the discretion of the business unit controlling the applicable
non-traditional media source and that such business unit may utilize different
materials in providing promotional services from non-traditional media sources.
(e) BROADBAND. To the extent that ABC offers any promotional services
during the term of this Agreement to third parties for use in any Narrowband
service or program owned or controlled by ABC that is made available for
transmission at data rates that would enable real time, full screen, full motion
video at equal to or better than NTSC resolution, ABC agrees to use reasonable
diligent efforts to provide Infoseek with opportunities to purchase both
commercially available and non-commercially available promotion on any such
service or program. In such event, ABC will amend Attachments A, B, and C as
appropriate to reflect the provision by ABC, and the opportunity to purchase by
Infoseek, of traditional and non-traditional promotional services from any such
service or program. For purposes of this Agreement, "Narrowband" means
programming that does not require transmission at data rates which would enable
real time, full screen, full motion video at equal to or better than NTSC
resolution.
(f) PERIODIC REPORTS. ABC will deliver to Infoseek, within thirty
days after the end of each month of the term of this Agreement, reports setting
forth the amounts and sources of promotional services from traditional media
sources delivered during such month. ABC will deliver to Infoseek, within
ninety days after the end of each month of the term of this Agreement, reports
setting forth the amounts and sources of promotional services from non-
traditional media sources delivered during such month.
(g) AUDIT RIGHTS. ABC agrees to retain, for three (3) years after the
term, accurate records of all transactions relating to this Agreement. No more
than one time during any twelve month period during the term of this Agreement
and for a period of three years thereafter, Infoseek shall have the right,
during ABC's normal business hours, upon fifteen business days' prior notice to
ABC, to have an independent auditor mutually agreed upon by the parties examine
and make extracts of all records of ABC that specifically relate to the
promotional services provided to Infoseek hereunder, subject to reasonable
confidentiality protections with respect to information disclosed by ABC,
provided, that ABC shall only be required to provide copies of the actual
audio/video promotion to the extent available.
3. NON-PORTAL PRODUCTS PROMOTION. Promotional services provided by ABC
that reference ESPN Sportszone, ABC News.com or any other ABC-branded service or
site which promotion does not mention the Portal Products shall not be charged
to Infoseek and shall not
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be included in determining the mix of promotional services provided hereunder
pursuant to Section 2(c).
4. TERM AND TERMINATION
(a) TERM. The term of this Agreement shall commence as of the later
of (i) the Effective Time and (ii) the date of the launch of the Portal
Products, as mutually agreed between the parties (such date being the "Effective
Date") and shall continue until the earlier of (i) the fifth anniversary of the
Effective Date and (ii) the date of termination of the License Agreement. In
the event that this Agreement has not been terminated prior to the fifth
anniversary of the Effective Date, Infoseek shall be entitled to renew this
Agreement on the terms stated herein; provided, that ABC shall not be required
to co-brand promotions for ABC News.com and ESPN.com with promotions for the
Portal Products during the renewal term.
(b) TERMINATION. Without prejudice to any other rights or remedies
available to the parties, ABC and Infoseek shall each have the right, in its
sole discretion, to terminate this Agreement upon written notice to the other in
the event that the other party makes any assignment for the benefit of creditors
or files a petition in bankruptcy (provided, that with respect to ABC's ability
to terminate in the event that Infoseek files a petition in bankruptcy, such
petition shall have been approved by a decision of the majority of Infoseek's
Disinterested Directors (as defined in that certain Governance Agreement by and
between Infoseek and Disney Enterprises, Inc.) or is adjudged bankrupt or is
placed in the hands of a receiver or if the equivalent of any of the proceedings
or acts referred to in this clause, though known and/or designated by some other
name or term, occurs.
(c) INJUNCTIVE RELIEF. Each party acknowledges and agrees that the
other party will be irreparably harmed by any material breach of this Agreement
by it. Therefore, each party agrees that in the event that it breaches any of
its obligations hereunder, the other parties in addition to all other remedies
available to it under this Agreement, or at law or in equity, shall be entitled
to all forms of injunctive relief including decrees of specific performance,
without showing or proving that it sustained any actual damages and without
posting bond.
5. GENERAL PROVISIONS.
(a) NOTICES. All notices which either party is required or may desire
to serve upon another party shall be in writing and addressed as follows:
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(i) if to ABC :
American Broadcasting Companies, Inc.
c/o The Walt Disney Company
500 S. Buena Vista Street
Burbank, CA 91521
Attention: General Counsel
Telephone: (818) 560-4370
Facsimile: (818) 563-4160
with a copy to:
Buena Vista Internet Group
500 S. Buena Vista Street
Burbank, CA 91521
Attention: Jake Winebaum
Telephone: (818) 623-3300
Facsimile: (818) 623-3304
(ii) if to Infoseek:
Infoseek Corporation
1399 Moffett Park Drive
Sunnyvale, California 94089
Attention: Harry M. Motro, President
Andrew E. Newton, Esq.
Telephone: (408) 543-6000
Facsimile: (408) 734-9350
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attention: David J. Segre
Telephone: (650) 493-9300
Facsimile: (650) 496-7556
Any such notice may be served personally or by mail (postage prepaid),
facsimile (provided oral confirmation of receipt is immediately obtained and a
hard copy is concurrently sent by internationally commercially recognized
overnight delivery service), internationally commercially recognized overnight
delivery service (such as Federal Express or D.H.L.) or courier. Notice shall
be deemed served upon personal delivery or upon actual receipt. Any
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party may change the address to which notices are to be delivered by written
notice to the other parties served as provided in this Section 5(b).
(b) ENTIRE AGREEMENT. This Agreement, together with the Attachments
hereto and hereby incorporated herein by reference, constitutes the complete,
final and exclusive understanding and agreement between the parties with respect
to the transactions contemplated, and supersedes any and all prior or
contemporaneous oral or written representation, understanding, agreement or
communication between the parties concerning the subject matter hereof.
(c) AMENDMENTS. All amendments or modifications of this Agreement
shall be binding upon the parties so long as the same shall be in writing and
executed by each of the parties hereto.
(d) WAIVERS. No waiver of any provision of this Agreement or any
rights or obligations of any party hereunder shall be effective, except pursuant
to a written instrument signed by the party waiving compliance, and any such
waiver shall be effective only in the specific instance and for the specific
purpose stated in such writing.
(e) NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement is
intended or shall be construed to give any person, other than the parties
hereto, any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision contained herein.
(f) ASSIGNMENT. No party shall, directly or indirectly, assign its
obligations hereunder to any third party, except that either party may assign
this Agreement to its parent corporation or any entity of which its parent owns
at least 80% of the voting equity.
(g) HEADINGS. The section and subsection headings and captions
appearing in this Agreement are inserted only as a matter of convenience and
shall not be given any legal effect.
(h) SEVERABILITY. If any restriction, covenant or provision of this
Agreement shall be adjudged by a court of competent jurisdiction to be void as
going beyond what is reasonable in all the circumstances for the protection of
the interests of the party seeking to enforce such restriction, covenant or
provision, such restriction, covenant or provision shall apply with such
modifications as may be necessary to make it valid and effective. In the event
that any provision of this Agreement should be found by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
shall not in any way be affected or impaired thereby.
(i) GOVERNING LAW. This Agreement shall be governed by the laws of
the State of California without giving effect to principles of conflicts of law.
Any action arising out of or relating to this Agreement shall be filed only in
the courts of the State of California for the Country of Los Angeles, or the
United States District Court for the Central District of
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California. The parties hereby consent and submit to the personal jurisdiction
of such courts for the purposes of litigating any such action.
IN WITNESS WHEREOF, the duly authorized representatives of each party have
executed this Agreement as of the day and year first written above.
AMERICAN BROADCASTING COMPANIES, INFOSEEK CORPORATION
INC.
By: /s/ Laurence J. Shapiro By: /s/ Harry M. Motro
------------------------------- -----------------------------
Name: Laurence J. Shapiro Name: Harry M. Motro
Title: Vice President Title: President and CEO
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EXHIBIT 13
AMENDED AND RESTATED
ESPN/STARWAVE
PARTNERSHIP AGREEMENT
THIS AMENDED AND RESTATED PARTNERSHIP AGREEMENT including the Exhibits
attached hereto (this "AGREEMENT") is entered into as of June 18, 1998 by and
between ESPN ONLINE INVESTMENTS, INC., a New York corporation ("ESPN PARTNER"),
a wholly-owned subsidiary of ESPN ENTERPRISES, INC., a Delaware corporation
("ESPN") and STARWAVE VENTURES, a Washington corporation ("STARWAVE PARTNER") a
wholly-owned subsidiary of STARWAVE CORPORATION, a Washington corporation
("STARWAVE"). This Agreement amends and restates in its entirety the Partnership
Agreement by and between the parties hereof entered into as of March 28, 1997
(the "Original Agreement"); provided that, this Agreement shall only become
effective upon the Effective Time, as defined in and pursuant to that certain
Agreement and Plan of Reorganization, of even date herewith, by and among
Infoseek Corporation, a California corporation, Infoseek Corporation, a Delaware
corporation, Starwave, and DEI and shall cease and be of no further force and
effect in the event that the Effective Time does not occur; and provided further
that, each of the parties hereto agrees not to terminate, amend or otherwise
alter this Agreement, or waive any of its rights hereunder, at any time prior to
immediately following the Effective Time. ESPN Partner and Starwave Partner are
each sometimes referred to herein as a "Partner" and, collectively, as
"Partners".
RECITALS
1. In connection with an investment in Starwave by DEI, ESPN Partner and
Starwave Partner entered into a partnership pursuant to the Original Agreement
to jointly develop, produce and exploit certain interactive media products, on
the terms and conditions contained herein and ESPN and Starwave entered into the
ESPN/Starwave Management and Services Agreement dated as of March 28, 1997 (the
"Original Service Agreement") to provide certain assets and services to the
Partnership in accordance with the terms and conditions set forth in the
Original Service Agreement.
2. Pursuant to an agreement and plan of reorganization and a stock and warrant
purchase agreement (collectively, the "Acquisition Agreements"), DEI has agreed
to acquire approximately a 43% interest in the voting equity of Infoseek
Corporation, a California corporation, subject to the terms and conditions set
forth in the Acquisition Agreements.
3. In connection with the transactions contemplated under the Acquisition
Agreements, the Partners desire to amend and restate the Original Agreement by
entering into this Agreement and Starwave agrees and ESPN agrees to cause ESPN,
its indirect wholly owned subsidiary, to amend and restate the Original
Agreement and Original Service Agreement in the form attached as Exhibit A.
THEREFORE, for good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, ESPN Partner and Starwave Partner hereby agree as
follows:
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1. DEFINITIONS
For purposes of this Agreement, the following terms have the following
meanings:
1.1 "ACT" means the New York Uniform Partnership Law, as amended from time
to time.
1.2 "ACTUAL CUMULATIVE FUNDING PERCENTAGE" means each Partner's total
actual cumulative funding divided by the total actual cumulative funding of both
Partners, expressed as a percentage.
1.3 "ADJUSTED CAPITAL ACCOUNT" means, with respect to a Partner, an
account with a balance (which may be a deficit balance) equal to the balance in
such Partner's Capital Account as of the end of the relevant year, after giving
effect to the following adjustments: (i) credit to such Capital Account any
amounts which such Partner is obligated to restore pursuant to any provision of
this Agreement or is deemed to be obligated to restore to the Partnership
pursuant to Regulations (S)(S) 1.704-2(g)(1) and 1.704-2(i)(5); and (ii) debit
to such Capital Account such Partner's share of items described in Regulations
(S)(S) 1.704-l(b)(2)(ii)(d)(4), (5) and (6). The foregoing definition of
Adjusted Capital Account is intended to comply with the provisions of
Regulations (S) 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
1.4 "ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to a Partner,
the deficit balance, if any, in such Partner's Adjusted Capital Account.
1.5 "ADVISORY COMMITTEE" has the meaning set forth in Section 3.1.
1.6 "AFFILIATE" means, with respect to any person, any person directly or
indirectly through one or more intermediaries controlling, controlled by or
under common control with such person. Notwithstanding the foregoing, for
purposes of this Agreement, Starwave and Starwave Partner shall not be
considered as Affiliates of ESPN or DEI.
1.7 "ANNUAL BUSINESS PLAN" has the meaning specified in Section 3.6.
1.8 "ANNUAL FINANCIAL STATEMENTS" has the meaning specified in Section
3.7.
1.9 "ASSET VALUE" with respect to any Partnership asset means the
following:
(i) the fair market value as determined by an appraiser mutually
agreed to by the Partners of any asset contributed by a Partner to the
Partnership;
(ii) the fair market value as determined by an appraiser mutually
agreed to by the Partners on the date of distribution of any Partnership asset
distributed to any Partner; or
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(iii) the fair market value as determined by an appraiser mutually
agreed to by the Partners of all Partnership assets at the time of (a) the
admission of an additional Partner or (b) the liquidation of the Partnership
pursuant to Section 11.6.
1.10 "BROADBAND" means programming that requires transmission at data rates
which would enable real time, full screen, full motion video at equal to or
better than NTSC broadcast resolution.
1.11 "CAPITAL ACCOUNT" has the meaning set forth in Section 6.5.
1.12 "CASH EXPENDITURES" means, for any period, the actual amount of cash
expenditures and capital expenditures of the Partnership during such period.
1.13 "CLAIMS" has the meaning specified in Section 12.1.
1.14 "CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
1.15 "CONTENT" means audio and audio visual material, photographs, art
work, videos, graphics, text or sound recordings.
1.16 "COSTS" means all direct costs and allocated costs, whether incurred
by ESPN, DEI or Starwave in connection with the Service Agreement or by the
Partnership, that are associated with the development, production, hosting,
maintenance, operation, distribution and exploitation of the Sports Products.
1.17 "DISNEY MEMBER" has the meaning set forth in Section 3.3.
1.18 "ESPN CONTENT" means all Content that is 100% owned or controlled by
ESPN or its successors or assigns. For purposes of this Section 1.1, "control"
means the ability to grant the licenses set forth herein; provided however that
if such Content is subject to the payment of royalties or other consideration to
third parties, ESPN will notify Starwave in writing in advance and the
Partnership shall have the right, at its option, to include such Content in the
definition of ESPN Content.
1.19 "ESPN TRADEMARKS" means "ESPN", "ESPNET" the ESPN logo and the other
marks, trade names, trademarks, brands, names, personalities, logos and
representations thereof that are properties of ESPN or its Affiliates that
appear within the ESPN Content, Programming, Sports Products or any other
materials created in association with this Agreement and that ESPN or any of its
Affiliates owns or controls.
1.20 "FIXED MEDIA PRODUCTS" means multimedia content products developed for
distribution to end users on any platform (including, without limitation, MS-
DOS, Windows, Macintosh, Sega, Nintendo, CD-ROM, Sony Playstation and 3DO
systems) designed to be read on an electronic device but excluding such products
if they include a Narrowband-delivered
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component and such products would not be commercially competitive (as reasonably
determined in good faith by the Partners) without the inclusion of a Narrowband-
delivered component.
1.21 "FORCE MAJEURE EVENT" has the meaning specified in Section 13.5.
1.22 "FORECASTED CASH EXPENDITURES" means, for any period, the forecasted
cash expenses and capital expenditures of the Partnership during such period,
prepared in accordance with GAAP and consistent with the Restated Initial
Business Plan and Annual Business Plans.
1.23 "GAAP" means Generally Accepted Accounting Principles, according to
U.S. accounting practices.
1.24 "GAIN YEAR" has the meaning specified in Section 6.1(a)(ii).
1.25 "GENERAL MANAGER" means the general manager appointed in accordance
with Section 3.1 to manage the operations of the Sports Products.
1.26 "INFOSEEK MEMBER" has the meaning specified in Section 3.1.
1.27 "INTELLECTUAL PROPERTY RIGHTS" means any and all (by whatever name or
term known or designated) tangible and intangible and now known or hereafter
existing (a) rights associated with works of authorship throughout the universe,
including but not limited to copyrights, moral rights, and mask-works, (b)
trademark, service marks and trade name rights and similar rights, (c) trade
secret rights, (d) patents, designs, algorithms and other industrial property
rights, (e) all other intellectual and industrial property and proprietary
rights (of every kind and nature throughout the universe and however designated)
(including without limitation logos, character rights, "rental" rights and
rights to remuneration), whether arising by operation of law, contract, license
or otherwise, and (f) all registrations, applications, renewals, extensions,
continuations, divisions or reissues thereof now or hereafter in force
throughout the universe (including without limitation rights in any of the
foregoing).
1.28 "INTEREST" OR "PARTNERSHIP INTEREST" means the entire ownership
interest of a Partner in the Partnership.
1.29 "LOSS YEAR" has the meaning specified in Section 6.1(a)(i).
1.30 "NARROWBAND" means programming that does not require transmission at
data rates which would enable real time, full screen, full motion video at equal
to or better than NTSC broadcast resolution.
1.31 "NET INCOME" AND "NET LOSS" means for each fiscal year or other
period, the Partnership's taxable income or loss for such year or period
determined in accordance with (S)703(a) of the Code, including therein all items
of income, gain, loss or deduction required to be stated separately pursuant to
(S)703(a)(1) of the Code, with the following adjustments:
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(i) Any tax-exempt income of the Partnership described in
(S)705(a)(1)(B) of the Code which is not otherwise taken into account in
determining Net Income or Net Loss shall be included as if it were taxable
income or loss;
(ii) Any expenditures of the Partnership described in
(S)705(a)(2)(B) or treated as such expenditures under Regulation (S)1.704-
1(b)(2)(iv)(i) not otherwise taken into account in computing Net Income and Net
Loss shall be treated as deductible items;
(iii) Upon the occurrence of an event described in Section 1.9(ii) or
(iii), the difference between the asset basis and Asset Value as determined in
such provision shall be taken into account as gain or loss;
(iv) Gain or loss resulting from the disposition of property from
which gain or loss is recognized for federal income tax purposes shall be
determined with reference to the Asset Value of the property disposed of;
(v) Cost recovery deductions shall be determined based on the Asset
Value of property in lieu of such deductions used in computing such taxable
income or loss;
(vi) Any items which are specially allocated pursuant to Section 6.6
shall not be taken into account.
1.32 "PARTNER NONRECOURSE DEBT" has the meaning set forth in Regulations
(S) 1.704-2(b)(4).
1.33 "PARTNER NONRECOURSE DEBT MINIMUM GAIN" means an amount, with respect
to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that
would result if such Partner Nonrecourse Debt were treated as a Nonrecourse
liability (within the meaning of Regulations (S) 1.704-2(b)(3)), determined in
accordance with Regulations (S) 1.704-2(i)(3).
1.34 "PARTNER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations (S)(S) 1.704-2(i)(1) and 1.704-2(i)(2).
1.35 "PARTNERSHIP" means the general partnership formed by this Agreement.
1.36 "PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Regulations
(S)(S) 1.704-2(b)(2) and 1.704-2(d).
1.37 "PERSON" means any individual, partnership, corporation, trust or
other entity.
1.38 "PORTAL PRODUCTS" means the internet portal service to be named "Go
Networks," or another name mutually agreed to between the Partners, developed
and produced by Infoseek utilizing the subject matter licensed under that
certain License Agreement between
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DEI and Infoseek of even date herewith, including but not limited to all
channels, sub-channels, sections, sites, features, services, utilities and
applications relating thereto.
1.39 "PROFIT PARTICIPATION" means the Partner's proportionate share of Net
Income, expressed as a percentage, in a gain year adjusted pursuant to Section
6.2.
1.40 "PROGRAMMING" means the programming included in the Sports Products
including, without limitation, all HTML, Java, and/or other formatted text
files, all related graphics files, animation files, data files, multimedia
files, modules, routines and objects, and the computer software and all of the
script or program files required to exploit such materials and that collectively
control the display of and end user interaction with the programming.
1.41 "PROMOTIONAL SERVICE AGREEMENT" means the agreement between American
Broadcasting Company and Infoseek, dated as of the date hereof.
1.42 "REGULATIONS" means the Income Tax Regulations promulgated under the
Code, as such regulations may be amended from time to time.
1.43 "RELATED PERSONS" has the meaning specified in Section 12.1.
1.44 "REMOTE ACCESS PRODUCTS" means Programming intended for distribution
by any Narrowband interactive transmission method. This definition excludes any
and all Programming that requires Broadband transmission and also excludes (a)
products developed for PDAs, pagers, screen phones and other future handheld
devices and (b) Fixed Media Products.
1.45 "REQUIRED CUMULATIVE FUNDING PERCENTAGE" means each Partner's total
cumulative funding if it were to have funded at its required cash contribution
amount in each year, divided by the total cumulative funding for both Partners
if each had funded at its required level in each year, expressed as a
percentage.
1.46 "RESTATED INITIAL BUSINESS PLAN" has the meaning specified in Section
3.6.
1.47 "REVENUES" means all revenues, as determined in accordance with GAAP,
including, without limitation, advertising, subscription, usage, merchandising,
licensing or other revenues derived from exploitation of the Sports Products,
the Technology owned by the Partnership or jointly by the Partners contained
therein or utilized in connection therewith or from any other Intellectual
Property Rights, Content or Programming owned by the Partnership or jointly by
the Partners but in all events excluding Portal Products revenues and Infoseek-
branded Search or Directory revenues. For the avoidance of doubt, any Revenues
derived from the first page seen by a viewer after a single click on a name,
logo, icon, link, headline or other content that is supplied by the Partnership
or one of the Partners, for use in the Sports Product. For example, if a user
clicks on the "Go Sports" channel within the Portal Products and the first page
to which the user is directed contains a Sports feature supplied by ESPN, after
the single
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click on the ESPN feature, the user is within the Sports Products and revenues
derived from such page shall be deemed Revenues hereunder.
1.48 "SEARCH OR DIRECTORY" means products, services, components or other
subject matter (a) for searching content such as searches of the World Wide Web,
directories, USENET News, or other databases, or (b) hierarchical listings of
sites or services, which listings are organized by categories.
1.49 "SERVICE AGREEMENT" means the Amended and Restated ESPN/Starwave
Management and Services Agreement attached hereto as Exhibit A.
1.50 "SPORTS PRODUCTS" means the Remote Access Products developed,
produced, marketed, distributed or otherwise exploited under this Agreement
containing professional or amateur sports Content, news or information.
1.51 "STANDARDS" means the written policy of standards and practices for
content and advertising that apply to the Sports Products under this Agreement,
attached as Exhibit B.
1.52 "STARWAVE TRADEMARKS" means "Starwave" and the other marks, trade
names, trademarks, brands, names, personalities, logos and representations
thereof that are properties of Starwave Partner or its Affiliates that appear
within the Sports Products or any other materials created in association with
this Agreement and that Starwave Partner owns or controls.
1.53 "TECHNOLOGY" means all software, hardware and middleware required or
appropriate to (i) transform the Content into the Programming, (ii) create,
modify or maintain the Programming, or (iii) deliver the Programming in an
online format.
1.54 "TERM" shall have the meaning set forth in Section 11.1.
1.55 "TERRITORY" means the United States and Canada.
1.56 "TRANSFER" means, as a noun, any voluntary or involuntary transfer,
sale, assignment, pledge, hypothecation, encumbrance or other disposition, and,
as a verb, voluntarily or involuntarily to transfer, sell, assign, pledge,
hypothecate, encumber or otherwise dispose of.
2. PARTNERSHIP
2.1 PARTNERSHIP NAME. The name of the Partnership shall be ESPN/Starwave
Partners, d/b/a EIV Venture or such other name as the Partners may from time to
time determine by mutual approval, and all business of the Partnership shall be
conducted under such name. Such name shall be the exclusive property of the
Partnership, and no Partner shall have any right to use, and each Partner agrees
that neither it nor its Affiliates shall use, such name or derivatives thereof
incorporating "ESPN" or "EIV"or "Starwave" other than as
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permitted by the mutual agreement of the Partners. The Partnership shall execute
and file and/or publish all assumed name statements and certificates required by
law to be filed and/or published in connection with the operation of the
Partnership.
2.2 PLACE OF BUSINESS. The principal place of business of the Partnership
shall be located at 605 Third Avenue, New York, New York 10158-0180, or at such
other place as the Partners may from time to time determine by mutual approval.
The Partnership may have such other or additional places of business or
headquarters as the Partners may from time to time designate.
2.3 PURPOSE. The purpose of the Partnership shall be to develop, produce,
market, distribute and otherwise exploit the Sports Products in the Territory.
Notwithstanding the foregoing, the Partners acknowledge that distribution of the
Sports Products on the Internet shall, by definition be on a worldwide basis;
provided, that it is the present intention of the Partners that the Partnership
shall not deploy the Programming on servers or other delivery systems that are
located outside the Territory. Notwithstanding the foregoing, if DEI determines
to develop, produce, market, distribute and otherwise exploit sports-related
Remote Access Products outside the Territory, the Disney Member will, when
possible, provide the Infoseek Member with a first offer to discuss in good
faith the possibility of delivering the Sports Products in additional countries
or regions or otherwise including the Partnership, Starwave Partner or Infoseek
as a partner or participant to any new sports-related Remote Access Products
that may be developed for any additional country or region; provided, that
Starwave Partner acknowledges that the worldwide business activities and
strategies of DEI and its Affiliates may preclude the participation of the
Partnership, Starwave Partner or Infoseek in any such sports-related Remote
Access Products.
2.4 AUTHORITY OF PARTNERS LIMITED. No Partner shall have any authority to
hold himself out as a general agent of another Partner or the Partnership in any
business activity other than that of the Partnership, and no Partner shall have
any authority to act for, or to assume any obligation or responsibility on
behalf of, any other Partner or the Partnership, except as expressly provided in
this Agreement or as authorized by the Partners. No Partner shall be liable to
third persons for Partnership losses, deficits, liabilities or obligations
except as expressly agreed to in writing by such Partner, unless the assets of
the Partnership shall first be exhausted. In any matter between the Partnership
on the one hand and either Partner on the other hand or in any matter between
the Partners, neither the Partnership nor any Partner shall be bound by the act
of a Partner unless such Partner is acting in accordance with the limitations
and provisions set forth in this Agreement. Except as otherwise expressly
provided herein, decisions of the Partnership shall be made by unanimous
approval of the Partners.
2.5 PARTITION. No Partner, nor any successor-in-interest to such Partner,
shall have the right, while this Agreement remains in effect, to have the
property of the Partnership partitioned or to file a complaint or institute any
proceeding at law or in equity to have the property of the Partnership
partitioned, and each Partner, on behalf of itself and its successors,
representatives and assigns, hereby waives any such right.
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3. GOVERNANCE
3.1 APPOINTMENT OF GENERAL MANAGER. The day-to-day operations of the
Sports Products will be managed by a General Manager nominated by DEI and
mutually appointed by the Partners. The General Manager shall report to the
Advisory Committee. The General Manager shall be a Partnership employee and
subject to termination by either the Starwave Member or the Disney Member. The
General Manager shall be located in New York City, or elsewhere in the event of
mutual agreement by the Advisory Committee. In the event of the termination or
resignation of a General Manager, the Disney Member shall have the right to
nominate candidates for a new General Manager; provided, that if three
successive nominees are not approved by the Advisory Committee, the Disney
Member shall have the sole right of approval for the subsequent nominee. This
process will be repeated in the event of any replacement of a General Manager.
Notwithstanding the foregoing, in the event that a General Manager is terminated
by the Starwave Member unilaterally, the Disney Member shall have the unilateral
right to appoint a replacement General Manager, subject to Starwave Partner's
subsequent rights to terminate the replacement General Manager. DEI agrees to
cause the Disney Member to use its reasonable good faith efforts to nominate
well qualified, "best available" candidates as General Manager candidates.
3.2 DUTIES OF GENERAL MANAGER. The General Manager shall implement the
Restated Initial Business Plan and subsequent Annual Business Plans and shall
exercise control over the day-to-day operations of the Partnership, including
editorial tactics, editorial strategy and creative development (subject to
Section 3.5(a)), production (technical or otherwise), distribution,
merchandising, advertising sales, affiliate relations (subject to Section
3.5(b)), and marketing and promotion (subject to Section 3.5(c)) of the Sports
Products, subject to the oversight and ultimate approval of the Advisory
Committee.
3.3 ADVISORY COMMITTEE. As of the Effective Time, Infoseek and Disney
will respectively appoint the Infoseek CEO and the Chairman of Buena Vista
Internet Group as the sole members (the "Infoseek Member" and the "Disney
Member" respectively) of an advisory committee (the "Advisory Committee"). Each
of Infoseek and Disney will have the right to replace its designee on the
Advisory Committee; provided, that Infoseek and Disney agree to consult with
each other prior to any such replacement. Any such replacement will be with an
officer of Infoseek or Disney, or their respective Affiliates, of similar
responsibilities and experience, to the extent possible. The Advisory Committee
shall oversee the management and operations of the Partnership, shall make
significant business decisions of the Partnership and shall participate
regularly in the overall supervision, direction and control of the Partnership
as set forth on Exhibit C (as amended as of the date hereof). The Advisory
Committee will meet monthly or as otherwise appropriate to discuss and advise
the General Manager on overall Sports Products key issues, and performance
within the parameters established in the Annual Business Plans. Except as
otherwise expressly provided herein, decisions of the Advisory Committee shall
be made by unanimous approval of the Infoseek Member and Disney Member.
3.4 ORGANIZATIONAL STRUCTURE. The Partners intend to staff the operations
of the Partnership in accordance with the Restated Initial Business Plan, as may
be modified from
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time to time upon the agreement of the Partners. Thereafter, the General Manager
(and the relevant senior employees) shall hire/fire/promote Partnership
employees at their discretion (subject to compliance with the Restated Initial
Business Plan and Annual Plans). Notwithstanding the foregoing, it is the
intention of the parties that the employees providing technology-related
services to the Partnership shall be primarily employed by Starwave and the
employees providing editorial-related services to the Partnership shall be
primarily employed by ESPN.
(a) CONTENT DEVELOPMENT/TRANSFORMATION/INTEGRATION.
(i) ESPN CONTENT. ESPN shall be responsible for the development
of ESPN Content for the Sports Products and for the transformation of ESPN
Content into Programming and integration of the Programming into the Sports
Products as set forth in the Service Agreement. The senior employee in such
group, who shall be an ESPN employee and subject to hiring/firing by ESPN, shall
report on a day-to-day basis to the General Manager, with direct reporting as
well to an ESPN designated executive for oversight of editorial and creative
aspects of such Content.
(ii) NON-ESPN CONTENT. The Partnership shall include a group of
employees responsible for the development of Content (other than ESPN Content)
for the Sports Products and for the transformation of such Content into
Programming and integration of the Programming into the Sports Products. The
senior employee in such group, who shall be an ESPN employee and subject to
hiring/firing by ESPN and firing by Starwave, and shall report on a day-to-day
basis to the General Manager, with direct reporting as well to an ESPN
designated executive for oversight of editorial and creative aspects of such
Content.
(b) ESPN NETWORK AFFILIATE RELATIONS. The Partnership shall include a
group of Partnership employees responsible for managing the relationship with
ESPN's affiliated television and radio stations, subject to Section 3.5(b). The
senior employee in such group shall report directly to the General Manager.
ESPN shall have veto power over the hiring/firing of such employee. ESPN shall,
from time to time, review the policies and practices of such group and assist
the General Manager in conforming such policies and practices with those used by
ESPN.
(c) ADVERTISING SALES.
(i) The Partnership may engage Starwave or any qualified third
party (including Affiliates) to provide representation services for advertising
sales for the Sports Products. The senior employee of any non-Affiliated party
providing representation services shall be subject to hiring/firing by either
Starwave or ESPN, shall report to the General Manager, with (1) a report to the
Disney Member on matters concerning group advertising sales in association with
Disney products and (2) a report to the Infoseek Member on matters concerning
group advertising sales in association with Infoseek products.
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(ii) The Advisory Committee shall mutually agree in writing on
the characteristics of all advertising that will appear with or in the Sports
Products, including without limitation, matters of price, content, size,
placement, quantity, frequency of changes, and identity of advertisers. The
Advisory Committee further shall mutually agree in writing on the "rate card"
for the advertising to be sold in connection with the Sports Products.
(iii) The General Manager and the advertising sales group shall
at all times comply with the Standards.
(iv) The Advisory Committee shall coordinate group advertising
sales for the Sports Products in association with DEI (which shall provide the
group advertising sales services in association with Disney products) and with
Infoseek (which shall provide the group advertising sales services in
association with Infoseek products) as set forth in the Service Agreement.
During the Term, such group advertising services may become a responsibility of
the Partnership or the Partners collectively, upon the mutual agreement of the
Partners.
(d) MARKETING/PROMOTION. The Partnership shall include a group of
Partnership employees responsible for marketing and promotion for the Sports
Products on Narrowband platforms and in other media, subject to Section 3.5(c).
The senior employee in such group shall be subject to hiring/firing by ESPN and
firing by Starwave and shall report directly to the General Manager. In
addition, ESPN shall provide marketing and promotion services for the Sports
Products in other media, as set forth in the Service Agreement, and in
accordance with the Promotional Services Agreement.
(e) FINANCE AND BUSINESS DEVELOPMENT. The Partnership shall include a
group of Partnership employees responsible for finance and business development
activities (including, without limitation, general and administrative
activities). Such group (and the General Manager) shall perform their
administrative and finance responsibilities in accordance with DEI's standards
of financial controls.
(f) BILLING, COLLECTION, CUSTOMER SERVICE. Starwave shall be
responsible for billing, collection, customer service and other "back office"
functions for the Partnership in accordance with the Service Agreement. During
the Term, such functions (or portions thereof) may become a responsibility of
the Partnership or the Partners collectively, upon the mutual agreement of the
Partners.
(g) TECHNOLOGY DEVELOPMENT AND MAINTENANCE. Starwave shall be
responsible for the technology development and maintenance relating to the
Sports Products in accordance with the Service Agreement. It is the present
intention of the parties that the preponderance of the technology development
and maintenance relating to the Sports Products shall be performed by Starwave.
The General Manager, in accordance with the Restated Initial Business Plan or
Annual Business Plans, may acquire or license additional or substitute
Technology (i) on an incidental and nonmaterial basis, (ii) if Starwave is in
breach of its material obligations under its agreements with the Partnership,
(iii) if the costs to the Partnership of acquiring or licensing Technology from
a third party are significantly less than
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the costs to the Partnership of acquiring or licensing such or similar
Technology from Starwave and such third-party Technology is fully scaleable and
compatible with other Technology used for the Sports Product and otherwise
appropriate for its intended uses, or (iv) if Starwave otherwise agrees. In
addition, the General Manager, in accordance with the Restated Initial Business
Plan or Annual Business Plans may acquire or license additional or substitute
Technology if, in the General Manager's reasonable opinion, the inability to so
acquire or license such Technology would have a material impact on the overall
quality and competitive position of the Sports Products. In such event, Starwave
shall have a three (3) day period to meet with the General Manager to attempt to
resolve the issues. If the issues have not been resolved in the three (3) day
period, the General Manager shall be entitled to present the issues to the
Partners for resolution based upon the mutual agreement of the Partners. During
the Term, such technology development and maintenance (or portions thereof) may
become a responsibility of the Partnership or the Partners collectively, upon
the mutual agreement of the Partners.
(h) HOSTING. Starwave shall be responsible for the hosting of the
Sports Products in accordance with the Service Agreement. During the Term, the
Partners may mutually agree to have the Partnership perform hosting functions
for the Sports Products, as may be approved in an Annual Business Plan or
otherwise as determined by the Partners. In addition, the General Manager may
utilize unaffiliated third parties to provide hosting of the Sports Products (i)
if the costs of any such hosting to the Partnership are significantly less than
the costs to the Partnership of such hosting services as charged by Starwave and
such third-party hosting is fully scaleable and compatible with the Technology
and hosting services provided for the Sports Products and otherwise appropriate,
(ii) Starwave is in breach of its material hosting obligations hereunder, or
(iii) if Starwave otherwise agrees.
(i) OTHER. The Partners shall mutually agree on whether any
additional necessary support for the development, production and delivery of the
Sports Products in any category other than as listed in this Agreement shall be
included as a responsibility of the Partnership or one or both Partners.
3.5 ESPN'S CONTROL.
(a) EDITORIAL AND CREATIVE. ESPN shall exercise sole and final
control over all editorial and creative aspects of the Sports Products and all
portions thereof.
(b) ESPN NETWORK AFFILIATE RELATIONS. ESPN shall exercise sole and
final control over all ESPN Network affiliate relations matters associated with
the Sports Products.
(c) MARKETING AND PROMOTIONS. ESPN shall exercise sole and final
control over all uses or references to any ESPN Trademark contained in marketing
and promotions associated with the Sports Products. Any use of an ESPN
Trademark by the Partnership or Starwave shall require the prior approval of
ESPN, which may be withheld at ESPN's sole discretion. ESPN shall cooperate in
good faith with the Partnership to agree on a templated use of ESPN Trademarks
from time to time to avoid recurrent approvals.
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(d) ADVERTISING SALES. The General Manager and the Partnership's
advertising sales group shall frequently consult with ESPN's advertising sales
executives in order to coordinate, when possible, advertising opportunities
among the Sports Products and ESPN products.
3.6 BUSINESS PLAN AND BUDGET.
(a) Prior to the date hereof, DEI and Starwave have agreed on a
restated three year business plan for the Sports Products, attached hereto as
Exhibit D (the "Restated Initial Business Plan"). At least thirty (30) days
prior to the beginning of each fiscal year (ending September 30) during the
Term, the General Manager shall prepare for the Partners' approval an annual
business plan and budget for the subsequent fiscal year (which shall include,
without limitation, a statement of Forecasted Cash Expenditures for such fiscal
year), utilizing the categories and methods established in the Restated Initial
Business Plan (i.e., spending requirements and limits, Revenue and operating
income targets)(each, an "Annual Business Plan and Budget"). If during the first
three years after the date hereof, an Annual Business Plan and Budget is not
mutually approved by the Partners by the beginning of a fiscal year, the
Partners shall continue to perform their obligations under this Agreement based
on the standards set forth in the Restated Initial Business Plan for the
corresponding year. After the first three years after the date hereof, if an
Annual Business Plan and Budget for any fiscal year are not mutually approved by
the Partners by the beginning of a fiscal year, the Partners shall continue to
perform their obligations under this Agreement based on the standards set forth
in the Annual Business Plan and Budget for the prior fiscal year, increased in
an amount equal to 50% of the increase in the projected Revenue growth for the
Partnership between the current fiscal year and the subsequent fiscal year (as
agreed between the Partners), provided, that if such projected Revenue growth is
a negative number, such aggregate amount shall be increased in an amount equal
to the percentage increase or decrease in the Consumer Price Index for Urban
Wage Earners and Clerical Workers [All Urban Consumers], U.S. City Average (1982
84 = 100) Unadjusted, all items index, published by the Bureau of Labor
Statistics, United States Department of Labor (the "CPI Factor") for the
preceding twelve-month period. In the event that the Partners cannot agree on
projected Revenue growth for the Partnership for a particular fiscal year, the
Annual Business Plan and Budget for such fiscal year shall be increased in an
amount equal to the actual growth rate in Revenues between the two prior fiscal
years. If such growth rate is a negative number, such Annual Business Plan and
Budget shall be adjusted by the CPI Factor. In each year, the Annual Business
Plan and Budget as adjusted as provided above shall be the baseline for any
adjustments for the subsequent year.
(b) Within fifteen (15) days prior to the beginning of each fiscal
quarter during the Term, the General Manager shall prepare for the Partners'
approval a statement of Forecasted Cash Expenditures and forecasted Revenues (as
agreed between the Partners) for such fiscal quarter. If any such statement is
not mutually approved by the Partners by the beginning of a fiscal quarter, (i)
if the fiscal quarter in question falls within the period reflected in the
Restated Initial Business Plan, then the Forecasted Cash Expenditures and
forecasted Revenues set forth therein for the applicable fiscal quarter
calculated from the annual amounts
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in the Annual Business Plan and Budget shall be applicable or (ii) if the fiscal
quarter in question is after the period reflected in the Restated Initial
Business Plan, then the Forecasted Cash Expenditures for such fiscal period will
be as follows: that fiscal quarter's forecasted Revenues is compared with the
Revenues in the same quarter from the prior year and a Revenue growth percentage
is calculated. 50% of this growth percentage is then applied to the Actual Cash
Expenditures for the same fiscal quarter from the prior year to determine the
Forecasted Cash Expenditures for the fiscal quarter under consideration. If the
Partners cannot agree on the Revenue growth percentage increase, then the prior
period Revenue growth percentage will be utilized as follows: 50% of the actual
year-over-year Revenue growth percentage achieved in the same quarter in the
prior year is calculated. The growth percentage is then applied to the Actual
Cash Expenditures for the same quarter from the prior year to determine the
Forecasted Cash Expenditures for the current quarter, provided, that if such
projected Revenue growth is a negative number, such aggregate amount shall be
increased in an amount equal to the percentage increase or decrease in the
Consumer Price Index for Urban Wage Earners and Clerical Workers [All Urban
Consumers], U.S. City Average (1982-84 = 100) Unadjusted, all items index,
published by the Bureau of Labor Statistics, United States Department of Labor
for the preceding twelve-month period. In each year, the Annual Business Plan
and Budget as adjusted as provided above shall be the baseline for any
adjustments for the subsequent year.
3.7 OTHER REPORTS. Within fifteen (15) days after the end of each fiscal
year during the Term, the General Manager shall prepare and deliver, with the
assistance of the Partners, unaudited twelve month profit and loss statements,
including detailed breakdowns of sources of Revenues and items of Costs for each
fiscal quarter as well as a statement of Net Cash Flow for such fiscal year
(collectively, the "Annual Financial Statements"). Within five (5) days after
the end of each fiscal quarter during the Term, the General Manager shall also
prepare and deliver, with the assistance of the Partners, unaudited quarterly
profit and loss statements, including detailed breakdowns of sources of Revenues
and items of Costs in such fiscal quarter and quarterly cash flow statements. In
addition, within ten (10) days prior to the start of any fiscal quarter, the
General Manager shall prepare and deliver quarterly forecasts, utilizing the
categories and methods established in the Restated Initial Business Plan. The
Partners acknowledge the importance of meeting the financial reporting deadlines
to ensure necessary financial and accounting compliance; provided, however, that
immaterial and infrequent failures to meet such deadlines shall not be
considered as material breaches of this Agreement.
4. STARWAVE, ESPN AND DEI OBLIGATIONS
During the Term, Starwave, ESPN and DEI shall have the obligations to the
Partnership set forth in the Service Agreement.
5. MERCHANDISING
DEI agrees to provide (or cause its Affiliates to provide) and the
Partnership agrees to purchase (subject to agreement on terms), e-commerce
services to the Partnership, including, without limitation, store design,
transaction processing, web hosting, inventory management, fulfillment and
customer service. In exchange for such services, the Partnership shall pay DEI
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its Costs (with the allocated costs to be mutually agreed) in providing such
services, plus a to-be-agreed markup on such Costs or a to-be-agreed upon
revenue share. In addition, DEI shall have joint ownership of all customer
information for use for its business purposes.
6. FINANCIAL PARTICIPATION
6.1 CAPITAL CONTRIBUTIONS.
(a) In accordance with the limits set forth in each Annual Business
Plan, the Partners shall make capital contributions at the start of each fiscal
quarter or from time to time as the Partners otherwise agree in accordance with
Forecasted Cash Expenditures:
(i) Starwave Partner shall make capital contributions in
sufficient amounts to provide for sixty percent (60%) of the Forecasted Cash
Expenditures and ESPN Partner shall make capital contributions in sufficient
amounts to provide for forty percent (40%) of the Forecasted Cash Expenditures
in any fiscal quarter during the Term in which Net Losses are expected to occur
(a "Loss Year").
(ii) Starwave Partner shall make capital contributions in
sufficient amounts to provide for fifty percent (50%) of the Forecasted Cash
Expenditures and ESPN Partner shall make capital contributions in sufficient
amounts to provide for fifty percent (50%) of the Forecasted Cash Expenditures
in any fiscal quarter during the Term in which Net Income is expected to occur
(a "Gain Year").
(b) Promptly upon the delivery of the Annual Financial Statements of
the Partnership, the Partners shall reconcile the differences, if any, between
the Forecasted Cash Expenditures and the Cash Expenditures as reflected in the
Annual Financial Statements, such that the total amount contributed by each
Partner with respect to a fiscal year is in accordance with the percentages
provided in Section 6.1(a) based on the Cash Expenditures with respect to such
fiscal year.
(c) To the extent that a Technology is developed by either Partner in
connection with this Agreement specifically for use in the development or
delivery of the Sports Products, the other Partner can elect, in its discretion
(but only at the time initial funding for the Technology is requested, unless
agreed to by the Partner developing such Technology), to provide its
proportionate share of the funding associated with such Technology, in which
event such Technology shall become jointly owned.
(d) For purposes of this Agreement, with respect to any capital asset
owned by a Partner and utilized in association with the Sports Products, either
Partner may charge the Partnership a fee for the use of such capital asset, in
accordance with limits set forth in the Initial Business Plan and Annual
Business Plan.
6.2 FAILURE TO MAKE CONTRIBUTIONS.
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(a) If any Partner fails to make any required cash contribution when
due pursuant to Section 6.1 (a "Nonfunding Partner"), the other Partner may, in
its discretion, elect to make a cash contribution in the amount of all or a
portion of the unfunded portion of the required contribution, in which event the
funding Partner's ("Funding Partner") Capital Account shall be adjusted as
follows: for every $1.00 of the unfunded portion of such required contribution
funded by the Funding Partner, the Funding Partner shall receive an increase of
$1.00 in its Capital Account.
(b) In addition, at the end of each fiscal year, each Partner's
Actual Cumulative Funding Percentage will be compared with its Required
Cumulative Funding Percentage. In the event that such Partner's Actual
Cumulative Funding Percentage is less than its Required Cumulative Funding
Percentage, such Partner's Profit Participation shall be adjusted at the
beginning of the next fiscal year such that the Nonfunding Partner's Profit
Participation will be (i) decreased 1 percentage point for each 1 percentage
point shortfall in the event the Nonfunding Partner's total cumulative funding
exceeds that of Funding Partner and (ii) will be decreased 2 percentage points
for every 1 percentage point (the "dilution ratio") in the event that the
Nonfunding Partner's total cumulative funding is less than that of the Funding
Partner. The Funding Partner will receive a corresponding increase in its Profit
Participation. An example is attached as Exhibit E.
(c) In any fiscal year in which the Starwave Partner's Profit
Participation falls below 25%, their control rights under this Agreement and the
Services Agreement shall be suspended, such that, for example, the Starwave
Partner shall not have a vote in any of the matters that previously required the
unanimous approval of the Advisory Committee. This right would be reinstated in
the event that Starwave Partner's Profit Participation again rises above 25%,
subject to subsequent suspension if Starwave Partner's Profit Participation
again falls below 25%.
(d) Prior to the end of the first fiscal year in which the
Partnership derives Net Income (i.e., as opposed to a Net Loss year), a
Nonfunding Partner shall be entitled to make capital contributions up to its
Required Cumulative Funding Percentage as well as additional funding necessary
to equalize the results of the cumulative overfunding by the Funding Partner at
the same dilution ratio (as defined above) and adjust its Profit Participation
upward; provided, however, at the end of the first fiscal year in which the
Partnership derives Net Income, while a Nonfunding Partner may make capital
contributions to maintain its Actual Cumulative Funding Percentage, it shall not
be entitled to make capital contributions to equalize the results of the
cumulative overfunding by the Funding Partner.
(e) In the event that Starwave Partner's Profit Participation falls
below 25% and Starwave Partner desires to fund a subsequent required cash
contribution and is unable to access capital on reasonable terms as determined
by the independent audit committee of the Board of Directors of Starwave Partner
given the Company's financial condition, and said terms would cause an adverse
impact on Starwave Partner's financial condition, Disney Partner will loan
Starwave Partner the necessary funds at an interest rate equal to the then prime
rate
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plus 1% for a twelve month term. If the loan is not repaid with accrued
interest thereon at the end of the twelve month period, such amounts will be
credited to Disney Partner's Capital Account and the Disney Partner's Actual
Cumulative Percentage would be adjusted at the beginning of the next fiscal year
as if Disney Partner had actually funded the Partnership instead of making the
loan to Starwave Partner.
6.3 ALLOCATIONS. After receipt of the Annual Financial Statements in any
fiscal year and subject to the special allocations of Section 6.6:
(a) ESPN Partner shall be allocated 40% of the Net Loss in any fiscal
year and 50% of the Net Income in any fiscal year.
(b) Starwave Partner shall be allocated 60% of the Net Loss in any
fiscal year and 50% of the Net Income in any fiscal year.
6.4 DISTRIBUTIONS. The Partnership shall make cash and/or asset
distributions at the end of each fiscal year upon receipt of the Annual
Financial Statements or when otherwise deemed appropriate by the Partners in the
same proportions as the cash contributions for each Partner in each fiscal year
attributable to such fiscal year.
6.5 CAPITAL ACCOUNTS. The Partnership shall maintain for each Partner a
single capital account (a "Capital Account") with respect to the Partner's
Partnership Interest in accordance with the regulations issued pursuant to Code
Section 704. The Capital Account of each Partner shall be maintained for such
Partner in accordance with the following provisions:
(a) To each Partner's Capital Account there shall be credited (i) the
amount of cash or the Asset Value contributed to the capital of the Partnership
by such Partner pursuant to any provision of this Agreement, (ii) the amounts of
such Partner's distributive share of Net Income allocated pursuant to Section
6.3 and any items in the nature of income or gain that are specially allocated
pursuant to Section 6.6, and (iii) the amount of any Partnership liabilities
that are assumed by such Partner.
(b) To each Partner's Capital Account there shall be debited (i) the
amount of cash or the Asset Value distributed to such Partner pursuant to any
provision of this Agreement, (ii) the amounts of such Partner's distributive
share of Net Loss allocated pursuant to Section 6.3 and any items in the nature
of expenses or losses that are specially allocated pursuant to Section 6.6, and
(iii) the amount of any liabilities of such Partner that are assumed by the
Partnership.
(c) In the event that all or a portion of a Partnership Interest is
Transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent that it relates
to the Transferred interest.
(d) In determining the amount of any liability for purposes of
paragraphs (a) and (b) hereof, there shall be taken into account Code Section
752(c) and any other applicable
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provisions of the Code and Regulations. The foregoing provisions and the other
provisions of this Agreement relating to the maintenance of Capital Accounts are
intended to comply with Regulations (S)(S) 1.704-1(b) and 1.704-2 in order that
the allocations of Revenues and Costs under this Agreement are deemed to have
substantial economic effect, and shall be interpreted and applied in a manner
consistent with such Regulations. In the event that the Partners mutually
determine that it is prudent to modify the manner in which the Capital Accounts,
or any debits or credits thereto (including, without limitation, debits or
credits relating to liabilities which are secured by contributed or distributed
property or which are assumed by the Partnership or any Partner), are computed
in order to comply with such Regulations, the Partners may make such
modification, provided that it is not likely to have a significant effect on the
amounts distributable to any Partner hereunder upon the dissolution of the
Partnership.
6.6 SPECIAL ALLOCATIONS.
(a) PREFERRED RETURN. A Funding Partner shall be specially allocated
Net Income equal to 15% per annum on the funding provided on behalf of the
Nonfunding Partner (and not subsequently made up by the Nonfunding Partner)
until such time as the Nonfunding Partner contributes all of the remaining
unfunded amounts to the Partnership.
(b) RECONCILIATION OF CAPITAL ASSETS. At the end of the fifth fiscal
year of the Partnership (and each subsequent fifth fiscal year during the Term),
the Partners shall cause the Partnership to make a special allocation of Net
Income or Net Loss, if necessary, to ensure that cumulative deductions
attributable to capital assets are consistent with each Partner's financial
contribution with respect to such capital assets.
(c) REGULATORY ALLOCATIONS TO CAPITAL ACCOUNTS. The following special
allocations shall be made in the following order:
(i) MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
Regulations (S) 1.704-2(f), notwithstanding any other provision of this Article
6, if there is a net decrease in Partnership Minimum Gain during any Partnership
year, each Partner shall be specially allocated items of Partnership income and
gain for such period (and, if necessary, subsequent periods) in an amount equal
to such Partner's share of the net decrease in Partnership Minimum Gain,
determined in accordance with Regulations (S) 1.704-2(g). Allocations pursuant
to the previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner. The items to be so allocated shall be
determined in accordance with Regulations (S)(S) 1.704-2(f)(6) and 1.704-
2(j)(2). This Section 6.6(c)(i) is intended to comply with the minimum gain
chargeback requirement in Regulations (S) 1.704-2(f) and shall be interpreted
consistently therewith.
(ii) PARTNER MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Regulations (S) 1.704-2(i)(4), notwithstanding any other provision
of this Article 6, if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain attributable to a Partner Nonrecourse Debt during any fiscal
period, each Partner who has a share of the Partner Nonrecourse Debt Minimum
Gain attributable to such Partner Nonrecourse Debt, determined in
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accordance with Regulations 1.704-2(i)(5), shall be specially allocated items of
Partnership income and gain for such period (and, if necessary, subsequent
periods) in an amount equal to such Partner's share of the net decrease in
Partner Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in accordance with Regulations (S) 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amount required to be allocated to each Partner pursuant thereto. The items to
be so allocated shall be determined in accordance with Regulations (S)(S) 1.704-
2(i)(4) and 1.704-1(j)(2). This Section 6.6(c)(ii) is intended to comply with
the minimum gain chargeback requirement in Regulations (S) 1.704-2(i)(4) and
shall be interpreted consistently therewith.
(iii) CERTAIN SECTION 754 ADJUSTMENTS. To the extent an
adjustment to the adjusted tax basis of any Partnership asset pursuant to Code
Section 743(b), Code Section 732(d) or Code Section 734(b) is required to be
taken into account in determining Capital Accounts as the result of a
distribution to a Partner in complete liquidation of its interest in the
Partnership, pursuant to Regulations (S) 1.704-1(b)(2)(iv)(m), the amount of
such adjustment to Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to the
Partners in accordance with their interests in the Partnership as determined
under Regulations 1.704-1(b)(3) in the event Regulations (S) 1.704-
1(b)(2)(iv)(m)(2) applies, or to the Partner to whom such distribution was made
in the event Regulations (S) 1.704-1(b)(2)(iv)(m)(4) applies.
(iv) PARTNER NONRECOURSE DEDUCTIONS. Any Partner Nonrecourse
Deductions for any fiscal period shall be specially allocated to the Partner who
bears the economic risk of loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance with
Regulations (S) 1.704-2(i)(1).
6.7 OTHER CAPITAL ACCOUNT ALLOCATION RULES.
(a) ALLOCATIONS WHEN PERCENTAGE INTERESTS CHANGE. For purposes of
determining the Net Income or Net Loss allocable with respect to any period, Net
Income or Net Loss shall be determined on a daily, monthly or other basis, as
determined by the Partners using any permissible method under Code Section 706
and the Regulations thereunder.
(b) TAX REPORTING. The Partners are aware of the income tax
consequences of the allocations made by this Article 6 and hereby agree to be
bound by the provisions of this Agreement in reporting their shares of
Partnership income, gain, loss, deduction and expenses for income tax purposes.
6.8 TAX ALLOCATIONS: CODE SECTION 704(C).
(a) GENERALLY. Except as otherwise provided in this Section 6.8, each
item of Partnership income, gain, loss, deduction and expense shall be allocated
to the Partners consistent with the allocations to Capital Accounts provided for
in this Agreement. Any item of income, gain, loss, deduction or credit,
including depreciation recapture, with respect to any
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property (other than money) that has been contributed by a Partner to the
capital of the Partnership and which is required to be allocated to the Partners
for income tax purposes pursuant to Code Section 704(c) so as to take into
account the variation between the adjusted basis of such property for federal
income tax purposes and its fair market value at the time of contribution shall
be allocated to the Partners in the manner so required by Code Section 704(c)
and the Regulations thereunder.
(b) ELECTIONS. Any elections or other decisions relating to
allocations pursuant to this Section 6.8 shall be made by the Partners in any
manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 6.8 are solely for purposes of federal,
state and local income taxes.
6.9 INTEREST ON CAPITAL ACCOUNTS. Except as specifically provided herein,
no Partner shall be entitled to any interest on its Capital Account or its
contributions to the capital of the Partnership, nor shall any Partner have the
right to demand or receive the return of all or any part of its Capital Account
or its contributions to the capital of the Partnership.
6.10 AUDITS. The Partnership shall employ Price Waterhouse to prepare and
deliver to the Partners an audit of the Annual Financial Statements. In
addition, promptly upon written notice and during normal business hours, either
Partner may (and may employ third-party accounting firms for assistance), no
more often than twice each fiscal year and at its expense, audit, inspect and
take extracts and copies from the other Partner's records with respect to the
Sports Products subject to reasonable confidentiality protections for the other
Partner's records and information. Either Partner may (and may employ third-
party accounting firms for assistance) audit, inspect and take extracts and
copies from the records of the Partnership at any time during normal business
hours.
7. EXCLUSIVITY
7.1 STARWAVE PARTNER EXCLUSIVITY. During the Term and in the Territory,
and except for activities associated with the development, expansion and
commercialization of the sports Component of the Portal Products and Search or
Directory, Starwave Partner and its Affiliates shall not develop, distribute,
produce, or exploit or market or promote on-air, or, provide services of any
nature or provide a license or permit a third party to utilize any of their
respective Intellectual Property Rights with respect to any Remote Access
Products containing professional or amateur sports Content, news or information.
7.2 ESPN PARTNER EXCLUSIVITY. During the Term and in the Territory, and
except for activities associated with the development, expansion and
commercialization of the news Component of the Portal Products, ESPN Partner and
its Affiliates shall not develop, distribute, produce, exploit or provide
services of any nature or market or promote on-air or provide a license or
permit a third party to utilize any of their respective Intellectual Property
Rights with respect to any Remote Access Products containing professional or
amateur sports Content, news or information.
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7.3 NO OTHER RESTRICTIONS. Except as expressly set forth in this Section
7, neither ESPN Partner and its Affiliates, on the one hand, nor Starwave
Partner and its Affiliates, on the other hand, shall be subject to any
restrictions on the licensing, use, distribution or other exploitation of their
respective properties (including all Intellectual Property Rights therein), that
either Partner or any of its Affiliates own, control, have a license to, or in
which they have any other form of right, title or interest.
7.4 BROADBAND APPLICATIONS. For clarification purposes, ESPN Partner and
its Affiliates, on the one hand, and Starwave Partner and its Affiliates, on the
other hand, in their respective sole discretion, may develop, produce, exploit
or provide services of any nature with respect to programming designed
specifically for Broadband delivery (i.e., content that requires Broadband
transmission to satisfactorily deliver services to consumers). ESPN Partner
agrees to investigate (without any obligation) cooperation with Starwave Partner
in the development of products designed for Broadband delivery.
8. PROPRIETARY RIGHTS
The Partnership shall jointly own all the Technology, Content (other than
ESPN Content, if any) and Programming developed and funded by the Partnership or
jointly funded by the Partners pursuant to Section 6.1(c) during the Term for
the Sports Products. Ownership of Technology, Content and Programming funded by
Starwave or ESPN shall be governed as provided in the Service Agreement.
9. CONFIDENTIAL INFORMATION
The definition and use of each Partner's "Confidential Information" by the
other Partner shall be governed by the terms of that certain Mutual Non-
Disclosure Agreement between the Partners dated March 28, 1997.
10. REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION
10.1 WARRANTIES OF STARWAVE PARTNER. Starwave Partner represents and
warrants that (a) it has the right, power and authority to enter into this
Agreement and fully to perform its obligations under this Agreement; (b) the
making of this Agreement by it does not violate any agreement existing between
it and any other person or entity; (c) it complies, and at all times shall
comply, with all applicable laws, rules and regulations in effect at the time
services are performed pursuant to this Agreement pertaining to the subject
matter hereof; and (d) it shall not exercise any of the rights granted to it
under or pursuant to this Agreement in a manner that shall violate any
applicable law, rule or regulation.
10.2 INDEMNIFICATION OBLIGATIONS OF STARWAVE PARTNER. Starwave Partner
agrees to, and shall, indemnify, defend and hold harmless ESPN Partner and its
Affiliates and their respective directors, shareholders, officers, agents,
employees, successors and assigns from and against any and all claims, demands,
suits, judgments, damages, costs, losses, expenses (including reasonable
attorneys' fees and expenses) and other liabilities arising from actions
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brought by third parties in connection with or related to, directly or
indirectly, any breach or alleged breach of any of the representations or
warranties made by it under this Agreement. The foregoing obligations of
Starwave Partner shall be subject to (i) ESPN Partner giving Starwave Partner
sole control of the defense and/or settlement of any third party claims, and
(ii) ESPN Partner providing Starwave Partner with reasonable assistance and full
information at Starwave Partner's expense. ESPN Partner shall promptly notify
Starwave Partner of any such claim and Starwave Partner shall bear full
responsibility for the defense (including any settlements) of any such claims
(i) Starwave Partner shall keep ESPN Partner informed of, and consult with ESPN
Partner in connection with the progress of such litigation or settlement; and
(ii) Starwave Partner shall not have any right, without ESPN Partner's written
consent, to settle any such claim if such settlement arises from or is part of
any criminal action, suit or proceeding or contains a stipulation to or
admission or acknowledgment of, any liability or wrongdoing (whether in
contract, tort or otherwise) on the part of any ESPN Affiliate,
10.3 WARRANTIES OF ESPN PARTNER. ESPN Partner represents and warrants that
(a) it has the right, power and authority to enter into this Agreement, to grant
the licenses herein granted, and to fully perform its obligations under this
Agreement; (b) the making of this Agreement by it does not violate any agreement
existing between it and any other person or entity; (c) it complies, and at all
times shall comply, with all applicable laws, rules and regulations in effect at
the time services are performed pursuant to this Agreement pertaining to the
subject matter hereof; and (d) it shall not exercise any of the rights granted
to it under or pursuant to this Agreement in a manner that shall violate any
applicable law, rule or regulation.
10.4 INDEMNIFICATION OBLIGATIONS OF ESPN PARTNER. ESPN Partner agrees to,
and shall, indemnify, defend and hold harmless Starwave Partner and its
Affiliates, and its directors, shareholders, officers, agents, employees,
successors and assigns from and against any and all claims, demands, suits,
judgments, damages, costs, losses, expenses (including reasonable attorneys'
fees and expenses) and other liabilities arising from actions brought by third
parties, in connection with or related to, directly or indirectly, any breach
or alleged breach of the representations and warranties made by it under this
Agreement. Starwave Partner shall promptly notify ESPN Partner of any such
claim, and ESPN shall bear full responsibility for the defense of such claim
(including any settlements) provided however, that (i) ESPN Partner shall keep
Starwave Partner informed of and consult with Starwave Partner in connection
with the progress of such litigation or settlement; and (ii) ESPN Partner shall
not have any right, without Starwave Partner's written consent, to settle any
such claim if such settlement arises from or is part of any criminal action,
suit or proceeding or contains a stipulation to or admission or acknowledgment
of, any liability or wrongdoing (whether in contract, tort or otherwise) on the
part of Starwave Partner.
10.5 CHOICE OF COUNSEL AND PROTECTION OF RIGHTS. Each Partner shall have
the right, in its absolute discretion, to employ attorneys of its own choice and
to institute or defend any matter, claim, action or proceeding and to take any
other appropriate steps to protect its Intellectual Property Rights and all
rights and interest in and title to its web sites, technology, content and every
element thereof and, in that connection, to settle, compromise in good faith, or
in any other manner dispose of any matter, claim, action, or proceeding and to
satisfy any
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judgment that may be rendered, in any manner as such Partner in its sole
discretion may determine.
10.6 NO OTHER REPRESENTATIONS. Except for the representations and
warranties specifically set forth in this Agreement, each party makes no other
representations and warranties of any nature whatsoever to the other parties.
10.7 NO SPECIAL DAMAGES. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS AGREEMENT, EXCEPT FOR LIABILITY ARISING UNDER SECTIONS 10.2
AND 10.4, NO PARTY SHALL UNDER ANY CIRCUMSTANCES, BE LIABLE TO ANOTHER PARTY FOR
ANY CONSEQUENTIAL, INDIRECT, SPECIAL, INCIDENTAL OR EXEMPLARY DAMAGES (INCLUDING
WITHOUT LIMITATION, LOST PROFITS, LOSS OF ANTICIPATED BUSINESS, LOSS OF DATA OR
BUSINESS LOSSES) EVEN IF SUCH DAMAGES ARE FORESEEABLE AND EVEN IF THE BREACHING
PARTY HAS BEEN APPRISED OF THE LIKELIHOOD OF SUCH DAMAGES OCCURRING.
11. TERM AND TERMINATION
11.1 TERM. The term of this Agreement shall commence as of the Effective
Time and shall continue for a period of ten (10) years after the date of the
Effective Time, unless earlier terminated as set forth below (the "Term").
11.2 RENEWAL. Unless earlier terminated, the Partners shall begin renewal
negotiations in good faith beginning on the eight (8) year anniversary of the
Effective Time. If the Partners do not reach an agreement to extend this
Agreement on mutually acceptable terms within three hundred sixty (360) days
after negotiations begin, the exclusivity provisions contained in Sections 7.1
and 7.2 shall be deemed modified, with no action required of the Partners, to
permit either Partner to develop, produce, distribute, exploit or provide
services with respect to competitive Remote Access Products; provided, that
except for such modifications, this Agreement shall continue in full force and
effect until the expiration of the Term and, provided, further, neither Partner
may engage in such activities with respect to Sports Products then available to
consumers in any manner or available prior to the expiration of the Term. In
the event the exclusivity provisions contained in Sections 7.1 and 7.2 shall be
deemed modified, and either Partner develops, produces, distributes, exploits or
provides services with respect to Remote Access Products competitive with the
Sports Products, such Partner's Remote Access Products competitive with the
Sports Products shall be provided with a prominent position on the Sports
Products, via an above-the-fold link on the start page for the Sports Product,
until the end of the Term.
11.3 TERMINATION. Without prejudice to any other rights or remedies
available to the Partners, each Partner shall have the right, in its sole
discretion, to terminate this Agreement upon written notice to the other in the
event of the occurrence of one or more of the following:
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(a) The other Partner (or DEI or Infoseek) makes any assignment for
the benefit of creditors or files a petition in bankruptcy (provided, that with
respect to ESPN Partner's ability to terminate in the event that Starwave
Partner or Infoseek files a petition in bankruptcy, such petition shall have
been approved by a decision of the majority of Infoseek's Disinterested
Directors (as defined in that certain Governance Agreement by and between
Infoseek and DEI)) or is adjudged bankrupt or is placed in the hands of a
receiver;
(b) With respect to Starwave Partner's termination rights, if ESPN
Partner willfully misuses the Starwave Marks or with respect to ESPN Partner's
termination rights, Starwave Partner willfully misuses the ESPN Marks, and (i)
the willful misuse occurs repeatedly and in each case in material breach of this
Agreement, and (ii) the willful misuse occurs more than three (3) times in any
one year period ("Excepted Misuses"), and (iii) with respect to each such
willful misuse, the breaching Partner fails to Cure such misuse within sixty
(60) days after the nonbreaching Partner delivers written notice of the misuse
to the other Partner; provided however that (w) if the misuse consists of
displaying the ESPN Marks within the Sports Products in a manner such that the
appearance of the ESPN Marks does not conform to the requirements set forth
herein, and this misuse does not have a material adverse effect on ESPN Partner,
such misuse shall be excluded from the Excepted Misuses; and (x) if the Partner
misusing the Marks of the other Partner is using its best efforts to Cure the
misuse, the Cure period shall be extended for so long as such efforts are
exercised; and (y) if a willful misuse is Cured within forty eight (48) hours of
an officer of the breaching Partner being notified in writing of such misuse by
the nonbreaching Partner, such willful misuse shall not count toward the three
(3) Excepted Misuses set forth above; and (z) if a Partner has not willfully
misused the other Partner's Marks within any six (6) month period during the
term hereof, all misuses occurring prior to the commencement of such six (6)
month period shall not count toward the three (3) Excepted Misuses set forth
above. In the event that a Partner misuses the other Partner's Marks (whether
willfully or otherwise), the Partner that misused the Marks shall implement
commercially reasonable policies to address the prevention of the occurrence of
such misuse in the future.
For purposes of this Section 11.3(b), the following terms shall have the
following meanings:
(i) "Marks" shall mean ESPN Marks with respect to ESPN Partner or
Starwave Marks with respect to Starwave; and
(ii) "misuse" by Starwave of an ESPN Trademark shall mean a use of
the ESPN Marks in a manner which materially breaches the provisions set forth in
Section 6.1 or 6.2 of the Management and Services Agreement attached hereto as
Exhibit A, either directly by Starwave or by a third party licensed by Starwave
to use the Marks; and
(iii) "Cure" shall mean if the misuse is performed directly by a
Partner, correcting the display or misapplication of the other Partner's Marks,
or if the misuse is performed by a third party under license by a Partner,
terminating the license or purported rights granted by Partner to use such Marks
and using reasonable efforts to cause the third party to cease its misuse of the
other Partner's Marks.
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The Partners acknowledge and agree that the nature of Remote Access Products and
the Narrowband medium in general may result in a misuse of a Partner's Marks
being displayed in multiple locations and across multiple networks. For the
avoidance of doubt, if the same application of a Mark is displayed multiple
times or in multiple places as a direct or indirect result of the Narrowband
medium or the manner in which Remote Access Products are operated, transmitted
or otherwise made available electronically, such repeated displays shall
constitute no more than one misuse for purposes of counting Excepted Misuses
hereunder.
(c) If the other Partner's Profit Participation is equal to or less
than 25% of the total Profit Participation and the Partnership sustains either
eight consecutive Net Loss fiscal quarters or ten total Net Loss fiscal
quarters; provided, that if the other Partner is Starwave Partner, ESPN Partner
shall not be able to terminate unless either Starwave Partner has not qualified
pursuant to Section 6.2(e) for a loan from ESPN Partner or such loan has been
treated as a Partnership capital contribution in accordance with its terms after
the expiration of the twelve (12) month period set forth in Section 6.2(e).
11.4 ADDITIONAL TERMINATION RIGHTS. [INTENTIONALLY OMITTED]
11.5 EFFECT OF TERMINATION. In the event of the expiration or termination
of this Agreement for any reason (including a material breach hereof), the
Partnership shall continue solely for the purposes of winding up its affairs in
an orderly manner, liquidating its assets (subject to Section 11.6) and
satisfying the claims of its creditors and Partners. No Partner shall take any
action that is inconsistent with, or not necessary to or appropriate for,
winding up the Partnership's business and affairs. The Partners shall be
responsible for overseeing the winding up and liquidation of the Partnership and
shall take full account of the Partnership's liabilities and property, and the
property of the Partnership shall be liquidated, and the proceeds therefrom, to
the extent sufficient therefor, shall be applied and distributed to the payment
and discharge of all of the Partnership's debts and liabilities to creditors of
the Partnership prior to distributions to the Partners pursuant to Section 11.6.
11.6 LIQUIDATING DISTRIBUTIONS. Upon the expiration or termination of this
Agreement, and after the payment and discharge of all of the Partnership's debts
and liabilities to third-party creditors, the Partnership shall liquidate and
distribute its assets in accordance with Capital Accounts; provided, that, the
Partners may elect to receive a distribution of the following assets (at their
respective Asset Values, without taking into consideration the values of the
associated ESPN Trademarks nor the values of any Technology, or other
development tools, software, hardware, middleware, or technical know-how
licensed to the Partnership by Starwave or its Affiliates) in lieu of a portion
of a cash distribution (except with respect to clauses (a) and (b) below, which
shall be distributed without giving effect to a reduction of any cash
distribution) and shall contribute cash to the Partnership as necessary to
provide that the assets of the Partnership are distributed in accordance with
Capital Accounts:
(a) ESPN Partner shall own the brand and name of the Sports Products
and all other descriptive names developed or used during the Term that contain
an ESPN
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Trademark and the Partnership and Starwave Partner shall assign to ESPN Partner
all of its right, title and interest in any registration or other indicator of
ownership and ESPN Partner shall own all URLs containing "ESPN" and any variant
thereof and the Partnership and Starwave Partner shall assign to ESPN Partner
all of its right, title and interest in any registration or other indicator of
ownership;
(b) As among Starwave Partner, DEI, and ESPN Partner and each of
their respective Affiliates, Starwave Partner shall own all Technology licensed
by Starwave Partner and its Affiliates to the Partnership in connection with the
operation of the Sports Products;
(c) With respect to in-kind distributions of assets of the
Partnership:
(i) ESPN Partner shall be entitled to receive as an in-kind
distribution, the assets (including personnel) of the affiliate relations group
(referenced in Section 3.4(b)) and all other editorial-related Content assets,
including personnel and content licenses;
(ii) Starwave Partner shall be entitled to receive as an in-
kind distribution, all remaining assets (other than customer lists) and
personnel of the Partnership including without limitation all Technology Assets
together with all technology licenses between Starwave or third parties and the
Partnership. For purposes of this Agreement, "Technology Assets" means all
technology-related assets of the Partnership or jointly owned by the Partnership
including without limitation all Programming, Technology, and other development
tools, software, hardware, middleware and technical know-how;
(iii) With respect to all such in-kind distributions, all assets
distributed shall be valued at their respective Asset Values (subject to the
parenthetical within the first sentence of Section 11.6 above) and the
Partnership and the assigning Partner shall assign to the other Partner all of
its respective right, title and interest in such assets, including employment
agreements;
(iv) The assigning Partner agrees to not solicit for hire or
hire any employee in any of the groups or performing functions associated with
the assets being distributed pursuant to this Section for a period of fifteen
(15) months starting from the date of the related in-kind distribution.
Upon the liquidation of the Partnership, if any Partner has a deficit
balance in its Capital Account (after giving effect to all contributions,
distributions and allocations for all fiscal periods, including the fiscal
period during which such liquidation occurs), such Partner shall be obligated to
contribute to the capital of the Partnership the amount necessary to restore the
Capital Account balance to zero as provided in Regulation 1.704-
1(b)(2)(ii)(b)(3).
11.7 PARTNERSHIP PROPERTY. Upon liquidation and after giving effect to
Section 11.6, the Partnership shall contribute all customer lists owned by the
Partnership to a California trust, with a mutually agreed trustee and both
Partners as equal beneficiaries. Such trust shall have a
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perpetual life (subject to termination for material breach or bankruptcy of a
Partner) and shall provide that each Partner shall have a perpetual royalty free
license to all customer lists owned by the Partnership (and transferred to the
trust). Neither Partner may provide the customer lists to third parties unless
mutually agreed. Notwithstanding the foregoing, the perpetual grant hereunder
shall be modified, if necessary, with respect to certain assets if such
perpetual grant would materially diminish the value of such assets as a matter
of law.
11.8 SURVIVAL. Unless otherwise specified, all obligations that accrue
prior to any expiration or termination of this Agreement shall survive such
expiration or termination. In addition, and without limiting the generality of
the preceding sentence, Sections 8, 9, 10, 11, 12, 13.1, 13.2, 13.4, 13.6, 13.7,
13.10, 13.11, 13.12, 13.13, 13.14 and 14 shall survive the expiration or
termination of this Agreement for any reason.
11.9 INJUNCTIVE RELIEF. Each Partner acknowledges and agrees that the
other Partner may be irreparably harmed by any material breach of this Agreement
by it. Therefore, each Partner agrees that in the event that it breaches any of
its obligations hereunder, the other Partner in addition to all other remedies
available to it under this Agreement, or at law or in equity, shall be entitled
to seek all forms of injunctive relief including decrees of specific
performance, without showing or proving that it sustained any actual damages and
without posting bond.
12. OTHER RIGHTS OF DUTIES AND RESTRICTIONS ON THE PARTNERS
12.1 INDEMNIFICATION. All costs, expenses, liabilities, obligations,
losses, damages, penalties, proceedings, actions, suits or claims of whatever
kind or nature which may be imposed on, incurred by, suffered by, or asserted
against the Partnership, any Partner or any Partner's respective Affiliates,
directors, officers and employees, in connection with the ownership or
management or operation of the business and affairs of the Partnership shall be
referred to as "Claims." The Partnership shall indemnify and hold harmless each
Partner and their respective Affiliates, directors, officers and employees
("Related Persons") for all Claims other than those caused by such Partner's or
such other Related Person's negligence, willful misconduct or breach of this
Agreement. Each Partner shall indemnify and hold harmless the Partnership and
each other Partner for all Claims sustained by any of them resulting from such
Partner's negligence, willful misconduct or breach of this Agreement.
12.2 CONTRIBUTION. In the event that any Partner shall pay in good faith
or become obligated to pay any proper obligation of the Partnership, such
Partner shall be entitled to contributions from the other Partners to the extent
necessary so that, after giving effect to such contributions, each Partner shall
bear no more than that part of such obligation which corresponds to its
respective Capital Contribution obligations at the time of the occurrence,
circumstances, events or conditions giving rise to the obligation.
13. GENERAL PROVISIONS
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13.1 NOTICES. All notices which either Partner or the Partnership is
required or may desire to serve upon the other Partner, DEI or the Partnership
shall be in writing and addressed as follows:
(a) if to ESPN Partner:
ESPN Online Investments, Inc.
605 Third Avenue
New York, NY 10158-0180
Attention: Richard Glover
Telephone: (212) 916-9247
Facsimile: (212) 916-9299
DOL Online Investments, Inc.
500 S. Buena Vista Street
Burbank, CA 91521
Attention: Jake Winebaum
Telephone: (818) 623-3300
Facsimile: (818) 623-3304
with a copy to:
Disney Enterprises, Inc.
500 S. Buena Vista Street
Burbank, CA 91521
Attention: General Counsel
Telephone: (818) 560-4370
Facsimile: (818) 563-4160
(b) if to DEI:
Disney Online
500 S. Buena Vista Street
Burbank, CA 91521
Attention: Jake Winebaum
Telephone: (818) 623-3300
Facsimile: (818) 623-3304
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with a copy to:
Disney Enterprises, Inc.
500 S. Buena Vista Street
Burbank, CA 91521
Attention: General Counsel
Telephone: (818) 560-4370
Facsimile: (818) 563-4160
(c) if to Starwave Partner:
Starwave Corporation
13810 SE Eastgate Way
Bellevue, WA 98005
Attention: Michael Slade
Curt Blake
Telephone: (206) 957-2000
Facsimile: (206) 643-9381
(d) if to the Partnership, c/o:
Starwave Corporation
13810 SE Eastgate Way
Bellevue, WA 98005
Attention: Michael Slade
Curt Blake
Telephone: (206) 957-2000
Facsimile: (206) 643-9381
ESPN Online Investments, Inc.
605 Third Avenue
New York, NY 10158-0180
Attention: Richard Glover
Telephone: (212) 916-9247
Facsimile: (212) 916-9299
DOL Online Investments, Inc.
500 S. Buena Vista Street
Burbank, CA 91521
Attention: Jake Winebaum
Telephone: (818) 623-3300
Facsimile: (818) 623-3304
Any such notice may be served personally or by mail (postage prepaid),
facsimile (provided oral confirmation of receipt is immediately obtained and a
hard copy is concurrently
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sent by internationally commercially recognized overnight delivery service),
internationally commercially recognized overnight delivery service (such as
Federal Express or D.H.L.) or courier. Notice shall be deemed served upon
personal delivery or upon actual receipt. Either Partner or the Partnership may
change the address to which notices are to be delivered by written notice to the
other Partner and the Partnership served as provided in this Section 13.1.
13.2 ENTIRE AGREEMENT. This Agreement, together with the Exhibits attached
hereto and hereby incorporated herein by reference, constitutes the complete,
final and exclusive understanding and agreement between the Partners with
respect to the transactions contemplated, and supersedes any and all prior or
contemporaneous oral or written representation, understanding, agreement or
communication between the Partners concerning the subject matter hereof.
13.3 AMENDMENTS. All amendments or modifications of this Agreement shall
be binding upon the Partners so long as the same shall be in writing and
executed by each of the Partners hereto.
13.4 WAIVER. No waiver of any provision of this Agreement or any rights or
obligations of either Partner hereunder shall be effective, except pursuant to a
written instrument signed by the Partner waiving compliance, and any such waiver
shall be effective only in the specific instance and for the specific purpose
stated in such writing.
13.5 FORCE MAJEURE. Neither Partner nor the Partnership shall be deemed in
default hereunder, nor shall it hold the other Partner or the Partnership
responsible for, any cessation, interruption or delay in the performance of its
obligations hereunder due to causes beyond its reasonable control including, but
not limited to: earthquake, flood, fire, storm or other natural disaster, act of
God, labor controversy or threat thereof, civil disturbance or commotion,
disruption of the public markets, war or armed conflict (whether or not
officially declared) or the inability to obtain sufficient material, supplies,
labor, transportation, telecommunications, power or other essential commodity or
service required in the conduct of its business, any change in or the adoption
of any law, ordinance, rule, regulation, order, judgment or decree (each a
"Force Majeure Event") provided that the Partner relying upon this Section 13.5:
(a) shall have given the other Partner and the Partnership written notice
thereof promptly and, in any event, within five (5) days of discovery thereof
and (b) shall take all steps reasonably necessary under the circumstances to
mitigate the effects of the force majeure upon which such notice is based.
13.6 NO THIRD PARTNER BENEFICIARIES. Nothing in this Agreement is intended
or shall be construed to give any person, other than the Partners hereto, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein.
13.7 RESTRICTION ON TRANSFER.
(a) Neither Partner shall, directly or indirectly, Transfer all or any
portion of its Partnership Interest or any rights therein (whether voluntarily
or by operation of law) without
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the consent of the other Partner, which consent may be withheld by such Partner
in its sole and absolute discretion; provided, that ESPN Partner shall be
entitled to assign its Partnership Interest or any rights therein to any
Affiliate, provided that such Affiliate satisfies the conditions of paragraph
(b) below and shall remain an Affiliate of the Partner, unless it obtains the
prior written consent of the other Partner, which consent may be withheld in the
other Partner's sole discretion. Any Transfer or attempted transfer by any
Partner in violation of the preceding sentence shall be null and void and of no
force or effect whatsoever. No transferee of a Partner's Interest shall be
admitted as a substitute Partner without (i) the prior unanimous written consent
of the other Partners, which may be withheld by any such Partner in its sole and
absolute discretion and (ii) the receipt of any applicable regulatory consents
or approvals.
(b) A Transfer to an Affiliate shall be conditioned upon the
following:
(i) The transferor and transferee shall execute and deliver to
the Partnership such documents and instruments of conveyance as may be necessary
to effect such Transfer including, without limitation, the execution by the
transferee of a counterpart to this Agreement by which the transferee agrees to
all of the terms, obligations and provisions of this Agreement.
(ii) The Transfer shall not cause the Partnership to terminate
for federal income tax purposes and shall not have a material adverse income tax
consequence to the Partnership or the other Partner.
(c) Upon a merger, consolidation, reorganization, liquidation or
similar event affecting a Partner, its successor-in-interest will assure all
obligations of such Partner hereunder.
13.8 INSURANCE. The Partnership will purchase and maintain sufficient
product liability insurance to protect the Partners and the Partnership against
liability as a result of product liability claims made in connection with the
Sports Products.
13.9 PARTNERSHIP BANK ACCOUNTS AND FUNDS. The Partnership shall establish
bank accounts at such banks as may from time to time be designated by the
Partners. The Partnership's funds shall be invested in such manner as the
Partners deem appropriate with interest accruing to the Partnership. All bank
and other accounts shall be maintained in the Partnership's name. None of the
Partnership's funds shall be commingled with the funds of any Partner unless
previously approved in writing by the Partners. The Partners shall designate
the General Manager, as a signatory on the bank accounts of the Partnership to
accomplish more effectively the purposes of this Section 13.9.
13.10 CONSTRUCTION. This Agreement shall be fairly interpreted and
construed in accordance with its terms and without strict interpretation or
construction in favor of or against either Partner. Each Partner has had the
opportunity to consult with counsel in the negotiation of this Agreement.
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13.11 CAPTIONS AND HEADINGS. The section and subsection headings and
captions appearing in this Agreement are inserted only as a matter of
convenience and shall not be given any legal effect.
13.12 SEVERABILITY. If any restriction, covenant or provision of this
Agreement shall be adjudged by a court of competent jurisdiction to be void as
going beyond what is reasonable in all the circumstances for the protection of
the interests of the Partner seeking to enforce such restriction, covenant or
provision, such restriction, covenant or provision shall apply with such
modifications as may be necessary to make it valid and effective. In the event
that any provision of this Agreement should be found by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
shall not in any way be affected or impaired thereby.
13.13 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New York. Any action arising out of or relating to this Agreement
shall be filed only in the courts of the State of California for the County of
Los Angeles, or the United States District Court for the Central District of
California. The parties hereby consent and submit to the personal jurisdiction
of such courts for the purposes of litigating any such action.
13.14 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which together shall constitute
one and the same instrument.
14. TAX MATTERS
14.1 PARTNERSHIP FOR TAX PURPOSES. The Partners intend to treat the
arrangement contemplated herein as a general partnership for tax purposes.
Accordingly, all transactions contemplated by this Agreement shall be
implemented in a manner that is consistent with such treatment.
14.2 PARTNERSHIP TAX YEAR. To the extent permitted by applicable tax law,
the Partnership's year end shall be September 30 for income tax purposes.
14.3 TAX MATTERS PARTNER. The Partners designate ESPN Partner as the tax
matters partner, pursuant to Section 6231 of the Code. To the extent permitted
by applicable tax law, actions taken by ESPN Partner in its capacity as the tax
matters partner shall require the prior joint approval of the Partners.
14.4 OVERSIGHT OF TAX MATTERS. The General Manager shall arrange for the
preparation and timely filing of all returns of Partnership income, gains,
losses, deductions, credits and other items necessary for federal, state and
local income tax purposes, shall provide copies of draft tax returns to each
Partner at least thirty days prior to filing the returns and shall use
reasonable good-faith efforts to furnish to the Partners within sixty days after
the close of each year of the Partnership the tax information reasonably
required for federal, state, and local income tax reporting purposes. The
General Manager shall use good-faith efforts to supply
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each Partner with the information necessary to determine estimated tax payments
or any other information related to taxes reasonably requested by each Partner.
The classification, realization and recognition of income, gains, losses,
deductions, credits and other items shall be on the accrual method of accounting
for federal income tax purposes.
14.5 PARTNER SECTION 482 ADJUSTMENT. If the Internal Revenue Service
reallocates an item of income, deduction, or loss to a Partner or an Affiliate
pursuant to Section 482 of the Code or any similar rule or principle of law (a
"Partner Section 482 Allocation"), and the Partnership has a corresponding
correlative item of deduction, loss or income (as determined under Section
1.482-1(g) of the Regulations (the "Partnership Correlative Item"), such
Partnership Correlative Item shall be specially allocated to and reflected in
the Capital Account of the Partner that received (or whose Affiliate received)
such Partner Section 482 Allocation, and a corresponding contribution or
distribution shall likewise be deemed to have been made by or to such Partner.
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IN WITNESS WHEREOF, the duly authorized representatives of each Partner
have executed this Agreement as of the day and year first written above.
ESPN ONLINE INVESTMENTS, INC. STARWAVE VENTURES
By: /s/ Laurence J. Shapiro By: /s/ Laurence J. Shapiro
------------------------- -------------------------
Name: Laurence J. Shapiro Name: Laurence J. Shapiro
Title: Vice President Title: Vice President
The undersigned parent corporations of the Partners agree to cause their
respective subsidiaries that are Partners (or other Affiliates, as necessary) to
fully perform their obligations hereunder. In addition, Disney Enterprises,
Inc. agrees to cause its Affiliates to provide to the Partnership all news-
related Content that is 100% owned by Disney Enterprises, Inc. and its
Affiliates, whether or not owned by ESPN, that may be necessary or useful in the
development and operation of the Sports Products and such Content shall be
deemed ESPN Content for purposes of this Agreement and the Services Agreement..
DISNEY ENTERPRISES, INC. INFOSEEK CORPORATION
By: /s/ Kevin A. Mayer By: /s/ Harry M. Motro
------------------------- ------------------------
Name: Kevin A. Mayer Name: Harry M. Motro
Title: Sr. Vice President Title: President and CEO
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EXHIBIT 14
AMENDED AND RESTATED
ESPN/STARWAVE
MANAGEMENT AND SERVICES AGREEMENT
THIS AMENDED AND RESTATED MANAGEMENT AND SERVICES AGREEMENT including the
Exhibits attached hereto (this "AGREEMENT") is entered into as of June 18, 1998
by and between ESPN Enterprises, Inc., a Delaware corporation ("ESPN"), STARWAVE
CORPORATION, a Washington corporation ("STARWAVE") and ESPN/STARWAVE PARTNERS, a
New York General Partnership (THE "PARTNERSHIP"); provided that, this Agreement
shall only become effective upon the Effective Time, as defined in and pursuant
to that certain Agreement and Plan of Reorganization, of even date herewith, by
and among Infoseek, Infoseek Corporation, a Delaware corporation, Starwave
Corporation, a Washington corporation, and Disney Enterprises, Inc., a Delaware
corporation ("DEI") and shall cease and be of no further force and effect in the
event that the Effective Time does not occur; and provided further that, each of
the parties hereto agrees not to terminate, amend or otherwise alter this
Agreement, or waive any of its rights hereunder, at any time prior to
immediately following the Effective Time. This Agreement amends and restates in
its entirety the Management and Services Agreement by and between the parties
hereof entered into as of March 28, 1997 (the "Original Services Agreement").
DEI is a party to this Agreement solely with respect to the provisions of
Sections 3.3, 3.6, 5.2, 6.1, 6.2 and 10.7.
RECITALS
1. ESPN and Starwave entered into a Production Agreement, dated February 18,
1995 (the "Production Agreement") for the development and production of
certain interactive media products.
2. In connection with an investment in Starwave by DEI, ESPN and Starwave
desire to terminate the Production Agreement and to cause Affiliates of
each to form a partnership to develop, produce and exploit certain
interactive media products.
3. The Partnership desires to obtain from each of ESPN and Starwave and each
of ESPN and Starwave have agreed, subject to certain conditions, to license
or otherwise provide certain assets and certain services to the
Partnership.
4. Pursuant to an agreement and plan of reorganization and a stock and warrant
purchase agreement (collectively, the "Acquisition Agreements"), DEI has
agreed to acquire approximately a 43% interest in the voting equity of
Infoseek Corporation, a California corporation ("Infoseek"), subject to the
terms and conditions set forth in the Acquisition Agreements.
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5. In connection with the transaction contemplated under the Acquisition
Agreements, the Partners desire to amend and restate the Original Agreement
by entering into this Agreement.
THEREFORE, for good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, ESPN, Starwave and the Partnership hereby agree as
follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the following
meanings:
1.1 "ADVISORY COMMITTEE" has the meaning specified in the Partnership
Agreement.
1.2 "AFFILIATE" means, with respect to any person, any person directly or
indirectly through one or more intermediaries controlling, controlled by or
under common control with such person. Notwithstanding the foregoing, for
purposes of this Agreement, Starwave shall not be considered as an Affiliate of
ESPN or DEI.
1.3 "ANNUAL BUSINESS PLAN" has the meaning specified in the Partnership
Agreement.
1.4 "BROADBAND" means programming that requires transmission at data rates
which would enable real time, full screen, full motion video at equal to or
better than NTSC broadcast resolution.
1.5 "CONTENT" means audio and audio visual material, photographs, art
work, videos, graphics, text, and sound recordings.
1.6 "COSTS" means all direct costs and allocated costs, whether incurred
by ESPN or DEI (including, without limitation, costs associated with Section 3)
or Starwave (including, without limitation, costs associated with Section 4) or
by the Partnership (as referenced in the Partnership Agreement), that are
associated with the development, production and exploitation of the Sports
Products.
1.7 "ESPN CONTENT" means all Content that is 100% owned or controlled by
ESPN or its successors or assigns. For purposes of this Section 1.1, "control"
means the ability to grant the licenses set forth herein; provided however that
if such Content is subject to the payment of royalties or other consideration to
third parties, ESPN will notify Starwave in writing in advance and the
Partnership shall have the right, at its option, to include such Content in the
definition of ESPN Content.
1.8 "ESPN TRADEMARKS" means "ESPN", ESPNET", ESPN logo and the other
marks, trade names, trademarks, brands, names, personalities, logos and
representations thereof that are properties of ESPN or its Affiliates that
appear within the ESPN Content, Programming,
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Sports Products or any other materials created in association with this
Agreement and that ESPN or any of its Affiliates owns or controls.
1.9 "FIXED MEDIA PRODUCTS" means multimedia content products developed for
distribution to end users on any platform (including, without limitation, MS-
DOS, Windows, Macintosh, Sega, Nintendo, CD-ROM, Sony Playstation and 3DO
systems) designed to be read on an electronic device but excluding such products
if they include a Narrowband-delivered component and such products would not be
commercially competitive (as reasonably determined in good faith by the
Partners) without the inclusion of a Narrow-band delivered component.
1.10 "FORCE MAJEURE EVENT" has the meaning specified in Section 10.5.
1.11 "INTELLECTUAL PROPERTY RIGHTS" means any and all (by whatever name or
term known or designated) tangible and intangible and now known or hereafter
existing (a) rights associated with works of authorship throughout the universe,
including but not limited to copyrights, moral rights, and mask-works, (b)
trademark, service mark and trade name rights and similar rights, (c) trade
secret rights, (d) patents, designs, algorithms and other industrial property
rights, (e) all other intellectual and industrial property and proprietary
rights (of every kind and nature throughout the universe and however designated)
(including without limitation logos, character rights, "rental" rights and
rights to remuneration), whether arising by operation of law, contract, license
or otherwise, and (f) all registrations, applications, renewals, extensions,
continuations, divisions or reissues thereof now or hereafter in force
throughout the universe (including without limitation rights in any of the
foregoing).
1.12 "NARROWBAND" means Programming that does not require transmission at
data rates which would enable real time, full screen, full motion video at equal
to or better than NTSC broadcast resolution.
1.13 "PARTNERSHIP" means the general partnership formed by Affiliates of
Starwave and ESPN and "PARTNERSHIP AGREEMENT" means the amended and restated
partnership agreement between such Affiliates, dated as of the date hereof.
1.14 "PERSON" means any individual, partnership, corporation, trust or
other entity.
1.15 "PRODUCTION AGREEMENT" has the meaning specified in the Recitals.
1.16 "PROGRAMMING" means the programming included in the Sports Products
including, without limitation, all HTML, Java, and/or other formatted text
files, all related graphics files, animation files, data files, multimedia
files, modules, routines and objects, and the computer software and all of the
script or program files required to exploit such materials and that collectively
control the display of and end user interaction with the programming.
1.17 "REMOTE ACCESS PRODUCTS" means Programming intended for distribution
by any Narrowband interactive transmission method. This definition excludes any
and all Programming
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that requires Broadband transmission and also excludes (a) products developed
for PDAs, pagers, screen phones and other future handheld devices and (b) Fixed
Media Products.
1.18 "RESTATED INITIAL BUSINESS PLAN" has the meaning specified in the
Partnership Agreement.
1.19 "SPORTS PRODUCTS" means the Remote Access Products developed,
produced, marketed, distributed or otherwise exploited under the Partnership
Agreement containing professional or amateur sports Content, news or
information.
1.20 "STARWAVE TRADEMARKS" means "Starwave" and the other marks, trade
names, trademarks, brands, names, personalities, logos and representations
thereof that are properties of Starwave Partner or its Affiliates that appear
within the Sports Products or any other materials created in association with
this Agreement and that Starwave Partner owns or controls.
1.21 "TECHNOLOGY" means all software, hardware and middleware required or
appropriate to (i) transform the Content into the Programming, (ii) create,
modify or maintain the Programming, or (iii) deliver the Programming in an
online format.
1.22 "TERM" shall have the meaning set forth in Section 9.1.
1.23 "TERRITORY" means the United States and Canada.
2. STARWAVE OBLIGATIONS. During the Term, Starwave shall have the following
obligations to the Partnership:
2.1 HOSTING/NETWORK INFRASTRUCTURE. Starwave shall host all portions of
the Sports Products on Starwave servers, at the highest quality levels as
Starwave performs hosting services for any third party (i.e., having
substantially similar service requirements) and at a nominal mark-up to Costs on
a cost-effective basis and on most-favored-nations terms as those provided to
any similarly situated third party having substantially similar service
requirements. Starwave shall be solely responsible for all Starwave network
infrastructure (i.e., telecommunications and connections to the Internet) in
conformance with the level of service that Starwave provides to itself or its
most valued partners and customers.
2.2 BILLING, COLLECTION, CUSTOMER SERVICE FUNCTIONS. Starwave shall be
responsible for billing, collection, customer service and other "back office"
functions for the Partnership at a nominal mark-up to Costs and on most-favored-
nations terms as those provided to any third party (i.e., having substantially
similar service requirements). All such services shall be performed by Starwave
at the highest quality levels Starwave performs services for any third party
(i.e., having substantially similar service requirements) and at a nominal mark-
up to Costs on a cost-effective basis and on most-favored-nations terms as those
provided to any similarly situated third party (i.e., having substantially
similar service requirements).
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2.3 TECHNOLOGY DEVELOPMENT AND MAINTENANCE. Starwave shall be responsible
for the technology development and maintenance relating to the Sports Products,
at a nominal mark-up to actual costs and on most-favored-nations terms as those
provided to any third party (i.e., having substantially similar service
requirements), to the extent commercially reasonable. All such services shall
be performed by Starwave at the highest quality levels Starwave performs
services for any third party (i.e., having substantially similar service
requirements) and at a nominal mark-up to Costs on a cost-effective basis and on
most-favored nations terms as those provided to any similarly situated third
party (i.e., having substantially similar service requirements). It is the
intention of the parties that the preponderance of the technology development
and maintenance relating to the Sports Products shall be performed by Starwave.
The General Manager (as defined in the Partnership Agreement), in accordance
with the Restated Initial Business Plan or Annual Business Plans, may acquire or
license additional or substitute Technology (i) on an incidental and nonmaterial
basis, (ii) if the Costs of acquiring or licensing Technology from a third party
are significantly less than the Costs to the Partnership of acquiring or
licensing such or similar Technology from Starwave and such third party
Technology from Starwave is fully scaleable and compatible with other Technology
used for the Sports Product and otherwise appropriate for its intended uses,
(iii) or if otherwise agreed and otherwise appropriate for use in the Sports
Products. In addition, the General Manager, in accordance with the Restated
Initial Business Plan or Annual Business Plans may acquire or license additional
or substitute Technology if, in the General Manager's reasonable opinion, the
inability to so acquire or license such Technology would have a material impact
on the overall quality and competitive position of the Sports Products. In such
event, Starwave shall have a three (3) day period to meet with the General
Manager to attempt to resolve the issues. If the issues have not been resolved
in the three (3) day period, the General Manager shall be entitled to present
the issues to the Partners for resolution based upon the mutual agreement of the
Partners. During the Term, such technology development and maintenance (or a
portion thereof) may become a responsibility of the Partnership or the Partners
collectively, upon the mutual agreement of the parties.
2.4 USAGE TRACKING.
(a) Starwave will track traffic in the Sports Products and shall
provide ongoing access to reports on such traffic to ESPN.
(b) Starwave shall from time to time promptly deliver to ESPN upon
ESPN's request, the names, addresses and other identifying information of users
of the Sports Products who complete merchandise, advertising, promotional or
subscription transactions over the Sports Products.
(c) The parties shall have the right to use all data provided by
Starwave under subsections (a) or (b) above in any manner, subject to a mutually
agreed privacy policy and credit policy. All such data shall be owned by the
Partnership. Each party agrees that during the term it shall not provide such
data to any third party, except as may be mutually agreed.
(d) Starwave acknowledges and agrees that the Sports Products may
contain registration forms and/or questionnaires for users to complete in
connection with contests,
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promotions or other features of the Sports Products. Starwave acknowledges and
agrees that such information shall be solely owned by the Partnership and may be
used for either party's and its respective Affiliates' business purposes, but
may not be provided to any third party (except advertisers), except as may be
mutually agreed.
2.5 EXISTING TECHNOLOGY. Starwave shall provide, on a royalty free basis,
Technology existing as of the date of this Agreement, including, without
limitation, interactive software development tools, middleware and engines owned
or licensed by Starwave or its Affiliates (provided that Starwave has the right,
with no additional monies owed, to license any such technology to ESPN, subject
to Section 5.1) for use in the development and delivery of the Sports Products.
Such Technology shall be licensed by Starwave, on a royalty free.
2.6 OTHER TECHNOLOGY. Starwave shall provide such additional technology
owned or licensed by Starwave or its Affiliates (provided that Starwave has the
right, with no additional monies owed, to license any such technology to ESPN,
subject to Section 5.1) that may be useful or necessary in the development of
the Sports Products, under an agreement to be negotiated in good faith between
the parties within sixty (60) days of the date hereof. If an agreement is not
timely entered into, such Technology shall be provided by Starwave at fair
market rates.
2.7 INFRASTRUCTURE. Starwave shall provide appropriate staffing, support
and infrastructure to fulfill its obligations under this Agreement, including,
without limitation, sufficient dedicated personnel to meet its obligations set
forth under Sections 2.1, 2.2., 2.3 and 2.4, in accordance with the Restated
Initial Business Plan and any Annual Business Plan.
2.8 OTHER NAMES. Starwave shall assign to the Partnership all of its
right, title and interest to any descriptive names and URLs containing the word
"zone" when intended for use or associated with a sport or sports (e.g.,
GolfZone).
3. ESPN AND DEI OBLIGATIONS. During the Term, ESPN and DEI shall have
the following obligations to the Partnership.
3.1 CONTENT. Pursuant to Section 6.1, ESPN shall provide the Partnership
with a royalty-free license to all ESPN Content or Content of its successors-in-
interest which is appropriate for use in the Sports Products, including without
limitation both television and radio programming. For the avoidance of doubt,
Content provided shall include without limitation scores, headlines, regular
programs (e.g., Sports Center), special programs (e.g., NFL draft), columnists
(e.g., Peter Gammons), subject to cancellation of current programming and the
inclusion of all owned or controlled programming as set forth in Section 1.7.
3.2 CONTENT DEVELOPMENT/TRANSFORMATION/INTEGRATION. At Costs set forth in
the Restated Initial Business Plan or applicable Annual Business Plan, ESPN
shall be responsible for the development of ESPN Content for the Sports Products
and for the transformation of ESPN Content into Programming and integration of
the Programming into the Sports Products. The senior employee in such group
shall report on a day-to-day basis to the General Manager, with
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direct reporting as well to an ESPN designated executive for oversight of
editorial and creative aspects of the ESPN Content.
3.3 ON-AIR MARKETING/PROMOTION. At no charge, ESPN shall provide
reasonable marketing and promotion for the Sports Products on its television and
radio networks, in amounts, formats and frequencies determined by ESPN, in its
sole discretion, provided, that ESPN agrees to provide such marketing and
promotion in a manner consistent with current levels of marketing and promotion.
3.4 INFRASTRUCTURE. ESPN shall provide appropriate staffing, support and
infrastructure to fulfill its obligations under this Agreement.
3.5 ON-AIR TALENT. Subject to Section 3.7(a) and (c), and at no charge
(except for out-of-pocket costs), ESPN shall provide appropriate access (in its
sole discretion) to on-air talent for use in connection with the Sports
Products.
3.6 GROUP ADVERTISING SALES. At Costs set forth in the Restated Initial
Business Plan or applicable Annual Business Plan, DEI shall provide, with
ongoing participation by the Partnership, group advertising sales services
(i.e., combining advertising sales services for the Sports Products of the
Partnership with additional Sports Products that may be developed by the
Partnership or the parties, individually or in other arrangements such as
ABCNews.com and Disney Online).
3.7 ESPN'S CONTROL.
(a) EDITORIAL AND CREATIVE. ESPN shall exercise sole and final
control over all editorial and creative aspects of the Sports Products and all
portions thereof.
(b) MARKETING AND PROMOTIONS. ESPN shall exercise sole and final
control over all uses or references to any ESPN Trademark contained in marketing
and promotions associated with the Sports Products. Any use of an ESPN
Trademark by the Partnership or Starwave shall require the prior approval of
ESPN, which may be withheld at ESPN's sole discretion. ESPN shall use its
reasonable efforts to promptly respond to requests from the Partnership for use
of the ESPN Trademarks. ESPN shall cooperate in good faith with the Partnership
to agree on a templated use of ESPN Trademarks from time to time to avoid
recurrent approvals.
4. MERCHANDISING
DEI agrees to provide (or cause its Affiliates to provide) e-commerce
services to the Partnership, including, without limitation, store design,
transaction processing, web hosting, inventory management, fulfillment and
customer service. In exchange for such services, the Partnership shall pay DEI
its costs in providing such services, plus a to-be-agreed markup on
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such costs or a to-be-agreed upon revenue share. In addition, the Partnership
shall have joint ownership of all customer information for use for its business
purposes
5. EXCLUSIVITY
5.1 STARWAVE EXCLUSIVITY. During the Term and on a worldwide basis and
except for activities associated with the development and expansion of the
sports Component of the Portal Products and further excluding the Sports
Products within the Partnership, Starwave and its Affiliates shall not develop,
distribute, produce, exploit or provide services of any nature or provide a
license or permit a third party to utilize any of their respective Intellectual
Property Rights with respect to any Remote Access Products containing
professional or amateur sports news or information.
5.2 DEI EXCLUSIVITY. During the Term and on a worldwide basis, DEI and
its Affiliates shall not develop, distribute, produce, exploit or provide
services of any nature or provide a license or permit a third party to utilize
any of their respective Intellectual Property Rights with respect to any Remote
Access Products containing professional or amateur sports news or information.
5.3 ADDITIONAL REMOTE ACCESS PRODUCTS. If ESPN determines, in its sole
discretion, to develop Remote Access Products that are targeted for users on an
international or foreign (country or regional) basis, the Partnership shall
participate in such development on similar terms to those reflected in the
Partnership Agreement (while taking into consideration additional terms and
potential partners that may be applicable in any particular potential
transaction).
5.4 NO OTHER RESTRICTIONS. Except as expressly set forth in this Section
5, neither ESPN and its Affiliates, on the one hand, nor Starwave and its
Affiliates, on the other hand, shall be subject to any restrictions on the
licensing, use, distribution or other exploitation of their respective
properties (including all Intellectual Property Rights therein), that either of
their respective Affiliates own, control, have a license to, or in which they
have any other form of right, title or interest.
5.5 BROADBAND APPLICATIONS. For clarification purposes, ESPN and its
Affiliates, on the one hand, and Starwave and its Affiliates, on the other hand,
in their respective sole discretion, may develop, produce, exploit or provide
services of any nature with respect to programming designed specifically for
Broadband delivery (i.e., content that requires Broadband transmission to
satisfactorily deliver services to consumers). ESPN agrees to investigate
(without any obligation) cooperation with Starwave in the development of
products designed for Broadband delivery.
6. PROPRIETARY RIGHTS
6.1 GRANT OF RIGHTS. Subject to the Partnership's and Starwave's
compliance with the terms and conditions set forth herein, including without
limitation ESPN's rights set forth in Section 3.7, ESPN hereby grants the
Partnership (by Partnership or by a third party on behalf of
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Partnership) the following limited, royalty-free, non-exclusive (except as
exclusive with respect to Narrowband services in accordance with the provisions
hereof), non-transferable licenses, without right of sublicense, during the Term
hereof:
(a) to use, reproduce, modify and adapt the ESPN Content to create the
Programming;
(b) to reproduce, transmit, distribute, display and perform the
Programming worldwide as part of the Sports Products; and
(c) to reproduce and display the ESPN Trademarks (including the
descriptive names for the Sports Products).
6.2 USE OF DISNEY NAME. Neither the Partnership nor Starwave shall have
the right to use the name, likeness or voice of Walt Disney, the word "Disney,"
any likeness of any DEI animated character or any other trademark, tradename or
logo of DEI for any manner whatsoever; provided, that the Partnership may use
such items solely as necessary for editorial purposes.
6.3 PROPRIETARY NOTICES. As a condition to the grant of rights hereunder,
any matter containing ESPN Content, including without limitation the Programming
shall bear properly located copyright and trademark notices as prescribed by law
in ESPN's name. The Partnership and Starwave will comply with such instructions
as to form, location and content of the notice as ESPN may give from time to
time. If by inadvertence a proper copyright notice in ESPN's or the ESPN
Affiliate's name, as applicable, is omitted from the Programming or any material
containing ESPN Content, the Partnership and Starwave agree at their respective
expense (to the extent the omission is caused by the Partnership or Starwave) to
use all reasonable efforts to prospectively correct any such omission. The
Partnership and Starwave agree to promptly respond to ESPN's request to make any
such corrections.
6.4 OWNERSHIP OF MATERIALS DEVELOPED BY EACH PARTY. Subject to ESPN's
ownership at all times of the ESPN Content, and to Sections 6.5 and 6.6, each
party shall own all right, title and interest in (a) any and all materials it
developed prior to or during the Term and all Intellectual Property Rights
therein and (b) any and all Technology, Content (other than ESPN Content, if
any) and Programming it developed and funded (i.e., without Partnership or joint
funding) during the Term and all Intellectual Property Rights thereto.
6.5 PARTNERSHIP OWNED MATERIALS. The Partnership shall jointly own all
the Technology, Content (other than ESPN Content, if any) and Programming
developed and funded by the Partnership during the Term for the Sports Products.
6.6 OWNERSHIP BY ESPN.
(a) The Partnership and Starwave acknowledge and agree that, as
between the Partnership and Starwave, on the one hand, and ESPN, on the other
hand, the ESPN Content, and all portions and derivative works thereof (other
than the Programming), whether created by
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the Partnership, Starwave or ESPN, shall be owned by ESPN and to the extent that
the Partnership or Starwave owns any right, title and interest in the ESPN
Content, each hereby assigns all such right, title, and interest therein to
ESPN, including without limitation all Intellectual Property Rights therein,
provided that Starwave shall retain all right, title and interest, including all
Intellectual Property Rights in, all development tools, software or other
technology developed and funded by Starwave and embodied in or used by Starwave
in connection with Starwave's development of the Programming. Subject only to
Section 5 and Starwave's ownership rights hereunder and under this Partnership
Agreement, ESPN may utilize, distribute and otherwise exploit in any manner the
ESPN Content and derivative works thereof (other than the Programming) now
existing or hereafter developed without any obligation to the Partnership or
Starwave; it being understood that no license under Starwave Intellectual
Property Rights shall be implied from the foregoing.
(b) ESPN shall own all URLs containing "ESPN", and any and all other
URLs with any variant of any ESPN Trademark, including, without limitation, any
URLs that also include any other name or description in addition to an ESPN
Trademark.
(c) ESPN shall own the descriptive names for the Sports Products
(i.e., ESPNET SportsZone, ESPNET Arena and additional or substitute descriptive
names) that contain the ESPN Trademark.
(d) Starwave Partner shall own all Technology used in connection with
the operation of the Sports Products that was owned by Starwave Partner prior to
the Effective Time.
(e) The Partnership has the sole right to license the descriptive
names for the Sports Products; provided that the Partnership shall be required
to provide such a license to ESPN or its Affiliates for their own business
purposes for a fair market value royalty to be paid to the Partnership (as
determined in good faith by the Partners). If such license is to a third party
(other than Infoseek or an Infoseek Affiliate (but excluding DEI and its
Affiliates) in connection with Portal Products (as defined in the Partnership
Agreement)), the terms shall include a fair market value royalty to be paid to
the Partnership (as determined in good faith by the Partners).
6.7 NO ADDITIONAL PARTICIPATION. Nothing in this Agreement conveys to the
Partnership or Starwave and, other than as specifically set forth hereunder, the
Partnership and Starwave shall not have or acquire, any right to participate in
any other promotions or activities relating to the ESPN Content or any other
ESPN activity or product, which rights are retained exclusively by ESPN.
6.8 LITIGATION. Should one party become aware of any infringing use of
its property (including Intellectual Property Rights), such party shall notify
the other party and the other party may, within its sole discretion, undertake
to prosecute necessary actions to prevent such use or distribution. In the
event that both parties are joined in any such litigation, the decisions of the
counsel of the party with the affected properties with reference to matters of
procedure, conduct of such litigation and/or the handling thereof, shall prevail
and the other party shall cooperate
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with and assist counsel. Any recovery shall be the sole property of the party
with the affected properties.
7. CONFIDENTIAL INFORMATION
The definition and use of each party's "Confidential Information" by the other
parties shall be governed by the terms of that certain Mutual Non-Disclosure
Agreement between the parties dated March 28, 1997
8. REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION
8.1 WARRANTIES OF STARWAVE. Starwave represents and warrants that (a) it
has the right, power and authority to enter into this Agreement and fully to
perform its obligations under this Agreement; (b) the making of this Agreement
by it does not violate any agreement existing between it and any other person or
entity; (c) Starwave complies, and at all times shall comply, with all
applicable laws, rules and regulations in effect at the time services are
performed pursuant to this Agreement pertaining to the subject matter hereof;
and (d) Starwave shall not exercise any of the rights granted to it under or
pursuant to this Agreement in a manner that shall violate any applicable law,
rule or regulation.
8.2 INDEMNIFICATION OBLIGATIONS OF STARWAVE. Starwave agrees to, and
shall, indemnify, defend and hold harmless ESPN and its Affiliates and their
respective directors, shareholders, officers, agents, employees, successors and
assigns from and against any and all claims, demands, suits, judgments, damages,
costs, losses, expenses (including reasonable attorneys' fees and expenses) and
other liabilities arising from actions brought by third parties, for (a) any
breach or alleged breach of any of the representations or warranties made by it
under this Agreement; (b) any unauthorized use by it or any of its
subcontractors of any ESPN Content or any portion of the Programming; (c) any
infringement of such third party's copyrights contained in the portions of the
Programming that are owned or controlled by Starwave or in all technology,
software, data, and content therein that are supplied by Starwave; provided that
ESPN shall promptly notify Starwave of any such claim and Starwave shall be
given sole control and bear full responsibility for the defense (including any
settlements) of any such claim; and ESPN shall provide Starwave with prompt
notice and full information and reasonable assistance at ESPN's expense with
respect to claims covered under this Section 8.2. Starwave shall keep ESPN
informed of, and consult with ESPN in connection with the progress of such
litigation or settlement; and Starwave shall not have any right, without ESPN's
written consent, to settle any such claim if such settlement arises from or is
part of any criminal action, suit or proceeding or contains a stipulation to or
admission or acknowledgment of, any liability or wrongdoing (whether in
contract, tort or otherwise) on the part of any ESPN Affiliate.
8.3 WARRANTIES OF ESPN. ESPN represents and warrants that (a) it has the
right, power and authority to enter into this Agreement, to grant the licenses
herein granted, and to fully perform its obligations under this Agreement; (b)
the making of this Agreement by it does not violate any agreement existing
between it and any other person or entity; (c) it has all necessary rights in
and to the Programming and any ESPN Content provided by ESPN hereunder for use
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within the scope of this Agreement; (d) it complies, and at all times shall
comply, with all applicable laws, rules and regulations in effect at the time
services are performed pursuant to this Agreement pertaining to the subject
matter hereof; and (e) ESPN shall not exercise any of the rights granted to it
under or pursuant to this Agreement in a manner that shall violate any
applicable law, rule or regulation.
8.4 INDEMNIFICATION OBLIGATIONS OF ESPN. ESPN agrees to, and shall,
indemnify, defend and hold harmless Starwave and its Affiliates, and its
directors, shareholders, officers, agents, employees, successors and assigns
from and against any and all claims, demands, suits, judgments, damages, costs,
losses, expenses (including reasonable attorneys' fees and expenses) and other
liabilities arising from actions brought by third parties, in connection with or
related to, directly or indirectly, (a) its performance of the Agreement; (b)
any breach or alleged breach of the representations, warranties and agreements
made by it under this Agreement; (c) its activities hereunder, including without
limitation, any unauthorized use by it or any of its subcontractors of any ESPN
Content or any portion of the Programming; (d) any act or omission of it, its
directors, officers, agents, employees or subcontractors; or (e) any violation
or infringement by ESPN of any right of privacy or publicity or any other
Intellectual Property Right within the Territory or any libelous defamatory,
obscene or unlawful material contained in the ESPN Content within the Territory.
Starwave shall promptly notify ESPN of any such claim, and ESPN shall bear full
responsibility for the defense of such claim (including any settlements)
provided however, that (i) ESPN shall keep Starwave informed of and consult with
Starwave in connection with the progress of such litigation or settlement; and
(ii) ESPN shall not have any right, without Starwave's written consent, to
settle any such claim if such settlement arises from or is part of any criminal
action, suit or proceeding or contains a stipulation to or admission or
acknowledgment of, any liability or wrongdoing (whether in contract, tort or
otherwise) on the part of Starwave.
8.5 CHOICE OF COUNSEL AND PROTECTION OF RIGHTS. Each party shall have the
right, in its absolute discretion, to employ attorneys of its own choice and to
institute or defend any matter, claim, action or proceeding and to take any
other appropriate steps to protect its Intellectual Property Rights and all
rights and interest in and title to its web sites, technology, content and every
element thereof and, in that connection, to settle, compromise in good faith, or
in any other manner dispose of any matter, claim, action, or proceeding and to
satisfy any judgment that may be rendered, in any manner as such party in its
sole discretion may determine.
8.6 NO OTHER REPRESENTATIONS. Except for the representations and
warranties specifically set forth in this Agreement, each party makes no other
representations and warranties of any nature whatsoever to the other parties.
8.7 NO SPECIAL DAMAGES. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS AGREEMENT, EXCEPT FOR LIABILITY ARISING UNDER SECTIONS 8.2 AND
8.4, NO PARTY SHALL UNDER ANY CIRCUMSTANCES, BE LIABLE TO ANOTHER PARTY FOR ANY
CONSEQUENTIAL, INDIRECT, SPECIAL, INCIDENTAL OR EXEMPLARY DAMAGES (INCLUDING
WITHOUT LIMITATION, LOST PROFITS, LOSS OF ANTICIPATED BUSINESS, LOSS OF DATA OR
BUSINESS
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LOSSES) EVEN IF SUCH DAMAGES ARE FORESEEABLE AND EVEN IF THE BREACHING PARTY HAS
BEEN APPRISED OF THE LIKELIHOOD OF SUCH DAMAGES OCCURRING.
9. TERM AND TERMINATION
9.1 TERM. The term of this Agreement shall commence as of the Effective
Time and shall continue for the same time period that each of ESPN and Starwave
are partners in the Partnership (the "Term").
9.2 RENEWAL. Unless earlier terminated pursuant to Section 9.3, the
parties shall begin renewal negotiations in good faith beginning on the eight
(8) year anniversary of the date hereof. If the parties do not reach an
agreement to extend this Agreement on mutually acceptable terms within three
hundred sixty (360) days after negotiations begin, the exclusivity provisions
contained in Sections 5.1 and 5.2 shall be deemed modified, with no action
required of the parties, to permit either party to develop, distribute, produce,
exploit or provide services with respect to competitive Remote Access Products;
provided, that except for such modifications, this Agreement shall continue in
full force and effect until the expiration of the Term and, provided, further,
that neither party may engage in such activities with respect to Sports
Products then available to consumers in any manner or available prior to the
expiration of the Term. In the event the exclusivity provisions contained in
Sections 5.1 and 5.2 shall be deemed modified, and either Partner develops,
distributes, produces, exploits or provides services with respect to Remote
Access Products competitive with the Sports Products, such Partner's Remote
Access Products competitive with the Sports Products shall be provided with a
prominent position on the Sports Products, via an above-the-fold link on the
start page for the Sports Product, until the end of the Term.
9.3 TERMINATION. Without prejudice to any other rights or remedies
available to the parties, ESPN and Starwave (but not the Partnership) shall each
have the right, in its sole discretion, to terminate this Agreement upon written
notice to the other in the event of the occurrence of one or more of the
following:
(a) The termination of the Partnership Agreement in accordance with
its terms; or
(b) The other party makes any assignment for the benefit of creditors
or files a petition in bankruptcy (provided, that with respect to ESPN's ability
to terminate in the event that Starwave Partner or Infoseek files a petition in
bankruptcy, such petition shall have been approved by a decision of the majority
of Infoseek's Disinterested Directors (as defined in that certain Governance
Agreement by and between Infoseek and DEI) or is adjudged bankrupt or is placed
in the hands of a receiver; or
(c) With respect to Starwave's termination rights, ESPN willfully
misuses the Starwave Marks or with respect to ESPN termination rights, Starwave
willfully misuses the ESPN Marks, and (i) the willful misuse occurs repeatedly
and in each case in material breach of
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this Agreement, and (ii) the willful misuse occurs more than three (3) times in
any one year period ("Excepted Misuses"), and (iii) with respect to each such
willful misuse, the breaching party fails to Cure such misuse within sixty (60)
days after the nonbreaching party delivers written notice of the misuse to the
other party; provided however that (w) if the misuse consists of displaying the
ESPN Marks within the Sports Products in a manner such that the appearance of
the ESPN Marks does not conform to the requirements set forth herein, and this
misuse does not have a material adverse effect on ESPN, such misuse shall be
excluded from the Excepted Misuses; and (x) if the party misusing the Marks of
the other party is using its best efforts to Cure the misuse, the Cure period
shall be extended for so long as such efforts are exercised; and (y) if a
willful misuse is Cured within forty eight (48) hours of an officer of the
breaching party being notified in writing of such misuse by the nonbreaching
party, such willful misuse shall not count toward the three (3) Excepted Misuses
set forth above; and (z) if a party has not willfully misused the other party's
Marks within any six (6) month period during the term hereof, all misuses
occurring prior to the commencement of such six (6) month period shall not count
toward the three (3) Excepted Misuses set forth above. In the event that a party
misuses the party's Marks, (whether willfully or otherwise), the party that
misused the Marks shall implement commercially reasonable policies to address
the prevention of the occurrence of such misuse in the future.
For purposes of this Section 9.3(c), the following terms shall have the
following meanings:
(i) "Marks" shall mean ESPN Marks with respect to ESPN or Starwave
Marks with respect to Starwave; and
(ii) "misuse" by Starwave of an ESPN Trademark shall mean a use of
the ESPN Marks in a manner which materially breaches the provisions set forth in
Section 6.1 or 6.2 of this Agreement, either directly by Starwave or by a third
party licensed by Starwave to use the Marks; and
(iii) "Cure" shall mean if the misuse is performed directly by a party
hereto, correcting the display or misapplication of the other party's Marks, or
if the misuse is performed by a third party under license by a party hereto,
terminating the license or purported rights granted by such party to use such
Marks and using reasonable efforts to cause the third party to cease its misuse
of the other party's Marks.
The Partners acknowledge and agree that the nature of Remote Access
Products and the Narrowband medium in general may result in a misuse of a
Partner's Marks being displayed in multiple locations and across multiple
networks. For the avoidance of doubt, if the same application of a Mark is
displayed multiple times or in multiple places as a direct or indirect result of
the Narrowband medium or the manner in which Remote Access Products are
operated, transmitted or otherwise made available electronically, such repeated
displays shall constitute no more than one misuse for purposes of counting
Excepted Misuses hereunder.
9.4 [INTENTIONALLY OMITTED.]
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9.5 SURVIVAL. Unless otherwise specified, all obligations that accrue
prior to any expiration or termination of this Agreement shall survive such
expiration or termination. In addition, and without limiting the generality of
the preceding sentence, Sections 6, 7, 8, 9, and 10 shall survive the expiration
or termination of this Agreement for any reason.
9.6 INJUNCTIVE RELIEF. Each party acknowledges and agrees that the other
parties may be irreparably harmed by any material breach of this Agreement by
it. Therefore, each party agrees that in the event that it breaches any of its
obligations hereunder, the other parties in addition to all other remedies
available to it under this Agreement, or at law or in equity, shall be entitled
to seek all forms of injunctive relief including decrees of specific
performance, without showing or proving that it sustained any actual damages and
without posting bond.
10. GENERAL PROVISIONS
10.1 NOTICES. All notices which either party is required or may desire to
serve upon another party shall be in writing and addressed as follows:
(a) if to ESPN:
ESPNET SportsZone
650 Third Avenue
New York, NY 10158
Attention: Dick Glover
Telephone: (212) 916-0247
Facsimile: (212) 916-9299
with a copy to:
Buena Vista Internet Group
500 S. Buena Vista Street
Burbank, CA 91521
Attention: Jake Winebaum
Telephone: (818) 623-3300
Facsimile: (818) 623-3304
(b) if to DEI:
Disney Online
500 S. Buena Vista Street
Burbank, CA 91521
Attention: Jake Winebaum
Telephone: (818) 623-3300
Facsimile: (818) 623-3304
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with a copy to:
Disney Enterprises, Inc.
500 S. Buena Vista Street
Burbank, CA 91521
Attention: General Counsel
Telephone: (818) 560-4370
Facsimile: (818) 563-4160
(c) if to Starwave:
Starwave Corporation
13810 SE Eastgate Way
Bellevue, WA 98005
Attention: Michael Slade
Curt Blake
Telephone: (206) 957-2000
Facsimile: (206) 643-9381
(d) if to the Partnership, c/o:
Starwave Corporation
13810 SE Eastgate Way
Bellevue, WA 98005
Attention: Michael Slade
Curt Blake
Telephone: (206) 957-2000
Facsimile: (206) 643-9381
DOL Online Investments, Inc.
500 S. Buena Vista Street
Burbank, CA 91521
Attention: Jake Winebaum
Telephone: (818) 623-3300
Facsimile: (818) 623-3304
Any such notice may be served personally or by mail (postage prepaid),
facsimile (provided oral confirmation of receipt is immediately obtained and a
hard copy is concurrently sent by internationally commercially recognized
overnight delivery service), internationally commercially recognized overnight
delivery service (such as Federal Express or D.H.L.) or courier. Notice shall
be deemed served upon personal delivery or upon actual receipt. Any party may
change the address to which notices are to be delivered by written notice to the
other parties served as provided in this Section 10.1.
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10.2 ENTIRE AGREEMENT. This Agreement, together with the Exhibits attached
hereto and hereby incorporated herein by reference, constitutes the complete,
final and exclusive understanding and agreement between the parties with respect
to the transactions contemplated, and supersedes any and all prior or
contemporaneous oral or written representation, understanding, agreement or
communication between the parties concerning the subject matter hereof.
10.3 AMENDMENTS. All amendments or modifications of this Agreement shall
be binding upon the parties so long as the same shall be in writing and executed
by each of the parties hereto.
10.4 WAIVER. No waiver of any provision of this Agreement or any rights or
obligations of any party hereunder shall be effective, except pursuant to a
written instrument signed by the party waiving compliance, and any such waiver
shall be effective only in the specific instance and for the specific purpose
stated in such writing.
10.5 FORCE MAJEURE. No party shall be deemed in default hereunder, nor
shall it hold the other parties responsible for, any cessation, interruption or
delay in the performance of its obligations hereunder due to causes beyond its
reasonable control including, but not limited to: earthquake, flood, fire, storm
or other natural disaster, act of God, labor controversy or threat thereof,
civil disturbance or commotion, disruption of the public markets, war or armed
conflict (whether or not officially declared) or the inability to obtain
sufficient material, supplies, labor, transportation, telecommunications, power
or other essential commodity or service required in the conduct of its business,
any change in or the adoption of any law, ordinance, rule, regulation, order,
judgment or decree (each a "Force Majeure Event") provided that the party
relying upon this Section 10.5: (a) shall have given the other parties written
notice thereof promptly and, in any event, within five (5) days of discovery
thereof and (b) shall take all steps reasonably necessary under the
circumstances to mitigate the effects of the force majeure upon which such
notice is based.
10.6 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement is intended
or shall be construed to give any person, other than the parties hereto, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein.
10.7 ASSIGNMENT. Neither party shall directly or indirectly assign this
Agreement to a third party without the prior written consent of the other party,
which consent shall not be unreasonably withheld.
10.8 CONSTRUCTION. This Agreement shall be fairly interpreted and
construed in accordance with its terms and without strict interpretation or
construction in favor of or against any party. Each party has had the
opportunity to consult with counsel in the negotiation of this Agreement.
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10.9 CAPTIONS AND HEADINGS. The section and subsection headings and
captions appearing in this Agreement are inserted only as a matter of
convenience and shall not be given any legal effect.
10.10 SEVERABILITY. If any restriction, covenant or provision of this
Agreement shall be adjudged by a court of competent jurisdiction to be void as
going beyond what is reasonable in all the circumstances for the protection of
the interests of the party seeking to enforce such restriction, covenant or
provision, such restriction, covenant or provision shall apply with such
modifications as may be necessary to make it valid and effective. In the event
that any provision of this Agreement should be found by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
shall not in any way be affected or impaired thereby.
10.11 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New York. Any action arising out of or relating to this Agreement
shall be filed only in the courts of the State of California for the County of
Los Angeles, or the United States District Court for the Central District of
California. The parties hereby consent and submit to the personal jurisdiction
of such courts for the purposes of litigating any such action.
10.12 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which together shall constitute
one and the same instrument.
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IN WITNESS WHEREOF, the duly authorized representatives of each party have
executed this Agreement as of the day and year first written above.
ESPN ENTERPRISES, INC.. STARWAVE CORPORATION
By: /s/ Laurence J. Shapiro By: /s/ Kevin A. Mayer
------------------------- ---------------------
Name: Laurence J. Shapiro Name: Kevin A. Mayer
Title: Vice President Title: Sr. Vice President
ESPN/STARWAVE PARTNERS
By its General Partners
ESPN ONLINE INVESTMENTS, INC. STARWAVE VENTURES
By: /s/ Laurence J. Shapiro By: /s/ Laurence J. Shapiro
------------------------- -------------------------
Name: Laurence J. Shapiro Name: Laurence J. Shapiro
Title: Vice President Title: Vice President
EXECUTED SOLELY WITH RESPECT
TO THE PROVISIONS OF
SECTIONS 3.6, 5.2, 6.2 AND 10.7
DISNEY ENTERPRISES, INC.
By: /s/ Kevin A. Mayer
-------------------------
Name: Kevin A. Mayer
Title: Sr. Vice President
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EXHIBIT 15
REPRESENTATION AGREEMENT
REPRESENTATION AGREEMENT, dated as of June 18, 1998, by and among
ESPN/Starwave Partners, a New York General Partnership ("Venture"), Starwave
Corporation, a Washington corporation ("Representative") and Infoseek
Corporation, a Delaware corporation ("Infoseek"); provided that, subject to the
earlier termination of this Agreement pursuant to the provisions of Section 11.2
hereof, this Agreement shall only become effective upon the Effective Time (as
defined in and pursuant to that certain Agreement and Plan of Reorganization
(the "Merger Agreement"), of even date herewith, by and among Infoseek
Corporation, a California corporation, Infoseek, Representative, and Disney
Enterprises, Inc., a Delaware corporation) and shall cease and be of no further
force and effect in the event that the Effective Time does not occur; and
provided further that, except as earlier terminated pursuant to Section 11.2
each of the parties hereto agrees not to terminate, amend or otherwise alter
this Agreement, or waive any of its rights hereunder, at any time prior to
immediately following the Effective Time; provided that, notwithstanding the
foregoing, the provisions of Section 11.2 hereof shall be in full force and
effect as of the date hereof and through to the Effective Time.
WHEREAS, Venture owns and operates an Internet service known as ESPN.com
and operates other Internet services such as NFL.com, NBA.com and NASCAR.com
(collectively, and including all additional Internet services that may be owned
and/or operated by the Venture during the term of this Agreement, the "Internet
Services"), which provide a variety of sports programming and information on the
Internet; and
WHEREAS, Representative is engaged, among other things, in the business of
operating Internet sites; and
WHEREAS, Venture desires to engage Representative to provide Venture with
Services (as defined below) associated with sales of available ad inventory on
the Internet Services and related products and services, and Representative is
willing to provide such representation, on the terms and subject to the
conditions set forth in this Agreement.
NOW, THEREFORE, the parties hereto covenant and agree as follows:
ARTICLE 1
SERVICES
Section 1.1. PROVISION OF SERVICES.
(a) DESCRIPTION. Venture hereby engages Representative, as an
independent contractor, and Representative hereby accepts such engagement, on
the terms and subject to the conditions set forth in this Agreement, to
represent Venture on an exclusive basis in the sale of advertising and other
items as designated or approved by Venture related to the Internet Services, and
to provide additional services, if any, as Venture may request in
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writing from time to time on terms mutually satisfactory to the parties hereto
(all of the foregoing collectively, the "Services"). Activities with respect to
the sale of advertising on the Internet Services and other related items include
without limitation, the negotiation, execution, renewal, amendment, modification
or termination of advertising and other related contracts. The parties hereto
acknowledge that Representative is being engaged to provide the Services
principally due to its expertise in such matters.
(b) MANNER. The Services shall be performed by Representative with
such care as a prudent manager would use in the conduct of his company's
affairs, and Representative shall accord the Internet Services the same priority
as Representative accords its own operations and the operations of internet
services that are managed, represented and afforded the most favorable treatment
by Representative or its affiliates, taking into consideration the size and
complexity of the Internet Services as compared with Representative's own
internet services for purposes of determining personnel assignments and head
count. In providing the Services, Representative shall use the best efforts it
would use if it were providing the Services on its own behalf to (i) promote the
Internet Services as an advertising medium, (ii) seek to preserve and maximize
the long-term value of the Internet Services, including the ESPN tradenames and
goodwill and (iii) comply with the standards and practices for the ESPN Service
attached as Exhibit A. Representative shall, at Representative's expense,
furnish to Venture the services of such full-time and part-time employees of
Representative, including, without limitation, marketing and sales personnel and
such other personnel as may be reasonably required properly to render the
Services. Representative hereby undertakes, on the terms set forth in the first
sentence of this Section 1.1(b), to cause the Services to be provided such that
Venture complies in all material respects with all applicable laws, rules and
regulations.
(c) CONSULTATION. Venture and Representative will consult with each
other from time to time as requested by either party with respect to the
Services, the Internet Services and the performance of their respective
obligations hereunder and under the other agreements contemplated hereby;
provided, however, that nothing in this subsection shall be deemed to in any way
limit Venture's exclusive control over the manner and use of its Marks (as
defined below) as provided for in this Agreement and the Trademark License
Agreement entered into between the parties as of the date hereof.
Section 1.2. REPORTS; ACCESS TO INFORMATION.
(a) NOTICE. Representative shall notify Venture as promptly as
practicable after the occurrence of any of the following:
(i) receipt by Representative of (A) any notice or inquiry from any
governmental authority with respect to or arising out of the Services
contemplated by this Agreement or the other agreements contemplated hereby
or (B) any written notice from any governmental authority or third party of
any claim or legal process or notification that, in the reasonable opinion
of Representative, is or is likely to become material to the Internet
Services; or
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(ii) any other development that, in the reasonable opinion of
Representative, materially affects or is likely to materially affect the
Internet Services or the ability of Representative to fulfill its
obligations under this Agreement.
(b) REQUESTS FOR INFORMATION. Representative promptly shall provide to
Venture such information (including financial information) concerning the
Services provided hereunder as Venture reasonably may request from time to time,
including, without limitation, monthly advertising sales reports, which reports
shall set forth total ad avails sold, average CPM, average revenue per page
view, ad avails per page, sellout rate, breakdown of costs incurred, list of
advertisers and revenue sold per advertiser.
(c) ACCESS. Representative shall maintain and make available for
inspection by Venture or its representatives, during normal business hours,
Representative's complete and accurate books of account relating to the Internet
Services, and all other records, books and other information received, compiled
or otherwise maintained by Representative with respect to the Internet Services,
and all other documents reasonably requested by Venture and its officers,
managerial employees, counsel and auditors.
(d) ADVERTISING INFORMATION. Without limiting the foregoing provisions of
this Section 1.2, during the last six months of the Term (as defined in Section
2.1), in order to facilitate Venture's determination of whether to seek to
extend the term of this Agreement or take other actions with respect to the
Internet Services upon expiration of the Term, Representative shall make or
cause to be made available to Venture and its Representatives such information
as Venture reasonably requests relating to the historical advertising revenues
of the Internet Services during the Term and the booked advertising sales
relating to the Internet Services.
Section 1.3. TITLE. Representative acknowledges that it will acquire no
right, title or interest in any property or assets of Venture, including,
without limitation, any trade names, trademarks or service marks owned or
licensed by Venture, by reason of this Agreement or Representative's provision
of the Services hereunder. Representative further acknowledges that all records,
books and other information received, compiled or otherwise maintained by
Representative with respect to the Internet Services in connection with
Representative's provision of the Services hereunder are solely the property of
Venture and shall be returned to Venture promptly upon the expiration or earlier
termination of the Term; provided, however, that Venture shall, upon reasonable
request of Representative and at reasonable times, and subject to such
confidentiality arrangements as Venture reasonably requests, permit
Representative to make reasonable examination of such books, records and other
information and permit Representative to make copies of the relevant portions of
such books, records and other information.
Section 1.4. POWER OF ATTORNEY. Subject to the provisions of Sections 6.1
(Trademark License Agreement), 6.2 (Programming Decisions), 6.3 (Use of Names)
and
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7.1 (Venture Approval Matters),Venture appoints Representative its attorney-in-
fact for the Internet Services for the Term, solely in performance of the
Services, and authorizes Representative, in the name and on behalf of the
Internet Services, to make, execute, deliver, acknowledge, swear to, file and
record all documents as may be necessary, in the discretion of Representative,
in connection with the performance of the Services hereunder. Representative
shall be required to notify Venture before entering into any agreement of any
nature and shall deliver copies of all agreements, invoices and similar
materials to Venture immediately upon completion.
Section 1.5. APPOINTMENT OF ADDITIONAL REPRESENTATIVES. Representative may
appoint other entities to sell advertising inventory for the Internet Services
with the prior written approval of the Venture. Additionally, upon request from
the Venture, Representative will sell ad avail inventory to an Affiliate of the
Venture for sale by such Affiliate which sale shall be at least, at the Minimum
Revenue Rate under Section 3.4. In any circumstance, responsibility for
collection of revenue and payment of minimums to the Venture resides with the
Representative.
ARTICLE 2
TERM
Section 2.1. TERM. The term during which the Services shall be provided
(the "Term") shall be the period from the Effective Time until the Termination
Date (as defined in Section 11.1).
ARTICLE 3
GUARANTEED MINIMUMS AND PAYMENTS
Section 3.1. GUARANTEED MINIMUM. Representative shall guarantee to the
Venture a minimum quarterly payment equal to (i) the number of projected page
views, multiplied by 80%, multiplied by (ii) the Minimum Revenue Rate (the
"Guaranteed Minimum Payment").
Section 3.2. INITIAL PROJECTED PAGE VIEWS. The initial projected number
of page views per quarter will be established by mutual agreement of the
Representative and Venture. In the event that the parties cannot agree upon an
initial number of page views, then such minimum shall be based on the actual
average quarterly number of page views over the previous two quarters.
Section 3.3. SUBSEQUENT PROJECTED PAGE VIEWS. In subsequent quarters, the
projected number of page views will be established for each quarter by mutual
agreement of the Representative and Venture; provided, however that should the
parties fail to agree on the projected number of page views for any quarter,
then the projected page views for
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such quarter shall be based on the actual number of page views for the
corresponding quarter of the prior year ("Prior Quarter") multiplied by 50% of
the actual year-over-year growth rate (i.e., compared with the same quarter from
the prior year) for the preceding 4 quarters.
Section 3.4. MINIMUM REVENUE RATE. The guaranteed minimum ad revenue rate
(the "Minimum Revenue Rate") per page view paid to the Venture will be based on
the average ad revenue rate per page view of publicly traded Internet companies
involved in activities comparable to those of the Venture. If a mutually
agreeable rate can not be determined, then the rate will be based on the
Venture's 12 month trailing average.
Section 3.5. GUARANTEED DELIVERY. Venture guarantees to deliver 80% of
the projected page views each quarter. In the event that Venture fails to
deliver such minimum number of page views, Representative will be entitled to a
proportional reduction in its Guaranteed Minimum Payment.
Section 3.6. REPRESENTATION RIGHTS FEES. Representative shall pay to
Venture for the right to render Services under this Agreement the greater of (i)
the Guaranteed Minimum Payment or (ii) actual ad revenues billed to third
parties in the performance of the Services, in each case less only
Representative's actual and reasonably allocated costs of providing the Services
and a profit margin of five percent (5%) of such costs (either amount, the
"Representation Rights Fee"). The Representation Rights Fee shall be payable
quarterly during the Term.
Section 3.7. UNCONDITIONAL OBLIGATIONS. Except as otherwise set forth
herein, the obligations of Representative to pay the Representation Rights Fee
are unconditional. Representative is required to pay the Venture the
Representation Rights Fees on or before the 20th day of the end of each quarter
of each month, regardless of whether Representative is able to collect the
related outstanding receivables.
ARTICLE 4
EXPENSES
Section 4.1. OPERATING EXPENSES. From and after the Effective Time, all
expenses of performing the Services shall be the responsibility of, and shall be
borne by, Representative subject only to recoupment thereof pursuant to Section
3.6 above.
ARTICLE 5
INTENTIONALLY OMITTED
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ARTICLE 6
VENTURE AGREEMENTS
Section 6.1. TRADEMARK LICENSE AGREEMENT. On the Effective Time, Venture and
Representative shall enter into a Trademark License Agreement in the form
attached hereto as Exhibit A (the "Trademark License Agreement") pursuant to
which Venture shall grant to Representative a non-exclusive, royalty-free
license to use the mark "ESPN" solely in connection with Representative's
performance of the Services during the Term. Notwithstanding the foregoing or
any provisions herein or in the Trademark License Agreement, Venture shall have
the exclusive control over the manner and use of any trade names, trademarks,
service marks, logos, copyrights and other intellectual property (the "Marks")
owned by Venture, including "ESPN.com." Representative acknowledges that the
License granted by the Trademark License Agreement is non-exclusive and, as
such, Venture is free to use, or license others to use the marks in any manner
whatsoever, other than for the purpose of selling advertising on the Internet
Services during the Term, except as provided in Section 1.5 above.
Section 6.2. PROGRAMMING DECISIONS. (i) During the Term, Venture shall have
the sole power, to make all decisions (other than decisions with respect to the
Services, except as provided herein) concerning the programming and content of
the Internet Services, including decisions relating to the execution, renewal,
amendment, modification or termination of all Agreements related thereto.
Section 6.3. USE OF NAMES. The Representative shall not have the right to
use the name, likeness or voice of Walt Disney, the words, "Disney," "ABC,"
"ESPN," (other than as part of "ESPN.com") or any Disney animated character or
any other trademark, tradename or logo of Disney for any manner whatsoever
without the prior consent of Disney or ABC, as appropriate.
ARTICLE 7
VENTURE APPROVAL MATTERS
Section 7.1. VENTURE APPROVAL MATTERS. Notwithstanding anything to the
contrary contained herein, Representative shall not, without the prior written
approval of the General Manager of Ventures (i) institute any legal proceedings
on behalf of the Internet Services (other than ordinary course collection
matters instituted by Representative following not less than thirty (30) days'
prior written notice to Venture).
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ARTICLE 8
REPRESENTATIONS AND WARRANTIES
Section 8.1. REPRESENTATIONS AND WARRANTIES OF VENTUre. Venture hereby
represents and warrants that:
(a) ORGANIZATION AND STANDING. Venture is a general partnership duly
formed, validly existing and in good standing under the laws of the State of New
York, and has all necessary corporate power and authority to carry on the
business of the Internet Services and to perform its obligations hereunder.
(b) AUTHORIZATION AND BINDING OBLIGATION. Venture has all necessary
power and authority to enter into and perform this Agreement and the Trademark
License Agreement and the transactions contemplated hereby and thereby, and
Venture's execution, delivery and performance of this Agreement and the
Trademark License Agreement have been duly and validly authorized by all
necessary action on its part. This Agreement has been, and upon execution and
delivery thereof on the Effective Time of the Trademark License Agreement will
have been duly executed and delivered by Venture and constitutes and will
constitute its valid and binding obligations enforceable against Venture in
accordance with their respective terms.
(c) ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS. The
execution, delivery and performance of this Agreement and the Trademark License
Agreement, by Venture: (i) do not and will not violate any provision of
Venture's organizational documents; (ii) do not and will not require the consent
of or any filing with any third party or governmental authority; (iii) do not
and will not violate any applicable law, judgment, order, injunction, decree,
rule, regulation or ruling of any governmental authority; and (iv) do not and
will not, either alone or with the giving of notice or the passage of time, or
both, conflict with, constitute grounds for termination or acceleration of or
result in a breach of the terms, conditions or provisions of, or constitute a
default under any agreement, lease, instrument, license or permit to which
Venture is now subject.
(d) ABSENCE OF PROCEEDINGS. There is no action, suit or proceeding, at
law or an equity, by or before any court, tribunal or governmental authority
pending or, to the knowledge of Venture, threatened, which, if adversely
determined, would materially and adversely affect Venture's ability to perform
its obligations hereunder or under the Trademark License Agreement or the
validity or enforceability of this Agreement or the Trademark License Agreement.
Section 8.2. REPRESENTATIONS AND WARRANTIES OF REPRESENTATIVE.
Representative hereby represents and warrants that:
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(a) ORGANIZATION AND STANDING. Representative is a corporation duly
formed, validly existing and in good standing under the laws of the State of
Washington and has all necessary corporate power and authority to perform its
obligations hereunder.
(b) AUTHORIZATION AND BINDING OBLIGATION. Representative has all
necessary power and authority to enter into and perform this Agreement and the
Trademark License Agreement, and the transactions contemplated hereby and
thereby, and Representative's execution, delivery and performance of this
Agreement have been duly and validly authorized by all necessary action on its
part. This Agreement has been, and upon execution and delivery thereof the
Trademark License Agreement will have been duly executed and delivered by
Representative and constitutes and will constitute its valid and binding
obligations enforceable against Representative in accordance with their
respective terms.
(c) ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS. The
execution, delivery and performance of this Agreement and the Trademark License
Agreement by Representative: (i) do not and will not violate any provision of
Representative's organizational documents; (ii) do not and will not require the
consent of or any filing with any third party or governmental authority; (iii)
do not and will not violate any applicable law, judgment, order, injunction,
decree, rule, regulation or ruling of any governmental authority; and (iv) do
not and will not, either alone or with the giving of notice or the passage of
time, or both, conflict with, constitute grounds for termination or acceleration
of or result in a breach of the terms, conditions or provisions of, or
constitute a default under any agreement, lease, instrument, license or permit
to which Representative is now subject.
(d) ABSENCE OF PROCEEDINGS. There is no action, suit or proceeding, at
law or an equity, by or before any court, tribunal or governmental authority
pending or, to the knowledge of Representative, threatened, which, if adversely
determined, would materially and adversely affect Representative's ability to
perform its obligations hereunder or under this Agreement or the Trademark
License Agreement or the validity or enforceability of this Agreement or the
Trademark License Agreement.
ARTICLE 9
INDEMNIFICATION
Section 9.1. INDEMNIFICATION.
(a) INDEMNIFICATION OF REPRESENTATIVE BY VENTURE. From and after the
Effective Time, Venture shall indemnify and hold Representative, its affiliates
and their respective directors, officers, affiliates, employees and agents, and
the successors and assigns of any of them, harmless from and against any and all
actions, claims, damages and liabilities (and all actions in respect thereof and
any legal or other expenses in giving
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testimony or furnishing documents in response to a subpoena or otherwise and
whether or not a party thereto), whether or not arising out of third party
claims, including reasonable legal fees and expenses in connection with, and
other costs of, investigating, preparing or defending any such action or claim,
whether or not in connection with litigation in which such person is a party,
and as and when incurred (collectively, "Losses"), caused by, relating to, based
upon or arising out of (directly or indirectly) (i) any liabilities, obligations
or commitments of Venture (whether absolute, accrued, contingent or otherwise)
(A) existing as of or prior to the Effective Time or arising out of facts and
circumstances existing as of or prior thereto, which were not expressly assumed
by Representative hereunder or (B) arising after the Effective Date which are
not related to the Services; (ii) any breach of, or inaccuracy in, any
representation or warranty of Venture in this Agreement or the Trademark License
Agreement, or any certificate or other documents delivered pursuant hereto or
thereto or in connection herewith or therewith; and (iii) any breach of any
covenant or agreement of Venture contained in this Agreement or the Trademark
License Agreement.
(b) INDEMNIFICATION OF VENTURE BY REPRESENTATIVE. From and after the
Effective Time, Representative shall indemnify and hold Venture, its affiliates
and their respective directors, officers, affiliates, employees and agents, and
the successors and assigns of any of them, harmless from and against any and all
Losses caused by, relating to, based upon or arising out of (directly or
indirectly) (i) any liabilities, obligations or commitments (whether absolute,
accrued, contingent or otherwise) assumed by Representative hereunder or
Representative's performance of the Services through the Termination Date hereof
(except to the extent caused by, relating to, based upon or arising out of
(directly or indirectly) the matters described in clauses (ii) and (iii) of
Section 9.1(a)); (ii) any breach of, or inaccuracy in, any representation or
warranty of Representative in this Agreement or the Trademark License Agreement,
or any certificate or other document delivered pursuant hereto or thereto or in
connection herewith or therewith; and (iii) any breach of any covenant or
agreement of Representative contained in this Agreement or the Trademark License
Agreement.
Section 9.2. PROCEDURE FOR INDEMNIFICATION.
(a) NOTICE OF CLAIMS. In the event of a claim for breach of the
representations and warranties contained in this Agreement or for failure to
fulfill a covenant or agreement, the party asserting such breach or failure
shall provide a written notice to the other party which shall state specifically
the representation, warranty, covenant or agreement with respect to which the
claim is made, the facts giving rise to an alleged basis for the claim and the
amount of liability asserted against the other party by reason of the claim.
(b) PROCEDURES THIRD PARTY CLAIMS. If any suit, action, proceeding or
investigation shall be commenced or any claim or demand shall be asserted by any
third party (a "Third Party Claim") in respect of which indemnification may be
sought by any party or parties from any other party or parties under the
provisions of this Article 9, the
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party or parties seeking indemnification (collectively, the "Indemnitee") shall
promptly provide written notice to the party or parties from which
indemnification is sought (collectively, the "Indemnitor"); provided, however,
that any failure by Indemnitee to so notify an Indemnitor will not relieve the
Indemnitor from its obligations hereunder, except to the extent that such
failure shall have prejudiced the defense of such Third Party Claim. The
Indemnitor shall have the right to control (except where an insurance carrier
has the right to control or where an insurance policy or applicable law
prohibits the Indemnitor from taking control of) the defense of any Third Party
Claim; provided, however, that the Indemnitee may participate in any such
proceeding with counsel of its choice and at its own expense unless there exists
a conflict between the Indemnitor and the Indemnitee as to their respective
legal defenses, in which case the fees and expenses of any such counsel shall be
reimbursed by the Indemnitor. Except as otherwise set forth herein, the
Indemnitee shall have the right to participate in (but not control) the defense
of any Third Party Claim and to retain its own counsel in connection therewith,
but the fees and expenses of any such counsel for the Indemnitee shall be borne
by the Indemnitee. The Indemnitor shall not, without the prior written consent
of the Indemnitee, effect any settlement of any pending or threatened proceeding
in respect of which such Indemnitee is, or with reasonable foreseeability could
have been, a party and indemnity could have been sought to be collected from the
Indemnitor, unless such settlement includes an unconditional release of such
Indemnitee from all liability arising out of such proceeding (provided, however,
that, whether or not such a release is required to be obtained, the Indemnitor
shall remain liable to such Indemnitee in accordance with Section 9.1
(Indemnification) in the event that a Third Party Claim is subsequently brought
against or sought to be collected from such Indemnitee). The Indemnitor shall be
liable for all Losses arising out of any settlement of any Third Party Claim;
provided, however, that the Indemnitor shall not be liable for any settlement of
any Third Party Claim brought against or sought to be collected from an
Indemnitee, the settlement of which is effected by such Indemnitee without such
Indemnitor's written consent, but if settled with such Indemnitor's written
consent, or if there is a final judgment for the plaintiff in any such Third
Party Claim, such Indemnitor shall (to the extent stated above) indemnify the
Indemnitee from and against any Losses in connection with such Third Party
Claim. The indemnification required by Section 9.1 (Indemnification) shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Losses are incurred.
Section 9.3. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties contained in this Agreement or the Trademark
License Agreement, or any certificate, document or instrument delivered pursuant
hereto or thereto shall survive for a period of six (6) months following the
termination of this Agreement (the "Survival Period"). No claim may be brought
under this Agreement unless the requisite written notice is given on or prior to
the termination of the Survival Period. In any event such notice is given prior
to the termination of the Survival Period, the right to indemnification with
respect thereto shall survive until such claim is finally resolved and any
obligations thereto are fully satisfied. Any investigation by or on behalf
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of any party thereto shall not constitute a waiver as to enforcement of any
representation or warranty contained herein.
ARTICLE 10
Section 10.1. NO CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL EITHER PARTY BE
LIABLE UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ITS EXHIBITS FOR ANY LOSS
OF PROFIT OR ANY OTHER INCIDENTAL, CONSEQUENTIAL, SPECIAL, EXEMPLARY, PUNITIVE
OR OTHER INDIRECT DAMAGES OF ANY NATURE, FOR ANY REASON, INCLUDING WITHOUT
LIMITATION THE BREACH OF THIS AGREEMENT OR ITS EXHIBITS EVEN IF THAT PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE FOREGOING PARAGRAPH SHALL
NOT OPERATE TO LIMIT THE INDEMNITY OBLIGATIONS EXPRESSLY ASSUMED IN THIS
AGREEMENT.
ARTICLE 11
TERMINATION
Section 11.1. TERMINATION. This Agreement shall automatically terminate
upon the date (the "Termination Date") of termination in accordance with its
terms or expiration of the Amended and Restated Partnership Agreement dated as
of the date hereof among the parties thereto (the "Partnership Agreement")
Section 11.2. Early Termination. In the event that Infoseek would not,
immediately following the Effective Time, be entitled to properly report, in
accordance with generally accepted accounting principles, the activities of
itself and its subsidiaries under this Agreement, including the gross sales of
advertising and related products and services by Representative, as revenue in
Infoseek's publicly disclosed consolidated financial statements, at any time up
to the Effective Time, Infoseek shall have the unilateral right, exercisable in
its sole discretion, to terminate this Agreement, in which case this Agreement
shall be of no further force or effect.
Section 11.3. CERTAIN MATTERS UPON TERMINATION.
(a) RELEASE OF RIGHTS; PAYMENT. If this Agreement expires or is terminated
for any reason in accordance herewith: (i) Representative shall cease providing
the Services and, following such expiration or termination, shall cooperate with
Venture in connection with the resumption by Venture of overall management of
the Internet Services; (ii) In the case of earlier termination, Representative
shall pay to Venture, by wire transfer of immediately available funds, not later
than sixty (60) days following the termination date, all amounts in respect of
the Representation Rights Fee accrued or which will accrue with respect to
Services rendered through the termination date, together with interest thereon
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from and including the next scheduled date of payment through but excluding the
actual date of payment; and (iii) the Trademark License Agreement and
Representative's engagement and all rights hereunder shall immediately cease.
(b) INDEMNIFICATION RIGHTS SURVIVE. No expiration or termination of this
Agreement shall terminate the obligation of any party to indemnify the other
under Section 9.1 (Indemnification) or limit or impair any party's rights to
receive payments due and owing or which accrued hereunder on or before the date
of such termination.
ARTICLE 12
CONFIDENTIALITY
Section 12.1. CONFIDENTIALITY. Representative shall treat confidentially
all records, books and other information of any type received or compiled for
the benefit of Venture hereunder in connection with this Agreement.
Representative agrees not to disclose any such records, books and information to
any third party (other than directors, officers, partners, employees or outside
advisors of such party and other than expressly in the performance of such
party's obligations hereunder) without the prior written consent of Venture.
Representative will take all commercially reasonable steps to protect all
confidential information of the Venture using methods at least substantially
equivalent to the steps it takes to protect its own proprietary information.
The foregoing shall not be applicable to any information that is (i) publicly
available when provided or that thereafter becomes publicly available other than
through a breach by such party of its agreements hereunder, (ii) required to be
disclosed by Representative by judicial or administrative process in connection
with any action, suit, proceeding or claim or otherwise by applicable law or
(iii) known by Representative on the date of this Agreement, not otherwise
primarily related to the business of the Internet Services or any Network Office
and not otherwise subject to a confidentiality agreement with or other
obligation of secrecy to Venture or any other party. Information shall be deemed
"publicly available" and not subject to Representative's agreement hereunder if
such information becomes a matter of public knowledge or is contained in
materials available to the public or is obtained by Representative from any
source other than Venture (or its directors, officers, partners, employees or
outside advisors), provided that such source has not to Representative's actual
knowledge entered into a confidentiality agreement with Venture with respect to
such information.
ARTICLE 13
MISCELLANEOUS
Section 13.1. NO PARTNERSHIP OR JOINT VENTURE. This Agreement is not
intended to be and shall not be construed as a partnership or joint venture
agreement between the
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parties. Except as otherwise specifically provided in this Agreement, no party
to this Agreement shall be authorized to act as agent of or otherwise represent
the other party to this Agreement.
Section 13.2. ENTIRE AGREEMENT; SCHEDULES; AMENDMENT; WAIVER. Except as set
forth in the subsequent sentence, this Agreement and the Trademark License
Agreement and the exhibits and schedules hereto and thereto, embody the entire
agreement and understanding of the parties hereto and supersede any and all
prior agreements, arrangements and understandings relating to the matters
provided for herein. Notwithstanding anything to the contrary contained in this
Agreement, each and every term or provision contained in the Partnership
Agreement and the related Amended and Restated Management and Services Agreement
dated as of the date hereof among the parties thereto (the "Management and
Service Agreement") shall govern in the event of any conflict with any term or
provision in this Agreement, without limitation. Any ambiguities in any such
determination should be resolved in favor of the reading of the Partnership
Agreement and the Management and Services Agreement. No amendment, waiver of
compliance with any provision or condition hereof, or consent pursuant to this
Agreement, shall be effective unless evidenced by an instrument in writing
signed by the party against whom enforcement of any amendment, waiver or consent
is sought. No failure or delay on the part of Venture or Representative in
exercising any right or power under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the parties to this Agreement are
cumulative and are not exclusive of any right or remedies which either may
otherwise have.
Section 13.3. FURTHER ASSURANCES. Each of Venture and Representative agrees
to execute and deliver such instruments and take such other actions as may
reasonably be required to carry out the intent of this Agreement.
Section 13.4. BENEFIT AND ASSIGNMENT. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Neither Representative nor Venture may assign its rights
or obligations under this Agreement except that either party may assign this
Agreement to its parent corporation or any entity of which its parent owns at
least 80% of the voting equity.
Section 13.5. HEADINGS. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
Section 13.6. GOVERNING LAW. The construction and performance of this
Agreement shall be governed by the laws of the State of New York without regard
to its principles of conflict of laws.
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Section 13.7. NOTICES. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing, and addressed as follows:
If to Venture: Starwave Corporation
13810 SE Eastgate Way
Bellevue, WA 98005
Attention: Michael Slade
Curt Blake
Telephone: (206) 957-2000
Facsimile: (206) 643-9381
If to Representative: Starwave Corporation
13810 SE Eastgate Way
Bellevue, WA 98005
Attention: Michael Slade
Curt Blake
Telephone: (206) 957-2000
Facsimile: (206) 643-9381
If to Infoseek: Infoseek Corporation
1399 Moffett Park Boulevard
Sunnyvale, California 94089
Attn: Harry Motro
Leslie Wright
Telephone: (408) 543-6700
Facsimile: (408) 734-9356
Any such notice, request, demand or communication shall be deemed to have been
duly delivered and received (a) upon hand delivery thereof during business
hours, (b) upon the earlier of receipt of three (3) days after posting by
registered mail or certified mail, return receipt requested, (c) on the next
business day following delivery to a reliable or recognized air freight delivery
service, and (d) on the date of transmission, if sent by facsimile during normal
business hours (but only if a hard copy is also send by overnight courier), but
in each case only if sent in the same manner to all persons entitled to receive
notice or a copy. Any party may, with written notice to the other, change the
place for which all further notices to such party shall be sent. All costs and
expenses for the delivery of notices hereunder shall be borne and paid for by
the delivering party.
Section 13.8. SEVERABILITY. If any of the provisions of this Agreement
shall be held unenforceable, then the remaining provisions shall be construed as
if such unenforceable provisions were not contained herein. Any provision of
this Agreement which is unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such unenforceability without
invalidating the remaining provisions hereof, and any such unenforceability in
any jurisdiction shall not invalidate or render
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unenforceable such provisions in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto hereby waive any provision of law now or
hereafter in effect which renders any provisions hereof unenforceable in any
respect.
Section 13.9. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Representation Agreement
as of the date first above written.
STARWAVE CORPORATION
By: /s/ Kevin Mayer
-------------------------
Name: Kevin Mayer
Title: Sr. Vice President
ESPN/STARWAVE PARTNERS
by: ESPN Online Investments, Inc.
By: /s/ Laurence J. Shapiro
-------------------------
Name: Laurence J. Shapiro
Title: Vice President
INFOSEEK CORPORATION
By: /s/ Harry M. Motro
-----------------------
Name: Harry M. Motro
Title: President and CEO
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EXHIBIT 16
AMENDED AND RESTATED
ABC NEWS/STARWAVE
PARTNERSHIP AGREEMENT
THIS AMENDED AND RESTATED PARTNERSHIP AGREEMENT including the Exhibits attached
hereto (this "AGREEMENT") is entered into as of June 18, 1998 by and between DOL
ONLINE INVESTMENTS, INC., a California corporation ("ABC PARTNER"), a wholly-
owned subsidiary of DISNEY ENTERPRISES, INC., a Delaware corporation ("DEI") and
STARWAVE VENTURES, a Washington corporation ("STARWAVE PARTNER"), a wholly-owned
subsidiary of STARWAVE CORPORATION, a Washington corporation, ("STARWAVE").
This Agreement amends and restates in its entirety the Partnership Agreement by
and between the parties hereof entered into as of March 28, 1997 (the "ORIGINAL
AGREEMENT"); provided that, this Agreement shall only become effective upon the
Effective Time, as defined in and pursuant to that certain Agreement and Plan of
Reorganization, of even date herewith, by and among Infoseek Corporation, a
California corporation, Infoseek Holding Company, a Delaware corporation,
Starwave, and DEI and shall cease and be of no further force and effect in the
event that the Effective Time does not occur; and provided further that, each of
the parties hereto agrees not to terminate, amend or otherwise alter this
Agreement, or waive any of its rights hereunder, at any time prior to
immediately following the Effective Time. ABC Partner and Starwave Partner are
each sometimes referred to herein as a "Partner" and, collectively, as
"Partners".
RECITALS
1. In connection with an investment in Starwave by DEI, ABC Partner and
Starwave Partner entered into a partnership pursuant to the Original Agreement
to jointly develop, produce and exploit certain interactive media products, on
the terms and conditions contained herein and ABC, Inc., a Delaware corporation
("ABC") and Starwave entered into the ABC News/Starwave Management and Services
Agreement dated as of March 28, 1997 (the "Original Service Agreement") to
provide certain assets and services to the Partnership in accordance with the
terms and conditions set forth in the Original Service Agreement.
2. Pursuant to an agreement and plan of reorganization and a stock and warrant
purchase agreement (collectively, the "Acquisition Agreements"), DEI has agreed
to acquire approximately a 43% interest in the voting equity of Infoseek
Corporation, a California corporation, subject to the terms and conditions set
forth in the Acquisition Agreements.
3. In connection with the transactions contemplated under the Acquisition
Agreements, the Partners desire to amend and restate the Original Agreement by
entering into this Agreement and Starwave agrees and ABC agrees to cause ABC
News, Inc., its indirect wholly owned subsidiary, to amend and restate the
Original Agreement and Original Service Agreement in the form attached as
Exhibit A.
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THEREFORE, for good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, ABC Partner and Starwave Partner hereby agree as
follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the following
meanings:
1.1 "ABC CONTENT" means all Content that is 100% owned or controlled by
ABC or its successors or assigns. For purposes of this Section 1.1, "control"
means the ability to grant the licenses set forth herein; provided however that
if such Content is subject to the payment of royalties or other consideration to
third parties, ABC will notify Starwave in writing in advance and the
Partnership shall have the right, at its option, to include such Content in the
definition of ABC Content.
1.2 "ABC TRADEMARKS" means "ABC News" and the other marks, trade names,
trademarks, brands, names, personalities, logos and representations thereof that
are properties of ABC or its Affiliates that appear within the ABC Content,
Programming, News Products or any other materials created in association with
this Agreement and that ABC or any of its Affiliates owns or controls.
1.3 "ACT" means the New York Uniform Partnership Law, as amended from time
to time.
1.4 "ACTUAL CUMULATIVE FUNDING PERCENTAGE" means each Partner's total
actual cumulative funding divided by the total actual cumulative funding of both
Partners, expressed as a percentage.
1.5 "ADJUSTED CAPITAL ACCOUNT" means, with respect to a Partner, an
account with a balance (which may be a deficit balance) equal to the balance in
such Partner's Capital Account as of the end of the relevant year, after giving
effect to the following adjustments: (i) credit to such Capital Account any
amounts which such Partner is obligated to restore pursuant to any provision of
this Agreement or is deemed to be obligated to restore to the Partnership
pursuant to Regulations (S)(S) 1.704-2(g)(1) and 1.704-2(i)(5); and (ii) debit
to such Capital Account such Partner's share of items described in Regulations
(S)(S) 1.704-1(b)(2)(ii)(d)(4), (5) and (6). The foregoing definition of
Adjusted Capital Account is intended to comply with the provisions of
Regulations (S) 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
1.6 "ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to a Partner,
the deficit balance, if any, in such Partner's Adjusted Capital Account.
1.7 "ADVISORY COMMITTEE" has the meaning set forth in Section 3.1.
1.8 "AFFILIATE" means, with respect to any person, any person directly or
indirectly through one or more intermediaries controlling, controlled by or
under common control with
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such person. Notwithstanding the foregoing, for purposes of this Agreement,
Starwave and Starwave Partner shall not be considered as Affiliates of ABC or
DEI.
1.9 "ANNUAL BUSINESS PLAN" has the meaning specified in Section 3.6.
1.10 "ANNUAL FINANCIAL STATEMENTS" has the meaning specified in Section
3.7.
1.11 "ASSET VALUE" with respect to any Partnership asset means the
following:
(i) the fair market value as determined by an appraiser mutually
agreed to by the Partners of any asset contributed by a Partner to the
Partnership;
(ii) the fair market value as determined by an appraiser mutually
agreed to by the Partners on the date of distribution of any Partnership asset
distributed to any Partner; or
(iii) the fair market value as determined by an appraiser mutually
agreed to by the Partners of all Partnership assets at the time of (a) the
admission of an additional Partner or (b) the liquidation of the Partnership
pursuant to Section 11.6.
1.12 "BROADBAND" means programming that requires transmission at data rates
which would enable real time, full screen, full motion video at equal to or
better than NTSC broadcast resolution.
1.13 "CAPITAL ACCOUNT" has the meaning set forth in Section 6.5.
1.14 "CASH EXPENDITURES" means, for any period, the actual amount of cash
expenditures and capital expenditures of the Partnership during such period.
1.15 "CLAIMS" has the meaning specified in Section 12.1.
1.16 "CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
1.17 "CONTENT" means audio and audio visual material, photographs, art
work, videos, graphics, text or sound recordings.
1.18 "COSTS" means all direct costs and allocated costs, whether incurred
by ABC, DEI or Starwave in connection with the Service Agreement or by the
Partnership, that are associated with the development, production, hosting,
maintenance, operation, distribution and exploitation of the News Products.
1.19 "DISNEY MEMBER" has the meaning set forth in Section 3.3.
1.20 "FIXED MEDIA PRODUCTS" means multimedia content products developed for
distribution to end users on any platform (including, without limitation, MS-
DOS, Windows,
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Macintosh, Sega, Nintendo, CD-ROM, Sony Playstation and 3DO systems) designed to
be read on an electronic device but excluding such products if they include a
Narrowband-delivered component and such products would not be commercially
competitive (as reasonably determined in good faith by the Partners) without the
inclusion of a Narrowband-delivered component.
1.21 "FORCE MAJEURE EVENT" has the meaning specified in Section 13.5.
1.22 "FORECASTED CASH EXPENDITURES" means, for any period, the forecasted
cash expenses and capital expenditures of the Partnership during such period,
prepared in accordance with GAAP and consistent with the Restated Initial
Business Plan and Annual Business Plans.
1.23 "GAAP" means Generally Accepted Accounting Principles, according to
U.S. accounting practices.
1.24 "GAIN YEAR" has the meaning specified in Section 6.1(a)(ii).
1.25 "GENERAL MANAGER" means the general manager appointed in accordance
with Section 3.1 to manage the operations of the News Products.
1.26 "INFOSEEK MEMBER" has the meaning specified in Section 3.1.
1.27 "INTELLECTUAL PROPERTY RIGHTS" means any and all (by whatever name or
term known or designated) tangible and intangible and now known or hereafter
existing (a) rights associated with works of authorship throughout the universe,
including but not limited to copyrights, moral rights, and mask-works, (b)
trademark, service marks and trade name rights and similar rights, (c) trade
secret rights, (d) patents, designs, algorithms and other industrial property
rights, (e) all other intellectual and industrial property and proprietary
rights (of every kind and nature throughout the universe and however designated)
(including without limitation logos, character rights, "rental" rights and
rights to remuneration), whether arising by operation of law, contract, license
or otherwise, and (f) all registrations, applications, renewals, extensions,
continuations, divisions or reissues thereof now or hereafter in force
throughout the universe (including without limitation rights in any of the
foregoing).
1.28 "INTEREST" OR "PARTNERSHIP INTEREST" means the entire ownership
interest of a Partner in the Partnership.
1.29 "LOSS YEAR" has the meaning specified in Section 6.1(a)(i).
1.30 "NARROWBAND" means programming that does not require transmission at
data rates which would enable real time, full screen, full motion video at equal
to or better than NTSC broadcast resolution.
1.31 "NET INCOME" AND "NET LOSS" means for each fiscal year or other
period, the Partnership's taxable income or loss for such year or period
determined in accordance with
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(S)703(a) of the Code, including therein all items of income, gain, loss or
deduction required to be stated separately pursuant to (S)703(a)(1) of the Code,
with the following adjustments:
(i) Any tax-exempt income of the Partnership described in
(S)705(a)(1)(B) of the Code which is not otherwise taken into account in
determining Net Income or Net Loss shall be included as if it were taxable
income or loss;
(ii) Any expenditures of the Partnership described in
(S)705(a)(2)(B) or treated as such expenditures under Regulation (S)1.704-
1(b)(2)(iv)(i) not otherwise taken into account in computing Net Income and Net
Loss shall be treated as deductible items;
(iii) Upon the occurrence of an event described in Section 1.9(ii) or
(iii), the difference between the asset basis and Asset Value as determined in
such provision shall be taken into account as gain or loss;
(iv) Gain or loss resulting from the disposition of property from
which gain or loss is recognized for federal income tax purposes shall be
determined with reference to the Asset Value of the property disposed of;
(v) Cost recovery deductions shall be determined based on the Asset
Value of property in lieu of such deductions used in computing such taxable
income or loss;
(vi) Any items which are specially allocated pursuant to Section 6.6
shall not be taken into account.
1.32 "NEWS PRODUCTS" means the Remote Access Products developed, produced,
marketed or otherwise exploited under this Agreement containing broad national,
international and local news Content, including, by way of example and without
limitation, stories and features regarding national, international and local
affairs and stories and features regarding business/finance, entertainment,
weather, environmental and other subjects, to the extent such subjects are of
national or international significance or are treated as such in traditional
news media.
1.33 "PARTNER NONRECOURSE DEBT" has the meaning set forth in Regulations
(S) 1.704-2(b)(4).
1.34 "PARTNER NONRECOURSE DEBT MINIMUM GAIN" means an amount, with respect
to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that
would result if such Partner Nonrecourse Debt were treated as a Nonrecourse
liability (within the meaning of Regulations (S) 1.704-2(b)(3)), determined in
accordance with Regulations (S) 1.704-2(i)(3).
1.35 "PARTNER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations (S)(S) 1.704-2(i)(1) and 1.704-2(i)(2).
1.36 "PARTNERSHIP" means the general partnership formed by this Agreement.
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1.37 "PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Regulations
(S)(S) 1.704-2(b)(2) and 1.704-2(d).
1.38 "PERSON" means any individual, partnership, corporation, trust or
other entity.
1.39 "PORTAL PRODUCTS" means the internet portal service to be named "Go
Networks," or another name, developed and produced by Infoseek utilizing the
subject matter licensed under that certain License Agreement between DEI and
Infoseek of even date herewith, including but not limited to all channels, sub-
channels, sections, sites, features, services, utilities and applications
relating thereto.
1.40 "PROFIT PARTICIPATION" means the Partner's proportionate share of Net
Income, expressed as a percentage, in a gain year adjusted pursuant to Section
6.2.
1.41 "PROGRAMMING" means the programming included in the News Products
including, without limitation, all HTML, Java, and/or other formatted text
files, all related graphics files, animation files, data files, multimedia
files, modules, routines and objects, and the computer software and all of the
script or program files required to exploit such materials and that collectively
control the display of and end user interaction with the programming.
1.42 "PROMOTIONAL SERVICE AGREEMENT" means the agreement between American
Broadcasting Companies, Inc. and Infoseek, dated as of the date hereof.
1.43 "REGULATIONS" means the Income Tax Regulations promulgated under the
Code, as such regulations may be amended from time to time.
1.44 "RELATED PERSONS" has the meaning specified in Section 12.1.
1.45 "REMOTE ACCESS PRODUCTS" means Programming intended for distribution
by any Narrowband interactive transmission method. This definition excludes any
and all Programming that requires Broadband transmission and also excludes (a)
products developed for PDAs, pagers, screen phones and other future handheld
devices and (b) Fixed Media Products.
1.46 "REQUIRED CUMULATIVE FUNDING PERCENTAGE" means each Partner's total
cumulative funding if it were to have funded at its required cash contribution
amount in each year, divided by the total cumulative funding for both Partners
if each had funded at its required level in each year, expressed as a
percentage.
1.47 "RESTATED INITIAL BUSINESS PLAN" has the meaning specified in Section
3.6.
1.48 "REVENUES" means all revenues, as determined in accordance with GAAP,
including, without limitation, advertising, subscription, usage, merchandising,
licensing or other revenues derived from exploitation of the News Products, the
Technology owned by the
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Partnership or jointly by the Partners contained therein or utilized in
connection therewith or from any other Intellectual Property Rights, Content or
Programming owned by the Partnership or jointly by the Partners but in all
events excluding Portal Products revenues and Infoseek-branded Search or
Directory revenues. For the avoidance of doubt, any Revenues derived from the
first page seen by a viewer after a single click on a name, logo, icon, link,
headline or other content that is supplied by the Partnership or one of the
Partners, for use in the News Product. For example, if a user clicks on the "Go
News" channel within the Portal Products and the first page to which the user is
directed contains a news story supplied by ABC, after the single click on the
ABC news story, the user is within the News Products and revenues derived from
such page shall be deemed Revenues hereunder.
1.49 "SEARCH OR DIRECTORY" means products, services, components or other
subject matter (i) for searching content such as searches of the World Wide Web,
directories, USENET News, or other databases, or (ii) hierarchical listings of
sites or services, which listings are organized by categories.
1.50 "SERVICE AGREEMENT" means the Amended and Restated ABC News/Starwave
Management and Services Agreement attached hereto as Exhibit A.
1.51 "STANDARDS" means the written policy of standards and practices for
content and advertising that apply to the News Products under this Agreement,
attached as Exhibit B.
1.52 "STARWAVE TRADEMARKS" means "Starwave" and the other marks, trade
names, trademarks, brands, names, personalities, logos and representations
thereof that are properties of Starwave Partner or its Affiliates that appear
within the News Products or any other materials created in association with this
Agreement and that Starwave Partner owns or controls.
1.53 "TECHNOLOGY" means all software, hardware and middleware required or
appropriate to (i) transform the Content into the Programming, (ii) create,
modify or maintain the Programming, or (iii) deliver the Programming in an
online format.
1.54 "TERM" shall have the meaning set forth in Section 11.1.
1.55 "TERRITORY" means the United States and Canada.
1.56 "TRANSFER" means, as a noun, any voluntary or involuntary transfer,
sale, assignment, pledge, hypothecation, encumbrance or other disposition, and,
as a verb, voluntarily or involuntarily to transfer, sell, assign, pledge,
hypothecate, encumber or otherwise dispose of.
2. PARTNERSHIP
2.1 PARTNERSHIP NAME. The name of the Partnership shall be ABC
News/Starwave Partners, d/b/a AIV Ventures or such other name as the Partners
may from time to time determine by mutual approval, and all business of the
Partnership shall be conducted under
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such name. Such name shall be the exclusive property of the Partnership, and no
Partner shall have any right to use, and each Partner agrees that neither it nor
its Affiliates shall use, such name or derivatives thereof incorporating "ABC"
or "AIV" or "Starwave" other than as permitted by the mutual agreement of the
Partners. The Partnership shall execute and file and/or publish all assumed name
statements and certificates required by law to be filed and/or published in
connection with the operation of the Partnership.
2.2 PLACE OF BUSINESS. The principal place of business of the Partnership
shall be located at 77 West 66/th/ Street, New York, New York, or at such other
place as the Partners may from time to time determine by mutual approval. The
Partnership may have such other or additional places of business or headquarters
as the Partners may from time to time designate.
2.3 PURPOSE. The purpose of the Partnership shall be to develop, produce,
market, distribute and otherwise exploit the News Products in the Territory.
Notwithstanding the foregoing, the Partners acknowledge that distribution of the
News Products on the Internet shall, by definition, be on a worldwide basis;
provided, that it is the present intention of the Partners that the Partnership
shall not deploy the Programming on servers or other delivery systems that are
located outside the Territory. Notwithstanding the foregoing, if DEI determines
to develop, produce, market, distribute and otherwise exploit news-related
Remote Access Products outside the Territory, the Disney Member will, when
possible, provide the Infoseek Member with a first offer to discuss in good
faith the possibility of delivering the News Products in additional countries or
regions or otherwise including the Partnership, Starwave Partner or Infoseek as
a partner or participant to any new news-related Remote Access Products that may
be developed for any additional country or region; provided, that Starwave
Partner acknowledges that the worldwide business activities and strategies of
DEI and its Affiliates may preclude the participation of the Partnership,
Starwave Partner or Infoseek in any such news-related Remote Access Products.
The News Products shall include, without limitation, an entertainment news
component that includes Programming from the "Mr. Showbiz" property contributed
by Starwave to the Partnership pursuant to the Original Service Agreement as
well as Remote Access Products containing personal finance and business news.
If within six (6) months after the Effective Date, Disney has not entered into
an agreement with a third party for local news Remote Access Products and during
such period Starwave Partner notifies Disney in writing that Starwave Partner
has the ability to include local news Remote Access Products as News Products
hereunder, such local news Remote Access Products shall become News Products
effective upon the date of such notice.
2.4 AUTHORITY OF PARTNERS LIMITED. No Partner shall have any authority to
hold himself out as a general agent of another Partner or the Partnership in any
business activity other than that of the Partnership, and no Partner shall have
any authority to act for, or to assume any obligation or responsibility on
behalf of, any other Partner or the Partnership, except as expressly provided in
this Agreement or as authorized by the Partners. No Partner shall be liable to
third persons for Partnership losses, deficits, liabilities or obligations
except as expressly agreed to in writing by such Partner, unless the assets of
the Partnership shall first be exhausted. In any matter between the Partnership
on the one hand and either Partner on the other hand or in any matter between
the Partners, neither the Partnership nor any Partner shall
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be bound by the act of a Partner unless such Partner is acting in accordance
with the limitations and provisions set forth in this Agreement. Except as
otherwise expressly provided herein, decisions of the Partnership shall be made
by unanimous approval of the Partners.
2.5 PARTITION. No Partner, nor any successor-in-interest to such Partner,
shall have the right, while this Agreement remains in effect, to have the
property of the Partnership partitioned or to file a complaint or institute any
proceeding at law or in equity to have the property of the Partnership
partitioned, and each Partner, on behalf of itself and its successors,
representatives and assigns, hereby waives any such right.
3. GOVERNANCE
3.1 APPOINTMENT OF GENERAL MANAGER. The day-to-day operations of the News
Products will be managed by a General Manager nominated by DEI and mutually
appointed by the Partners. The General Manager shall report to the Advisory
Committee. The General Manager shall be a Partnership employee and subject to
termination by either the Starwave Member or the Disney Member. The General
Manager shall be located in New York City, or elsewhere in the event of mutual
agreement by the Advisory Committee. In the event of the termination or
resignation of a General Manager, the Disney Member shall have the right to
nominate candidates for a new General Manager; provided, that if three
successive nominees are not approved by the Advisory Committee, the Disney
Member shall have the sole right of approval for the subsequent nominee. This
process will be repeated in the event of any replacement of a General Manager.
Notwithstanding the foregoing, in the event that a General Manager is terminated
by the Starwave Member unilaterally, the Disney Member shall have the unilateral
right to appoint a replacement General Manager, subject to Starwave Partner's
subsequent rights to terminate the replacement General Manager. DEI agrees to
cause the Disney Member to use its reasonable good faith efforts to nominate
well qualified, "best available" candidates as General Manager candidates.
3.2 DUTIES OF GENERAL MANAGER. The General Manager shall implement the
Restated Initial Business Plan and subsequent Annual Business Plans and shall
exercise control over the day-to-day operations of the Partnership, including
editorial tactics, editorial strategy and creative development (subject to
Section 3.5(a)), production (technical or otherwise), distribution,
merchandising, advertising sales, affiliate relations (subject to Section
3.5(b)) and marketing and promotion (subject to Section 3.5(c)) of the News
Products, subject to the oversight and ultimate approval of the Advisory
Committee.
3.3 ADVISORY COMMITTEE. As of the Effective Time, Infoseek and Disney
will respectively appoint the Infoseek CEO and the Chairman of Buena Vista
Internet Group as the sole members (the "Infoseek Member" and the "Disney
Member" respectively) of an advisory committee (the "Advisory Committee"). Each
of Infoseek and Disney will have the right to replace its designee on the
Advisory Committee; provided, that Infoseek and Disney agree to consult with
each other prior to any such replacement. Any such replacement will be with an
officer of Infoseek or Disney, or their respective Affiliates, of similar
responsibilities and experience, to the extent possible. The Advisory Committee
shall oversee the management and
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operations of the Partnership, shall make significant business decisions of the
Partnership and shall participate regularly in the overall supervision,
direction and control of the Partnership as set forth on Exhibit C (as amended
as of the date hereof). The Advisory Committee will meet monthly or as otherwise
appropriate to discuss and advise the General Manager on overall News Products
key issues, and performance within the parameters established in the Annual
Business Plans. Except as otherwise expressly provided herein, decisions of the
Advisory Committee shall be made by unanimous approval of the Infoseek Member
and Disney Member.
3.4 ORGANIZATIONAL STRUCTURE. The Partners intend to staff the operations
of the Partnership in accordance with the Restated Initial Business Plan, as may
be modified from time to time upon the agreement of the Partners. Thereafter,
the General Manager (and the relevant senior employees) shall hire/fire/promote
Partnership employees at their discretion (subject to compliance with the
Restated Initial Business Plan and Annual Plans). Notwithstanding the
foregoing, it is the intention of the parties that the employees providing
technology-related services to the Partnership shall be primarily employed by
Starwave and the employees providing editorial-related services to the
Partnership shall be primarily employed by ABC.
(a) CONTENT DEVELOPMENT/TRANSFORMATION/INTEGRATION.
(i) ABC CONTENT. ABC shall be responsible for the development
of ABC Content for the News Products and for the transformation of ABC Content
into Programming and integration of the Programming into the News Products as
set forth in the Service Agreement. The senior employee in such group, who shall
be an ABC employee and subject to hiring/firing by ABC, shall report on a day-
to-day basis to the General Manager, with direct reporting as well to an ABC
designated executive for oversight of editorial and creative aspects of such
Content.
(ii) NON-ABC CONTENT. The Partnership shall include a group of
employees responsible for the development of Content (other than ABC Content)
for the News Products and for the transformation of such Content into
Programming and integration of the Programming into the News Products. The
senior employee in such group, who shall be an ABC employee and subject to
hiring/firing by ABC and firing by Starwave, and shall report on a day-to-day
basis to the General Manager, with direct reporting as well to an ABC designated
executive for oversight of editorial and creative aspects of such Content.
(b) ABC NETWORK AFFILIATE RELATIONS. The Partnership shall include a
group of Partnership employees responsible for managing the relationship with
ABC's affiliated television and radio stations, subject to Section 3.5(b). The
senior employee in such group shall report directly to the General Manager. ABC
shall have veto power over the hiring/firing of such employee. ABC shall, from
time to time, review the policies and practices of such group and assist the
General Manager in conforming such policies and practices with those used by
ABC.
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(c) ADVERTISING SALES.
(i) The Partnership may engage Starwave or any qualified third
party (including Affiliates) to provide representation services for advertising
sales for the News Products. The senior employee of any non-Affiliated party
providing representation services shall be subject to hiring/firing by either
Starwave or ABC, shall report to the General Manager, with (1) a report to the
Disney Member on matters concerning group advertising sales in association with
Disney products and (2) a report to the Infoseek Member on matters concerning
group advertising sales in association with Infoseek products.
(ii) The Advisory Committee shall mutually agree in writing on
the characteristics of all advertising that will appear with or in the News
Products, including without limitation, matters of price, content, size,
placement, quantity, frequency of changes, and identity of advertisers. The
Advisory Committee further shall mutually agree in writing on the "rate card"
for the advertising to be sold in connection with the News Products.
(iii) The General Manager and the advertising sales group shall
at all times comply with the Standards.
(iv) The Advisory Committee shall coordinate group advertising
sales for the News Products in association with DEI (which shall provide the
group advertising sales services in association with Disney products) and with
Infoseek (which shall provide the group advertising sales services in
association with Infoseek products), as set forth in the Service Agreement.
During the Term, such group advertising services may become a responsibility of
the Partnership or the Partners collectively, upon the mutual agreement of the
Partners.
(d) MARKETING/PROMOTION. The Partnership shall include a group of
Partnership employees responsible for marketing and promotion for the News
Products on Narrowband platforms and in other media, subject to Section 3.5(c).
The senior employee in such group shall be subject to hiring/firing by ABC and
firing by Starwave and shall report directly to the General Manager. In
addition, ABC shall provide marketing and promotion services for the News
Products in other media, as set forth in the Service Agreement, and in
accordance with the Promotional Services Agreement.
(e) FINANCE AND BUSINESS DEVELOPMENT. The Partnership shall include a
group of Partnership employees responsible for finance and business development
activities (including, without limitation, general and administrative
activities). Such group (and the General Manager) shall perform their
administrative and finance responsibilities in accordance with DEI's standards
of financial controls.
(f) BILLING, COLLECTION, CUSTOMER SERVICE. Starwave shall be
responsible for billing, collection, customer service and other "back office"
functions for the Partnership in accordance with the Service Agreement. During
the Term, such functions (or portions thereof) may become a responsibility of
the Partnership or the Partners collectively, upon the mutual agreement of the
Partners.
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(g) TECHNOLOGY DEVELOPMENT AND MAINTENANCE. Starwave shall be
responsible for the technology development and maintenance relating to the News
Products in accordance with the Service Agreement. It is the present intention
of the parties that the preponderance of the technology development and
maintenance relating to the News Products shall be performed by Starwave. The
General Manager, in accordance with the Restated Initial Business Plan or Annual
Business Plans, may acquire or license additional or substitute Technology (i)
on an incidental and nonmaterial basis, (ii) if Starwave is in breach of its
material obligations under its agreements with the Partnership, (iii) if the
costs to the Partnership of acquiring or licensing Technology from a third party
are significantly less than the costs to the Partnership of acquiring or
licensing such or similar Technology from Starwave and such third-party
Technology from Starwave and such third-party Technology is fully scaleable and
compatible with other Technology used for the News Product and otherwise
appropriate for its intended uses, or (iv) if Starwave otherwise agrees. In
addition, the General Manager, in accordance with the Restated Initial Business
Plan or Annual Business Plans may acquire or license additional or substitute
Technology if, in the General Manager's reasonable opinion, the inability to so
acquire or license such Technology would have a material impact on the overall
quality and competitive position of the News Products. In such event, Starwave
shall have a three (3) day period to meet with the General Manager to attempt to
resolve the issues. If the issues have not been resolved in the three (3) day
period, the General Manager shall be entitled to present the issues to the
Partners for resolution based upon the mutual agreement of the Partners. During
the Term, such technology development and maintenance (or portions thereof) may
become a responsibility of the Partnership or the Partners collectively, upon
the mutual agreement of the Partners.
(h) HOSTING. Starwave shall be responsible for the hosting of the
News Products in accordance with the Service Agreement. During the Term, the
Partners may mutually agree to have the Partnership perform hosting functions
for the News Products, as may be approved in an Annual Business Plan or
otherwise as determined by the Partners. In addition, the General Manager may
utilize unaffiliated third parties to provide hosting of the News Products (i)
if the costs of any such hosting to the Partnership are significantly less than
the costs to the Partnership of such hosting services as charged by Starwave and
such third-party hosting is fully scaleable and compatible with the Technology
and hosting services provided for the News Products and otherwise appropriate,
(ii) Starwave is in breach of its material hosting obligations hereunder, or
(iii) if Starwave otherwise agrees.
(i) OTHER. The Partners shall mutually agree on whether any
additional necessary support for the development, production and delivery of the
News Products in any category other than as listed in this Agreement shall be
included as a responsibility of the Partnership or one or both Partners.
3.5 ABC'S CONTROL.
(a) EDITORIAL AND CREATIVE. ABC shall exercise sole and final control
over all editorial and creative aspects of the News Products and all portions
thereof.
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(b) ABC NETWORK AFFILIATE RELATIONS. ABC shall exercise sole and
final control over all ABC Network affiliate relations matters associated with
the News Products.
(c) MARKETING AND PROMOTIONS. ABC shall exercise sole and final
control over all uses or references to any ABC Trademark contained in marketing
and promotions associated with the News Products. Any use of an ABC Trademark
by the Partnership or Starwave shall require the prior approval of ABC, which
may be withheld at ABC's sole discretion. ABC shall cooperate in good faith
with the Partnership to agree on a templated use of ABC Trademarks from time to
time to avoid recurrent approvals.
(d) ADVERTISING SALES. The General Manager and the Partnership's
advertising sales group shall frequently consult with the ABC News' advertising
sales executives in order to coordinate, when possible, advertising
opportunities among the News Products and ABC News' products.
3.6 BUSINESS PLAN AND BUDGET, FORECASTED CASH EXPENDITURES.
(a) Prior to the date hereof, DEI and Starwave have agreed on a
restated three year business plan for the News Products, attached hereto as
Exhibit D (the "Restated Initial Business Plan"). At least thirty (30) days
prior to the beginning of each fiscal year (ending September 30) during the
Term, the General Manager shall prepare for the Partners' approval an annual
business plan and budget for the subsequent fiscal year (which shall include,
without limitation, a statement of Forecasted Cash Expenditures for such fiscal
year), utilizing the categories and methods established in the Restated Initial
Business Plan (i.e., spending requirements and limits, Revenue and operating
income targets)(each, an "Annual Business Plan and Budget"). If during the
first three years after the date hereof, an Annual Business Plan and Budget is
not mutually approved by the Partners by the beginning of a fiscal year, the
Partners shall continue to perform their obligations under this Agreement based
on the standards set forth in the Restated Initial Business Plan for the
corresponding year. After the first three years after the date hereof, if an
Annual Business Plan and Budget for any fiscal year are not mutually approved by
the Partners by the beginning of a fiscal year, the Partners shall continue to
perform their obligations under this Agreement based on the standards set forth
in the Annual Business Plan and Budget for the prior fiscal year, increased in
an amount equal to 50% of the increase in the projected Revenue growth for the
Partnership between the current fiscal year and the subsequent fiscal year (as
agreed between the Partners), provided, that if such projected Revenue growth is
a negative number, such aggregate amount shall be increased in an amount equal
to the percentage increase or decrease in the Consumer Price Index for Urban
Wage Earners and Clerical Workers [All Urban Consumers], U.S. City Average
(1982-84 = 100) Unadjusted, all items index, published by the Bureau of Labor
Statistics, United States Department of Labor (the "CPI Factor") for the
preceding twelve-month period. In the event that the Partners cannot agree on
projected Revenue growth for the Partnership for a particular fiscal year, the
Annual Business Plan and Budget for such fiscal year shall be increased in an
amount equal to the actual growth rate in Revenues between the two prior fiscal
years. If such growth rate is a negative number, such Annual Business Plan and
Budget shall be
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adjusted by the CPI Factor. In each year, the Annual Business Plan and Budget as
adjusted as provided above shall be the baseline for any adjustments for the
subsequent year.
(b) Within fifteen (15) days prior to the beginning of each fiscal
quarter during the Term, the General Manager shall prepare for the Partners'
approval a statement of Forecasted Cash Expenditures and forecasted Revenues (as
agreed between the Partners) for such fiscal quarter. If any such statement is
not mutually approved by the Partners by the beginning of a fiscal quarter, (i)
if the fiscal quarter in question falls within the period reflected in the
Restated Initial Business Plan, then the Forecasted Cash Expenditures and
forecasted Revenues set forth therein for the applicable fiscal quarter
calculated from the annual amounts in the Annual Business Plan and Budget shall
be applicable or (ii) if the fiscal quarter in question is after the period
reflected in the Restated Initial Business Plan, then the Forecasted Cash
Expenditures for such fiscal period will be as follows: that fiscal quarter's
forecasted Revenues is compared with the Revenues in the same quarter from the
prior year and a Revenue growth percentage is calculated. 50% of this growth
percentage is then applied to the Actual Cash Expenditures for the same fiscal
quarter from the prior year to determine the Forecasted Cash Expenditures for
the fiscal quarter under consideration. If the Partners cannot agree on the
Revenue growth percentage increase, then the prior period Revenue growth
percentage will be utilized as follows: 50% of the actual year-over-year Revenue
growth percentage achieved in the same quarter in the prior year is calculated.
The growth percentage is then applied to the Actual Cash Expenditures for the
same quarter from the prior year to determine the Forecasted Cash Expenditures
for the current quarter, provided, that if such projected Revenue growth is a
negative number, such aggregate amount shall be increased in an amount equal to
the percentage increase or decrease in the Consumer Price Index for Urban Wage
Earners and Clerical Workers [All Urban Consumers], U.S. City Average (1982-84 =
100) Unadjusted, all items index, published by the Bureau of Labor Statistics,
United States Department of Labor for the preceding twelve-month period. In each
year, the Annual Business Plan and Budget as adjusted as provided above shall be
the baseline for any adjustments for the subsequent year.
3.7 OTHER REPORTS. Within fifteen (15) days after the end of each fiscal
year during the Term, the General Manager shall prepare and deliver, with the
assistance of the Partners, unaudited twelve month profit and loss statements,
including detailed breakdowns of sources of Revenues and items of Costs for each
fiscal quarter as well as a statement of Net Cash Flow for such fiscal year
(collectively, the "Annual Financial Statements"). Within five (5) days after
the end of each fiscal quarter during the Term, the General Manager shall also
prepare and deliver, with the assistance of the Partners, unaudited quarterly
profit and loss statements, including detailed breakdowns of sources of Revenues
and items of Costs in such fiscal quarter and quarterly cash flow statements.
In addition, within ten (10) days prior to the start of any fiscal quarter, the
General Manager shall prepare and deliver quarterly forecasts, utilizing the
categories and methods established in the Restated Initial Business Plan. The
Partners acknowledge the importance of meeting the financial reporting deadlines
to ensure necessary financial and accounting compliance; provided however, that
immaterial and infrequent failures to meet such deadlines shall not be
considered as material breaches of this Agreement.
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4. STARWAVE, ABC AND DEI OBLIGATIONS TO THE PARTNERSHIP
During the Term, Starwave, ABC and DEI shall have the obligations to the
Partnership set forth in the Service Agreement.
5. MERCHANDISING
DEI agrees to provide (or cause its Affiliates to provide) and the
Partnership agrees to purchase (subject to agreement on terms), e-commerce
services to the Partnership, including, without limitation, store design,
transaction processing, web hosting, inventory management, fulfillment and
customer service. In exchange for such services, the Partnership shall pay DEI
its Costs (with the allocated costs to be mutually agreed) in providing such
services, plus a to-be-agreed markup on such Costs or a to-be-agreed upon
revenue share. In addition, DEI shall have joint ownership of all customer
information for use for its business purposes.
6. FINANCIAL PARTICIPATION
6.1 CAPITAL CONTRIBUTIONS.
(a) In accordance with the limits set forth in each Annual Business
Plan, the Partners shall make capital contributions at the start of each fiscal
quarter or from time to time as the Partners otherwise agree in accordance with
Forecasted Cash Expenditures:
(i) Starwave Partner shall make capital contributions in
sufficient amounts to provide for sixty percent (60%) of the Forecasted Cash
Expenditures and ABC Partner shall make capital contributions in sufficient
amounts to provide for forty percent (40%) of the Forecasted Cash Expenditures
in any fiscal quarter during the Term in which Net Losses are expected to occur
(a "Loss Year").
(ii) Starwave Partner shall make capital contributions in
sufficient amounts to provide for fifty percent (50%) of the Forecasted Cash
Expenditures and ABC Partner shall make capital contributions in sufficient
amounts to provide for fifty percent (50%) of the Forecasted Cash Expenditures
in any fiscal quarter during the Term in which Net Income is expected to occur
(a "Gain Year").
(b) Promptly upon the delivery of the Annual Financial Statements of
the Partnership, the Partners shall reconcile the differences, if any, between
the Forecasted Cash Expenditures and the Cash Expenditures as reflected in the
Annual Financial Statements, such that the total amount contributed by each
Partner with respect to a fiscal year is in accordance with the percentages
provided in Section 6.1(a) based on the Cash Expenditures with respect to such
fiscal year.
(c) To the extent that a Technology is developed by either Partner in
connection with this Agreement specifically for use in the development or
delivery of the News Products, the other Partner can elect, in its discretion
(but only at the time initial funding for
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the Technology is requested, unless agreed to by the Partner developing such
Technology), to provide its proportionate share of the funding associated with
such Technology, in which event such Technology shall become jointly owned.
(d) For purposes of this Agreement, with respect to any capital asset
owned by a Partner and utilized in association with the News Products, either
Partner may charge the Partnership a fee for the use of such capital asset, in
accordance with limits set forth in the Restated Initial Business Plan and
Annual Business Plan.
6.2 FAILURE TO MAKE CONTRIBUTIONS.
(a) If any Partner fails to make any required cash contribution when
due pursuant to Section 6.1 (a "Nonfunding Partner"), the other Partner may, in
its discretion, elect to make a cash contribution in the amount of all or a
portion of the unfunded portion of the required contribution, in which event the
funding Partner's ("Funding Partner") Capital Account shall be adjusted as
follows: for every $1.00 of the unfunded portion of such required contribution
funded by the Funding Partner, the Funding Partner shall receive an increase of
$1.00 in its Capital Account.
(b) In addition, at the end of each fiscal year, each Partner's Actual
Cumulative Funding Percentage will be compared with its Required Cumulative
Funding Percentage. In the event that such Partner's Actual Cumulative Funding
Percentage is less than its Required Cumulative Funding Percentage, such
Partner's Profit Participation shall be adjusted at the beginning of the next
fiscal year such that the Nonfunding Partner's Profit Participation will be (i)
decreased 1 percentage point for each 1 percentage point shortfall in the event
the Nonfunding Partner's total cumulative funding exceeds that of Funding
Partner and (ii) will be decreased 2 percentage points for every 1 percentage
point (the "dilution ratio") in the event that the Nonfunding Partner's total
cumulative funding is less than that of the Funding Partner. The Funding
Partner will receive a corresponding increase in its Profit Participation. An
example is attached as Exhibit E.
(c) In any fiscal year in which the Starwave Partner's Profit
Participation falls below 25%, their control rights under this Agreement and the
Services Agreement shall be suspended, such that, for example, the Starwave
Partner shall not have a vote in any of the matters that previously required the
unanimous approval of the Advisory Committee. This right would be reinstated in
the event that Starwave Partner's Profit Participation again rises above 25%,
subject to subsequent suspension if Starwave Partner's Profit Participation
again falls below 25%.
(d) Prior to the end of the first fiscal year in which the Partnership
derives Net Income (i.e., as opposed to a Net Loss year), a Nonfunding Partner
shall be entitled to make capital contributions up to its Required Cumulative
Funding Percentage as well as additional funding necessary to equalize the
results of the cumulative overfunding by the Funding Partner at the same
dilution ratio (as defined above) and adjust its Profit Participation upward;
provided, however, at the end of the first fiscal year in which the Partnership
derives Net
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Income, while a Nonfunding Partner may make capital contributions to maintain
its Actual Cumulative Funding Percentage, it shall not be entitled to make
capital contributions to equalize the results of the cumulative overfunding by
the Funding Partner.
(e) In the event that Starwave Partner's Profit Participation falls
below 25% and Starwave Partner desires to fund a subsequent required cash
contribution and is unable to access capital on reasonable terms as determined
by the independent audit committee of the Board of Directors of Starwave Partner
given the Company's financial condition and said terms would cause an adverse
impact on Starwave Partner's financial condition, Disney Partner will loan
Starwave Partner the necessary funds at an interest rate equal to the then prime
rate plus 1% for a twelve month term. If the loan is not repaid with accrued
interest thereon at the end of the twelve month period, such amounts will be
credited to Disney Partner's Capital Account and the Disney Partner's Actual
Cumulative Percentage would be adjusted at the beginning of the next fiscal year
as if Disney Partner had actually funded the Partnership instead of making the
loan to Starwave Partner.
6.3 ALLOCATIONS. After receipt of the Annual Financial Statements in any
fiscal year and subject to the special allocations of Section 6.6:
(a) ABC Partner shall be allocated 40% of the Net Loss in any fiscal
year and 50% of the Net Income in any fiscal year;
(b) Starwave Partner shall be allocated 60% of the Net Loss in any
fiscal year and 50% of the Net Income in any fiscal year.
6.4 DISTRIBUTIONS. The Partnership shall make cash and/or asset
distributions at the end of each fiscal year upon receipt of the Annual
Financial Statements or when otherwise deemed appropriate by the Partners in the
same proportions as the cash contributions for each Partner in each fiscal year
attributable to such fiscal year.
6.5 CAPITAL ACCOUNTS. The Partnership shall maintain for each Partner a
single capital account (a "Capital Account") with respect to the Partner's
Partnership Interest in accordance with the regulations issued pursuant to Code
Section 704. The Capital Account of each Partner shall be maintained for such
Partner in accordance with the following provisions:
(a) To each Partner's Capital Account there shall be credited (i) the
amount of cash or the Asset Value contributed to the capital of the Partnership
by such Partner pursuant to any provision of this Agreement, (ii) the amounts of
such Partner's distributive share of Net Income allocated pursuant to Section
6.3 and any items in the nature of income or gain that are specially allocated
pursuant to Section 6.6, and (iii) the amount of any Partnership liabilities
that are assumed by such Partner.
(b) To each Partner's Capital Account there shall be debited (i) the
amount of cash or the Asset Value distributed to such Partner pursuant to any
provision of this Agreement, (ii) the amounts of such Partner's distributive
share of Net Loss allocated pursuant
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to Section 6.3 and any items in the nature of expenses or losses that are
specially allocated pursuant to Section 6.6, and (iii) the amount of any
liabilities of such Partner that are assumed by the Partnership.
(c) In the event that all or a portion of a Partnership Interest is
Transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent that it relates
to the Transferred interest.
(d) In determining the amount of any liability for purposes of
paragraphs (a) and (b) hereof, there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and Regulations. The
foregoing provisions and the other provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Regulations (S)(S)
1.704-1(b) and 1.704-2 in order that the allocations of Revenues and Costs under
this Agreement are deemed to have substantial economic effect, and shall be
interpreted and applied in a manner consistent with such Regulations. In the
event that the Partners mutually determine that it is prudent to modify the
manner in which the Capital Accounts, or any debits or credits thereto
(including, without limitation, debits or credits relating to liabilities which
are secured by contributed or distributed property or which are assumed by the
Partnership or any Partner), are computed in order to comply with such
Regulations, the Partners may make such modification, provided that it is not
likely to have a significant effect on the amounts distributable to any Partner
hereunder upon the dissolution of the Partnership.
6.6 SPECIAL ALLOCATIONS.
(a) PREFERRED RETURN. A Funding Partner shall be specially allocated
Net Income equal to 15% per annum on the funding provided on behalf of the
Nonfunding Partner (and not subsequently made up by the Nonfunding Partner)
until such time as the Nonfunding Partner contributes all of the remaining
unfunded amounts to the Partnership.
(b) RECONCILIATION OF CAPITAL ASSETS. At the end of the fifth fiscal
year of the Partnership (and each subsequent fifth fiscal year during the Term),
the Partners shall cause the Partnership to make a special allocation of Net
Income or Net Loss, if necessary, to ensure that cumulative deductions
attributable to capital assets are consistent with each Partner's financial
contribution with respect to such capital assets.
(c) REGULATORY ALLOCATIONS TO CAPITAL ACCOUNTS. The following special
allocations shall be made in the following order:
(i) MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
Regulations (S) 1.704-2(f), notwithstanding any other provision of this Article
6, if there is a net decrease in Partnership Minimum Gain during any Partnership
year, each Partner shall be specially allocated items of Partnership income and
gain for such period (and, if necessary, subsequent periods) in an amount equal
to such Partner's share of the net decrease in Partnership Minimum Gain,
determined in accordance with Regulations (S) 1.704-2(g). Allocations pursuant
to the previous sentence shall be made in proportion to the respective
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amounts required to be allocated to each Partner. The items to be so allocated
shall be determined in accordance with Regulations (S)(S) 1.704-2(f)(6) and
1.704-2(j)(2). This Section 6.6(c)(i) is intended to comply with the minimum
gain chargeback requirement in Regulations (S) 1.704-2(f) and shall be
interpreted consistently therewith.
(ii) PARTNER MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Regulations (S) 1.704-2(i)(4), notwithstanding any other provision
of this Article 6, if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain attributable to a Partner Nonrecourse Debt during any fiscal
period, each Partner who has a share of the Partner Nonrecourse Debt Minimum
Gain attributable to such Partner Nonrecourse Debt, determined in accordance
with Regulations 1.704-2(i)(5), shall be specially allocated items of
Partnership income and gain for such period (and, if necessary, subsequent
periods) in an amount equal to such Partner's share of the net decrease in
Partner Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in accordance with Regulations (S) 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amount required to be allocated to each Partner pursuant thereto. The items to
be so allocated shall be determined in accordance with Regulations (S)(S) 1.704-
2(i)(4) and 1.704-1(j)(2). This Section 6.6(c)(ii) is intended to comply with
the minimum gain chargeback requirement in Regulations (S) 1.704-2(i)(4) and
shall be interpreted consistently therewith.
(iii) CERTAIN SECTION 754 ADJUSTMENTS. To the extent an
adjustment to the adjusted tax basis of any Partnership asset pursuant to Code
Section 743(b), Code Section 732(d) or Code Section 734(b) is required to be
taken into account in determining Capital Accounts as the result of a
distribution to a Partner in complete liquidation of its interest in the
Partnership, pursuant to Regulations (S) 1.704-1(b)(2)(iv)(m), the amount of
such adjustment to Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to the
Partners in accordance with their interests in the Partnership as determined
under Regulations 1.704-1(b)(3) in the event Regulations (S) 1.704-
1(b)(2)(iv)(m)(2) applies, or to the Partner to whom such distribution was made
in the event Regulations (S) 1.704-1(b)(2)(iv)(m)(4) applies.
(iv) PARTNER NONRECOURSE DEDUCTIONS. Any Partner Nonrecourse
Deductions for any fiscal period shall be specially allocated to the Partner who
bears the economic risk of loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance with
Regulations (S) 1.704-2(i)(1).
6.7 OTHER CAPITAL ACCOUNT ALLOCATION RULES.
(a) ALLOCATIONS WHEN PERCENTAGE INTERESTS CHANGE. For purposes of
determining the Net Income or Net Loss allocable with respect to any period, Net
Income or Net Loss shall be determined on a daily, monthly or other basis, as
determined by the Partners using any permissible method under Code Section 706
and the Regulations thereunder.
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(b) TAX REPORTING. The Partners are aware of the income tax
consequences of the allocations made by this Article 6 and hereby agree to be
bound by the provisions of this Agreement in reporting their shares of
Partnership income, gain, loss, deduction and expenses for income tax purposes.
6.8 TAX ALLOCATIONS: CODE SECTION 704(C).
(a) GENERALLY. Except as otherwise provided in this Section 6.8, each
item of Partnership income, gain, loss, deduction and expense shall be allocated
to the Partners consistent with the allocations to Capital Accounts provided for
in this Agreement. Any item of income, gain, loss, deduction or credit,
including depreciation recapture, with respect to any property (other than
money) that has been contributed by a Partner to the capital of the Partnership
and which is required to be allocated to the Partners for income tax purposes
pursuant to Code Section 704(c) so as to take into account the variation between
the adjusted basis of such property for federal income tax purposes and its fair
market value at the time of contribution shall be allocated to the Partners in
the manner so required by Code Section 704(c) and the Regulations thereunder.
(b) ELECTIONS. Any elections or other decisions relating to
allocations pursuant to this Section 6.8 shall be made by the Partners in any
manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 6.8 are solely for purposes of federal,
state and local income taxes.
6.9 INTEREST ON CAPITAL ACCOUNTS. Except as specifically provided herein,
no Partner shall be entitled to any interest on its Capital Account or its
contributions to the capital of the Partnership, nor shall any Partner have the
right to demand or receive the return of all or any part of its Capital Account
or its contributions to the capital of the Partnership.
6.10 AUDITS. The Partnership shall employ Price Waterhouse to prepare and
deliver to the Partners an audit of the Annual Financial Statements. In
addition, promptly upon written notice and during normal business hours, either
Partner may (and may employ third-party accounting firms for assistance), no
more often than twice each fiscal year and at its expense, audit, inspect and
take extracts and copies from the other Partner's records with respect to the
News Products subject to reasonable confidentiality protections for the other
Partner's records and information. Either Partner may (and may employ third-
party accounting firms for assistance) audit, inspect and take extracts and
copies from the records of the Partnership at any time during normal business
hours.
7. EXCLUSIVITY
7.1 STARWAVE PARTNER EXCLUSIVITY. During the Term and in the Territory,
and except for activities associated with the development, expansion and
commercialization of the news Component of the Portal Products and Search or
Directory, Starwave Partner and its Affiliates shall not develop, distribute,
produce, or exploit, or market or promote on-air, or, provide services of any
nature or provide a license or permit a third party to utilize any of their
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respective Intellectual Property Rights with respect to any Remote Access
Products that are dedicated primarily to national and international news,
including, by way of example and without limitation, stories and features
regarding national, international and local affairs and stories and features
regarding business/finance, entertainment, weather, environmental and other
subjects, to the extent such subjects are of national or international
significance or are treated as such in traditional news media. Notwithstanding
the foregoing, Starwave Partner and its Affiliates may engage in such activities
with respect to any Remote Access Products dedicated primarily to entertainment
news or personal finance news.
7.2 ABC PARTNER EXCLUSIVITY. During the Term and in the Territory, and
except for activities associated with the development, expansion and
commercialization of the news Component of the Portal Products, ABC Partner and
its Affiliates shall not develop, distribute, produce, exploit or provide
services of any nature or market or promote on-air (subject to the current
agreement between ABC and America Online, dated March 5, 1997, as amended) or
provide a license or permit a third party to utilize any of their respective
Intellectual Property Rights with respect to any Remote Access Products that are
dedicated primarily to national, international and local news, including, by way
of example and without limitation, stories and features regarding national and
international affairs and stories and features regarding business/finance,
entertainment, weather, environmental and other subjects, to the extent such
subjects are of national or international significance or are treated as such in
traditional news media. Notwithstanding the foregoing, ABC Partner and its
Affiliates may engage in such activities with respect to any Remote Access
Products dedicated primarily to entertainment news or personal finance news. If
during the Term, ABC Partner owns an entertainment news Remote Access Product
that competes with Mr. Showbiz (other than entertainment news coverage that
represents 25% or less of the Content of a larger service owned by DEI or its
Affiliates (e.g., ABC.com)), ABC Partner shall, at Starwave Partner's option,
either take all necessary action to have the Partnership (a) assign back to
Starwave all right, title and interest of the Partnership in Mr. Showbiz or (b)
continue to own Mr. Showbiz but permit Starwave to develop and market Mr.
Showbiz as an independent property without the restrictions set forth in Section
7.1; provided, that in each case, Starwave shall provide the Partnership with a
royalty-free license (subject to compliance with a promotion plan to be mutually
agreed upon by the Advisory Committee) to use Mr. Showbiz as part of the Remote
Access Products during the Term and, in the case of clause (b), ABC Partner
shall continue to promote Mr. Showbiz as provided in such promotion plan.
7.3 NO OTHER RESTRICTIONS. Except as expressly set forth in this Section
7, neither ABC Partner and its Affiliates, on the one hand, nor Starwave Partner
and its Affiliates, on the other hand, shall be subject to any restrictions on
the licensing, use, distribution or other exploitation of their respective
properties (including all Intellectual Property Rights therein) that either
Partner or any of its Affiliates own, control, have a license to, or in which
they have any other form of right, title or interest.
7.4 BROADBAND APPLICATIONS. For clarification purposes, ABC Partner and
its Affiliates, on the one hand, and Starwave Partner and its Affiliates, on the
other hand, in their respective sole discretion, may develop, produce, exploit
or provide services of any nature with
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respect to programming designed specifically for Broadband delivery (i.e.,
content that requires Broadband transmission to satisfactorily deliver services
to consumers). ABC Partner agrees to investigate (without any obligation)
cooperation with Starwave Partner in the development of products designed for
Broadband delivery.
8. PROPRIETARY RIGHTS.
The Partnership shall jointly own all the Technology, Content (other than
ABC Content, if any) and Programming developed and funded by the Partnership or
jointly funded by the Partners pursuant to Section 6.1(c) during the Term for
the News Products. Ownership of Technology, Content and Programming funded by
Starwave or ABC shall be governed as provided in the Service Agreement.
9. CONFIDENTIAL INFORMATION
The definition and use of each Partner's "Confidential Information" by the
other Partner shall be governed by the terms of that certain Mutual Non-
Disclosure Agreement between the Partners dated March 28, 1997.
10. REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION
10.1 WARRANTIES OF STARWAVE PARTNER. Starwave Partner represents and
warrants that (a) it has the right, power and authority to enter into this
Agreement and fully to perform its obligations under this Agreement; (b) the
making of this Agreement by it does not violate any agreement existing between
it and any other person or entity; (c) it complies, and at all times shall
comply, with all applicable laws, rules and regulations in effect at the time
services are performed pursuant to this Agreement pertaining to the subject
matter hereof; and (d) it shall not exercise any of the rights granted to it
under or pursuant to this Agreement in a manner that shall violate any
applicable law, rule or regulation.
10.2 INDEMNIFICATION OBLIGATIONS OF STARWAVE PARTNER. Starwave Partner
agrees to, and shall, indemnify, defend and hold harmless ABC Partner and its
Affiliates and their respective directors, shareholders, officers, agents,
employees, successors and assigns from and against any and all claims, demands,
suits, judgments, damages, costs, losses, expenses (including reasonable
attorneys' fees and expenses) and other liabilities arising from actions brought
by third parties in connection with or related to, directly or indirectly, any
breach or alleged breach of any of the representations or warranties made by it
under this Agreement. The foregoing obligations of Starwave Partner shall be
subject to (i) ABC Partner giving Starwave Partner sole control of the defense
and/or settlement of any third party claims, and (ii) ABC Partner providing
Starwave Partner with reasonable assistance and full information at Starwave
Partner's expense. ABC Partner shall promptly notify Starwave Partner of any
such claim, and Starwave Partner shall bear full responsibility for the defense
(including any settlements) of any such claims (i) Starwave Partner shall keep
ABC Partner informed of, and consult with ABC Partner in connection with the
progress of such litigation or settlement; and (ii) Starwave Partner shall not
have any right, without ABC Partner's written consent, to settle
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any such claim if such settlement arises from or is part of any criminal action,
suit or proceeding or contains a stipulation to or admission or acknowledgment
of, any liability or wrongdoing (whether in contract, tort or otherwise) on the
part of any ABC Affiliate,
10.3 WARRANTIES OF ABC PARTNER. ABC Partner represents and warrants that
(a) it has the right, power and authority to enter into this Agreement, to grant
the licenses herein granted, and to fully perform its obligations under this
Agreement; (b) the making of this Agreement by it does not violate any agreement
existing between it and any other person or entity; (c) it complies, and at all
times shall comply, with all applicable laws, rules and regulations in effect at
the time services are performed pursuant to this Agreement pertaining to the
subject matter hereof; and (d) it shall not exercise any of the rights granted
to it under or pursuant to this Agreement in a manner that shall violate any
applicable law, rule or regulation.
10.4 INDEMNIFICATION OBLIGATIONS OF ABC PARTNER. ABC Partner agrees to,
and shall, indemnify, defend and hold harmless Starwave Partner and its
Affiliates, and its directors, shareholders, officers, agents, employees,
successors and assigns from and against any and all claims, demands, suits,
judgments, damages, costs, losses, expenses (including reasonable attorneys'
fees and expenses) and other liabilities arising from actions brought by third
parties, in connection with or related to, directly or indirectly, any breach
or alleged breach of the representations and warranties made by it under this
Agreement. Starwave Partner shall promptly notify ABC of any such claim, and
ABC shall bear full responsibility for the defense of such claim (including any
settlements) provided however, that (i) ABC Partner shall keep Starwave Partner
informed of and consult with Starwave Partner in connection with the progress of
such litigation or settlement; and (ii) ABC Partner shall not have any right,
without Starwave Partner's written consent, to settle any such claim if such
settlement arises from or is part of any criminal action, suit or proceeding or
contains a stipulation to or admission or acknowledgment of, any liability or
wrongdoing (whether in contract, tort or otherwise) on the part of Starwave
Partner.
10.5 CHOICE OF COUNSEL AND PROTECTION OF RIGHTS. Each Partner shall have
the right, in its absolute discretion, to employ attorneys of its own choice and
to institute or defend any matter, claim, action or proceeding and to take any
other appropriate steps to protect its Intellectual Property Rights and all
rights and interest in and title to its web sites, technology, content and every
element thereof and, in that connection, to settle, compromise in good faith, or
in any other manner dispose of any matter, claim, action, or proceeding and to
satisfy any judgment that may be rendered, in any manner as such Partner in its
sole discretion may determine.
10.6 NO OTHER REPRESENTATIONS. Except for the representations and
warranties specifically set forth in this Agreement, each party makes no other
representations and warranties of any nature whatsoever to the other parties.
10.7 NO SPECIAL DAMAGES. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED
IN THIS AGREEMENT, EXCEPT FOR LIABILITY ARISING UNDER SECTIONS 10.2 AND 10.4, NO
PARTY SHALL UNDER ANY
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CIRCUMSTANCES, BE LIABLE TO ANOTHER PARTY FOR ANY CONSEQUENTIAL, INDIRECT,
SPECIAL, INCIDENTAL OR EXEMPLARY DAMAGES (INCLUDING WITHOUT LIMITATION, LOST
PROFITS, LOSS OF ANTICIPATED BUSINESS, LOSS OF DATA OR BUSINESS LOSSES) EVEN IF
SUCH DAMAGES ARE FORESEEABLE AND EVEN IF THE BREACHING PARTY HAS BEEN APPRISED
OF THE LIKELIHOOD OF SUCH DAMAGES OCCURRING.
11. TERM AND TERMINATION
11.1 TERM. The term of this Agreement shall commence as of the Effective
Time and shall continue for a period of ten (10) years after the date of the
Effective Time, unless earlier terminated as set forth below (the "Term").
11.2 RENEWAL. Unless earlier terminated, the Partners shall begin renewal
negotiations in good faith beginning on the eight (8) year anniversary of the
Effective Time. If the Partners do not reach an agreement to extend this
Agreement on mutually acceptable terms within three hundred sixty (360) days
after negotiations begin, the exclusivity provisions contained in Sections 7.1
and 7.2 shall be deemed modified, with no action required of the Partners, to
permit either Partner to develop, produce, distribute, exploit or provide
services with respect to competitive Remote Access Products; provided, that
except for such modifications, this Agreement shall continue in full force and
effect until the expiration of the Term and, provided, further, neither Partner
may engage in such activities with respect to News Products then available to
consumers in any manner or available prior to the expiration of the Term. In
the event the exclusivity provisions contained in Sections 7.1 and 7.2 shall be
deemed modified, and either Partner develops, produces, distributes, exploits or
provides services with respect to Remote Access Products competitive with the
News Products, such Partner's Remote Access Products competitive with the News
Products shall be provided with a prominent position on the News Products, via
an above-the-fold link on the start page for the News Product, until the end of
the Term.
11.3 TERMINATION. Without prejudice to any other rights or remedies
available to the Partners, each Partner shall have the right, in its sole
discretion, to terminate this Agreement upon written notice to the other in the
event of the occurrence of one or more of the following:
(a) The other Partner (or DEI or Infoseek) makes any assignment for
the benefit of creditors or files a petition in bankruptcy (provided, that with
respect to ABC Partner's ability to terminate in the event that Starwave Partner
or Infoseek files a petition in bankruptcy, such petition shall have been
approved by a decision of the majority of Infoseek's Disinterested Directors (as
defined in that certain Governance Agreement by and between Infoseek and DEI) or
is adjudged bankrupt or is placed in the hands of a receiver;
(b) With respect to Starwave Partner's termination rights, if ABC
Partner willfully misuses the Starwave Marks or with respect to ABC Partner's
termination rights, Starwave Partner willfully misuses the ABC Marks, and (i)
the willful misuse occurs repeatedly and in each case in material breach of this
Agreement, and (ii) the willful misuse occurs more
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than three (3) times in any one year period ("Excepted Misuses"), and (iii) with
respect to each such willful misuse, the breaching Partner fails to Cure such
misuse within sixty (60) days after the nonbreaching Partner delivers written
notice of the misuse to the other Partner; provided however that (w) if the
misuse consists of displaying the ABC Marks within the News Products in a manner
such that the appearance of the ABC Marks does not conform to the requirements
set forth herein, and this misuse does not have a material adverse effect on ABC
Partner, such misuse shall be excluded from the Excepted Misuses; and (x) if the
Partner misusing the Marks of the other Partner is using its best efforts to
Cure the misuse, the Cure period shall be extended for so long as such efforts
are exercised; and (y) if a willful misuse is Cured within forty eight (48)
hours of an officer of the breaching Partner being notified in writing of such
misuse by the nonbreaching Partner, such willful misuse shall not count toward
the three (3) Excepted Misuses set forth above; and (z) if a Partner has not
willfully misused the other Partner's Marks within any six (6) month period
during the term hereof, all misuses occurring prior to the commencement of such
six (6) month period shall not count toward the three (3) Excepted Misuses set
forth above. In the event that a Partner misuses the other Partner's Marks
(whether willfully or otherwise), the Partner that misused the Marks shall
implement commercially reasonable policies to address the prevention of the
occurrence of such misuse in the future.
For purposes of this Section 11.3(b), the following terms shall have the
following meanings:
(i) "Marks" shall mean ABC Marks with respect to ABC Partner or
Starwave Marks with respect to Starwave; and
(ii) "misuse" by Starwave of an ABC Trademark shall mean a use of the
ABC Marks in a manner which materially breaches the provisions set forth in
Section 6.1 or 6.2 of the Management and Services Agreement attached hereto as
Exhibit A, either directly by Starwave or by a third party licensed by Starwave
to use the Marks; and
(iii) "Cure" shall mean if the misuse is performed directly by a
Partner, correcting the display or misapplication of the other Partner's Marks,
or if the misuse is performed by a third party under license by a Partner,
terminating the license or purported rights granted by Partner to use such Marks
and using reasonable efforts to cause the third party to cease its misuse of the
other Partner's Marks.
The Partners acknowledge and agree that the nature of Remote
Access Products and the Narrowband medium in general may result in a misuse of a
Partner's Marks being displayed in multiple locations and across multiple
networks. For the avoidance of doubt, if the same application of a Mark is
displayed multiple times or in multiple places as a direct or indirect result of
the Narrowband medium or the manner in which Remote Access Products are
operated, transmitted or otherwise made available electronically, such repeated
displays shall constitute no more than one misuse for purposes of counting
Excepted Misuses hereunder.
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(c) If the other Partner's Profit Participation is equal to or less
than 25% of the total Profit Participation and the Partnership sustains either
eight consecutive Net Loss fiscal quarters or ten total Net Loss fiscal
quarters; provided, that if the other Partner is Starwave Partner, ABC Partner
shall not be able to terminate unless either Starwave Partner has not qualified
pursuant to Section 6.2(e) for a loan from ABC Partner or such loan has been
treated as a Partnership capital contribution in accordance with its terms after
the expiration of the twelve (12) month period set forth in Section 6.2(e).
11.4 ADDITIONAL TERMINATION RIGHTS. [INTENTIONALLY OMITTED]
11.5 EFFECT OF TERMINATION. In the event of the expiration or termination
of this Agreement for any reason (including a material breach hereof), the
Partnership shall continue solely for the purposes of winding up its affairs in
an orderly manner, liquidating its assets (subject to Section 11.6) and
satisfying the claims of its creditors and Partners. No Partner shall take any
action that is inconsistent with, or not necessary to or appropriate for,
winding up the Partnership's business and affairs. The Partners shall be
responsible for overseeing the winding up and liquidation of the Partnership and
shall take full account of the Partnership's liabilities and property, and the
property of the Partnership shall be liquidated, and the proceeds therefrom, to
the extent sufficient therefor, shall be applied and distributed to the payment
and discharge of all of the Partnership's debts and liabilities to creditors of
the Partnership prior to distributions to the Partners pursuant to Section 11.6.
11.6 LIQUIDATING DISTRIBUTIONS. Upon the expiration or termination of this
Agreement, and after the payment and discharge of all of the Partnership's debts
and liabilities to third-party creditors, the Partnership shall liquidate and
distribute its assets in accordance with Capital Accounts; provided, that the
Partners may elect to receive a distribution of the following assets (at their
respective Asset Values, without taking into consideration the values of the
associated ABC Trademarks nor the values of any Technology, or other development
tools, software, hardware, middleware, or technical know-how licensed to the
Partnership by Starwave or its Affiliates) in lieu of a portion of a cash
distribution (except with respect to clauses (a) and (b) below, which shall be
distributed without giving effect to a reduction of any cash distribution) and
shall contribute cash to the Partnership as necessary to provide that the assets
of the Partnership are distributed in accordance with Capital Accounts:
(a) ABC Partner shall own the brand and name of the News Products and
all other descriptive names developed or used during the Term that contain an
ABC Trademark and the Partnership and Starwave Partner shall assign to ABC
Partner all of its right, title and interest in any registration or other
indicator of ownership and ABC Partner shall own all URLs containing "ABC" and
any variant thereof and the Partnership and Starwave Partner shall assign to ABC
Partner all of its right, title and interest in any registration or other
indicator of ownership;
(b) As among Starwave Partner, DEI, and ABC Partner and each of their
respective Affiliates, Starwave Partner shall own all Technology licensed by
Starwave Partner and its Affiliates to the Partnership in connection with the
operation of the News Products;
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(c) With respect to in-kind distributions of assets of the
Partnership:
(i) ABC Partner shall be entitled to receive as an in-kind
distribution, the assets (including personnel) of the affiliate relations group
(referenced in Section 3.4(b)) and all other editorial-related Content assets,
including personnel and content licenses;
(ii) Starwave Partner shall be entitled to receive as an in-kind
distribution, all remaining assets (other than customer lists) and personnel of
the Partnership including without limitation all Technology Assets together with
all technology licenses between Starwave or third parties and the Partnership.
For purposes of this Agreement, "Technology Assets" means all technology-related
assets of the Partnership or jointly owned by the Partnership including without
limitation all Programming, Technology, and other development tools, software,
hardware, middleware and technical know-how;
(iii) With respect to all such in-kind distributions, all assets
distributed shall be valued at their respective Asset Values (subject to the
parenthetical within the first sentence of Section 11.6 above) and the
Partnership and the assigning Partner shall assign to the other Partner all of
its respective right, title and interest in such assets, including employment
agreements;
(iv) The assigning Partner agrees to not solicit for hire or
hire any employee in any of the groups or performing functions associated with
the assets being distributed pursuant to this Section for a period of fifteen
(15) months starting from the date of the related in-kind distribution.
Upon the liquidation of the Partnership, if any Partner has a deficit
balance in its Capital Account (after giving effect to all contributions,
distributions and allocations for all fiscal periods, including the fiscal
period during which such liquidation occurs), such Partner shall be obligated to
contribute to the capital of the Partnership the amount necessary to restore the
Capital Account balance to zero as provided in Regulation 1.704-
1(b)(2)(ii)(b)(3).
11.7 PARTNERSHIP PROPERTY. Upon liquidation and after giving effect to
Section 11.6, the Partnership shall contribute all customer lists owned by the
Partnership to a California trust, with a mutually agreed trustee and both
Partners as equal beneficiaries. Such trust shall have a perpetual life (subject
to termination for material breach or bankruptcy of a Partner) and shall provide
that each Partner shall have a perpetual royalty free license to all customer
lists owned by the Partnership (and transferred to the trust). Neither Partner
may provide the customer lists to third parties unless mutually agreed.
Notwithstanding the foregoing, the perpetual grant hereunder shall be modified,
if necessary, with respect to certain assets if such perpetual grant would
materially diminish the value of such assets as a matter of law.
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11.8 SURVIVAL. Unless otherwise specified, all obligations that accrue
prior to any expiration or termination of this Agreement shall survive such
expiration or termination. In addition, and without limiting the generality of
the preceding sentence, Sections 8, 9, 10, 11, 12, 13.1, 13.2, 13.4, 13.6, 13.7,
13.10, 13.11, 13.12, 13.13, 13.14 and 14 shall survive the expiration or
termination of this Agreement for any reason.
11.9 INJUNCTIVE RELIEF. Each Partner acknowledges and agrees that the other
Partner may be irreparably harmed by any material breach of this Agreement by
it. Therefore, each Partner agrees that in the event that it breaches any of its
obligations hereunder, the other Partner in addition to all other remedies
available to it under this Agreement, or at law or in equity, shall be entitled
to seek all forms of injunctive relief including decrees of specific
performance, without showing or proving that it sustained any actual damages and
without posting bond.
12. OTHER RIGHTS OF DUTIES AND RESTRICTIONS ON THE PARTNERS
12.1 INDEMNIFICATION. All costs, expenses, liabilities, obligations,
losses, damages, penalties, proceedings, actions, suits or claims of whatever
kind or nature which may be imposed on, incurred by, suffered by, or asserted
against the Partnership, any Partner or any Partner's respective Affiliates,
directors, officers and employees, in connection with the ownership or
management or operation of the business and affairs of the Partnership shall be
referred to as "Claims." The Partnership shall indemnify and hold harmless each
Partner and their respective Affiliates, directors, officers and employees
("Related Persons") for all Claims other than those caused by such Partner's or
such other Related Person's negligence, willful misconduct or breach of this
Agreement. Each Partner shall indemnify and hold harmless the Partnership and
each other Partner for all Claims sustained by any of them resulting from such
Partner's negligence, willful misconduct or breach of this Agreement.
12.2 CONTRIBUTION. In the event that any Partner shall pay in good faith
or become obligated to pay any proper obligation of the Partnership, such
Partner shall be entitled to contributions from the other Partners to the extent
necessary so that, after giving effect to such contributions, each Partner shall
bear no more than that part of such obligation which corresponds to its
respective Capital Contribution obligations at the time of the occurrence,
circumstances, events or conditions giving rise to the obligation.
13. GENERAL PROVISIONS
13.1 NOTICES. All notices which either Partner or the Partnership is
required or may desire to serve upon the other Partner, DEI or the Partnership
shall be in writing and addressed as follows:
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(a) if to ABC Partner:
ABC News
47 W. 66/th/ Street
New York, NY 10023
Attention: Jeffrey C. Gralnick
Telephone: (212) 456-3300
Facsimile: (212) 456-3299
DOL Online Investments, Inc.
500 S. Buena Vista Street
Burbank, CA 91521
Attention: Jake Winebaum
Telephone: (818) 623-3300
Facsimile: (818) 623-3304
with a copy to:
Disney Enterprises, Inc.
500 S. Buena Vista Street
Burbank, CA 91521
Attention: General Counsel
Telephone: (818) 560-4370
Facsimile: (818) 563-4160
(d) if to the Partnership, c/o:
Starwave Corporation
13810 SE Eastgate Way
Bellevue, WA 98005
Attention: Michael Slade
Curt Blake
Telephone: (206) 957-2000
Facsimile: (206) 643-9381
with a copy to:
DOL Online Investments, Inc.
500 S. Buena Vista Street
Burbank, CA 91521
Attention: Jake Winebaum
Telephone: (818) 623-3300
Facsimile: (818) 623-3304
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(b) if to DEI:
Disney Online
500 S. Buena Vista Street
Burbank, CA 91521
Attention: Jake Winebaum
Telephone: (818) 623-3300
Facsimile: (818) 623-3304
with a copy to:
Disney Enterprises, Inc.
500 S. Buena Vista Street
Burbank, CA 91521
Attention: General Counsel
Telephone: (818) 560-4370
Facsimile: (818) 563-4160
(c) if to Starwave Partner:
Starwave Corporation
13810 SE Eastgate Way
Bellevue, WA 98005
Attention: Michael Slade
Curt Blake
Telephone: (206) 957-2000
Facsimile: (206) 643-9381
Any such notice may be served personally or by mail (postage prepaid),
facsimile (provided oral confirmation of receipt is immediately obtained and a
hard copy is concurrently sent by internationally commercially recognized
overnight delivery service), internationally commercially recognized overnight
delivery service (such as Federal Express or D.H.L.) or courier. Notice shall be
deemed served upon personal delivery or upon actual receipt. Either Partner or
the Partnership may change the address to which notices are to be delivered by
written notice to the other Partner and the Partnership served as provided in
this Section 13.1.
13.2 ENTIRE AGREEMENT. This Agreement, together with the Exhibits attached
hereto and hereby incorporated herein by reference, constitutes the complete,
final and exclusive understanding and agreement between the Partners with
respect to the transactions contemplated, and supersedes any and all prior or
contemporaneous oral or written representation, understanding, agreement or
communication between the Partners concerning the subject matter hereof.
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13.3 AMENDMENTS. All amendments or modifications of this Agreement shall
be binding upon the Partners so long as the same shall be in writing and
executed by each of the Partners hereto.
13.4 WAIVER. No waiver of any provision of this Agreement or any rights or
obligations of either Partner hereunder shall be effective, except pursuant to a
written instrument signed by the Partner waiving compliance, and any such waiver
shall be effective only in the specific instance and for the specific purpose
stated in such writing.
13.5 FORCE MAJEURE. Neither Partner nor the Partnership shall be deemed in
default hereunder, nor shall it hold the other Partner or the Partnership
responsible for, any cessation, interruption or delay in the performance of its
obligations hereunder due to causes beyond its reasonable control including, but
not limited to: earthquake, flood, fire, storm or other natural disaster, act of
God, labor controversy or threat thereof, civil disturbance or commotion,
disruption of the public markets, war or armed conflict (whether or not
officially declared) or the inability to obtain sufficient material, supplies,
labor, transportation, telecommunications, power or other essential commodity or
service required in the conduct of its business, any change in or the adoption
of any law, ordinance, rule, regulation, order, judgment or decree (each a
"Force Majeure Event") provided that the Partner relying upon this Section 13.5:
(a) shall have given the other Partner and the Partnership written notice
thereof promptly and, in any event, within five (5) days of discovery thereof
and (b) shall take all steps reasonably necessary under the circumstances to
mitigate the effects of the force majeure upon which such notice is based.
13.6 NO THIRD PARTNER BENEFICIARIES. Nothing in this Agreement is intended
or shall be construed to give any person, other than the Partners hereto, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein.
13.7 RESTRICTION ON TRANSFER.
(a) Neither Partner shall, directly or indirectly, Transfer all or any
portion of its Partnership Interest or any rights therein (whether voluntarily
or by operation of law) without the consent of the other Partner, which consent
may be withheld by such Partner in its sole and absolute discretion; provided,
that ABC Partner shall be entitled to assign its Partnership Interest or any
rights therein to any Affiliate, provided that such Affiliate satisfies the
conditions of paragraph (b) below and shall remain an Affiliate of the Partner,
unless it obtains the prior written consent of the other Partner, which consent
may be withheld in the other Partner's sole discretion. Any Transfer or
attempted transfer by any Partner in violation of the preceding sentence shall
be null and void and of no force or effect whatsoever. No transferee of a
Partner's Interest shall be admitted as a substitute Partner without (i) the
prior unanimous written consent of the other Partners, which may be withheld by
any such Partner in its sole and absolute discretion and (ii) the receipt of any
applicable regulatory consents or approvals.
(b) A Transfer to an Affiliate shall be conditioned upon the following:
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(i) The transferor and transferee shall execute and deliver to
the Partnership such documents and instruments of conveyance as may be necessary
to effect such Transfer including, without limitation, the execution by the
transferee of a counterpart to this Agreement by which the transferee agrees to
all of the terms, obligations and provisions of this Agreement.
(ii) The Transfer shall not cause the Partnership to terminate
for federal income tax purposes and shall not have a material adverse income tax
consequence to the Partnership or the other Partner.
(c) Upon a merger, consolidation, reorganization, liquidation or
similar event affecting a Partner, its successor-in-interest will assure all
obligations of such Partner hereunder.
13.8 INSURANCE. The Partnership will purchase and maintain sufficient
product liability insurance to protect the Partners and the Partnership against
liability as a result of product liability claims made in connection with the
News Products.
13.9 PARTNERSHIP BANK ACCOUNTS AND FUNDS. The Partnership shall establish
bank accounts at such banks as may from time to time be designated by the
Partners. The Partnership's funds shall be invested in such manner as the
Partners deem appropriate with interest accruing to the Partnership. All bank
and other accounts shall be maintained in the Partnership's name. None of the
Partnership's funds shall be commingled with the funds of any Partner unless
previously approved in writing by the Partners. The Partners shall designate
the General Manager, as a signatory on the bank accounts of the Partnership to
accomplish more effectively the purposes of this Section 13.9.
13.10 CONSTRUCTION. This Agreement shall be fairly interpreted and
construed in accordance with its terms and without strict interpretation or
construction in favor of or against either Partner. Each Partner has had the
opportunity to consult with counsel in the negotiation of this Agreement.
13.11 CAPTIONS AND HEADINGS. The section and subsection headings and
captions appearing in this Agreement are inserted only as a matter of
convenience and shall not be given any legal effect.
13.12 SEVERABILITY. If any restriction, covenant or provision of this
Agreement shall be adjudged by a court of competent jurisdiction to be void as
going beyond what is reasonable in all the circumstances for the protection of
the interests of the Partner seeking to enforce such restriction, covenant or
provision, such restriction, covenant or provision shall apply with such
modifications as may be necessary to make it valid and effective. In the event
that any provision of this Agreement should be found by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
shall not in any way be affected or impaired thereby.
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13.13 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New York. Any action arising out of or relating to this Agreement
shall be filed only in the courts of the State of California for the County of
Los Angeles, or the United States District Court for the Central District of
California. The parties hereby consent and submit to the personal jurisdiction
of such courts for the purposes of litigating any such action.
13.14 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which together shall constitute
one and the same instrument.
14. TAX MATTERS
14.1 PARTNERSHIP FOR TAX PURPOSES. The Partners intend to treat the
arrangement contemplated herein as a general partnership for tax purposes.
Accordingly, all transactions contemplated by this Agreement shall be
implemented in a manner that is consistent with such treatment.
14.2 PARTNERSHIP TAX YEAR. To the extent permitted by applicable tax law,
the Partnership's year end shall be September 30 for income tax purposes.
14.3 TAX MATTERS PARTNER. The Partners designate ABC Partner as the tax
matters partner, pursuant to Section 6231 of the Code. To the extent permitted
by applicable tax law, actions taken by ABC Partner in its capacity as the tax
matters partner shall require the prior joint approval of the Partners.
14.4 OVERSIGHT OF TAX MATTERS. The General Manager shall arrange for the
preparation and timely filing of all returns of Partnership income, gains,
losses, deductions, credits and other items necessary for federal, state and
local income tax purposes, shall provide copies of draft tax returns to each
Partner at least thirty days prior to filing the returns and shall use
reasonable good-faith efforts to furnish to the Partners within sixty days after
the close of each year of the Partnership the tax information reasonably
required for federal, state, and local income tax reporting purposes. The
General Manager shall use good-faith efforts to supply each Partner with the
information necessary to determine estimated tax payments or any other
information related to taxes reasonably requested by each Partner. The
classification, realization and recognition of income, gains, losses,
deductions, credits and other items shall be on the accrual method of accounting
for federal income tax purposes.
14.5 PARTNER SECTION 482 ADJUSTMENT. If the Internal Revenue Service
reallocates an item of income, deduction, or loss to a Partner or an Affiliate
pursuant to Section 482 of the Code or any similar rule or principle of law (a
"Partner Section 482 Allocation"), and the Partnership has a corresponding
correlative item of deduction, loss or income (as determined under Section
1.482-1(g) of the Regulations (the "Partnership Correlative Item"), such
Partnership Correlative Item shall be specially allocated to and reflected in
the Capital Account of the Partner that received (or whose Affiliate received)
such Partner Section 482 Allocation,
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and a corresponding contribution or distribution shall likewise be deemed to
have been made by or to such Partner.
IN WITNESS WHEREOF, the duly authorized representatives of each Partner
have executed this Agreement as of the day and year first written above.
DOL ONLINE INVESTMENTS, INC. STARWAVE VENTURES
By: /s/ Laurence J. Shapiro By: /s/ Laurence J. Shapiro
------------------------- -----------------------------
Name: Laurence J. Shapiro Name: /s/ Laurence J. Shapiro
Title: Vice President Title: Vice President
The undersigned parent corporations of the Partners agree to cause their
respective subsidiaries that are Partners (or other Affiliates, as necessary) to
fully perform their obligations hereunder. In addition, Disney Enterprises,
Inc. agrees to cause its Affiliates to provide to the Partnership all news-
related Content that is 100% owned by Disney Enterprises, Inc. and its
Affiliates, whether or not owned by ABC News, that may be necessary or useful in
the development and operation of the News Products and such Content shall be
deemed ABC Content for purposes of this Agreement and the Services Agreement.
DISNEY ENTERPRISES, INC. INFOSEEK CORPORATION
By: /s/ Kevin A. Mayer By: /s/ Harry M. Motro
------------------------- ------------------------
Name: Kevin A. Mayer Name: Harry M. Motro
Title: Sr. Vice President Title: President and CEO
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EXHIBIT 17
AMENDED AND RESTATED
ABC NEWS/STARWAVE
MANAGEMENT AND SERVICES AGREEMENT
THIS AMENDED AND RESTATED MANAGEMENT AND SERVICES AGREEMENT including the
Exhibits attached hereto (this "AGREEMENT") is entered into as of June 18, 1998
by and among ABC, INC., a Delaware corporation ("ABC"), STARWAVE CORPORATION, a
Washington corporation ("STARWAVE") and ABC NEWS/STARWAVE PARTNERS, a New York
General Partnership (THE "PARTNERSHIP"); provided that, this Agreement shall
only become effective upon the Effective Time, as defined in and pursuant to
that certain Agreement and Plan of Reorganization, of even date herewith, by and
among Infoseek, Infoseek Company, a Delaware corporation, Starwave Corporation,
a Washington corporation, and Disney Enterprises, Inc., a Delaware corporation
("DEI") and shall cease and be of no further force and effect in the event that
the Effective Time does not occur; and provided further that, each of the
parties hereto agrees not to terminate, amend or otherwise alter this Agreement,
or waive any of its rights hereunder, at any time prior to immediately following
the Effective Time. This Agreement amends and restates in its entirety the
Management and Services Agreement by and between the parties hereof entered into
as of March 28, 1997 (the "Original Services Agreement"). DEI is a party to
this Agreement solely with respect to the provisions of Sections 3.3, 3.6, 5.2,
6.1, 6.2 and 10.7.
RECITALS
1. In connection with an investment in Starwave by DEI, Affiliates of each of
ABC and Starwave entered into a Partnership pursuant to a Partnership Agreement
dated March 28, 1997 (the "Original Agreement").
2. Pursuant to an agreement and plan of reorganization and a stock and warrant
purchase agreement (collectively, the "Acquisition Agreements"), DEI has agreed
to acquire approximately a 43% interest in the voting equity of Infoseek
Corporation, a California corporation ("Infoseek"), subject to the terms and
conditions set forth in the Acquisition Agreements.
3. In connection with the transaction contemplated under the Acquisition
Agreements, the Partners desire to amend and restate the Original Agreement by
entering into this Agreement.
THEREFORE, for good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, ABC, Starwave and the Partnership hereby agree as
follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the following
meanings:
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1.1 "ABC CONTENT" means all Content that is 100% owned or controlled by
ABC or its successors or assigns. For purposes of this Section 1.1, "control"
means the ability to grant the licenses set forth herein; provided however that
if such Content is subject to the payment of royalties or other consideration to
third parties, ABC will notify Starwave in writing in advance and the
Partnership shall have the right, at its option, to include such Content in the
definition of ABC Content.
1.2 "ABC TRADEMARKS" means "ABC News" and the other marks, trade names,
trademarks, brands, names, personalities, logos and representations thereof that
are properties of ABC or its Affiliates that appear within the ABC Content,
Programming, News Products or any other materials created in association with
this Agreement and that ABC or any of its Affiliates owns or controls.
1.3 "ADVISORY COMMITTEE" has the meaning specified in the Partnership
Agreement.
1.4 "AFFILIATE" means, with respect to any person, any person directly or
indirectly through one or more intermediaries controlling, controlled by or
under common control with such person. Notwithstanding the foregoing, for
purposes of this Agreement, Starwave shall not be considered as an Affiliate of
ABC or DEI.
1.5 "ANNUAL BUSINESS PLAN" has the meaning specified in the Partnership
Agreement.
1.6 "BROADBAND" means programming that requires transmission at data rates
which would enable real time, full screen, full motion video at equal to or
better than NTSC broadcast resolution.
1.7 "CONTENT" means audio and audio visual material, photographs, art
work, videos, graphics, text, and sound recordings.
1.8 "COSTS" means all direct costs and allocated costs, whether incurred
by ABC or DEI (including, without limitation, costs associated with Section 3)
or Starwave (including, without limitation, costs associated with Section 4) or
by the Partnership (as referenced in the Partnership Agreement), that are
associated with the development, production and exploitation of the News
Products.
1.9 "FIXED MEDIA PRODUCTS" means multimedia content products developed for
distribution to end users on any platform (including, without limitation, MS-
DOS, Windows, Macintosh, Sega, Nintendo, CD-ROM, Sony Playstation and 3DO
systems) designed to be read on an electronic device but excluding such products
if they include a Narrowband-delivered component and such products would not be
commercially competitive (as reasonably determined in good faith by the
Partners) without the inclusion of a Narrow-band delivered component.
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1.10 "FORCE MAJEURE EVENT" has the meaning specified in Section 10.5.
1.11 "INTELLECTUAL PROPERTY RIGHTS" means any and all (by whatever name or
term known or designated) tangible and intangible and now known or hereafter
existing (a) rights associated with works of authorship throughout the universe,
including but not limited to copyrights, moral rights, and mask-works, (b)
trademark, service mark and trade name rights and similar rights, (c) trade
secret rights, (d) patents, designs, algorithms and other industrial property
rights, (e) all other intellectual and industrial property and proprietary
rights (of every kind and nature throughout the universe and however designated)
(including without limitation logos, character rights, "rental" rights and
rights to remuneration), whether arising by operation of law, contract, license
or otherwise, and (f) all registrations, applications, renewals, extensions,
continuations, divisions or reissues thereof now or hereafter in force
throughout the universe (including without limitation rights in any of the
foregoing).
1.12 "NARROWBAND" means programming that does not require transmission at
data rates which would enable real time, full screen, full motion video at equal
to or better than NTSC broadcast resolution.
1.13 "NEWS PRODUCTS" means the Remote Access Products developed, produced,
marketed, distributed or otherwise exploited under the Partnership Agreement
containing broad national, international and local news media, including, by way
of example and without limitation, stories and features regarding national,
international and local affairs and stories and features regarding
business/finance, entertainment, weather, environmental and other subjects, to
the extent such subjects are of national or international significance or are
treated as such in traditional news media.
1.14 "PARTNERSHIP" means the general partnership formed by Affiliates of
Starwave and ABC and "PARTNERSHIP AGREEMENT" means the amended and restated
partnership agreement between such Affiliates, dated as of the date hereof.
1.15 "PERSON" means any individual, partnership, corporation, trust or
other entity.
1.16 "PROGRAMMING" means the programming included in the News Products
including, without limitation, all HTML, Java, and/or other formatted text
files, all related graphics files, animation files, data files, multimedia
files, modules, routines and objects, and the computer software and all of the
script or program files required to exploit such materials and that collectively
control the display of and end user interaction with the programming.
1.17 "REMOTE ACCESS PRODUCTS" means Programming intended for distribution
by any Narrowband interactive transmission method. This definition excludes any
and all Programming that requires Broadband transmission and also excludes (a)
products developed for PDAs, pagers, screen phones and other future handheld
devices and (b) Fixed Media Products.
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1.18 "RESTATED INITIAL BUSINESS PLAN" has the meaning specified in the
Partnership Agreement.
1.19 "STARWAVE TRADEMARKS" means "Starwave" and the other marks, trade
names, trademarks, brands, names, personalities, logos and representations
thereof that are properties of Starwave Partner or its Affiliates that appear
within the News Products or any other materials created in association with this
Agreement and that Starwave Partner owns or controls.
1.20 "TECHNOLOGY" means all software, hardware and middleware required or
appropriate to (i) transform the Content into the Programming, (ii) create,
modify or maintain the Programming, or (iii) deliver the Programming in an
online format.
1.21 "TERM" shall have the meaning set forth in Section 9.1.
1.22 "TERRITORY" means the United States and Canada.
2. STARWAVE OBLIGATIONS. During the Term, Starwave shall have the following
obligations to the Partnership:
2.1 HOSTING/NETWORK INFRASTRUCTURE. Starwave shall host all portions of
the News Products on Starwave servers, at the highest quality levels as Starwave
performs hosting services for any third party (i.e., having substantially
similar service requirements) and at a nominal mark-up to Costs on a cost-
effective basis and on most-favored-nations terms as those provided to any
similarly situated third party (i.e., having substantially similar service
requirements). Starwave shall be solely responsible for all Starwave network
infrastructure (i.e., telecommunications and connections to the Internet) in
conformance with the level of service that Starwave provides to itself or its
most valued partners and customers.
2.2 BILLING, COLLECTION, CUSTOMER SERVICE FUNCTIONS. Starwave shall be
responsible for billing, collection, customer service and other "back office"
functions for the Partnership at a nominal mark-up to Costs and on most-favored-
nations terms as those provided to any third party (i.e., having substantially
similar service requirements). All such services shall be performed by Starwave
at the highest quality levels Starwave performs services for any third party
(i.e., having substantially similar service requirements) and at a nominal mark-
up to Costs on a cost-effective basis and on most-favored-nations terms as those
provided to any similarly situated third party (i.e., having substantially
similar service requirements).
2.3 TECHNOLOGY DEVELOPMENT AND MAINTENANCE. Starwave shall be responsible
for the technology development and maintenance relating to the News Products, at
a nominal mark-up to actual costs and on most-favored-nations terms as those
provided to any third party (i.e., having substantially similar service
requirements), to the extent commercially reasonable. All such services shall
be performed by Starwave at the highest quality levels Starwave performs
services for any third party (i.e., having substantially similar service
requirements) and at a nominal mark-up to Costs on a cost-effective basis and on
most-favored nations terms as those provided to any similarly situated third
party (i.e., having substantially similar service
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requirements). It is the intention of the parties that the preponderance of the
technology development and maintenance relating to the News Products shall be
performed by Starwave. The General Manager (as defined in the Partnership
Agreement), in accordance with the Restated Initial Business Plan or Annual
Business Plans, may acquire or license additional or substitute Technology (i)
on an incidental and nonmaterial basis, (ii) if the Costs of acquiring or
licensing Technology from a third party are significantly less than the Costs to
the Partnership of acquiring or licensing such or similar Technology from
Starwave and such third party Technology from Starwave is fully scaleable and
compatible with other Technology used for the News Product and otherwise
appropriate for its intended uses, (iii) or if otherwise agreed and otherwise
appropriate for use in the News Products. In addition, the General Manager, in
accordance with the Restated Initial Business Plan or Annual Business Plans may
acquire or license additional or substitute Technology if, in the General
Manager's reasonable opinion, the inability to so acquire or license such
Technology would have a material impact on the overall quality and competitive
position of the News Products. In such event, Starwave shall have a three (3)
day period to meet with the General Manager to attempt to resolve the issues. If
the issues have not been resolved in the three (3) day period, the General
Manager shall be entitled to present the issues to the Partners for resolution
based upon the mutual agreement of the Partners. During the Term, such
technology development and maintenance (or a portion thereof) may become a
responsibility of the Partnership or the Partners collectively, upon the mutual
agreement of the parties.
2.4 USAGE TRACKING.
(a) Starwave will track traffic in the News Products and shall provide
ongoing access to reports on such traffic to ABC.
(b) Starwave shall from time to time promptly deliver to ABC upon
ABC's request, the names, addresses and other identifying information of users
of the News Products who complete merchandise, advertising, promotional or
subscription transactions over the News Products.
(c) The parties shall have the right to use all data provided by
Starwave under subsections (a) or (b) above in any manner, subject to a mutually
agreed privacy policy and credit policy. All such data shall be owned by the
Partnership. Each party agrees that during the term it shall not provide such
data to any third party, except as may be mutually agreed.
(d) Starwave acknowledges and agrees that the News Products may
contain registration forms and/or questionnaires for users to complete in
connection with contests, promotions or other features of the News Products.
Starwave acknowledges and agrees that such information shall be solely owned by
the Partnership and may be used for either party's and its respective
Affiliates' business purposes, but may not be provided to any third party
(except advertisers), except as may be mutually agreed.
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2.5 EXISTING TECHNOLOGY. Starwave shall provide, on a royalty free basis,
Technology existing as of the date of this Agreement, including, without
limitation, interactive software development tools, middleware and engines owned
or licensed by Starwave or its Affiliates (provided that Starwave has the right,
with no additional monies owed, to license any such technology to ABC, subject
to Section 5.1) for use in the development and delivery of the News Products.
Such Technology shall be licensed by Starwave, on a royalty free basis.
2.6 OTHER TECHNOLOGY. Starwave shall provide such additional technology
owned or licensed by Starwave or its Affiliates (provided that Starwave has the
right, with no additional monies owed, to license any such technology to ABC,
subject to Section 5.1) that may be useful or necessary in the development of
the News Products, under an agreement to be negotiated in good faith between the
parties within sixty (60) days of the date hereof. If an agreement is not timely
entered into, such Technology shall be provided by Starwave at fair market
rates.
2.7 INFRASTRUCTURE. Starwave shall provide appropriate staffing, support
and infrastructure to fulfill its obligations under this Agreement, including,
without limitation, sufficient dedicated personnel to meet its obligations set
forth under Sections 2.1, 2.2., 2.3 and 2.4, in accordance with the Restated
Initial Business Plan and any Annual Business Plan.
2.8 [INTENTIONALLY OMITTED]
3. ABC AND DEI OBLIGATIONS. During the Term, ABC and DEI shall have the
following obligations to the Partnership.
3.1 CONTENT. Pursuant to Section 6.1, ABC shall provide the Partnership
with a royalty-free license to all ABC Content or Content of its successors-in-
interest which is appropriate for use in the News Products, including without
limitation both television and radio programming. For the avoidance of doubt,
Content provided shall include without limitation all news programs (e.g.,
Evening News), news magazines (e.g., 20/20) and morning shows (e.g., Good
Morning America), subject to cancellation of current programming and the
inclusion of all owned or controlled news programming as set forth in Section
1.1.
3.2 CONTENT DEVELOPMENT/TRANSFORMATION/INTEGRATION. At Costs set forth in
the Restated Initial Business Plan or applicable Annual Business Plan, ABC shall
be responsible for the development of ABC Content for the News Products and for
the transformation of ABC Content into Programming and integration of the
Programming into the News Products. The senior employee in such group shall
report on a day-to-day basis to the General Manager, with direct reporting as
well to an ABC designated executive for oversight of editorial and creative
aspects of the ABC Content.
3.3 ON-AIR MARKETING/PROMOTION. At no charge, ABC shall provide
reasonable marketing and promotion for the News Products on its television and
radio networks, in amounts, formats and frequencies determined by ABC, in its
sole discretion, provided, that ABC shall market and promote ABC News.com in a
manner generally consistent with ESPN's
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marketing and promotion of ESPNET SportsZone, taking into consideration (i) the
differences between news and sports programming, marketing and promotion, (ii)
the appropriateness of any particular marketing and promotional opportunity, and
(iii) the overall reach and ratings differences among the various on-air
programs on which ABC News.com is promoted as compared with the on-air programs
on which ESPNET SportsZone is promoted, in each case, as determined by DEI. For
the avoidance of doubt, it is understood and agreed that the provisions of this
Section 3.3 shall not limit the promotional services obligations of DEI and its
Affiliates under that certain Promotional Services Agreement of even date
herewith.
3.4 INFRASTRUCTURE. ABC shall provide appropriate staffing, support and
infrastructure, including reasonable access to the ABC News Broadcast Newsroom
infrastructure, to fulfill its obligations under this Agreement.
3.5 ON-AIR TALENT. Subject to Section 3.7(a) and (c), and at no charge,
ABC shall provide appropriate access (in its sole discretion) to on-air talent
for use in connection with the News Products.
3.6 GROUP ADVERTISING SALES. At Costs set forth in the Restated Initial
Business Plan or applicable Annual Business Plan, DEI shall provide, with
ongoing participation by the Partnership, group advertising sales services
(i.e., combining advertising sales services for the News Products of the
Partnership with additional News Products that may be developed by the
Partnership or the parties, individually or in other arrangements such as ESPNET
SportsZone and Disney Online).
3.7 ABC'S CONTROL.
(a) EDITORIAL AND CREATIVE. ABC shall exercise sole and final control
over all editorial and creative aspects of the News Products and all portions
thereof.
(b) ABC NETWORK AFFILIATE RELATIONS. ABC shall exercise sole and
final control over all ABC Network affiliate relations matters associated with
the News Products.
(c) MARKETING AND PROMOTIONS. ABC shall exercise sole and final
control over all uses or references to any ABC Trademark contained in marketing
and promotions associated with the News Products. Any use of an ABC Trademark
by the Partnership or Starwave shall require the prior approval of ABC, which
may be withheld at ABC's sole discretion. ABC shall use its reasonable efforts
to promptly respond to requests from the Partnership for use of the ABC
Trademarks. ABC shall cooperate in good faith with the Partnership to agree on
a templated use of ABC Trademarks from time to time to avoid recurrent
approvals.
4. MERCHANDISING
DEI agrees to provide (or cause its Affiliates to provide) and the
Partnership agrees to purchase (subject to agreement on terms) e-commerce
services to the Partnership, including,
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without limitation, store design, transaction processing, web hosting, inventory
management, fulfillment and customer service. In exchange for such services, the
Partnership shall pay DEI its costs in providing such services, plus a to-be-
agreed markup on such costs or a to-be-agreed upon revenue share. In addition,
the Partnership shall have joint ownership of all customer information for use
for its business purposes
5. EXCLUSIVITY
5.1 STARWAVE EXCLUSIVITY. During the Term and in the Territory and except
for activities associated with the development and expansion of the news
Component of the Portal Products and Search or Directory and further excluding
the News Products within the Partnership, Starwave and its Affiliates shall not
develop, distribute, produce, or market or promote on-air, or exploit or provide
services of any nature or provide a license or permit a third party to utilize
any of their respective Intellectual Property Rights with respect to any Remote
Access Products that are dedicated primarily to national and international news,
including, by way of example and without limitation, stories and features
regarding national, international and local affairs and stories and features
regarding business/finance, entertainment, weather, environmental and other
subjects, to the extent such subjects are of national or international
significance or are treated as such in traditional news media. Notwithstanding
the foregoing, Starwave Partner and its Affiliates may engage in such activities
with respect to any Remote Access Products dedicated primarily to entertainment
news or personal finance news.
5.2 DEI EXCLUSIVITY. During the Term and in the Territory, DEI and its
Affiliates shall not develop, distribute, produce, or market or promote on-air
(subject to the current agreement between ABC and America Online, Inc., dated
March 5, 1997, as amended which will not be renewed), or exploit or provide
services of any nature or provide a license or permit a third party to utilize
any of their respective Intellectual Property Rights with respect to any Remote
Access Products that are dedicated primarily to national, international and
local news, including, by way of example and without limitation, stories and
features regarding national and international affairs and stories and features
regarding business/finance, entertainment, weather, environmental and other
subjects, to the extent such subjects are of national or international
significance or are treated as such in traditional news media. Notwithstanding
the foregoing, ABC Partner and its Affiliates may engage in such activities with
respect to any Remote Access Products dedicated primarily to entertainment news.
If during the Term, DEI or its Affiliates develops or owns an entertainment news
Remote Access Product that competes with Mr. Showbiz, DEI and its Affiliates
shall, at Starwave's option, either take all necessary action to have the
Partnership (a) assign back to Starwave all right, title and interest of the
Partnership in Mr. Showbiz or (b) continue to own Mr. Showbiz but permit
Starwave to develop and market Mr. Showbiz as an independent property without
the restrictions set forth in Section 5.1; provided, that in each case, Starwave
shall provide the Partnership with a royalty-free license (subject to compliance
with a promotion plan to be mutually agreed upon by the Partners in writing) to
use Mr. Showbiz as part of the Remote Access Products during the Term and, in
the case of clause (b), DEI's appropriate Affiliates shall continue to promote
Mr. Showbiz as provided in such promotion plan.
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5.3 ADDITIONAL REMOTE ACCESS PRODUCTS. If ABC determines, in its sole
discretion, to develop general news Remote Access Products targeted for users on
an international or foreign (country or regional) basis, the Partnership shall
participate in such development on similar terms to those reflected in the
Partnership Agreement (while taking into consideration additional terms and
potential partners that may be applicable in any particular potential
transaction).
5.4 NO OTHER RESTRICTIONS. Except as expressly set forth in this Section
5, neither ABC and its Affiliates, on the one hand, nor Starwave and its
Affiliates, on the other hand, shall be subject to any restrictions on the
licensing, use, distribution or other exploitation of their respective
properties (including all Intellectual Property Rights therein), that either of
their respective Affiliates own, control, have a license to, or in which they
have any other form of right, title or interest.
5.5 BROADBAND APPLICATIONS. For clarification purposes, ABC and its
Affiliates, on the one hand, and Starwave and its Affiliates, on the other hand,
in their respective sole discretion, may develop, produce, exploit or provide
services of any nature with respect to programming designed specifically for
Broadband delivery (i.e., content that requires Broadband transmission to
satisfactorily deliver services to consumers). ABC agrees to investigate
(without any obligation) cooperation with Starwave in the development of
products designed for Broadband delivery.
6. PROPRIETARY RIGHTS
6.1 GRANT OF RIGHTS. Subject to the Partnership's and Starwave's
compliance with the terms and conditions set forth herein, including without
limitation ABC's rights set forth in Section 3.7, ABC hereby grants the
Partnership (by Partnership or by a third party on behalf of Partnership) the
following limited, royalty-free, non-exclusive (except as exclusive with respect
to Narrowband services in accordance with the provisions hereof), non-
transferable licenses, without right of sublicense, during the Term hereof:
(a) to use, reproduce, modify and adapt the ABC Content to create the
Programming;
(b) to reproduce, transmit, distribute, display and perform the
Programming worldwide as part of the News Products; and
(c) to reproduce and display the ABC Trademarks (including the
descriptive names for the News Products).
6.2 USE OF DISNEY NAME. Neither the Partnership nor Starwave shall have
the right to use the name, likeness or voice of Walt Disney, the word "Disney,"
any likeness of any DEI animated character or any other trademark, tradename or
logo of DEI for any manner
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whatsoever; provided, that the Partnership may use such items solely as
necessary for editorial purposes.
6.3 PROPRIETARY NOTICES. As a condition to the grant of rights hereunder,
any matter containing ABC Content, including without limitation the Programming
shall bear properly located copyright and trademark notices as prescribed by law
in ABC's name. The Partnership and Starwave will comply with such instructions
as to form, location and content of the notice as ABC may give from time to
time. If by inadvertence a proper copyright notice in ABC's or the ABC
Affiliate's name, as applicable, is omitted from the Programming or any material
containing ABC Content, the Partnership and Starwave agree at their respective
expense (to the extent the omission is caused by the Partnership or Starwave) to
use all reasonable efforts to prospectively correct any such omission. The
Partnership and Starwave agree to promptly respond to ABC's request to make any
such corrections.
6.4 OWNERSHIP OF MATERIALS DEVELOPED BY EACH PARTY. Subject to ABC's
ownership at all times of the ABC Content, and to Sections 6.5 and 6.6, each
party shall own all right, title and interest in (a) any and all materials it
developed prior to or during the Term and all Intellectual Property Rights
therein and (b) any and all Technology, Content (other than ABC Content, if any)
and Programming it developed and funded (i.e., without Partnership or joint
funding) during the Term and all Intellectual Property Rights thereto.
6.5 PARTNERSHIP OWNED MATERIALS. The Partnership shall jointly own all
the Technology, Content (other than ABC Content, if any) and Programming
developed and funded by the Partnership during the Term for the News Products.
6.6 OWNERSHIP BY ABC.
(a) The Partnership and Starwave acknowledge and agree that, as
between the Partnership and Starwave, on the one hand, and ABC, on the other
hand, the ABC Content, and all portions and derivative works thereof (other than
the Programming), whether created by the Partnership, Starwave or ABC, shall be
owned by ABC and to the extent that the Partnership or Starwave owns any right,
title and interest in the ABC Content, each hereby assigns all such right,
title, and interest therein to ABC, including without limitation all
Intellectual Property Rights therein, provided that Starwave shall retain all
right, title and interest, including all Intellectual Property Rights in, all
development tools, software or other technology developed and funded by Starwave
and embodied in or used by Starwave in connection with Starwave's development of
the Programming. Subject only to Section 5 and Starwave's ownership rights
hereunder and under the Partnership Agreement, ABC may utilize, distribute and
otherwise exploit in any manner the ABC Content and derivative works thereof
(other than the Programming) now existing or hereafter developed without any
obligation to the Partnership or Starwave; it being understood that no license
under Starwave Intellectual Property Rights shall be implied from the foregoing.
(b) ABC shall own all URLs containing "ABC", and any and all other
URLs with any variant of any ABC Trademark, including, without limitation, any
URLs that also
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include any other name or description in addition to an ABC Trademark and ABC
shall own the descriptive names for the News Products (i.e., ABC News Now and
additional or substitute descriptive names) that contain an ABC Trademark.
(c) Starwave Partner shall own all Technology used in connection with
the operation of the News Products that was owned by Starwave Partner prior to
the Effective Time.
(d) The Partnership has the sole right to license the descriptive
names for the News Products; provided that the Partnership shall be required to
provide such a license to ABC or its Affiliates for their own business purposes
for a fair market value royalty to be paid to the Partnership (as determined in
good faith by the Partners). If such license is to a third party (other than
Infoseek or an Infoseek Affiliate (but excluding DEI and its Affiliates) in
connection with Portal Products (as defined in the Partnership Agreement)), the
terms shall include a fair market value royalty to be paid to the Partnership
(as determined in good faith by the Partners).
6.7 NO ADDITIONAL PARTICIPATION. Nothing in this Agreement conveys to the
Partnership or Starwave and, other than as specifically set forth hereunder, the
Partnership and Starwave shall not have or acquire, any right to participate in
any other promotions or activities relating to the ABC Content or any other ABC
activity or product, which rights are retained exclusively by ABC.
6.8 LITIGATION. Should one party become aware of any infringing use of
its property (including Intellectual Property Rights), such party shall notify
the other party and the other party may, within its sole discretion, undertake
to prosecute necessary actions to prevent such use or distribution. In the
event that both parties are joined in any such litigation, the decisions of the
counsel of the party with the affected properties with reference to matters of
procedure, conduct of such litigation and/or the handling thereof, shall prevail
and the other party shall cooperate with and assist counsel. Any recovery shall
be the sole property of the party with the affected properties.
7. CONFIDENTIAL INFORMATION
The definition and use of each party's "Confidential Information" by the other
parties shall be governed by the terms of that certain Mutual Non-Disclosure
Agreement between the parties dated March 28, 1997
8. REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION
8.1 WARRANTIES OF STARWAVE. Starwave represents and warrants that (a) it
has the right, power and authority to enter into this Agreement and fully to
perform its obligations under this Agreement; (b) the making of this Agreement
by it does not violate any agreement existing between it and any other person or
entity; (c) it complies, and at all times shall comply, with all applicable
laws, rules and regulations in effect at the time services are performed
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pursuant to this Agreement pertaining to the subject matter hereof; and (d)
Starwave shall not exercise any of the rights granted to it under or pursuant to
this Agreement in a manner that shall violate any applicable law, rule or
regulation.
8.2 INDEMNIFICATION OBLIGATIONS OF STARWAVE. Starwave agrees to, and
shall, indemnify, defend and hold harmless ABC and its Affiliates and their
respective directors, shareholders, officers, agents, employees, successors and
assigns from and against any and all claims, demands, suits, judgments, damages,
costs, losses, expenses (including reasonable attorneys' fees and expenses) and
other liabilities arising from actions brought by third parties, for (a) any
breach or alleged breach of any of the representations or warranties made by it
under this Agreement; (b) any unauthorized use by it or any of its
subcontractors of any ABC Content or any portion of the Programming; (d) any
infringement of such third party's copyrights contained in the portions of the
Programming that are owned or controlled by Starwave or in all technology,
software, data, and content therein that are supplied by Starwave; provided that
ABC shall promptly notify Starwave of any such claim and Starwave shall be given
sole control and bear full responsibility for the defense (including any
settlements) of any such claim; and ABC shall provide Starwave with prompt
notice and full information and reasonable assistance at Starwave's expense with
respect to claims covered under this Section 8.2. Starwave shall keep ABC
informed of, and consult with ABC in connection with the progress of such
litigation or settlement; and Starwave shall not have any right, without ABC's
written consent, to settle any such claim if such settlement arises from or is
part of any criminal action, suit or proceeding or contains a stipulation to or
admission or acknowledgment of, any liability or wrongdoing (whether in
contract, tort or otherwise) on the part of any ABC Affiliate.
8.3 WARRANTIES OF ABC. ABC represents and warrants that (a) it has the
right, power and authority to enter into this Agreement, to grant the licenses
herein granted, and to fully perform its obligations under this Agreement; (b)
the making of this Agreement by it does not violate any agreement existing
between it and any other person or entity; (c) it has all necessary rights in
and to the Programming and any ABC Content provided by ABC hereunder for use
within the scope of this Agreement; (d) it complies, and at all times shall
comply, with all applicable laws, rules and regulations in effect at the time
services are performed pursuant to this Agreement pertaining to the subject
matter hereof; and (e) ABC shall not exercise any of the rights granted to it
under or pursuant to this Agreement in a manner that shall violate any
applicable law, rule or regulation.
8.4 INDEMNIFICATION OBLIGATIONS OF ABC. ABC agrees to, and shall,
indemnify, defend and hold harmless Starwave and its Affiliates, and its
directors, shareholders, officers, agents, employees, successors and assigns
from and against any and all claims, demands, suits, judgments, damages, costs,
losses, expenses (including reasonable attorneys' fees and expenses) and other
liabilities arising from actions brought by third parties, in connection with or
related to, directly or indirectly, (a) its performance of the Agreement; (b)
any breach or alleged breach of the representations, warranties and agreements
made by it under this Agreement; (c) its activities hereunder, including without
limitation, any unauthorized use by it or any of its subcontractors of any ABC
Content or any portion of the Programming; (d) any act or omission of it, its
directors, officers, agents, employees or subcontractors; or (e) any
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violation or infringement by ABC of any right of privacy or publicity or any
other Intellectual Property Right within the Territory or any libelous
defamatory, obscene or unlawful material contained in the ABC Content within the
Territory. Starwave shall promptly notify ABC of any such claim, and ABC shall
bear full responsibility for the defense of such claim (including any
settlements) provided however, that (i) ABC shall keep Starwave informed of and
consult with Starwave in connection with the progress of such litigation or
settlement; and (ii) ABC shall not have any right, without Starwave's written
consent, to settle any such claim if such settlement arises from or is part of
any criminal action, suit or proceeding or contains a stipulation to or
admission or acknowledgment of, any liability or wrongdoing (whether in
contract, tort or otherwise) on the part of Starwave.
8.5 CHOICE OF COUNSEL AND PROTECTION OF RIGHTS. Each party shall have the
right, in its absolute discretion, to employ attorneys of its own choice and to
institute or defend any matter, claim, action or proceeding and to take any
other appropriate steps to protect its Intellectual Property Rights and all
rights and interest in and title to its web sites, technology, content and every
element thereof and, in that connection, to settle, compromise in good faith, or
in any other manner dispose of any matter, claim, action, or proceeding and to
satisfy any judgment that may be rendered, in any manner as such party in its
sole discretion may determine.
8.6 NO OTHER REPRESENTATIONS. Except for the representations and
warranties specifically set forth in this Agreement, each party makes no other
representations and warranties of any nature whatsoever to the other parties.
8.7 NO SPECIAL DAMAGES. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS AGREEMENT, EXCEPT FOR LIABILITY ARISING UNDER SECTIONS 8.2 AND
8.4, NO PARTY SHALL UNDER ANY CIRCUMSTANCES, BE LIABLE TO ANOTHER PARTY FOR ANY
CONSEQUENTIAL, INDIRECT, SPECIAL, INCIDENTAL OR EXEMPLARY DAMAGES (INCLUDING
WITHOUT LIMITATION, LOST PROFITS, LOSS OF ANTICIPATED BUSINESS, LOSS OF DATA OR
BUSINESS LOSSES) EVEN IF SUCH DAMAGES ARE FORESEEABLE AND EVEN IF THE BREACHING
PARTY HAS BEEN APPRISED OF THE LIKELIHOOD OF SUCH DAMAGES OCCURRING.
9. TERM AND TERMINATION
9.1 TERM. The term of this Agreement shall commence as of the Effective
Time and shall continue for the same time period that each of ABC Partner and
Starwave Partner are partners in the Partnership (the "Term").
9.2 RENEWAL. Unless earlier terminated pursuant to Section 9.3, the
parties shall begin renewal negotiations in good faith beginning on the eight
(8) year anniversary of the date hereof. If the parties do not reach an
agreement to extend this Agreement on mutually acceptable terms within three
hundred sixty (360) days after negotiations begin, the exclusivity provisions
contained in Sections 5.1 and 5.2 shall be deemed modified, with no action
required
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of the parties, to permit either party to develop, distribute, produce, exploit
or provide services with respect to competitive Remote Access Products;
provided, that except for such modifications, this Agreement shall continue in
full force and effect until the expiration of the Term and, provided, further,
that neither party may engage in such activities with respect to News Products
then available to consumers in any manner or available prior to the expiration
of the Term. In the event the exclusivity provisions contained in Sections 5.1
and 5.2 shall be deemed modified, and either Partner develops, distributes,
produces, exploits or provides services with respect to Remote Access Products
competitive with the News Products, such Partner's Remote Access Products
competitive with the News Products shall be provided with a prominent position
on the News Products, via an above-the-fold link on the start page for the News
Product, until the end of the Term.
9.3 TERMINATION. Without prejudice to any other rights or remedies
available to the parties, ABC and Starwave (but not the Partnership) shall each
have the right, in its sole discretion, to terminate this Agreement upon written
notice to the other in the event of the occurrence of one or more of the
following:
(a) The termination of the Partnership Agreement in accordance with
its terms; or
(b) The other party makes any assignment for the benefit of creditors
or files a petition in bankruptcy (provided, that with respect to ABC Partner's
ability to terminate in the event that Starwave Partner or Infoseek files a
petition in bankruptcy, such petition shall have been approved by a decision of
the majority of Infoseek's Disinterested Directors (as defined in that certain
Governance Agreement by and between Infoseek and DEI) or is adjudged bankrupt or
is placed in the hands of a receiver; or
(c) With respect to Starwave's termination rights, ABC willfully
misuses the Starwave Marks or with respect to ABC termination rights, Starwave
willfully misuses the ABC Marks, and (i) the willful misuse occurs repeatedly
and in each case in material breach of this Agreement, and (ii) the willful
misuse occurs more than three (3) times in any one year period ("Excepted
Misuses"), and (iii) with respect to each such willful misuse, the breaching
party fails to Cure such misuse within sixty (60) days after the nonbreaching
party delivers written notice of the misuse to the other party; provided however
that (w) if the misuse consists of displaying the ABC Marks within the News
Products in a manner such that the appearance of the ABC Marks does not conform
to the requirements set forth herein, and this misuse does not have a material
adverse effect on ABC, such misuse shall be excluded from the Excepted Misuses;
and (x) if the party misusing the Marks of the other party is using its best
efforts to Cure the misuse, the Cure period shall be extended for so long as
such efforts are exercised; and (y) if a willful misuse is Cured within forty
eight (48) hours of an officer of the breaching party being notified in writing
of such misuse by the nonbreaching party, such willful misuse shall not count
toward the three (3) Excepted Misuses set forth above; and (z) if a party has
not willfully misused the other party's Marks within any six (6) month period
during the term hereof, all misuses occurring prior to the commencement of such
six (6) month period shall not count toward the three (3) Excepted Misuses set
forth above. In the event that a party misuses
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the party's Marks, (whether willfully or otherwise), the party that misused the
Marks shall implement commercially reasonable policies to address the prevention
of the occurrence of such misuse in the future.
For purposes of this Section 9.3(c), the following terms shall have the
following meanings:
(i) "Marks" shall mean ABC Marks with respect to ABC or Starwave Marks with
respect to Starwave; and
(ii) "misuse" by Starwave of an ABC Trademark shall mean a use of the ABC Marks
in a manner which materially breaches the provisions set forth in Section 6.1 or
6.2 of this Agreement, either directly by Starwave or by a third party licensed
by Starwave to use the Marks; and
(iii) "Cure" shall mean if the misuse is performed directly by a party hereto,
correcting the display or misapplication of the other party's Marks, or if the
misuse is performed by a third party under license by a party hereto,
terminating the license or purported rights granted by such party to use such
Marks and using reasonable efforts to cause the third party to cease its misuse
of the other party's Marks.
The Partners acknowledge and agree that the nature of Remote Access Products and
the Narrowband medium in general may result in a misuse of a Partner's Marks
being displayed in multiple locations and across multiple networks. For the
avoidance of doubt, if the same application of a Mark is displayed multiple
times or in multiple places as a direct or indirect result of the Narrowband
medium or the manner in which Remote Access Products are operated, transmitted
or otherwise made available electronically, such repeated displays shall
constitute no more than one misuse for purposes of counting Excepted Misuses
hereunder.
9.4 [INTENTIONALLY OMITTED.]
9.8 SURVIVAL. Unless otherwise specified, all obligations that accrue
prior to any expiration or termination of this Agreement shall survive such
expiration or termination. In addition, and without limiting the generality of
the preceding sentence, Sections 6, 7, 8, 9, and 10 shall survive the expiration
or termination of this Agreement for any reason.
9.9 INJUNCTIVE RELIEF. Each party acknowledges and agrees that the other
parties may be irreparably harmed by any material breach of this Agreement by
it. Therefore, each party agrees that in the event that it breaches any of its
obligations hereunder, the other parties in addition to all other remedies
available to it under this Agreement, or at law or in equity, shall be entitled
to seek all forms of injunctive relief including decrees of specific
performance, without showing or proving that it sustained any actual damages and
without posting bond.
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10. GENERAL PROVISIONS
10.1 NOTICES. All notices which either party is required or may desire to
serve upon another party shall be in writing and addressed as follows:
(a) if to ABC:
ABC News
47 W. 66th Street
New York, NY 10023
Attention: Jeffrey C. Gralnick
Telephone: (212) 456-3300
Facsimile: (212) 456-3299
with a copy to:
Disney Online
500 S. Buena Vista Street
Burbank, CA 91521
Attention: Jake Winebaum
Telephone: (818) 623-3300
Facsimile: (818) 623-3304
(b) if to DEI:
Disney Online
500 S. Buena Vista Street
Burbank, CA 91521
Attention: Jake Winebaum
Telephone: (818) 623-3300
Facsimile: (818) 623-3304
with a copy to:
Disney Enterprises, Inc.
500 S. Buena Vista Street
Burbank, CA 91521
Attention: General Counsel
Telephone: (818) 560-4370
Facsimile: (818) 563-4160
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(c) if to Starwave:
Starwave Corporation
13810 SE Eastgate Way
Bellevue, WA 98005
Attention: Michael Slade
Curt Blake
Telephone: (206) 957-2000
Facsimile: (206) 643-9381
(d) if to the Partnership, c/o:
Starwave Corporation
13810 SE Eastgate Way
Bellevue, WA 98005
Attention: Michael Slade
Curt Blake
Telephone: (206) 957-2000
Facsimile: (206) 643-9381
DOL Online Investments, Inc.
500 S. Buena Vista Street
Burbank, CA 91521
Attention: Jake Winebaum
Telephone: (818) 623-3300
Facsimile: (818) 623-3304
ABC News
47 W. 66th Street
New York, NY 10023
Attention: Jeffrey C. Gralnick
Telephone: (212) 456-3300
Facsimile: (212) 456-3299
Any such notice may be served personally or by mail (postage prepaid),
facsimile (provided oral confirmation of receipt is immediately obtained and a
hard copy is concurrently sent by internationally commercially recognized
overnight delivery service), internationally commercially recognized overnight
delivery service (such as Federal Express or D.H.L.) or courier. Notice shall
be deemed served upon personal delivery or upon actual receipt. Any party may
change the address to which notices are to be delivered by written notice to the
other parties served as provided in this Section 10.1.
10.2 ENTIRE AGREEMENT. This Agreement, together with the Exhibits
attached hereto and hereby incorporated herein by reference, constitutes the
complete, final and exclusive
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understanding and agreement between the parties with respect to the transactions
contemplated, and supersedes any and all prior or contemporaneous oral or
written representation, understanding, agreement or communication between the
parties concerning the subject matter hereof.
10.3 AMENDMENTS. All amendments or modifications of this Agreement shall
be binding upon the parties so long as the same shall be in writing and executed
by each of the parties hereto.
10.4 WAIVER. No waiver of any provision of this Agreement or any rights
or obligations of any party hereunder shall be effective, except pursuant to a
written instrument signed by the party waiving compliance, and any such waiver
shall be effective only in the specific instance and for the specific purpose
stated in such writing.
10.5 FORCE MAJEURE. No party shall be deemed in default hereunder, nor
shall it hold the other parties responsible for, any cessation, interruption or
delay in the performance of its obligations hereunder due to causes beyond its
reasonable control including, but not limited to: earthquake, flood, fire, storm
or other natural disaster, act of God, labor controversy or threat thereof,
civil disturbance or commotion, disruption of the public markets, war or armed
conflict (whether or not officially declared) or the inability to obtain
sufficient material, supplies, labor, transportation, telecommunications, power
or other essential commodity or service required in the conduct of its business,
any change in or the adoption of any law, ordinance, rule, regulation, order,
judgment or decree (each a "Force Majeure Event") provided that the party
relying upon this Section 10.5: (a) shall have given the other parties written
notice thereof promptly and, in any event, within five (5) days of discovery
thereof and (b) shall take all steps reasonably necessary under the
circumstances to mitigate the effects of the force majeure upon which such
notice is based.
10.6 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement is intended
or shall be construed to give any person, other than the parties hereto, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein.
10.7 ASSIGNMENT. Neither party shall directly or indirectly assign this
Agreement to a third party without the prior written consent of the other party,
which consent shall not be unreasonably withheld.
10.8 CONSTRUCTION. This Agreement shall be fairly interpreted and
construed in accordance with its terms and without strict interpretation or
construction in favor of or against any party. Each party has had the
opportunity to consult with counsel in the negotiation of this Agreement.
10.9 CAPTIONS AND HEADINGS. The section and subsection headings and
captions appearing in this Agreement are inserted only as a matter of
convenience and shall not be given any legal effect.
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10.10 SEVERABILITY. If any restriction, covenant or provision of this
Agreement shall be adjudged by a court of competent jurisdiction to be void as
going beyond what is reasonable in all the circumstances for the protection of
the interests of the party seeking to enforce such restriction, covenant or
provision, such restriction, covenant or provision shall apply with such
modifications as may be necessary to make it valid and effective. In the event
that any provision of this Agreement should be found by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
shall not in any way be affected or impaired thereby.
10.11 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New York. Any action arising out of or relating to this Agreement
shall be filed only in the courts of the State of California for the County of
Los Angeles, or the United States District Court for the Central District of
California. The parties hereby consent and submit to the personal jurisdiction
of such courts for the purposes of litigating any such action.
10.12 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which together shall constitute
one and the same instrument.
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IN WITNESS WHEREOF, the duly authorized representatives of each party have
executed this Agreement as of the day and year first written above.
ABC, INC. STARWAVE CORPORATION
By: /s/ Laurence J. Shapiro By: /s/ Kevin A. Mayer
------------------------- -------------------------
Name: Laurence J. Shapiro Name: Kevin A. Mayer
Title: Vice President Title: Sr. Vice President
ABC NEWS/STARWAVE PARTNERS
By its General Partners
DOL ONLINE INVESTMENTS, INC. STARWAVE VENTURES
By: /s/ Laurence J. Shapiro By: /s/ Laurence J. Shapiro
------------------------- -------------------------
Name: Laurence J. Shapiro Name: Laurence J. Shapiro
Title: Vice President Title: Vice President
EXECUTED SOLELY WITH RESPECT
TO THE PROVISIONS OF
SECTIONS 3.1, 3.6, 4.6, 5.2, 6.1 AND 6.2
DISNEY ENTERPRISES, INC.
By: /s/ Kevin A. Mayer
-------------------------
Name: Kevin A. Mayer
Title: Sr. Vice President
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EXHIBIT 18
REPRESENTATION AGREEMENT
REPRESENTATION AGREEMENT, dated as of June 16, 1998, between ABC/Starwave
Partners, a New York General Partnership ("Venture"), and Starwave Corporation,
a Washington corporation ("Representative") and Infoseek Corporation, a Delaware
corporation ("Infoseek"); provided that, subject to the earlier termination of
this Agreement pursuant to the provisions of Section 11.2 hereof, this
Agreement shall only become effective upon the Effective Time (as defined in and
pursuant to that certain Agreement and Plan of Reorganization (the "Merger
Agreement"), of even date herewith, by and among Infoseek Corporation, a
California corporation, Infoseek, Representative, and Disney Enterprises, Inc.,
a Delaware corporation) and shall cease and be of no further force and effect in
the event that the Effective Time does not occur; and provided further that,
except as earlier terminated pursuant to Section 11.2, each of the parties
hereto agrees not to terminate, amend or otherwise alter this Agreement, or
waive any of its rights hereunder, at any time prior to immediately following
the Effective Time; provided that, notwithstanding the foregoing, the provisions
of Section 11.2 hereof shall be in full force and effect as of the date hereof
and through to the Effective Time.
WHEREAS, Venture owns and operates Internet services known as ABCNEWS.com,
Mr. Showbiz, Wall of Sound, Celebsite and Money Scope (collectively, and
including all additional Internet services that may be owned and/or operated by
the Venture during the term of this Agreement, the "Internet Services"), which
provide a variety of news programming and information on the Internet; and
WHEREAS, Representative is engaged, among other things, in the business of
operating Internet sites; and
WHEREAS, Venture desires to engage Representative to provide Venture with
Services (as defined below) associated with sales of available ad inventory on
the Internet Services and related products and services, and Representative is
willing to provide such representation, on the terms and subject to the
conditions set forth in this Agreement.
NOW, THEREFORE, the parties hereto covenant and agree as follows:
ARTICLE 1
SERVICES
Section 1.1. PROVISION OF SERVICES.
(a) DESCRIPTION. Venture hereby engages Representative, as an independent
contractor, and Representative hereby accepts such engagement, on the terms and
subject to the conditions set forth in this Agreement, to represent Venture on
an exclusive basis in the sale of advertising and other items as designated or
approved by Venture related to
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the Internet Services, and to provide additional services, if any, as Venture
may request in writing from time to time on terms mutually satisfactory to the
parties hereto (all of the foregoing collectively, the "Services"). Activities
with respect to the sale of advertising on the Internet Services and other
related items include without limitation, the negotiation, execution, renewal,
amendment, modification or termination of advertising and other related
contracts. The parties hereto acknowledge that Representative is being engaged
to provide the Services principally due to its expertise in such matters.
(b) MANNER. The Services shall be performed by Representative with such
care as a prudent manager would use in the conduct of his company's affairs, and
Representative shall accord the Internet Services the same priority as
Representative accords its own operations and the operations of internet
services that are managed, represented and afforded the most favorable treatment
by Representative or its affiliates, taking into consideration the size and
complexity of the Internet Services as compared with Representative's own
internet services for purposes of determining personnel assignments and head
count. In providing the Services, Representative shall use the best efforts it
would use if it were providing the Services on its own behalf to (i) promote the
Internet Services as an advertising medium, (ii) seek to preserve and maximize
the long-term value of the Internet Services, including the ABC tradenames and
goodwill and (iii) comply with the standards and practices for the ABC Service
attached as Exhibit A. Representative shall, at Representative's expense,
furnish to Venture the services of such full-time and part-time employees of
Representative, including, without limitation, marketing and sales personnel and
such other personnel as may be reasonably required properly to render the
Services. Representative hereby undertakes, on the terms set forth in the first
sentence of this Section 1.1(b), to cause the Services to be provided such that
Venture complies in all material respects with all applicable laws, rules and
regulations.
(c) CONSULTATION. Venture and Representative will consult with each other
from time to time as requested by either party with respect to the Services, the
Internet Services and the performance of their respective obligations hereunder
and under the other agreements contemplated hereby; provided, however, that
nothing in this subsection shall be deemed to in any way limit Venture's
exclusive control over the manner and use of its Marks (as defined below) as
provided for in this Agreement and the Trademark License Agreement entered into
between the parties as of the date hereof.
Section 1.2. REPORTS; ACCESS TO INFORMATION.
(a) NOTICE. Representative shall notify Venture as promptly as
practicable after the occurrence of any of the following:
(i) receipt by Representative of (A) any notice or inquiry from any
governmental authority with respect to or arising out of the Services
contemplated by this Agreement or the other agreements contemplated hereby
or (B) any written notice from any governmental authority or third party of
any claim or
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legal process or notification that, in the reasonable opinion of
Representative, is or is likely to become material to the Internet
Services; or
(ii) any other development that, in the reasonable opinion of
Representative, materially affects or is likely to materially affect the
Internet Services or the ability of Representative to fulfill its
obligations under this Agreement.
(b) REQUESTS FOR INFORMATION. Representative promptly shall provide to
Venture such information (including financial information) concerning the
Services provided hereunder as Venture reasonably may request from time to time,
including, without limitation, monthly advertising sales reports, which reports
shall set forth total ad avails sold, average CPM, average revenue per page
view, ad avails per page, sellout rate, breakdown of costs incurred, list of
advertisers and revenue sold per advertiser.
(c) ACCESS. Representative shall maintain and make available for
inspection by Venture or its representatives, during normal business hours,
Representative's complete and accurate books of account relating to the Internet
Services, and all other records, books and other information received, compiled
or otherwise maintained by Representative with respect to the Internet Services,
and all other documents reasonably requested by Venture and its officers,
managerial employees, counsel and auditors.
(d) ADVERTISING INFORMATION. Without limiting the foregoing provisions of
this Section 1.2, during the last six months of the Term (as defined in Section
2.1), in order to facilitate Venture's determination of whether to seek to
extend the term of this Agreement or take other actions with respect to the
Internet Services upon expiration of the Term, Representative shall make or
cause to be made available to Venture and its Representatives such information
as Venture reasonably requests relating to the historical advertising revenues
of the Internet Services during the Term and the booked advertising sales
relating to the Internet Services.
Section 1.3. TITLE. Representative acknowledges that it will acquire no
right, title or interest in any property or assets of Venture, including,
without limitation, any trade names, trademarks or service marks owned or
licensed by Venture, by reason of this Agreement or Representative's provision
of the Services hereunder. Representative further acknowledges that all records,
books and other information received, compiled or otherwise maintained by
Representative with respect to the Internet Services in connection with
Representative's provision of the Services hereunder are solely the property of
Venture and shall be returned to Venture promptly upon the expiration or earlier
termination of the Term; provided, however, that Venture shall, upon reasonable
request of Representative and at reasonable times, and subject to such
confidentiality arrangements as Venture reasonably requests, permit
Representative to make reasonable examination of such books, records and other
information and permit Representative to make copies of the relevant portions of
such books, records and other information.
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Section 1.4. POWER OF ATTORNEY. Subject to the provisions of Sections 6.1
(Trademark License Agreement), 6.2 (Programming Decisions), 6.3 (Use of Names)
and 7.1 (Venture Approval Matters),Venture appoints Representative its attorney-
in-fact for the Internet Services for the Term, solely in performance of the
Services, and authorizes Representative, in the name and on behalf of the
Internet Services, to make, execute, deliver, acknowledge, swear to, file and
record all documents as may be necessary, in the discretion of Representative,
in connection with the performance of the Services hereunder. Representative
shall be required to notify Venture before entering into any agreement of any
nature and shall deliver copies of all agreements, invoices and similar
materials to Venture immediately upon completion.
Section 1.5. APPOINTMENT OF ADDITIONAL REPRESENTATIVES. Representative may
appoint other entities to sell advertising inventory for the Internet Services
with the prior written approval of the Venture. Additionally, upon request from
the Venture, Representative will sell ad avail inventory to an Affiliate of the
Venture for sale by such Affiliate which sale shall be at least, at the Minimum
Revenue Rate under Section 3.4. In any circumstance, responsibility for
collection of revenue and payment of minimums to the Venture resides with the
Representative.
ARTICLE 2
TERM
Section 2.1. TERM. The term during which the Services shall be provided
(the "Term") shall be the period from the Effective Time until the Termination
Date (as defined in Section 11.1).
ARTICLE 3
GUARANTEED MINIMUMS AND PAYMENTS
Section 3.1. GUARANTEED MINIMUM. Representative shall guarantee to the
Venture a minimum quarterly payment equal to (i) the number of projected page
views, multiplied by 80%, multiplied by (ii) the Minimum Revenue Rate (the
"Guaranteed Minimum Payment").
Section 3.2. INITIAL PROJECTED PAGE VIEWS. The initial projected number of
page views per quarter will be established by mutual agreement of the
Representative and Venture. In the event that the parties cannot agree upon an
initial number of page views, then such minimum shall be based on the actual
average quarterly number of page views over the previous six month period.
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Section 3.3. SUBSEQUENT PROJECTED PAGE VIEWS. In subsequent months, the
projected number of page views will be established for each quarter by mutual
agreement of the Representative and Venture; provided, however that should the
parties fail to agree on the projected number of page views for any quarter,
then the projected page views for such quarter shall be based on the actual
number of page views for the corresponding quarter of the prior year ("Prior
Quarter") multiplied by 50% of the actual year-over-year growth rate (i.e.,
compared with the same quarter from the prior year) for the preceding 4
quarters.
Section 3.4. MINIMUM REVENUE RATE. The guaranteed minimum ad revenue rate
(the "Minimum Revenue Rate") per page view paid to the Venture will be based on
the average ad revenue rate per page view of publicly traded Internet companies
involved in activities comparable to those of the Venture. If a mutually
agreeable rate can not be determined, then the rate will be based on the
Venture's 12 month trailing average.
Section 3.5. GUARANTEED DELIVERY. Venture guarantees to deliver 80% of the
projected page views each quarter. In the event that Venture fails to deliver
such minimum number of page views, Representative will be entitled to a
proportional reduction in its Guaranteed Minimum Payment.
Section 3.6. REPRESENTATION RIGHTS FEES. Representative shall pay to
Venture for the right to render Services under this Agreement the greater of (i)
the Guaranteed Minimum Payment or (ii) actual ad revenues billed to third
parties in the performance of the Services, in each case less only
Representative's actual and reasonably allocated costs of providing the Services
and a profit margin of five percent (5%) of such costs (either amount, the
"Representation Rights Fee"). The Representation Rights Fee shall be payable
quarterly during the Term.
Section 3.7. UNCONDITIONAL OBLIGATIONS. Except as otherwise set forth
herein, the obligations of Representative to pay the Representation Rights Fee
are unconditional. Representative is required to pay the Venture the
Representation Rights Fees on or before the 20th day of the end of each quarter
of each month, regardless of whether Representative is able to collect the
related outstanding receivables.
ARTICLE 4
EXPENSES
Section 4.1. OPERATING EXPENSES. From and after the Effective Time, all
expenses of performing the Services shall be the responsibility of, and shall be
borne by, Representative subject only to recoupment thereof pursuant to Section
3.6 above.
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ARTICLE 5
INTENTIONALLY OMITTED
ARTICLE 6
VENTURE AGREEMENTS
Section 6.1. TRADEMARK LICENSE AGREEMENT. On the Effective Time, Venture
and Representative shall enter into a Trademark License Agreement in the form
attached hereto as Exhibit A (the "Trademark License Agreement") pursuant to
which Venture shall grant to Representative a non-exclusive, royalty-free
license to use the mark "ABC" solely in connection with Representative's
performance of the Services during the Term. Notwithstanding the foregoing or
any provisions herein or in the Trademark License Agreement, Venture shall have
the exclusive control over the manner and use of any trade names, trademarks,
service marks, logos, copyrights and other intellectual property (the "Marks")
owned by Venture, including "ABCNEWS.com." Representative acknowledges that the
License granted by the Trademark License Agreement is non-exclusive and, as
such, Venture is free to use, or license others to use the marks in any manner
whatsoever, other than for the purpose of selling advertising on the Internet
Services during the Term, except as provided in Section 1.5 above.
Section 6.2. PROGRAMMING DECISIONS. (i) During the Term, Venture shall
have the sole power, to make all decisions (other than decisions with respect to
the Services, except as provided herein) concerning the programming and content
of the Internet Services, including decisions relating to the execution,
renewal, amendment, modification or termination of all Agreements related
thereto.
Section 6.3. USE OF NAMES. The Representative shall not have the right to
use the name, likeness or voice of Walt Disney, the words, "Disney," "ABC,"
"ESPN," (other than as part of "ABCNEWS.com") or any Disney animated character
or any other trademark, tradename or logo of Disney for any manner whatsoever
without the prior consent of Disney or ABC, as appropriate.
ARTICLE 7
VENTURE APPROVAL MATTERS
Section 7.1. VENTURE APPROVAL MATTERS. Notwithstanding anything to the
contrary contained herein, Representative shall not, without the prior written
approval of the General Manager of Ventures (i) institute any legal proceedings
on behalf of the
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Internet Services (other than ordinary course collection matters instituted by
Representative following not less than thirty (30) days' prior written notice to
Venture).
ARTICLE 8
REPRESENTATIONS AND WARRANTIES
Section 8.1. REPRESENTATIONS AND WARRANTIES OF VENTURE. Venture hereby
represents and warrants that:
(a) ORGANIZATION AND STANDING. Venture is a general partnership duly
formed, validly existing and in good standing under the laws of the State of New
York, and has all necessary corporate power and authority to carry on the
business of the Internet Services and to perform its obligations hereunder.
(b) AUTHORIZATION AND BINDING OBLIGATION. Venture has all necessary power
and authority to enter into and perform this Agreement and the Trademark License
Agreement and the transactions contemplated hereby and thereby, and Venture's
execution, delivery and performance of this Agreement and the Trademark License
Agreement have been duly and validly authorized by all necessary action on its
part. This Agreement has been, and upon execution and delivery thereof on the
Effective Time of the Trademark License Agreement will have been duly executed
and delivered by Venture and constitutes and will constitute its valid and
binding obligations enforceable against Venture in accordance with their
respective terms.
(c) ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS. The execution,
delivery and performance of this Agreement and the Trademark License Agreement,
by Venture: (i) do not and will not violate any provision of Venture's
organizational documents; (ii) do not and will not require the consent of or any
filing with any third party or governmental authority; (iii) do not and will not
violate any applicable law, judgment, order, injunction, decree, rule,
regulation or ruling of any governmental authority; and (iv) do not and will
not, either alone or with the giving of notice or the passage of time, or both,
conflict with, constitute grounds for termination or acceleration of or result
in a breach of the terms, conditions or provisions of, or constitute a default
under any agreement, lease, instrument, license or permit to which Venture is
now subject.
(d) ABSENCE OF PROCEEDINGS. There is no action, suit or proceeding, at law
or an equity, by or before any court, tribunal or governmental authority pending
or, to the knowledge of Venture, threatened, which, if adversely determined,
would materially and adversely affect Venture's ability to perform its
obligations hereunder or under the Trademark License Agreement or the validity
or enforceability of this Agreement or the Trademark License Agreement.
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Section 8.2. REPRESENTATIONS AND WARRANTIES OF REPRESENTATIVE.
Representative hereby represents and warrants that:
(a) ORGANIZATION AND STANDING. Representative is a corporation duly
formed, validly existing and in good standing under the laws of the State of
Washington and has all necessary corporate power and authority to perform its
obligations hereunder.
(b) AUTHORIZATION AND BINDING OBLIGATION. Representative has all necessary
power and authority to enter into and perform this Agreement and the Trademark
License Agreement, and the transactions contemplated hereby and thereby, and
Representative's execution, delivery and performance of this Agreement have been
duly and validly authorized by all necessary action on its part. This Agreement
has been, and upon execution and delivery thereof the Trademark License
Agreement will have been duly executed and delivered by Representative and
constitutes and will constitute its valid and binding obligations enforceable
against Representative in accordance with their respective terms.
(c) ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS. The execution,
delivery and performance of this Agreement and the Trademark License Agreement
by Representative: (i) do not and will not violate any provision of
Representative's organizational documents; (ii) do not and will not require the
consent of or any filing with any third party or governmental authority; (iii)
do not and will not violate any applicable law, judgment, order, injunction,
decree, rule, regulation or ruling of any governmental authority; and (iv) do
not and will not, either alone or with the giving of notice or the passage of
time, or both, conflict with, constitute grounds for termination or acceleration
of or result in a breach of the terms, conditions or provisions of, or
constitute a default under any agreement, lease, instrument, license or permit
to which Representative is now subject.
(d) ABSENCE OF PROCEEDINGS. There is no action, suit or proceeding, at law
or an equity, by or before any court, tribunal or governmental authority pending
or, to the knowledge of Representative, threatened, which, if adversely
determined, would materially and adversely affect Representative's ability to
perform its obligations hereunder or under this Agreement or the Trademark
License Agreement or the validity or enforceability of this Agreement or the
Trademark License Agreement.
ARTICLE 9
INDEMNIFICATION
Section 9.1. INDEMNIFICATION.
(a) INDEMNIFICATION OF REPRESENTATIVE BY VENTURE. From and after the Effective
Time, Venture shall indemnify and hold Representative, its affiliates and their
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respective directors, officers, affiliates, employees and agents, and the
successors and assigns of any of them, harmless from and against any and all
actions, claims, damages and liabilities (and all actions in respect thereof and
any legal or other expenses in giving testimony or furnishing documents in
response to a subpoena or otherwise and whether or not a party thereto), whether
or not arising out of third party claims, including reasonable legal fees and
expenses in connection with, and other costs of, investigating, preparing or
defending any such action or claim, whether or not in connection with litigation
in which such person is a party, and as and when incurred (collectively,
"Losses"), caused by, relating to, based upon or arising out of (directly or
indirectly) (i) any liabilities, obligations or commitments of Venture (whether
absolute, accrued, contingent or otherwise) (A) existing as of or prior to the
Effective Time or arising out of facts and circumstances existing as of or prior
thereto, which were not expressly assumed by Representative hereunder or (B)
arising after the Effective Date which are not related to the Services; (ii) any
breach of, or inaccuracy in, any representation or warranty of Venture in this
Agreement or the Trademark License Agreement, or any certificate or other
documents delivered pursuant hereto or thereto or in connection herewith or
therewith; and (iii) any breach of any covenant or agreement of Venture
contained in this Agreement or the Trademark License Agreement.
(b) INDEMNIFICATION OF VENTURE BY REPRESENTATIVE. From and after the
Effective Time, Representative shall indemnify and hold Venture, its affiliates
and their respective directors, officers, affiliates, employees and agents, and
the successors and assigns of any of them, harmless from and against any and all
Losses caused by, relating to, based upon or arising out of (directly or
indirectly) (i) any liabilities, obligations or commitments (whether absolute,
accrued, contingent or otherwise) assumed by Representative hereunder or
Representative's performance of the Services through the Termination Date hereof
(except to the extent caused by, relating to, based upon or arising out of
(directly or indirectly) the matters described in clauses (ii) and (iii) of
Section 9.1(a)); (ii) any breach of, or inaccuracy in, any representation or
warranty of Representative in this Agreement or the Trademark License Agreement,
or any certificate or other document delivered pursuant hereto or thereto or in
connection herewith or therewith; and (iii) any breach of any covenant or
agreement of Representative contained in this Agreement or the Trademark License
Agreement.
Section 9.2. PROCEDURE FOR INDEMNIFICATION.
(a) NOTICE OF CLAIMS. In the event of a claim for breach of the
representations and warranties contained in this Agreement or for failure to
fulfill a covenant or agreement, the party asserting such breach or failure
shall provide a written notice to the other party which shall state specifically
the representation, warranty, covenant or agreement with respect to which the
claim is made, the facts giving rise to an alleged basis for the claim and the
amount of liability asserted against the other party by reason of the claim.
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(b) PROCEDURES THIRD PARTY CLAIMS. If any suit, action, proceeding or
investigation shall be commenced or any claim or demand shall be asserted by any
third party (a "Third Party Claim") in respect of which indemnification may be
sought by any party or parties from any other party or parties under the
provisions of this Article 9, the party or parties seeking indemnification
(collectively, the "Indemnitee") shall promptly provide written notice to the
party or parties from which indemnification is sought (collectively, the
"Indemnitor"); provided, however, that any failure by Indemnitee to so notify an
Indemnitor will not relieve the Indemnitor from its obligations hereunder,
except to the extent that such failure shall have prejudiced the defense of such
Third Party Claim. The Indemnitor shall have the right to control (except where
an insurance carrier has the right to control or where an insurance policy or
applicable law prohibits the Indemnitor from taking control of) the defense of
any Third Party Claim; provided, however, that the Indemnitee may participate in
any such proceeding with counsel of its choice and at its own expense unless
there exists a conflict between the Indemnitor and the Indemnitee as to their
respective legal defenses, in which case the fees and expenses of any such
counsel shall be reimbursed by the Indemnitor. Except as otherwise set forth
herein, the Indemnitee shall have the right to participate in (but not control)
the defense of any Third Party Claim and to retain its own counsel in connection
therewith, but the fees and expenses of any such counsel for the Indemnitee
shall be borne by the Indemnitee. The Indemnitor shall not, without the prior
written consent of the Indemnitee, effect any settlement of any pending or
threatened proceeding in respect of which such Indemnitee is, or with reasonable
foreseeability could have been, a party and indemnity could have been sought to
be collected from the Indemnitor, unless such settlement includes an
unconditional release of such Indemnitee from all liability arising out of such
proceeding (provided, however, that, whether or not such a release is required
to be obtained, the Indemnitor shall remain liable to such Indemnitee in
accordance with Section 9.1 (Indemnification) in the event that a Third Party
Claim is subsequently brought against or sought to be collected from such
Indemnitee). The Indemnitor shall be liable for all Losses arising out of any
settlement of any Third Party Claim; provided, however, that the Indemnitor
shall not be liable for any settlement of any Third Party Claim brought against
or sought to be collected from an Indemnitee, the settlement of which is
effected by such Indemnitee without such Indemnitor's written consent, but if
settled with such Indemnitor's written consent, or if there is a final judgment
for the plaintiff in any such Third Party Claim, such Indemnitor shall (to the
extent stated above) indemnify the Indemnitee from and against any Losses in
connection with such Third Party Claim. The indemnification required by Section
9.1 (Indemnification) shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or Losses are incurred.
Section 9.3. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties contained in this Agreement or the Trademark
License Agreement, or any certificate, document or instrument delivered pursuant
hereto or thereto shall survive for a period of six (6) months following the
termination of this Agreement (the "Survival Period"). No claim may be brought
under this Agreement unless the requisite written notice is given on or prior to
the termination of the Survival
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Period. In any event such notice is given prior to the termination of the
Survival Period, the right to indemnification with respect thereto shall survive
until such claim is finally resolved and any obligations thereto are fully
satisfied. Any investigation by or on behalf of any party thereto shall not
constitute a waiver as to enforcement of any representation or warranty
contained herein.
ARTICLE 10
Section 10.1. NO CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL EITHER PARTY BE
LIABLE UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ITS EXHIBITS FOR ANY LOSS
OF PROFIT OR ANY OTHER INCIDENTAL, CONSEQUENTIAL, SPECIAL, EXEMPLARY, PUNITIVE
OR OTHER INDIRECT DAMAGES OF ANY NATURE, FOR ANY REASON, INCLUDING WITHOUT
LIMITATION THE BREACH OF THIS AGREEMENT OR ITS EXHIBITS EVEN IF THAT PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE FOREGOING PARAGRAPH SHALL
NOT OPERATE TO LIMIT THE INDEMNITY OBLIGATIONS EXPRESSLY ASSUMED IN THIS
AGREEMENT.
ARTICLE 11
TERMINATION
Section 11.1. TERMINATION. This Agreement shall automatically terminate
upon the date (the "Termination Date") termination in accordance with its terms
or expiration of the Amended and Restated Partnership Agreement dated as of the
date hereof among the parties thereto (the "Partnership Agreement")
Section 11.2. EARLY TERMINATION. In the event that Infoseek would not,
immediately following the Effective Time, be entitled to properly report, in
accordance with generally accepted accounting principles, the activities of
itself and its subsidiaries under this Agreement, including the gross sales of
advertising and related products and services by Representative, as revenue in
Infoseek's publicly disclosed consolidated financial statements, at any time up
to the Effective Time, Infoseek shall have the unilateral right, exercisable in
its sole discretion, to terminate this Agreement, in which case this Agreement
shall be of no further force or effect.
Section 11.3. CERTAIN MATTERS UPON TERMINATION.
(a) RELEASE OF RIGHTS; PAYMENT. If this Agreement expires or is terminated
for any reason in accordance herewith: (i) Representative shall cease providing
the Services and, following such expiration or termination, shall cooperate with
Venture in connection
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with the resumption by Venture of overall management of the Internet Services;
(ii) In the case of earlier termination, Representative shall pay to Venture, by
wire transfer of immediately available funds, not later than sixty (60) days
following the termination date, all amounts in respect of the Representation
Rights Fee accrued or which will accrue with respect to Services rendered
through the termination date, together with interest thereon from and including
the next scheduled date of payment through but excluding the actual date of
payment; and (iii) the Trademark License Agreement and Representative's
engagement and all rights hereunder shall immediately cease.
(b) INDEMNIFICATION RIGHTS SURVIVE. No expiration or termination of this
Agreement shall terminate the obligation of any party to indemnify the other
under Section 9.1 (Indemnification) or limit or impair any party's rights to
receive payments due and owing or which accrued hereunder on or before the date
of such termination.
ARTICLE 12
CONFIDENTIALITY
Section 12.1. CONFIDENTIALITY. Representative shall treat confidentially
all records, books and other information of any type received or compiled for
the benefit of Venture hereunder in connection with this Agreement.
Representative agrees not to disclose any such records, books and information to
any third party (other than directors, officers, partners, employees or outside
advisors of such party and other than expressly in the performance of such
party's obligations hereunder) without the prior written consent of Venture.
Representative will take all commercially reasonable steps to protect all
confidential information of the Venture using methods at least substantially
equivalent to the steps it takes to protect its own proprietary information. The
foregoing shall not be applicable to any information that is (i) publicly
available when provided or that thereafter becomes publicly available other than
through a breach by such party of its agreements hereunder, (ii) required to be
disclosed by Representative by judicial or administrative process in connection
with any action, suit, proceeding or claim or otherwise by applicable law or
(iii) known by Representative on the date of this Agreement, not otherwise
primarily related to the business of the Internet Services or any Network Office
and not otherwise subject to a confidentiality agreement with or other
obligation of secrecy to Venture or any other party. Information shall be deemed
"publicly available" and not subject to Representative's agreement hereunder if
such information becomes a matter of public knowledge or is contained in
materials available to the public or is obtained by Representative from any
source other than Venture (or its directors, officers, partners, employees or
outside advisors), provided that such source has not to Representative's actual
knowledge entered into a confidentiality agreement with Venture with respect to
such information.
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ARTICLE 13
MISCELLANEOUS
Section 13.1. NO PARTNERSHIP OR JOINT VENTURE. This Agreement is not
intended to be and shall not be construed as a partnership or joint venture
agreement between the parties. Except as otherwise specifically provided in this
Agreement, no party to this Agreement shall be authorized to act as agent of or
otherwise represent the other party to this Agreement.
Section 13.2. ENTIRE AGREEMENT; SCHEDULES; AMENDMENT; WAIVER. Except as set
forth in the subsequent sentence, this Agreement and the Trademark License
Agreement and the exhibits and schedules hereto and thereto, embody the entire
agreement and understanding of the parties hereto and supersede any and all
prior agreements, arrangements and understandings relating to the matters
provided for herein. Notwithstanding anything to the contrary contained in this
Agreement, each and every term or provision contained in the Partnership
Agreement and the related Amended and Restated Management and Services Agreement
dated as of the date hereof among the parties thereto (the "Management and
Service Agreement") shall govern in the event of any conflict with any term or
provision in this Agreement, without limitation. Any ambiguities in any such
determination should be resolved in favor of the reading of the Partnership
Agreement and the Management and Services Agreement. No amendment, waiver of
compliance with any provision or condition hereof, or consent pursuant to this
Agreement, shall be effective unless evidenced by an instrument in writing
signed by the party against whom enforcement of any amendment, waiver or consent
is sought. No failure or delay on the part of Venture or Representative in
exercising any right or power under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the parties to this Agreement are
cumulative and are not exclusive of any right or remedies which either may
otherwise have.
Section 13.3. FURTHER ASSURANCES. Each of Venture and Representative
agrees to execute and deliver such instruments and take such other actions as
may reasonably be required to carry out the intent of this Agreement.
Section 13.4. BENEFIT AND ASSIGNMENT. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Neither Representative nor Venture may assign its rights
or obligations under this Agreement except that either party may assign this
Agreement to its parent corporation or any entity of which its parent owns at
least 80% of the voting equity.
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<PAGE>
Section 13.5. HEADINGS. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
Section 13.6. GOVERNING LAW. The construction and performance of this
Agreement shall be governed by the laws of the State of New York without regard
to its principles of conflict of laws.
Section 13.7. NOTICES. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing, and addressed as follows:
If to Venture: Starwave Corporation
13810 SE Eastgate Way
Bellevue, WA 98005
Attention: Michael Slade
Curt Blake
Telephone: (206) 957-2000
Facsimile: (206) 643-9381
If to Representative: Starwave Corporation
13810 SE Eastgate Way
WA 98005
Attention: Michael Slade
Curt Blake
Telephone: (206) 957-2000
Facsimile: (206) 643-9381
If to Infoseek: Infoseek Corporation
1399 Moffett Park Blvd.
Sunnyvale, CA 94089
Attn: Harry Motro
Leslie Wright
Telephone: (408) 543-6700
Facsimile;: (408) 734-9356
Any such notice, request, demand or communication shall be deemed to have been
duly delivered and received (a) upon hand delivery thereof during business
hours, (b) upon the earlier of receipt of three (3) days after posting by
registered mail or certified mail, return receipt requested, (c) on the next
business day following delivery to a reliable or recognized air freight delivery
service, and (d) on the date of transmission, if sent by facsimile during normal
business hours (but only if a hard copy is also send by overnight courier), but
in each case only if sent in the same manner to all persons entitled to receive
notice or a copy. Any party may, with written notice to the other, change the
place for
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which all further notices to such party shall be sent. All costs and expenses
for the delivery of notices hereunder shall be borne and paid for by the
delivering party.
Section 13.8. SEVERABILITY. If any of the provisions of this Agreement
shall be held unenforceable, then the remaining provisions shall be construed as
if such unenforceable provisions were not contained herein. Any provision of
this Agreement which is unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such unenforceability without
invalidating the remaining provisions hereof, and any such unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provisions in
any other jurisdiction. To the extent permitted by applicable law, the parties
hereto hereby waive any provision of law now or hereafter in effect which
renders any provisions hereof unenforceable in any respect.
Section 13.9. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Representation Agreement
as of the date first above written.
STARWAVE CORPORATION
By: /s/ Laurence J. Shapiro
------------------------------
Name: Laurence J. Shapiro
Title: Vice President
ABC/STARWAVE PARTNERS
By: DOL Online Investments, Inc.
By: /s/ Laurence J. Shapiro
------------------------------
Name: Laurence J. Shapiro
Title: Vice President
INFOSEEK CORPORATION
By: /s/ Harry M. Motro
------------------------------
Name: Harry M. Motro
Title: President and CEO
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EXHIBIT 19
TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT (the "Agreement"), dated as of November 18,
1998, is by and between The Walt Disney Company, a Delaware corporation
("TWDC"), and Infoseek Corporation, a Deleware corporation ("Holding Company").
WITNESSETH:
WHEREAS, upon the consummation of the transactions described in the
Agreement and Plan of Reorganization, dated as of June 18, 1998 (the "Closing"),
Disney Enterprises, Inc., a wholly-owned subsidiary of TWDC, will own
approximately forty-three percent (43%) of the issued and outstanding shares of
Holding Company common stock;
WHEREAS, following the Closing, one or more members of each of a TWDC
Separate Group (as hereinafter defined) and a Holding Company Group (as
hereinafter defined) may become members of one or more consolidated, combined or
unitary groups ("Consolidated Groups"), which, at TWDC's option, may (or, if
otherwise required by law, will) file one or more consolidated, combined and/or
unitary Tax returns ("Consolidated Returns"); and
WHEREAS, it is the intent and desire of the parties hereto that a
method be established for reimbursing TWDC (or any other entity designated by
TWDC) for the Tax liability allocated to Holding Company pursuant to Section 4
of this Agreement.
NOW THEREFORE, in consideration of the promises, covenants and
agreements contained herein, the parties hereto agree as follows:
<PAGE>
1. DEFINITIONS.
"Holding Company Group" means, with respect to any Consolidated
Return, Holding Company and all member corporations in which Holding Company
directly or indirectly (including through any other entity) owns stock and which
are included in such Consolidated Return.
"TWDC Group" means, with respect to any Consolidated Return, TWDC
and/or any member corporation in which TWDC directly or indirectly (including
through any other entity) owns stock and which are included in such Consolidated
Return.
"TWDC Separate Group" means, with respect to any Consolidated Return,
all members of the relevant TWDC Group that are included in such Consolidated
Return and that are not also members of any Holding Company Group.
"Tax" means any form of taxation, whenever created or imposed, and
whenever imposed by a national, municipal, governmental, state, federal,
foreign, or other body (a "Taxing Authority"), and without limiting the
generality of the foregoing, shall include any net income, alternative or add-on
minimum tax, gross income, sales, use, ad valorem, gross receipts, value added,
franchise, profits, license, transfer, recording, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, windfall
profit, custom duty, or other tax, government fee or other like assessment or
charge of any kind whatsoever, together with any related interest, penalties, or
other additions to tax, or additional amount imposed by any such Taxing
Authority.
"Tax Attribute" means any net operating loss, net capital loss, excess
charitable contribution, foreign Tax credit, investment Tax credit or other
similar item.
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2. FILING OF CONSOLIDATED RETURNS. At TWDC's option, TWDC (or any other
corporation in which TWDC directly or indirectly owns stock) may file, and
Holding Company agrees to join (and, at the direction of TWDC, to cause any and
all members of any Holding Company Group to join) in any such filing of a
Consolidated Return for any taxable year (or portion thereof) for which such
corporations are permitted or required to file a Consolidated Return.
3. COOPERATION ON CONSOLIDATED RETURN MATTERS. Holding Company (on behalf
of itself and all members of any Holding Company Group) hereby designates TWDC
(or TWDC's designee) as its agent for the purpose of taking any and all action
necessary or incidental to the filing of all Consolidated Returns. Holding
Company agrees to furnish TWDC with any and all information (including, without
limitation, the Holding Company Group's pro-forma consolidated tax returns with
supporting separate company pro-forma tax returns), in the manner and format
requested by TWDC, with respect to any Holding Company Group in order to carry
out the provisions of this Agreement; to cooperate with TWDC in any Tax return
or consent contemplated by this Agreement; to take such action with respect to
Taxes and such Tax returns as TWDC may request, including, without limitation,
the filing of all elections and the filing of all requests for the extension of
time within which to file and/or audit or challenge Tax returns; to cooperate in
connection with any audit or refund claim; and to undertake all of the foregoing
obligations on a timely basis as requested by TWDC. TWDC (or its designee) shall
control the preparation and filing of all Consolidated Returns and all audits,
investigations, actions or proceedings with respect to any matter relating to
any Consolidated Return.
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4. APPORTIONMENT OF TAXES. For each taxable period (or portion
thereof) for which a Consolidated Return is filed pursuant to this Agreement,
Holding Company shall be allocated (on behalf of the Holding Company Group) a
Tax liability equal to the Tax liability that would be imposed if the members of
the Holding Company Group that are included in such Consolidated Return had
filed such a Consolidated Return including solely those members of the Holding
Company Group and/or had filed separate returns, as the case may be, for all
relevant periods; PROVIDED, HOWEVER, that the computation of such allocation
shall be consistent with any positions taken or elections, adjustments or
amendments made by Holding Company in determining its Tax liability, which
positions, elections, adjustments and amendments must be properly supportable by
applicable law.
5. PAYMENT OF TAXES. For each taxable period (or portion thereof)
for which a Consolidated Return is filed pursuant to this Agreement, TWDC shall
prepare or cause to be prepared the Consolidated Returns of the TWDC Group and
shall pay all Taxes reported on each such Consolidated Return to the relevant
Taxing Authority. At least five (5) business days prior to the due date of any
payment any member of the TWDC Group is required to make to any Taxing Authority
of any Taxes due with respect to any Consolidated Return (including, without
limitation, estimated Tax payments, extension Tax payments and Tax payments due
with a Consolidated Return), Holding Company shall pay to TWDC (or any other
entity designated by TWDC) the amount determined under Section 4 of this
Agreement with respect to such Consolidated Return (unless TWDC directs in
writing to Holding Company that Holding Company shall make such payment directly
to any Taxing Authority, in which event Holding Company shall comply with such
request within two (2) business days). In no event shall TWDC or any
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other entity be required to make any payment to Holding Company hereunder based
on (a) the allocation of a negative Tax liability to Holding Company under
Section 4 or (b) the use of any Tax Attribute of any Holding Company Group by
any TWDC Separate Group until or unless Holding Company demonstrates that (i)
such member of the Holding Company Group that generated the attribute has ceased
to be a member of a TWDC Group and (ii) such member could have used that
attribute to reduce its Tax liability on a stand-alone basis under applicable
law at that time.
6. SUBSEQUENT ADJUSTMENTS. If for any taxable period (or portion thereof)
----------------------
for which a Consolidated Return is filed pursuant to this Agreement, the Tax
liability (or any component thereof) as reported on such Consolidated Return is
adjusted, including, without limitation, by means of an amended return, a claim
for refund, notification of audit changes, or an audit by the relevant Taxing
Authority, then the liabilities of the TWDC Separate Group, the TWDC Group and
the Holding Company Group shall be recomputed under the relevant sections of
this Agreement to give effect to those adjustments as if such adjustments had
been part of the original determination of the consolidated income Tax
liability. In the case of a refund payable to a member of the TWDC Separate
Group or the Holding Company Group, TWDC (or any other entity designated by
TWDC) or Holding Company, as the case may be, shall make payment to the other of
such group's share of the refund within five (5) business days after the refund
is received by such group. In the case of an increase in Tax liability, Holding
Company shall pay to TWDC (or any other entity designated by TWDC) its share of
such increased Tax liability at least five (5) business days prior to the date
on which the relevant TWDC Group member would expect to pay such Tax liability
to the relevant Taxing Authority.
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If any interest is to be paid as a result of any Tax deficiency with respect to
a Consolidated Return, that interest shall be allocated to each of the TWDC
Separate Group and the Holding Company Group in the ratio that each such group's
positive change in Tax liability bears to the total change in the Tax liability,
but not to exceed the amount of the interest to be paid to the relevant Taxing
Authority. If any interest is to be received as a result of any Tax refund with
respect to a Consolidated Return, that interest shall be allocated to each of
the TWDC Separate Group and the Holding Company Group in the ratio that each
such group's negative change in Tax liability bears to the total change in the
Tax liability, but not to exceed the amount of the interest to be received from
the relevant Taxing Authority. If any penalty is to be paid with respect to a
Consolidated Return as a result of any Tax deficiency, that penalty shall be
allocated to the TWDC Separate Group or the Holding Company Group, as the case
may be, whose income resulted in the imposition of such penalty.
7. OTHER TAX ITEMS AND PRINCIPLES. This Agreement shall not apply with
respect to the carryback of any Tax Attribute generated by a corporation that
ceases to be a member of the Holding Company Group and attributable to a taxable
year beginning after the date hereof in which such member is no longer a member
of the relevant TWDC Group. All computations of payments between members of the
Holding Company Group and the TWDC Separate Group hereunder shall (i) be made by
TWDC, and (ii) be adjusted to take into account any corresponding federal Tax
benefit or Tax detriment (whether or not a federal Consolidated Return is
filed). Interest shall be imposed upon any late payment hereunder at the rate
prescribed by Section 6621(a)(2) of the Internal Revenue Code of 1986, as
amended. Holding Company shall provide all Tax returns of
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or including any member of the Holding Company Group for TWDC's review and
comment at least fifteen days prior to filing.
8. FEES AND EXPENSES. All fees and expenses (including, without
limitation, allocation of internal overhead costs) associated with administering
this Agreement (including, without limitation, preparing and filing such Tax
returns and addressing audit and controversy matters as are described herein)
shall be shared proportionately by TWDC (or any other entity designated by TWDC)
taking into account other relevant members of the TWDC Group and Holding
Company.
9. DISPUTES. Any dispute concerning the interpretation of a Section or an
amount of payment due under this Agreement shall be resolved by a mutually
selected and jointly engaged independent nationally recognized accounting firm,
the fees and expenses of which to be shared equally by the parties, whose
judgement shall be conclusive and binding on the parties.
10. SUCCESSORS. Unless otherwise provided herein, a party's rights and
obligations under this Agreement may not be assigned without the prior written
consent of the other party to this Agreement. This Agreement shall be binding
upon and inure to the benefit of any successor to any party hereto.
11. EXCLUSIVE AGREEMENT. This Agreement embodies the entire understanding
among the parties as to the subject matter hereof, and no change or modification
may be made except in writing by each of the parties.
12. WAIVERS. The waiver of a breach of any term or condition of this
Agreement shall not be deemed to constitute the waiver of any other breach of
the same or any other term or condition.
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13. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which together shall constitute one
and the same instrument.
14. CHOICE OF LAW; HEADINGS. This Agreement shall be governed by the
internal laws of the State of California. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
15. SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
INFOSEEK CORPORATION, a Deleware
corporation
By: /s/ HARRY M. MOTRO
------------------------------------
Name: Harry M. Motro
Title: CEO
THE WALT DISNEY COMPANY, a Delaware
corporation
By: /s/ DAVID K. THOMPSON
------------------------------------
Name: David K. Thompson
Title: Senior Vice President
9
