<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Quarterly period ended April 30, 1997
Commission File Number 0-27830
___________
LYCOS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3277338
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
500 Old Connecticut Path, Framingham, Massachusetts 01701-4576
(Address of principal executive offices, including Zip Code)
(508)-424-0400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [_] No
The number of shares outstanding of the registrant's Common Stock as of June 13,
1997 was 13,796,620.
================================================================================
<PAGE>
LYCOS, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information
Item 1 Consolidated Financial Statements:
Consolidated Balance Sheets (unaudited)
April 30, 1997 and July 31, 1996............................... 3
Consolidated Statements of Operations (unaudited)
Three and nine months ended April 30, 1997 and 1996............ 4
Consolidated Statements of Cash Flows (unaudited)
Nine months ended April 30, 1997 and 1996...................... 5
Notes to Consolidated Financial Statements (unaudited)............ 7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 10
Part II. Other Information
Item 1 Legal Proceedings................................................. 13
Item 2 Changes in Securities............................................. 13
Item 3 Defaults Upon Senior Securities................................... 13
Item 4 Submission of Matters to a Vote of Securities Holders............. 13
Item 5 Other Information................................................. 13
Item 6 Exhibits and Reports on Form 8-K.................................. 13
Signature......................................................... 14
</TABLE>
2
<PAGE>
LYCOS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
April 30, July 31,
1997 1996
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 37,010,072 $ 44,142,187
Accounts receivable, less allowance
for doubtful accounts of $389,000 at 6,094,811 3,293,925
April 30, 1997 and $200,000 at July
31, 1996
License fees receivable 4,589,351 1,032,405
Prepaid expenses 5,510,236 981,711
------------ ------------
Total currrent assets 53,204,470 49,450,228
------------ ------------
Property and equipment, less 2,388,611 1,405,768
accumulated depreciation
Long-term license fees receivable 1,700,000 951,816
License agreement, net 1,221,100 1,513,466
Goodwill, net 128,737 171,682
Other assets 354,140 167,615
------------ ------------
Total assets $ 58,997,058 $ 53,660,575
============ ============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 2,899,179 $ 2,741,879
Accrued expenses 8,236,998 1,746,418
Deferred revenues 6,575,228 3,148,422
Billings in excess of revenues 1,315,757 1,402,432
Due to related parties 206,053 437,267
------------ ------------
Total current liabilities 19,233,215 9,476,418
------------ ------------
Long-term deferred revenue 1,500,000 -
Deferred taxes 61,667 78,000
Stockholders' equity:
Common stock, $.01 par value 137,966 137,929
Additional paid-in capital 49,546,316 49,537,608
Deferred compensation (245,048) (376,161)
Accumulated deficit (11,237,058) (5,193,219)
------------ ------------
Total stockholders' equity 38,202,176 44,106,157
------------ ------------
Commitments
Total liabilities and stockholders' equity $ 58,997,058 $ 53,660,575
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
LYCOS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
1997 1996 1997 1996
--------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Advertising $ 4,487,541 $ 1,305,865 $11,600,135 $ 2,244,912
License and product 1,365,486 246,417 2,920,086 348,833
--------------- -------------- ------------- ---------------
Total revenues 5,853,027 1,552,282 14,520,221 2,593,745
Cost of revenues 2,190,981 1,472,012 6,618,845 2,139,094
--------------- -------------- ------------- ---------------
Gross profit 3,662,046 80,270 7,901,376 454,651
Operating expenses:
Research and development 1,167,161 226,112 3,110,702 514,176
In process research and development - - - 452,000
Sales and marketing 3,565,490 1,055,228 10,437,989 1,495,171
General and administrative 682,322 499,241 1,999,601 997,027
--------------- -------------- ------------- ---------------
Total operating expenses 5,414,973 1,780,581 15,548,292 3,458,374
--------------- -------------- ------------- ---------------
Operating loss (1,752,927) (1,700,311) (7,646,916) (3,003,723)
Interest income, net 480,145 111,937 1,603,077 121,883
--------------- -------------- ------------- ---------------
Net loss $ (1,272,782) $ (1,588,374) $(6,043,839) $ (2,881,840)
=============== ============== ============= ===============
Net loss per share $ (0.09) $ (0.13) (0.44) $ (0.25)
=============== ============== ============= ===============
Shares used in computing net loss per
share 13,796,620 11,973,097 13,794,110 11,328,202
=============== ============== ============= ===============
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
LYCOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
April 30,
1997 1996
-------------- --------------
<S> <C> <C>
Operating activities
Net loss $ (6,043,839) $ (2,881,840)
Adjustments to reconcile net loss to net cash used in
operating activities:
Amortization of deferred compensation 121,456 164,148
Depreciation and amortization 913,445 313,219
Provision for bad debts 240,000 100,000
In process research and development expense - 452,000
Changes in operating assets and liabilities:
Accounts receivable (3,040,886) (1,905,726)
License fees receivable (4,305,130) (3,018,708)
Prepaid expenses (4,528,525) (134,469)
Other assets (186,525) (369,250)
Accounts payable 157,300 846,551
Accrued expenses 6,490,580 1,272,693
Deferred revenues 4,926,806 2,290,338
Billings in excess of revenues (86,675) 1,449,024
Due to related parties (231,214) 793,035
Deferred taxes (16,333) -
-------------- --------------
Net cash used in operating activities (5,589,540) (628,985)
Investing activities
Purchase of property and equipment (1,560,977) (1,288,412)
Payments under License Agreement - (747,500)
Cash acquired through acquisition of Point Communications - 17,137
-------------- --------------
Net cash used in investing activities (1,560,977) (2,018,775)
Financing activities
Proceeds from issuance of common stock, net of issuance costs 18,402 46,021,314
Proceeds from capital contribution - 1,000,000
-------------- --------------
Net cash provided by financing activities 18,402 47,021,314
-------------- --------------
Decrease in cash and cash equivalents (7,132,115) 44,373,554
-------------- --------------
Cash and cash equivalents at beginning of period 44,142,187 446,447
-------------- --------------
Cash and cash equivalents at end of period $ 37,010,072 $ 44,820,001
============== ==============
</TABLE>
5
<PAGE>
LYCOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS-(CONTINUED)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
April 30,
1997 1996
---------- ----------
<S> <C> <C>
Schedule of non-cash financing and investing activities:
Issuance of common stock for License Agreement - $300,000
Recognition of deferred tax liability related to License Agreement - 50,000
Assets and liabilities recognized upon acquisition of Point Communications:
Accounts receivable - 33,975
Property and equipment - 47,496
Goodwill - 186,633
Accounts payable - 97,734
Deferred revenues - 23,137
Accrued expenses - 4,370
Due to related parties - 70,000
Supplementary disclosure of cash flow information:
Interest paid - $ 8,942
</TABLE>
See accompanying notes to consolidated financial statements
6
<PAGE>
LYCOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The Company and Basis of Presentation
Lycos, Inc. ("the Company") provides among the most widely used online
navigational guides to the Internet's World Wide Web. The Company was formed
in June 1995 by CMG@Ventures, L.P., a wholly-owned subsidiary of CMG
Information Services. The Company operates in one industry segment, selling
advertising on its Web sites and licensing its technology and products to
customers in various industries worldwide. The Company's fiscal year end is
July 31.
The accompanying unaudited consolidated financial statements include the
accounts of the Company and Point Communications Corporation, its wholly-
owned subsidiary, and have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions for Form 10-Q and Article 10 of Regulation S-X. In the opinion
of management, these financial statements contain all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of
the results of these interim periods. Certain information and related
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted, although the Company believes the disclosures in these financial
statements are adequate to make the information presented not misleading.
These financial statements should be read in conjunction with the Company's
audited financial statements for the year ended July 31, 1996, included in
the Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission. The results of operations for the interim periods shown
are not necessarily indicative of the results for any future interim period
or for the entire fiscal year.
2. Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original
or remaining maturities of three months or less to be cash equivalents, and
those with maturities of greater than three months but less than twelve
months to be short-term investments. At April 30, 1997, the Company had no
investments with maturities greater than three months.
3. Commitments
In April 1996, the Company entered into a one year "Premier Provider"
agreement ("the 1996 Agreement") with Netscape Communications Corporation
("Netscape") pursuant to which the Company was designated one of five
"Premier Providers" of search and navigation services accessible from the
"Net Search" button on the Netscape browser. Under the terms of the 1996
Agreement, the Company was obligated to make installment payments totaling $5
million over its term. At April 30, 1997, the Company had no remaining
financial obligations under the terms of the 1996 Agreement. The cost of the
1996 Agreement was recognized ratably over its term and therefore, $972,000
relating to the 1996 Agreement was included in "Cost of revenues" in the
accompanying Consolidated Statements of Operations for the three months ended
April 30, 1997.
7
<PAGE>
LYCOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(Unaudited)
3. Commitments (continued)
In March 1997, the Company renewed its one year "Premier Provider" agreement
("the 1997 Agreement") with Netscape which commenced in May, 1997 for an
additional one year term, pursuant to which the Company was designated as one
of four "Premier Providers" of search and navigation services accessible from
the "Net Search" button on the Netscape browser. The Company is obligated to
make minimum payments of $4.7 million under the terms of the 1997 Agreement.
To the extent that the minimum guaranteed exposures are exceeded, the Company
is obligated to make additional payments. In addition, during the term of the
1997 Agreement, Netscape is required to purchase advertising and services on
the Company's Web Site valued at $1,500,000. The cost of the 1997 Agreement
will be recognized over its term, however, no costs have been incurred
through April, 1997 under the 1997 Agreement.
The Company leases its facilities and certain other equipment under operating
agreements expiring through 2001. Future noncancelable minimum payments as of
April 30, 1997 under these leases for each fiscal year end are as follows:
<TABLE>
<S> <C>
1997 $ 666,312
1998 2,506,560
1999 2,230,337
2000 941,113
2001 276,981
Thereafter 238,270
----------
$6,859,573
==========
</TABLE>
The Company is subject to legal proceedings and claims which arise in the
ordinary course of business. In the opinion of management, the ultimate
liability with respect to these actions will not materially affect the
financial position of the Company.
In December 1996, the Company entered into a lease for new corporate offices
located in Framingham, Massachusetts. The lease, which has a three and one-
half year term, commenced in February 1997. In addition, during the nine
months ended April 30, 1997, the Company entered into three lease agreements
for sales offices in New York, San Francisco, and a new operations center in
Pittsburgh.
4. Net Loss Per Share
Net loss per share is computed using the weighted average number of shares of
common stock and dilutive common stock equivalent shares outstanding during
the period. Pursuant to the Securities and Exchange Commission Staff
Accounting Bulletins, for periods prior to the Company's initial public
offering such computations include those common and common equivalent shares
issued within 12 months of the filing date as if they were outstanding for
all periods presented using the treasury stock method. Common equivalent
shares consist of shares issuable upon the exercise of stock options. Fully
diluted net loss per share approximates primary net loss per share.
8
<PAGE>
4. Net Loss Per Share (Continued)
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128, "Earnings per Share". This
Statement is effective for the Company's fiscal year ending July 31, 1997.
The Statement redefines earnings per share under generally accepted
accounting principles. Under the new standard, primary earnings per share is
replaced by basic earnings per share and fully diluted earnings per share is
replaced by diluted earnings per share. If the Company had adopted this
Statement for the three month periods ended April 30, 1997 and 1996, the
Company's basic and diluted net income per share would have been unchanged
from primary and fully diluted earnings per share for the three month periods
ended April 30, 1997 and 1996.
5. Subsequent Event
Lycos entered into a joint venture agreement with Bertelsmann Internet
Services GmbH ("Bertelsmann") dated as of May 1, 1997, to create and
distribute Internet navigation centers throughout Eastern and Western Europe.
Bertelsmann will provide up to $10 million in financing to the venture and
Lycos will contribute its technology and Internet expertise. Lycos and
Bertelsmann will each own a 50% stake in the new venture, named Lycos-
Bertelsmann. The venture has commenced operations in Germany, the United
Kingdom and France and is expected to establish operations by September in
Italy, Belgium, Netherlands, Luxembourg and Spain.
9
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The matters discussed in this report contain forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to, those discussed in this
section and elsewhere in this Report, and the risks discussed in the "Factors
Affecting the Company's Business, Operating Results and Financial Condition"
section included in the Company's 1996 Annual Report on Form 10-K filed with the
Securities and Exchange Commission.
Overview
Lycos, Inc. ("the Company") provides among the most widely used online
navigational guides to the Internet's World Wide Web. The Company was formed in
June 1995 by CMG@Ventures, L.P., a wholly-owned subsidiary of CMG Information
Services. The Company operates in one industry segment, selling advertising on
its Web sites and licensing its technology and products to customers in various
industries worldwide. The Company's fiscal year end is July 31.
The Company has an extremely limited operating history upon which an
evaluation of the Company and its prospects can be based. The Company and its
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered by companies in their early stage of development,
particularly companies in new and rapidly evolving markets. The Company has
achieved only limited revenues to date. The limited operating history of the
Company makes the prediction of future results of operations difficult or
impossible, and therefore, there can be no assurance that the Company will
sustain revenue growth or achieve profitability. The Company has incurred
significant losses since inception and expects to continue to incur significant
losses on a quarterly basis for the foreseeable future. As of April 30, 1997,
the Company had an accumulated deficit of $11,237,058.
As a result of the Company's limited operating history, the Company does not
have historical financial data for any significant period of time on which to
base planned operating expenses. The Company's expense levels are based in part
on its expectations as to future revenues and to a large extent are fixed.
Quarterly sales and operating results generally depend on the advertising
revenues, license fees and other revenues received within the quarter, which are
difficult to forecast. Since the Company's expense levels are based upon
anticipated advertising and licensing revenue, the Company may not be able to
adjust spending in a timely manner to compensate for any unexpected revenue
shortfall. Accordingly, any significant shortfall in relation to the Company's
expectations would have an immediate adverse impact on the Company's business,
results of operations and financial condition. In addition, the Company plans to
increase its operating expenses to fund greater levels of research and
development, increase its sales and marketing operations, develop new
distribution channels, broaden its customer support capabilities and establish
brand identity and strategic alliances. In the future, leading Web sites,
browser providers and other distribution channels may require payments or other
consideration for listing the Company's products and services such as the
Company's arrangement with Netscape. To the extent that such expenses precede or
are not subsequently followed by increased revenues, the Company's business,
results of operations and financial condition will be materially adversely
affected.
The Company's operating results may fluctuate significantly in the future as a
result of a variety of factors, some of which are outside of the Company's
control. These factors include general economic conditions, specific economic
conditions in the Internet industry, usage of the Internet, demand for Internet
advertising, seasonal trends in advertising sales, the advertising budgeting
cycles of individual advertisers, capital expenditures and other costs relating
to the expansion of operations, the introduction of new products or services by
the Company or its competitors, the mix of the services sold and the channels
through which those services are sold and pricing changes. As a strategic
response to the changing competitive environment, the Company may elect from
time to time to make certain pricing, service or marketing decisions or
acquisitions that could have a material adverse effect on the Company's
business, results of operations and financial condition. The Company believes
that period to period comparisons of its operating results are not meaningful
and should not be relied upon for an indication of future performance. The
Company also expects that, in the future, it may experience seasonality in its
business, with advertising impressions (and therefore revenues) being somewhat
lower during the summer months, when usage of the Company's products and
services may be expected to decline. Due to all of the foregoing factors, it is
possible that in some future quarter, the Company's operating results may be
below the expectations of public market analysts and investors. In such event,
the price of the Company's Common Stock would likely be materially adversely
affected.
Results of Operations
Revenues Total revenues for the three and nine months ended April 30, 1997
were $5.9 million and $14.5 million versus $1.6 and $2.6 million for the three
and nine months ended April 30, 1996, representing an increase of 277% and 460%,
respectively. As of April 30, 1997, the Company had deferred revenues of $9.4
million attributable to advertising and license agreements for which there are
significant obligations of the Company remaining, and billings in excess of
revenues attributable to billings in advance of revenue recognized on
advertising contracts.
Advertising revenues Advertising revenues were $4.5 million and $11.6 million
for the three and nine months ended April 30, 1997, representing 77% and 80% of
total revenues as compared to advertising revenues of $1.3 million and $2.2
million for the three and nine months ended April 30, 1996, which represented
84% and 87% of total revenues, respectively.
The Company's advertising revenues are derived principally from the sale of
advertising on its Internet web sites. Advertising contracts vary in duration
from several days to five years. Advertising contracts are principally sold as
either: (1) a "general rotation" contract under which a customer is guaranteed a
minimum number of impressions; (2) a "key word" contract in which a customer
purchases the right to specified words and the customer's advertisement is shown
as those words are "searched"; or (3) a combination of general rotation and key
word contracts.
License and product revenues License and product revenues were $1.4 million
and $2.9 million for the three and nine months ended April 30, 1997,
representing 23% and 20% of total revenues as compared to $246,000 and $349,000
for the three and nine months ended April 30, 1996, representing 16% and 13% of
total revenues, respectively. This increase is attributable primarily to the
addition of new licensees, including, among others, GTE, Blockbuster,
Compuserve, and Dun and Bradstreet.
The Company licenses its products and technology generally in exchange for a
license fee, maintenance fees for product updates and, where applicable, a share
of the advertising revenues, subscription fees or product sales received by
licensees. The Company's license agreements generally have terms of one to three
years.
Cost of revenues Cost of revenues were $2.2 million and $6.6 million for the
three and nine months ended April 30, 1997, representing 37% and 46% of total
revenues, as compared to $1.5 million and $2.1 million in the three and nine
months ended April 30, 1996, which represented 95% and 83% of total revenues,
respectively. Cost of revenues consist primarily of expenses associated with the
ongoing enhancement, maintenance and support of the Company's products and
services, including compensation, consulting fees, equipment, networking and
other related indirect costs. Cost of revenues also includes amortization costs
associated with the Company's License Agreement with Carnegie Mellon University,
as well as costs associated with the Company's "Premier Provider" agreement, as
further described below.
10
<PAGE>
In April 1996, the Company entered into a one year "Premier Provider"
agreement ("the Agreement") with Netscape pursuant to which the Company was
designated one of five "Premier Providers" of search and navigation services
accessible from the "Net Search" button on the Netscape browser. Under the
terms of the Agreement, the Company made installment payments totaling $5
million over the term of the Agreement. The Company recognized the cost of this
agreement ratably over the term of the agreement. For the three months ended
April 30, 1997, cost of revenues includes $972,000 attributable to the
Agreement.
In March 1997, the Company renewed its one year "Premier Provider"
agreement ("the 1997 Agreement") with Netscape pursuant to which the Company was
designated one of four "Premier Providers" of search and navigation services
accessible from the "Net Search" button on the Netscape browser. Under the
terms of the 1997 Agreement, the Company is obligated to make installment
payments totaling $4.7 million over the term of the 1997 Agreement. The Company
recognizes the cost of the 1997 Agreement ratably over its term. For the three
months ended April 30, 1997, no costs have been incurred attributable to the
1997 Agreement.
Operating expenses
Research and Development Research and development expenses were $1.2 million
and $3.1 million for the three and nine months ended April 30, 1997,
representing 20% and 21% of total revenues, versus $226,000 and $966,000 for the
three and nine months ended April 30, 1996, or 15% and 37% of total revenues,
respectively. In addition, during the nine months ended April 30, 1996, the
Company recorded $452,000 of in process research and development expense related
to the acquisition of Point Communications. Research and development expenses
consist primarily of equipment depreciation, personnel costs and editorial
costs. The overall increase in research and development spending was primarily
due to increased staffing required to continue to develop and enhance the
Company's product lines. The Company expects to continue to commit substantial
resources to research and development in the future.
Sales and Marketing Sales and marketing expenses were $3.6 million and $10.4
million for the three and nine months ended April 30, 1997, representing 61% and
72% of total revenues, versus $1.1 million and $1.5 million for the three and
nine months ended April 30, 1996, representing 68% and 58% of total revenues,
respectively. The spending increases were due to the addition of sales and
marketing personnel and expenses associated with the Company's expanded
advertising, marketing and public relations campaigns. The Company expects to
continue to build its sales force and promote its brand resulting in continued
increases in sales and marketing expenses in future periods.
General and Administrative General and administrative expenses were
approximately $682,000 and $2.0 million for the three and nine months ended
April 30, 1997, representing 12% and 14% of total revenues versus $500,000 and
$997,000 for the three and nine months ended April 30, 1996, representing 32%
and 38% of total revenues, respectively. The increases in spending were
primarily due to the expansion of the Company's corporate infrastructure,
including the addition of finance and administrative personnel and increased
costs for professional services.
Interest Income, net Interest income, net, was approximately $480,000 and $1.6
million for the three and nine months ended April 30, 1997 versus $112,000 and
$122,000 for the three and nine months ended April 30, 1996, respectively. The
increase is due primarily to the investment of proceeds received upon the
closing of the Company's initial public offering in April 1996.
Other factors which may affect future operations There are a number of
business factors which singularly or combined may affect the Company's future
operating results. These factors include the limited operating history of the
Company, dependence on major customers, dependence on advertising revenues,
dependence on third party relationships, dependence on the Internet, rapid
technological change, competition and variability of quarterly results, which
have been outlined in the Company's 1996 Annual Report on Form 10-K, filed with
the Securities and Exchange Commission.
11
<PAGE>
Liquidity and Capital Resources
At April 30, 1997, the Company had cash and cash equivalents of $37.0
million. The Company regularly invests excess funds in short-term money market
funds, government securities, and commercial paper. At April 30, 1997, the
Company also has available a bank revolving credit facility providing for
borrowings up to $1.0 million which matures on June 1, 1997. As of April 30,
1997, there were no borrowings outstanding under this credit facility.
The Company used cash from operations of $5.6 million in the nine months
ended April 30, 1997, due primarily to the net loss, as well as the increase in
accrued expenses, primarily attributable the Company's Premier Provider
Agreement with Netscape. The Company's primary investing activity in the three
month period has been, and further expenditures are anticipated to be, for the
purchase of computer and office equipment to support the Company's growth.
From time to time the Company expects to evaluate the acquisition of
products, businesses and technologies that complement the Company's business.
Currently, however, the Company does not have any understandings, commitments or
agreements with respect to any such material acquisitions.
The Company believes that its existing cash and cash equivalents, together
with borrowings available under the Company's credit facility, will be
sufficient to meet the Company's cash requirements for at least the next twelve
months. Thereafter, the Company may need to raise additional funds. The Company
may need to raise additional funds sooner in order to fund more rapid expansion,
to develop new or enhanced products and services, to respond to competitive
pressures or to acquire complementary businesses or technologies. If additional
funds are raised through the issuance of equity securities, the percentage
ownership of the stockholders of the Company will be reduced, stockholders may
experience additional dilution, and such equity securities may have rights,
preferences or privileges senior to those of the Company's Common Stock. There
can be no assurance that additional financing will be available when needed on
terms favorable to the Company or at all. If adequate funds are not available or
are not available on acceptable terms, the Company may be unable to develop or
enhance products and services, take advantage of future opportunities or respond
to competitive pressures, which could have a material adverse effect on the
Company's business, results of operations or financial condition.
12
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not currently involved in any legal proceedings that it
believes could have, either individually or in the aggregate, a
material adverse effect on its business or financial condition.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Securities Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) *Exhibit 10.1: Netscape Premier Provider Agreement, dated
as of April 1, 1997
*Exhibit 10.2: Agreement dated as of May 1, 1997 between
Bertelsmann Internet Services GmbH and Lycos,
Inc.
*Exhibit 10.3: GTE New Media Services License and Services
Agreement, dated as of November 18, 1996
Exhibit 10.4: Praxis International Sublease, dated as of
December 4, 1996
Exhibit 11: Statement of Computation of Net Loss Per Share
included herein on page 14.
Exhibit 27: Financial Data Schedule (Edgar Version Only)
(b) No reports on Form 8-K were filed during the three-month period
ended April 30, 1997.
- ------------------------
* Confidential material omitted and filed separately with the Securities and
Exchange Commission.
13
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LYCOS, INC.
Date: June 13, 1997 By:
------------------------------------
Edward M. Philip
Chief Operating Officer and
Chief Financial Officer
(Principal Financial and Accounting Officer,
Authorized Officer)
14
<PAGE>
[NETSCAPE LOGO APPEARS HERE] Exhibit 10.1
NETSCAPE COMMUNICATIONS CORPORATION
U.S. English-Language Net Search Program
Premier Provider Services Agreement
OBJECTIVE: To direct users of a Netscape client software Internet browser
product (including the Netscape Navigator 2.x and subsequent versions of
Netscape client software) ("Browser") to U.S. English-language Internet search
and directory services.
TERMS AND CONDITIONS:
1. Premier Provider. The entity ("Premier Provider") named on the signature
page to this agreement ("Agreement") will be a premier search and directory
service for the U.S. English-language HTML page accessible by the public via the
Internet at the Universal Resource Locator ("URL")
http://home.netscape.com/home/internet-search, or such other URL as Netscape may
designate from time to time in writing (the "Page"). The Page is part of the
collection of U.S. English-language HTML documents accessible by the public via
the Internet at the URL http://home.netscape.com and/or at such other URL or
URL's as Netscape may designate ("Netscape's U.S. English-language Web Site").
The Page may also be accessed by Internet users of the Netscape-distributed
English-language version of the Browser by pressing or "clicking" on the Net
Search Button, by visiting the Page by way of a bookmark pre-loaded in certain
versions of the Browser toolbar as described herein, or such other methods as
Netscape may specify from time to time. Notwithstanding the foregoing, Netscape
reserves the right to determine other means whereby users may access pages which
provide Internet search and directory services on Netscape's U.S. English-
language Web Site including, but not limited to, through the use of mirror sites
and pointers based on a user's IP address, and which pages are separate and
distinct from the Page described in this Agreement.
2. Premier Period. Netscape will maintain the Premier Graphic, as defined
below, on the Page for the period commencing on May 1, 1997 and ending on the
earlier of April 31, 1998 or the date of termination of this Agreement ("Premier
Period"):
3. Services Provided by Netscape.
3.1. Premier Graphic. The Premier Provider will supply Netscape with HTML
---------------
and/or GIF files, or files of such other format as may be designated from time
to time in writing by Netscape, which conform to the specifications in Exhibit A
("Premier Graphic") which Netscape will place on the Page during the Premier
Period. Premier Provider shall retain all right, title and interest in and to
the Premier Graphic (including the copyright ownership thereof), and Premier
Provider hereby grants Netscape a royalty-free worldwide license, without
payment or other charge therefor, to use, display, perform, reproduce and
distribute the Premier Graphic, and such other licenses with respect to the
Premier Graphic necessary to fulfill the intention of this Agreement. The
Premier Graphic shall contain a functional search field and, if desired, a
directory tree. The specifications of the Premier Graphic and its placement on
the Page are set forth on Exhibit A hereto, and Premier Provider's compliance
with the content as well as the technical, visual and functional specifications
set forth in Exhibit A are a material obligation of Premier Provider under this
Agreement. Netscape may, upon notice to Premier Provider, revise Exhibit A,
provided that the Premier Graphics for each of the participants in this U.S.
English-language Net Search Program -- Premier Provider shall remain the largest
and most prominent category of search graphics on
<PAGE>
the Page, shall remain equivalent in size for each of the Premier Providers, and
shall not differ substantially, including, without limitation, any reduction in
the size of the Premier Graphic, from the current specifications for the Premier
Graphics set forth in Exhibit A.
3.2. Stack. Netscape will produce the Page as set forth on Exhibit A.
-----
The Premier Graphic of each of the services appearing in the Premier Provider
category will appear to be overlapped in a stack (the "Stack"). A Premier
Graphic will be accessible by the end user by pressing or "clicking" on a tab
for the relevant Premier Provider's service. Netscape will produce the Page
such that when an end user presses or "clicks" on hypertext links ("Premier
Links") placed by Premier Provider on the Premier Graphic, the end user's
Browser will access Premier Provider's applicable HTML pages located at the
applicable URL's ("Premier URL's") for such pages on the collection of English-
language HTML documents Premier Provider maintains as its primary web site whose
home page is located at the URL http://www.lycos.com ("Premier Provider's Web
Site"). Netscape shall not change the location of the Stack from the current
top-most position on the Page as set forth on Exhibit A unless Netscape receives
prior written consent from Premier Provider, such consent not to be unreasonably
withheld.
3.3. Rotation. Netscape will rotate the display of Premier Graphics which
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will appear on the top of the Stack when the Page is served to an end user who
has not selected a Premier Graphic as a default, as described in Section 3.4.
Subject to the provisions of Section 3.4, Premier Provider's Premier Graphic
will appear on the top of the Stack [*] of the time in which the Page is served
up to end users who have not selected a particular Premier Graphic or selected a
default Premier Graphic when accessing the Page. Premier Provider acknowledges
that the above-stated rotation percentage is a per-calendar quarter target.
Netscape shall use reasonable commercial efforts to serve up the Premier Graphic
at approximately the same rotation frequency throughout the Premier Period.
3.4. End User Default. Netscape shall produce the Page such that the end
----------------
user may select which Premier Graphic, or the premier graphic supplied by
certain marquee providers participating in the Net Search Program, the end user
would prefer to have served on the top of the Stack. If an end user selects a
default Premier Graphic, the Premier Graphic selected by the end user will be
served on top of the Stack when that end user accesses the Page. If an end user
has elected to have a particular Premier Graphic appear on top of the Stack on a
default basis, the other Premier Graphics will not appear on the top of the
Stack unless selected by the end user.
3.5. Alphabetical Listing. Premier Provider will supply Netscape with
--------------------
text describing Premier Provider's search service ("Alphabetical Text"), which
shall be no more than fifty (50) words in length and which Alphabetical Text
Netscape may edit in Netscape's reasonable discretion. Netscape shall notify
Premier Provider in advance of making any changes to the Alphabetical Text.
(The Alphabetical Text together with Premier Provider's name are collectively
referred to herein as the "Alphabetical Listing"). During the Premier Period,
Netscape will place the Alphabetical Listing on an HTML page linked to the Page
and which linked HTML page lists Internet search services (the "Alpha Page").
Netscape will produce the Alpha Page such that when an end user presses or
clicks on a link ("Alphabetical Link") embedded in the Alphabetical Listing, the
end user's Browser will access Premier Provider's applicable HTML page located
at the applicable URL for such page on Premier Provider's Web Site
("Alphabetical URL"). Premier Provider hereby grants Netscape a worldwide
license to use, display, perform, reproduce and distribute the Alphabetical
Listing, Alphabetical Link and Alphabetical URL and such other licenses with
respect to the Alphabetical Listing, Alphabetical Link and Alphabetical URL
necessary to fulfill the intention of this Agreement.
3.6. Page Specifications. The specifications of the Premier Graphic, the
-------------------
Stack, the Alphabetical Listing and their placement on the Page and Alpha Page
are set forth on Exhibit A hereto; provided however, that Netscape may, within
reasonable limits and upon notice to Premier Provider, (i) change the location
of the Stack on the Page, the Premier Graphic or the Alphabetical Listing on the
Page or Alpha Page, (ii) redesign or reconfigure the Stack, the Page, the Alpha
Page, Netscape's U.S. English-language Web Site, and/or the manner in which an
end user interacts with any of the pages of Netscape's U.S. English-language Web
Site, or (iii) revise Exhibit A, and Premier Provider shall promptly, and in any
event, within no more than thirty (30) days following receipt of the notice,
supply Netscape with a revised
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Premier Graphic and Alphabetical Listing which conform to the specifications of
the revised Exhibit A. In the event that Netscape revises Exhibit A and Premier
Provider must supply conforming materials, such conforming materials shall be
received by Netscape and fully functional within five (5) days (excluding
holidays) prior to the revised Premier Graphic, Stack or Alphabetical Listing
being posted on Netscape's U.S. English-language Web Site. If Netscape has not
received such revised and conforming materials within such five (5) day time
period described above, or if the materials supplied by Premier Provider do not
function in accordance with the specifications set by Netscape, then Netscape
shall either (i) post previous versions of Premier Provider's supplied
materials, or (ii) make such changes as necessary to bring the materials into
conformity with the new specifications and notify Premier Provider of such
changes, until such time as the specifications of Exhibit A are again revised.
The schedule of planned updates for the Page are set forth in Exhibit E, as such
Exhibit E may be revised from time to time.
3.7. Update of Premier Graphic. Premier Provider may elect to revise or
-------------------------
update its Premier Graphic, provided that such Premier Graphic complies with the
specifications of Exhibit A. Netscape shall provide Premier Provider with a
schedule of material due dates and planned Page updates.
3.8. Emergency Engineering Support. Netscape will provide, free of
-----------------------------
charge, up to an aggregate of [*] of emergency engineering support services time
per update to help Premier Provider service any newly revised Premier Graphic(s)
so that the Premier Graphic complies with the new specifications. Netscape will
use reasonable commercial efforts promptly to remedy any material malfunctioning
of the tabbing mechanism for the Premier Graphics, any material misplacement of
the Alphabetical Listing or any material malfunctioning of the Premier Links or
Alphabetical Link under the control of Netscape, provided Premier Provider will
fully cooperate with Netscape to remedy any such material malfunctioning or
misplacement, and provided further that Netscape shall not incur liability for
any failure to remedy such material malfunctioning or misplacement if such
remedy is not within the reasonable control of Netscape. Premier Provider may
report malfunctions to Netscape at the email address [email protected].
Notwithstanding the foregoing, Netscape has no obligation to perform services in
connection with malfunctions resulting from software not supplied by Netscape.
4. Additional Premier Provider Benefits.
4.1. Advertising Services. During the Premier Period, Netscape will
--------------------
provide Premier Provider with total advertising services in consideration of a
portion of the payments set forth in Section 7.1. During the Premier Period,
Premier Provider may purchase additional advertising on Netscape's U.S. English-
language Web Site for advertising that will run during the Premier Period for
the service of Premier Provider [*]. Premier Provider shall execute Netscape's
Sponsorship Agreement, a copy of which is attached as Exhibit C, with respect to
postings of Premier Provider's advertisement ("Premier Provider's
Advertisement"). Premier Provider and Netscape shall mutually agree to the
schedule and the placement of Premier Provider's Advertisement on Netscape's
U.S. English-language Web Site. Premier Provider shall supply Netscape with the
graphic files and other materials and information within the timeframes and as
set forth in the specifications of the applicable Netscape advertising program
and as reasonably requested by Netscape to produce the Premier Provider's
Advertisement. Premier Provider agrees not to include in any Premier Provider's
Advertisement on the Page any Internet search functionality as such Premier
Provider's Advertisement is served to end users. Netscape shall not knowingly
place any advertisements on the Page that contain any Internet search
functionality substantially similar to the search functionality provided by the
Premier Provider's Premier Graphic.
4.2. Limit on Premier Providers. Netscape shall limit the number of
--------------------------
companies whose tabs appear on the Stack at any one time to a total of five (5)
entities.
4.3. Preset Bookmark. Netscape shall include a graphic HTML link to
---------------
Premier Provider's URL ("Premier Provider's Bookmark") in the bookmark section
of the Netscape Communicator client software versions 4.x, and subsequent
commercial releases during the Premier Period if such releases include graphic
HTML links to third-party Internet search and directory providers. Premier
Provider hereby acknowledges that Premier Provider's Bookmark, although preset
in the shipping version of the
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Netscape Communicator 4.x distributed by Netscape, may be reconfigured,
customized or deleted by an end user. Should a user upgrade their version of the
Communicator, the bookmarks which the user has loaded at the time of the upgrade
will be carried forward and installed as part of the upgraded Communicator
software.
4.4. Infoblock. Premier Provider shall be accorded consideration for the
---------
possible inclusion of Premier Provider's service as a default "Infoblock", or
similar opportunity, in Netscape's Constellation client software, subject to
terms and conditions as Netscape may determine in its sole discretion.
5. Exposure Guarantee
5.1. Occurrence of Exposures. An exposure ("Exposure") occurs upon the
-----------------------
serving up to an end user of: (i) Premier Provider's Premier Graphic on the top
of the Stack, (ii) Premier Provider's Web Site in conjunction with a search
query executed by an end user through entering the search terms in the URL
window of the Browser except when such query is executed from the Page when the
Premier Graphic is on the top of the Stack, (iii) Premier Provider's Web Site
as a result of an end user clicking on a link (excluding Premier Links) to
Premier Provider's Web Site on Netscape's U.S. English-language Web Site, (iv)
the page on Premier Provider's Web Site linked to Premier Provider's Bookmark
(the "Bookmarked Page") in conjunction with the program described in this
Agreement, or (v) other Premier Provider content as a consequence of an end user
accessing a promotional page on Netscape's U.S. English-language Web Site if the
parties agree that such promotional page traffic shall constitute an Exposure.
Exposures shall also include those pages served up as the result of Modifying
Functionality Exposures, as defined in Section 6.5 (Modifying Functionality).
The Premier Graphic may be served on the top of the Stack to an end user by the
following means: (i) the Premier Graphic appears as part of the Stack
rotation, as described in Section 3.3, (ii) the Premier Graphic has been set as
an end user's default selection, as described in Section 3.4, and (iii) an end
user selects or clicks on the Premier Graphic tab in the Stack.
5.2. Minimum Guaranteed Exposures. Netscape guarantees a total of [*]
----------------------------
Exposures (such number of Exposures being referred to as the "Minimum Guaranteed
Exposures") during the Premier Period. Failure of the number of Premier
Provider's Exposures to exceed the number of Minimum Guaranteed Exposures shall
not be deemed to be material breach by Netscape of this Agreement.
5.3 Make-Good. If, at the end of the Premier Period, Premier Provider's
---------
content has not, in the aggregate, received total Exposures equal to or greater
than the Minimum Guaranteed Exposures, and provided that Premier Provider has
complied with its material obligations hereunder, including, but not limited to,
those obligations of Premier Provider pursuant to Section 3.1 (Premier Graphic),
Section 6.1 (Netscape Now), Section 6.5 (Modifying Functionality), Section 7
(Payment to Netscape), Section 8 (Usage Reports) and Section 11
(Responsibility), Netscape will: [*]
6. Premier Provider Obligations. In addition to the other obligations set
forth herein, Premier Provider shall:
6.1. Netscape Now. Display the "Netscape Now" button [*];
------------
provided, however, that (1) on any page on Premier Provider's Web Site which
contains only promotional text for any third party Internet client browser
software, Premier Provider shall use commercially reasonable efforts to produce
such page such that it contains the following statement (or a statement
designated by Netscape and generally used by Netscape as a successor to the
following statement or in connection with any successor program to Netscape's
Netscape Now program): "This site is best
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<PAGE>
viewed with Netscape Navigator 3.0. Download Netscape Now!" (or such higher non-
beta version as is then available) ("Netscape Promotional Text"), and, at
Premier Provider's option, the "Netscape Now" button; and (2) on any page on
Premier Provider's Web Site which contains a combination of promotional text and
a virtual button for any third party Internet client browser software, Premier
Provider shall use commercially reasonable efforts to produce such page such
that it includes a combination of the Netscape Promotional Text and the
"Netscape Now" button. On any page on which the "Netscape Now" button, or a
successor button, and/or Netscape Promotional Text is displayed, Premier
Provider shall produce such page such that when an end user presses or clicks on
the "Netscape Now" button, on the successor button or on the Netscape
Promotional Text, the end user's Internet client software will access the
applicable HTML page located at a URL supplied by Netscape. On any page on
which the "Netscape Now" button or a successor button, and/or Netscape
Promotional Text is displayed, such "Netscape Now" button, successor button and
Netscape Promotional Text [*]. Premier Provider shall use reasonable commercial
efforts promptly to remedy any misplacement of the "Netscape Now" button,
successor button or Netscape Promotional Text on its home page or other pages or
any malfunctioning of the button or the Netscape Promotional Text, provided
Netscape will fully cooperate with Premier Provider to remedy any such
misplacement or malfunctioning, and provided further that Premier Provider shall
not incur liability for any failure to remedy such misplacement or
malfunctioning if such remedy is not within the reasonable control of Premier
Provider. In the event that Netscape replaces the Netscape Now program with a
successor program, Netscape shall advise Premier Provider and Premier Provider
shall produce the page to conform to such successor program, provided Premier
Provider's obligations under such successor program shall not be materially
increased. Netscape hereby grants Premier Provider a nonexclusive,
nontransferable, nonassignable, nonsublicensable license to perform and display
the "Netscape Now" button or successor button and the Netscape Promotional Text
directly in connection with fulfilling the foregoing obligation. Premier
Provider's use of the "Netscape Now" button, any successor button, and Netscape
Promotional Text shall be in accordance with Netscape's reasonable policies
regarding advertising and trademark usage as established from time to time by
Netscape, including the guidelines of the Netscape Now Program published on
Netscape's U.S. English-language Web Site. Premier Provider acknowledges that
(1) the "Netscape Now" button and any successor button are proprietary logos of
Netscape and contain Netscape's trademarks, and (2) the Netscape Promotional
Text contains Netscape's trademarks. In the event that Netscape determines that
Premier Provider's use of the "Netscape Now" button, any successor buttons or
Netscape Promotional Text is inconsistent with Netscape's quality standards,
then Netscape shall have the right to suspend immediately such use of the
"Netscape Now" button, any successor buttons and Netscape Promotional Text.
Premier Provider understands and agrees that the use of the "Netscape Now"
button, any successor buttons and Netscape Promotional Text in connection with
this Agreement shall not create any right, title or interest in or to the use of
the "Netscape Now" button, any successor buttons or associated trademarks,
including as such are used in the Netscape Promotional Text, and that all such
use and goodwill associated with the "Netscape Now" button, any successor
buttons and associated trademarks will inure to the benefit of Netscape. Premier
Provider agrees not to register or use any trademark that is similar to the
"Netscape Now" button or any successor buttons or any of Netscape's trademarks
as used in the Netscape Promotional Text. Premier Provider further agrees that
it will not use the "Netscape Now" button, any successor buttons or the Netscape
Promotional Text in a misleading manner or otherwise in a manner that could tend
to reflect adversely on Netscape or its products. If Premier Provider fails to
honor the commitment set forth in this Section 6.1 and does not cure such
failure within thirty (30) days after receipt of written notice thereof from
Netscape, Netscape shall be relieved of its obligations described in Section 5.3
arising after the expiration of such thirty (30) day period. Netscape hereby
represents that all participants in the Net Search Program - Premier Provider
shall be bound by terms substantially similar to the terms of this Section 6.1.
6.2. Server Software. [*] Netscape core Web server software product
---------------
(currently comprised of Netscape Enterprise Server and Netscape FastTrack
Server) to
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maintain Premier Provider's Web Site and, if requested, provide Netscape of
evidence of such use. Netscape will provide Premier Provider with "Expert-
Expert" product support, as described in Exhibit F, free of charge for any
Netscape software deployed by Premier Provider in accordance with this
obligation;
6.3. Site Features. [*] any of HTML Frames, layers, dynamic HTML
-------------
pages, Java, JavaScript or the then current client software technology (or
subsequent features displayable by the Browser, within the beta testing period
of the availability of such features) ("Site Features") for display with those
Internet software clients capable of displaying the Site Features on (i) the
Premier Provider's Web Site, provided that Premier Provider shall use reasonable
commercial efforts to [*] the Site Features on Premier Provider's Web Site
in a location and in a fashion as Netscape may agree, and (ii) at least one (1)
HTML page located at each Premier URL (or on an HTML page located further down
the directory tree from the page located at the Premier URL; provided Premier
Provider will use reasonable efforts to implement the Site Features as high in
such directory tree structure as possible), and, where appropriate, on all other
HTML pages of Premier Provider's primary Web site; provided Premier Provider
shall not be required to implement the Site Features on pages of any secondary
Web site of Premier Provider that Premier Provider is required to construct to
satisfy Premier Provider's obligations under any third party contract existing
as of the date of this Agreement. Netscape shall use reasonable commercial
efforts to help Premier Provider implement changes in order to comply with new
Site Features; and
6.4. Mailto Link. Include on the page served to an end user in
-----------
conjunction with the results of the end user's search query a "mailto" link
which users of Premier Provider's service can use to direct questions or help
requests to Premier Provider. Netscape shall also include such a "mailto" link
on the Page. Premier Provider will use reasonable efforts to reply promptly,
but in any event within one (1) week, to any such question or help request.
6.5. Modifying Functionality. Except for any Exposures generated by
-----------------------
Current Modifying Technology (as defined below), each serving up to an end user
of Premier Provider content as the result of any means or functionality
("Modifying Functionality") which (i) alters or modifies, or enables end users
to alter or modify, the standard user interface or configuration of any Browser
except for those Browsers distributed by third parties who have been granted by
Netscape the right to alter or modify such Browsers, or (ii) modifies the
functioning of pages served from Netscape's U.S. English-language Web Site shall
be [*]. The number of such Modifying Functionality Exposures shall be calculated
by a technical means or by a periodically statistically significant users survey
as mutually agreed by the parties prior to commencement of the Premier Period.
[*]. As used in this Section 6.5, "Current Modifying Technology" means the
provision or implementation by Premier Provider, [*] of which would (i) alter
or modify, or enable end users to alter or modify, the standard user interface
or configuration of any Browser, or (ii) modify the functioning of pages served
from Netscape's U.S. English-language Web Site.
7. Payment to Netscape.
7.1. Payment. For the benefits and services provided by Netscape to
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Premier Provider for the one (1) year Premier Period, Premier Provider shall pay
Netscape a total of [*] (the "Payment") comprised of the fees for the following:
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[*]
7.2 Timing of Payment. Premier Provider shall pay the Payment as follows:
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[*] upon the execution of this Agreement;
[*] no later than June 30, 1997;
[*] no later than September 30, 1997;
[*] no later than December 31, 1997; and
[*] no later than March 31, 1998.
7.3. Overage Payments. If, during the Premier Period, the number of
----------------
Premier Provider's Exposures exceeds the number of Minimum Guaranteed Exposures,
Premier Provider shall remit to Netscape additional payments ("Overage
Payments") equal to [*] Exposures received in excess of the Minimum Guaranteed
Exposures, subject to the terms of Section 7.4. Netscape shall invoice Premier
Provider on a quarterly basis for such Overage Payments after the number of
Premier Provider's Exposures exceeds the number of Minimum Guaranteed Exposures,
and Premier Provider shall remit such additional funds within thirty (30) days
of receipt of such invoice.
7.4. Payment Cap. Notwithstanding the foregoing, the total amount payable
-----------
by Premier Provider to Netscape as described in this Section 7 shall not exceed
[*] (the "Payment Cap") including all amounts due under Section 7.1 and Section
7.3.
7.5. Interest. Any portion of the Payment or the Overage Payments which
--------
has not been paid to Netscape within the applicable time set forth above shall
bear interest at the lesser of [*].
7.6. No Taxes. All payments due hereunder are exclusive of any applicable
--------
taxes. Premier Provider shall be responsible for all applicable national, state
and local taxes, value added or sales taxes, exchange, interest, banking,
collection and other charges and levies and assessments pertaining to payments
other than U.S. taxes based on Netscape's net income. If Premier Provider is
required by law to make any deduction or to withhold from any sum payable to
Netscape by Premier Provider hereunder, (i) Premier Provider shall effect such
deduction or withholding, remit such amounts to the appropriate taxing
authorities and promptly furnish Netscape with tax receipts evidencing the
payments of such amounts, and (ii) the sum payable by Premier Provider upon
which the deduction or withholding is based shall be increased to the extent
necessary to ensure that, after such deduction or withholding, Netscape receives
and retains, free from liability for such deduction or withholding, a net amount
equal to the amount Netscape would have received and retained in the absence of
such required deduction or withholding.
7.7. Advertising Purchase by Netscape. During the Premier Period,
--------------------------------
Netscape shall purchase from Premier Provider advertising inventory and services
on Premier Provider's Web Site valued at [*] as such inventory and services are
valued based on Premier Provider's advertising rate card. In addition, on a
quarterly basis, Netscape shall purchase from Premier Provider advertising
inventory and services on Premier Provider's Web Site valued at [*] of Overage
Payments paid by Premier Provider as such inventory and services are valued
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based on Premier Provider's advertising rate card. Advertising inventory and
services purchased by Netscape pursuant to this Section 7.7 shall be mutually
agreed upon by the parties including placement and available advertising key
words or other value added targeting services.
8. Usage Reports.
8.1. Provide Usage Reports. Netscape and Premier Provider will each
---------------------
provide the other, via email to the email address set forth below, with usage
reports ("Usage Reports") containing the information and in the format set forth
in Exhibit B hereto. The Usage Reports shall cover each one-month time period
of the Premier Period, and the parties shall use reasonable commercial efforts
to deliver the Usage Reports within fifteen (15) days following the end of each
month. If, due to technical problems, a party is unable to provide any portion
of a Usage Report in any given month, the previous month's Usage Report data
will be substituted as a proxy for the unavailable data. The parties may, by
mutual written agreement, alter the content and format of the Usage Reports.
8.2. No Liability. NETSCAPE AND PREMIER PROVIDER WILL USE REASONABLE
------------
COMMERCIAL EFFORTS TO ENSURE THE TIMELY DELIVERY, ACCURACY AND COMPLETENESS OF
THE USAGE REPORTS, BUT NEITHER PARTY WARRANTS THAT THE USAGE REPORTS WILL
CONFORM TO ANY PUBLISHED NUMBERS AT ANY GIVEN TIME. NEITHER PARTY SHALL BE HELD
LIABLE FOR ANY CLAIMS AS THEY RELATE TO SAID USAGE REPORTS.
9. Termination.
9.1. Methods of Termination.
----------------------
a. Termination on Breach. Either party may terminate this Agreement
---------------------
if the other party materially breaches its obligations hereunder and such breach
remains uncured for fifteen (15) days following notice to the breaching party of
the breach or as otherwise provided in Section 6.5 (Modifying Functionality) and
Section 10 (Right to Refuse).
b. Termination for Convenience. Premier Provider may terminate this
---------------------------
Agreement for its convenience ("Termination for Convenience") upon sixty (60)
prior written notice to Netscape.
9.2. Effect of Termination. Except as specifically provided otherwise in
---------------------
this Agreement, upon termination of the Agreement, all rights and obligations
hereunder shall cease and each party will promptly and at the direction of the
other party, either return or destroy, and will not take or use, any items of
any nature that belong to the other party and all items containing or related to
Confidential Information of the other party. The following provisions shall
survive the expiration or termination of this Agreement for any reason: Section
7.6 (No Taxes), Section 8.2 (No Liability), Section 9.2 (Effect of Termination),
Section 11 (Responsibility), Section 12 (Limitation of Liability), and Section
13 (General).
9.2.1 Termination For Convenience. Notwithstanding Section 9.2,
---------------------------
in the event this Agreement is terminated by Premier Provider as a
Termination for Convenience, Premier Provider [*] at the time of
termination or (2) would otherwise become due and payable under the terms
of this Agreement, including but not limited to, Overage Payments, but only
as such Overage Payments accrue through the end of the Premier Period as
the result of Exposures occurring upon the serving up to an end user of the
Bookmarked Page.
9.2.2 Termination Due to Breach by Premier Provider.
---------------------------------------------
Notwithstanding Section 9.2, in the event this Agreement is terminated by
Netscape pursuant to Section 9.1 as a result of a breach by Premier
Provider, Premier Provider shall remain liable for the value of the
payments which (1) are due at the time of termination, or (2) but for the
breach, would otherwise become due and payable under the terms of this
Agreement, including but not limited to, Overage Payments, but only as such
Overage Payments accrue through the end of the Premier Period as the result
of Exposures occurring upon the serving up to an end user of the Bookmarked
Page.
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9.2.3 Termination Due to Breach by Netscape. Notwithstanding
-------------------------------------
Section 9.2, in the event this Agreement is terminated by Premier Provider
pursuant to Section 9.1 as a result of a material breach by Netscape of its
significant material obligations set forth in Section 1 (Premier Provider),
Section 2 (Premier Period), Section 3.1 (Premier Graphic), Section 3.2
(Stack), Section 3.3 (Rotation), Section 3.5 (Alphabetical Listing),
Section 4.1 (Advertising Services), Section 4.2 (Limit on Premier
Providers), Section 4.3 (Preset Bookmark) or Section 5.3 (Make-Good),
Netscape shall pay to Premier Provider [*], to the extent such amount is
greater than zero equal to (i) the total amount of Payment received as of
the date of termination [*] less (ii) the total number of Exposures
received as of the date of Termination multiplied by [*]; provided,
however, that Netscape shall have no obligation [*] if the Minimum
Guaranteed Exposures have been achieved as of the date of such termination;
and, provided further, that Premier Provider shall remain liable for (1)
any accrued but unpaid Overage Payments as of the date of termination and
(2) the value of the payments which, but for the termination of this
Agreement and assuming that the Minimum Guaranteed Exposures have been
achieved, would otherwise become due and payable under the terms of this
Agreement as the result of any Overage Payments accruing through the end of
the Premier Period due to Exposures occurring upon the serving up to an end
user of the Bookmarked Page.
10. Right to Refuse. Netscape will have the right to review the contents and
format of the Premier Graphic, the Alphabetical Listing, the Bookmarked Page and
Premier Provider's Advertisement. If Netscape, in its reasonable discretion, at
any time determines that the Premier Graphic, the Alphabetical Listing, the
Bookmarked Page or Premier Provider's Advertisement contains any material, or
presents any material in a manner, that does not comply with Netscape's
Materials Standards, as defined below, Netscape will inform Premier Provider of
the reason Netscape has made such determination and may (i) refuse to include
the Premier Graphic or the Alphabetical Listing in the Page or Premier
Provider's Advertisement on Netscape's U.S. English-language Web Site, and/or
(ii) immediately terminate this Agreement if Premier Provider has not revised to
Netscape's reasonable satisfaction the Premier Graphic, the Alphabetical
Listing, the Bookmarked Page or Premier Provider's Advertisement within one (1)
business day of written notice from Netscape. If Netscape, in its reasonable
discretion, at any time determines that the Premier Provider's Web Site contains
any material, or presents any material in a manner, that does not comply with
Netscape's Materials Standards, Netscape may immediately terminate this
Agreement if Premier Provider has not revised to Netscape's reasonable
satisfaction such material within one (1) business day of written notice from
Netscape. Netscape reserves the right to refuse to include in the Page any
Premier Graphic, or any Alphabetical Listing in the Alpha Page, that does not
completely conform to the specifications set forth in Exhibit A, and any Premier
Provider's Advertisement that does not completely conform to the specifications
of the applicable advertising program. As used in this Section 10, "Netscape's
Materials Standards" means that the requirement that subject material is not
unlawful, harmful, fraudulent, threatening, abusive, harassing, defamatory,
vulgar, obscene, profane, hateful, racially, ethnically or otherwise
objectionable, including, without limitation, any material that encourages
conduct that would constitute a criminal offense, give rise to civil liability,
or otherwise violate any applicable local, state, national or international law.
To the extent that Netscape's right to reject materials pursuant to this Section
10 is inconsistent with its rights to reject such materials under Netscape's
Sponsorship Agreement, the terms of this Section 10 shall govern.
11. Responsibility. Premier Provider is solely responsible for any legal
liability arising out of or relating to (i) the Premier Graphic, the
Alphabetical Listing, Premier Provider's Bookmark, the Bookmarked Page and
Premier Provider's Advertisement, and/or (ii) any material to which users can
link through the Premier Graphic, the Alphabetical Listing, Premier Provider's
Bookmark, the Bookmarked Page and Premier Provider's Advertisement. Premier
Provider represents and warrants that it holds the necessary rights to permit
the use of the Premier Graphic, the Alphabetical Listing, the Premier URL, the
Alphabetical URL, the Premier Links, the Alphabetical Link, Premier Provider's
Bookmark, the Bookmarked Page and Premier Provider's Advertisements by Netscape
for the purpose of this Agreement;
9
* Certain information on this page has been omitted and
filed separately with the Commission. Confidential
treatment has been requested with respect to the
omitted portions.
<PAGE>
and that the permitted use, reproduction, distribution, or transmission of the
Premier Graphic, the Alphabetical Listing, Premier Provider's Bookmark, the
Bookmarked Page, Premier Provider's Advertisements and any material to which
users can link through the Premier Graphic, Alphabetical Listing, Premier
Provider's Bookmark, the Bookmarked Page and Premier Provider's Advertisements
will not violate any criminal laws or any rights of any third parties,
including, but not limited to, infringement or misappropriation of any
copyright, patent, trademark, trade secret, music, image, or other proprietary
or property right, false advertising, unfair competition, defamation, invasion
of privacy or rights of celebrity, violation of any antidiscrimination law or
regulation, or any other right of any person or entity, or otherwise violate any
applicable local, state, national or international law. Premier Provider agrees
to indemnify Netscape and to hold Netscape harmless from any and all liability,
loss, damages, claims, or causes of action, including reasonable legal fees and
expenses that may be incurred by Netscape, arising out of or related to Premier
Provider's breach of any of the foregoing representations and warranties.
12. Limitation of Liability. IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE
OTHER FOR ANY SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, WHETHER BASED ON
BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), OR OTHERWISE, AND WHETHER OR
NOT THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. THE LIABILITY
OF EITHER PARTY FOR DAMAGES OR ALLEGED DAMAGES HEREUNDER (EXCEPT FOR DAMAGES OR
ALLEGED DAMAGES ARISING UNDER SECTION 11) WHETHER IN CONTRACT OR TORT OR ANY
OTHER LEGAL THEORY IS LIMITED TO AND SHALL NOT EXCEED THE PAYMENT DUE FROM
PREMIER PROVIDER HEREUNDER.
13. General.
13.1. Governing Law. This Agreement shall be subject to and governed in
-------------
all respects by the statutes and laws of the State of California without regard
to the conflicts of laws principles thereof. The Superior Court of Santa Clara
County and/or the United States District Court for the Northern District of
California shall have exclusive jurisdiction and venue over all controversies in
connection herewith, and each party hereby consents to such exclusive and
personal jurisdiction and venue.
13.2. Entire Agreement. The parties agree that by signing this Agreement,
----------------
the Net Search Program - Premier Provider agreement between the parties dated
March 29, 1996, as amended, (the "1996 Net Search Agreement") shall (1) remain
in effect until April 30, 1997 without any further payment by Premier Provider
to Netscape, and with Premier Provider's [*] on the Stack on the current Page to
remain unchanged until April 30, 1997 and (2) upon the commencement of the
Premier Period, be terminated, and any outstanding rights, duties or obligations
between the parties as described in the 1996 Net Search Agreement shall be
extinguished This Agreement shall be the sole recital of the rights, duties and
obligations of the parties with respect to Netscape's U.S. English-language Web
Site and Premier Provider participation in the Net Search Program. This
Agreement, including the exhibits and attachments referenced on the signature
page hereto, constitutes the entire Agreement and understanding between the
parties and integrates all prior discussions between them related to its subject
matter. No modification of any of the terms of this Agreement shall be valid
unless in writing and signed by an authorized representative of each party.
13.3. Assignment. Premier Provider may not assign any of its rights or
----------
delegate any of its duties under this Agreement, or otherwise transfer this
Agreement (by merger, operation of law or otherwise), without the prior written
consent of Netscape; [*], in connection therewith, Netscape [*], either by
written notice of such election or by failure of Netscape to deliver such
consent to Premier Provider within (30) days of a request from Premier Provider
for such consent, [*] to Premier Provider an amount as calculated in Section
9.2.3 above as "Refund". Any attempted assignment, delegation or transfer in
derogation hereof shall be null and void.
10
* Certain information on this page has been omitted and
filed separately with the Commission. Confidential
treatment has been requested with respect to the
omitted portions.
<PAGE>
13.4. Notices. All notices required or permitted hereunder shall be given
-------
in writing addressed to the respective parties as set forth below and shall
either be (i) personally delivered, (ii) transmitted by postage prepaid
certified mail, return receipt requested, or (iii) transmitted by nationally-
recognized private express courier, and shall be deemed to have been given on
the date of receipt if delivered personally, or two (2) days after deposit in
mail or express courier. Either party may change its address for purposes hereof
by written notice to the other in accordance with the provisions of this
Subsection. The addresses for the parties are as follows:
<TABLE>
<CAPTION>
Premier Provider: Netscape:
---------------- --------
<S> <C>
Lycos, Inc. Netscape Communications Corporation
500 Old Connecticut Path 501 East Middlefield Road
Framingham, MA 01701-4576 Mountain View, CA 94043
Fax: (508) 820-4499 Fax: (415) 528-4123
Attn: Ted Philip Attn: General Counsel
Chief Operating Officer
</TABLE>
13.5. Confidentiality. All disclosures of proprietary and/or confidential
---------------
information in connection with this Agreement as well as the contents of this
Agreement shall be governed by the terms of the Mutual Confidential Disclosure
Agreement either entered into previously by the parties or entered into
concurrently with this Agreement, a copy of which is attached hereto as
Exhibit D. The information contained in the Usage Reports provided by each party
hereunder shall be deemed the Proprietary Information of the disclosing party.
Notwithstanding the foregoing, Netscape may, in its sole discretion, make
publicly available client software market share information contained in the
Usage Reports submitted by Premier Provider, provided that Netscape shall not
indicate that Premier Provider is the source of the information.
13.6. Force Majeure. Neither party will be responsible for any failure to
-------------
perform its obligations under this Agreement due to causes beyond its reasonable
control, including but not limited to, acts of God, war, riot, embargoes, acts
of civil or military authorities, fire, floods or accidents.
13.7. Waiver. The waiver, express or implied, by either party of any
------
breach of this Agreement by the other party will not waive any subsequent breach
by such party of the same or a different kind.
13.8. Headings. The headings to the Sections and Subsections of this
--------
Agreement are included merely for convenience of reference and shall not affect
the meaning of the language included therein.
13.9. Independent Contractors. The parties acknowledge and agree that
-----------------------
they are dealing with each other hereunder as independent contractors. Nothing
contained in this Agreement shall be interpreted as constituting either party
the joint venturer, employee or partner of the other party or as conferring upon
either party the power of authority to bind the other party in any transaction
with third parties.
13.10. Severability. In the event any provision of this Agreement is held
------------
by a court or other tribunal of competent jurisdiction to be unenforceable, such
provision shall be reformed only to the extent necessary to make it enforceable,
and the other provisions of this Agreement will remain in full force and effect.
13.11. 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. For purposes hereof, a
facsimile copy of this Agreement, including the signature pages hereto, shall be
deemed to be an original. Notwithstanding the foregoing, the parties shall
deliver original execution copies of this Agreement to one another as soon as
practicable following execution thereof.
11
<PAGE>
The parties have duly executed this Agreement as of the later of the two (2)
dates set forth below.
Premier Provider: Netscape:
LYCOS, INC. NETSCAPE COMMUNICATIONS CORPORATION
By:__________________________________ By:_________________________________
Print Name:__________________________ Print Name:_________________________
Title:_______________________________ Title:______________________________
Date:________________________________ Date:_______________________________
Premier Provider Address: Netscape Address:
500 Old Connecticut Path 501 East Middlefield Road
Framingham, MA 01701-4576 Mountain View, California 94043
USA USA
Attention: Ted Philip, Chief Operating Attention: General Counsel
Officer
Facsimile: (508) 820-4499 Facsimile: (415) 988-1132
Email: [email protected] Email: Roberta Katz
Attached Exhibits:
Exhibit A: Specifications of the Page
Exhibit B: Usage Reports
Exhibit C: Form of Sponsorship Agreement
Exhibit D: Mutual Confidential Disclosure Agreement
Exhibit E: Schedule of Planned Updates
Exhibit F: Description of Expert-Expert Product Support
12
<PAGE>
<TABLE>
EXHIBIT A
Specifications of the Page
Site Samplers are available exclusively to Premier and "Marquee" Providers. As
of May 1, 1997, Net Search will support Netscape Navigator versions 2 and 3
(both Macintosh and PC platforms), and Microsoft Internet Explorer 3.0 (PC
only). (See Net Search Sampler Test Specification, External for complete list).
All other browsers will be routed to a simple version of the page which
encourages users to download a more current version of Netscape's browser.
Netscape will spend up to one hour of engineering time per sampler per month to
integrate the Site Samplers into the Net Search page if available. If more
engineering or QA time than is available becomes necessary to fix bugs
discovered, or if the necessary changes to fix any bugs include changes to the
appearance of the sampler, the Site Sampler will be returned for revision. The
specifications are as follows:
. Size. All Premier Provider materials should be exactly 468 by 165 pixels.
Design Site Samplers that include text and interactive forms for a default
font size of 12 points. (Be aware, however, that text and forms may resize
on your audience's browsers as they change their default font sizes.) Keep
in mind that the <FONTSIZE=> tag is not implemented in early versions of
web browsers.
Site Samplers will be measured by taking a screen shot on a system
configured as follows: A PC running Windows 95, with the settings
configured for small fonts, and an NEC MultiSync XV17+ (17 inch) monitor.
The screen shot will be taken of Netscape Navigator Gold version 3.1, with
the Proportional Font set at 12pt Times New Roman, and the Fixed Font set
at 10pt Courier New. The measurement will be taken in Paintbrush. Netscape
will provide "measurement services", if needed, for companies that don't
have the specified platform configuration.
. HTML Quirks. We have found a few less-than-obvious quirks which cause some
browsers to crash, which we thought would be helpful to pass on:
1. [FORM-TYPE] tags must follow IMMEDIATELY AFTER your sampler's first
TABLE tag. Any variation of this whatsoever will cause a
significant number of users to crash.
2. Any empty <TD> tags should be separated by a carriage return.
HTML should read as follows:
<TD>
<S><C>
</TD>
as opposed to
<TD></TD>
3. If text appears without any spacing between words (for instance,
in a sentence as opposed to in a table), any text that falls
closer than 50 pixels to the edge of the Site Sampler should be
tested on a Unix machine. Often, this text will be cut off on
that platform.
4. Interleaving HTML tags will cause several browsers to crash. Tags
should be ordered as follows:
<H3><FONTCOLOR="#000055">Text here</FONT></H3>
as opposed to
<H3><FONTCOLOR="#000055">Text here</H3></FONT>
. Tables. In order to maintain the robustness of the page, please do not
include any more than one nested table, for a total of two tables per
sampler. Any more than one nested table will cause crashes for a
significant number of users. One simple table is ideal, as even one nested
table may cause some implementation problems when integrated with the Net
Search page. If you are nesting a table, please test carefully.
</TABLE>
<PAGE>
. Image maps. Only a client-side image map is necessary, since browsers which
don't support client-side maps will not be directed to the main Net Search
page.
. File sizes. To keep the user's load time low, we request that Premier
Provider files not exceed 20K unless cleared by the Destinations production
manager at [email protected].
. Animated GIFs. Due to the large number of users whose browsers do not
support animated GIFs, and their typically large file size, we are not
implementing animated GIFs at this time.
. JavaScript. JavaScript tends to cause older browsers to behave
unpredictably and in many cases crash, and there is delicate technology in
place to implement the Site Sampler functionality. As a result, the
implementation of JavaScript in Site Samplers is not an option at this
time.
. Delivery. Content providers should email files to Netscape at
[email protected]. If you are providing multiple files, you
should place them in a folder labeled with the content provider's name. For
the best possible results, deliver Site Samplers that are already
integrated into a copy of the Net Search page.
. Filenames. It is important that filenames be in the following format:
search_providername.fmt (for example, search_yoohoo.gif,
search_yoohoo.htm). If there are two or more files of a certain format,
filenames should be in the following format: search_providername#.fmt (for
example, search_yoohoo1.gif, search_yoohoo2.gif). When you update your Site
Sampler, continue to increment the number to help avoid caching issues.
. Format. All content providers need to provide HTML files that include the
layout for their materials. All HTML should be uppercase. Please include
the TARGET="_top" attribute in all HREF tags. Height and width tags need to
be specified for all images. Graphics files should be in GIF format; all
other formats should be cleared with the Destinations production manager at
[email protected].
. Graphics. By limiting the number of individual graphics (server calls) in
your Site Sampler, you will improve overall page performance and allow the
page to load more quickly. Cropping as close as possible to the image,
leaving no white space around them, will also allow the page to load more
quickly. To minimize dithering and insure that the users across all
platforms see what you expect them to see, we recommend use of the Netscape
Color Palette.
2
<PAGE>
EXHIBIT B
Usage Reports
Sample report provided by Premier Provider to Netscape each month.
For the week of: 5/1/97 - 5/8/97
[*]
* Certain information on this page has been omitted and
filed separately with the Commission. Confidential
treatment has been requested with respect to the
omitted portions.
<PAGE>
Sample report provided by Netscape to Premier Provider each month.
<TABLE>
<CAPTION>
For the month of May, 1997
(1) (2) (3) (4) (5)
Rotated Default Total First User Selected Total
Exposures Exposures Exposures Exposures Exposures
(1+2) (3+4)
<S> <C> <C> <C> <C> <C>
May 1 1M 200K 1.2M 400K 1.6M
May 2 1.1M 210K 1.31M 500K 1.81M
May 3 1.2M 220K 1.42M 600K 2.02M
May 31 1.8M 280K 2.08M 800K 3.08M
Total
</TABLE>
A running total of the Exposures will also be included.
2
<PAGE>
EXHIBIT C
Form of Sponsorship Agreement
<PAGE>
EXHIBIT D
Form Confidential Disclosure Agreement
<PAGE>
EXHIBIT E
Schedule of Planned Updates
. Calendar: The following is the schedule for submitting materials for the
Net Search program during the first two months of the Premier Period.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Final materials due: Net Search Page goes live:
- -------------------- --------------------------
- --------------------------------------------------------------------------------
<S> <C>
May 6, 1997 May 12, 1997
- --------------------------------------------------------------------------------
May 13, 1997 May 19, 1997
- --------------------------------------------------------------------------------
May 19, 1997 (please note this is a Monday) May 22, 1997
- --------------------------------------------------------------------------------
May 27, 1997 (please note the 26th is a holiday) June 2, 1997
- --------------------------------------------------------------------------------
June 3, 1997 June 9, 1997
- --------------------------------------------------------------------------------
June 10, 1997 June 16, 1997
- --------------------------------------------------------------------------------
June 17, 1997 June 23, 1997
- --------------------------------------------------------------------------------
June 24, 1997 June 30, 1997
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT F
Description of Expert-Expert Product Support
Designed for medium to large organizations
Web businesses
Internet service providers
Large system integrators
Large resellers
Mission-critical level of support for Netscape customers.
. Priority escalation to expert-level technical support engineer
. Includes support for complex fault isolation
. Customers provide front-line (help-desk) support for their installed base
. 2 authorized customer contacts included
. Unlimited incidents
. 24 x 7 (pager only after hours for P1 issues only)
. Informational support on selected beta products
. Technical support bulletins
. Incident closure reports
<PAGE>
Exhibit 10.2
------------
AGREEMENT
---------
This Agreement is entered into effective as of May 1, 1997 (this
"Agreement"), between BERTELSMANN INTERNET SERVICES GmbH, a company organized
under the laws of Germany, having its principal office at Carl-Bertelsmann
Strasse 161E, Gutersloh, Germany ("BIS") and LYCOS, INC., a corporation
organized under the laws of the State of Delaware, having its principal office
at 500 Old Connecticut Path, Framingham, Massachusetts, U.S.A. 01701 ("Lycos").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, BIS and Lycos (collectively, the "Parties" and each a "Party")
have agreed to jointly establish the Business (as defined in this Agreement) in
accordance with the terms and conditions of this Agreement;
WHEREAS, the Parties wish to set forth the terms and conditions of their
agreement;
NOW, THEREFORE, the Parties hereby agree as follows:
ARTICLE I
Definitions
-----------
The following terms shall, for the purposes of this Agreement, have the
following meanings, except as otherwise expressly provided herein (terms defined
in the singular or the plural include the plural or the singular, as the case
may be):
1.1 "Affiliate" shall mean, as to any Person, any other Person that,
directly or indirectly, controls, is under common control with, or is controlled
by, that Person. For purposes of this definition, "control" (including, with
its correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities
or by contract or otherwise. For the sake of clarity, the Parties agree that
Persons in which BAG possesses an interest and which offer the services of AOL
in the Territory are not Affiliates of BAG or BIS (directly or indirectly) for
so long as the ownership interest therein is equal to no more than fifty percent
(50%).
<PAGE>
1.2 "Agreement" shall mean this Agreement and any Schedules, Exhibits and
Certificates attached to this Agreement.
1.3 "Aggregate Cap" shall have the meaning given to that term in Section
4.2(a).
1.4 "AOL" shall mean America Online, Inc.
1.5 "Appraised Value" shall have the meaning given to that term in Section
9.7.
1.6 "BAG" shall mean Bertelsmann AG, a company organized under the laws of
Germany.
1.7 "Breakeven" shall mean positive cash flow from operating activities,
less: (i) the sum of cash used in investing activities; and (ii) payments under
capital lease obligations, as such items are reflected on a statement of cash
flows prepared in accordance with U.S. generally accepted accounting principles
(such terms having the meanings given in U.S. generally accepted accounting
principles). The Joint Entities shall be deemed to have reached Breakeven on
the last day of the fourth fiscal quarter if the foregoing definition is
satisfied for each of four (4) full consecutive fiscal quarters for all Joint
Entities on a consolidated basis even if all Joint Entities do not independently
attain Breakeven (whether or not such period constitutes a calendar or fiscal
year).
1.8 "Board of Directors" shall mean the Board of Directors (or its
equivalent) of each Joint Entity.
1.9 "Business" shall have the meaning given to that term in Section 2.1.
1.10 "Business Day" shall mean any day on which commercial banks are not
authorized or required to close in New York, New York, U.S.A. or Frankfurt-am-
Main, Germany.
1.11 "Business Plan" shall mean: (i) the business plan attached hereto as
Exhibit A, covering the period commencing on the date hereof and ending on June
- ---------
30, 2001, for the Joint Entities to be established for the Core Countries, and
(ii) after such period and in all other cases, an annual capital, revenue and
expense plan, including a profit and loss statement and a statement of cash
flows for a Joint Entity, together with a quarterly cash funding plan with dates
of funding, plus marketing, operational and other business strategies,
reflecting the financial objectives and requirements of each Joint Entity.
1.12 "CMU" shall mean Carnegie Mellon University.
1.13 "Competitive Activities" shall mean an activity of BAG or its
Affiliates whereby funds are provided (either as loan or as capital) to a
Competitor in connection with an equity or debt investment, license agreement,
joint venture or other similar business relationship entered into with such
Competitor in the Territory.
2
<PAGE>
1.14 "Competitor" shall mean an entity which is engaged in search or
directory services via the internet and which is substantially similar to [*]
as such entities are constituted on the date of this Agreement. The term
"Competitor" shall not include an entity which was acquired as part of a larger
acquisition involving operating assets in the book, media, music, television and
printing industries, if BAG declares its intention to sell such offending
portion of the acquired entity within twelve (12) months after the acquisition
and BAG uses commercially reasonable efforts to consummate such sale.
1.15 "Content" shall mean either text or multimedia information which
contains any combination of the following in digital form or such other forms as
may become available in the future: text, graphics, video, sound, still images,
or the like.
1.16 "Core Countries" shall have the meaning given to that term in Section
3.1(a).
1.17 "Deadlock Notice" shall mean a notice given by a Party to the other
Party that the following conditions have been satisfied: [*]
1.18 "Determination Date" shall have the meaning given to that term in
Section 4.4(a).
1.19 "Distributable Cash" shall mean, with respect to any relevant period,
"positive cash flow" (determined by deducting from cash flow from operating
activities the sum of cash used in investing activities and payments under
capital lease obligations, as reflected on a statement of cash flows prepared in
accordance with U.S. generally accepted accounting principles) but excluding
funds from capital contributions or loans and further excluding a reserve, in an
amount reasonably determined by the Steering Committee in its business judgment
to be necessary or appropriate for cash disbursements (other than for repayment
of principal under the Loan Facility) including, but not limited to, provision
for the payment of all outstanding and unpaid current obligations of the Joint
Entities as of such time and a reasonable reserve for unearned advertising
revenues and licensing fees.
1.20 "Effective Date" shall have the meaning given to that term in Section
8.1.
1.21 "Escrow Agreement" shall mean that certain Escrow Agreement which
shall be executed and delivered by Lycos and BIS at the time that the License
Agreement is entered into with the first Joint Entity.
3
* Certain information on this page has been omitted and
filed separately with the Commission. Confidential
treatment has been requested with respect to the
omitted portions.
<PAGE>
1.22 "Failure Notice" shall mean a notice given by BIS, in its sole
discretion, to terminate its funding obligations under this Agreement. Such
Failure Notice may be given by BIS if the Joint Entities have not achieved
[*] (as such terms are defined below) as of the end of the twelve (12) month
period ending June 30, 1999. A Failure Notice may not be given prior to June 30,
1999 or if BIS is in default of its funding obligations. For purposes of the
preceding, the terms "Revenues" and "Profits" shall have the normal accounting
meaning given to such terms, provided that if such amounts are different due to
--------
accounting standards, then the said terms shall mean the average Revenues or
Profits, as the case may be, under each of the U.S. and German generally
accepted accounting principles.
1.23 "German Entity" shall have the meaning given to that term in
Section 3.2.
1.24 "Governmental Body" shall mean any domestic or foreign national,
state or municipal or other local government or multi-national body (including,
but not limited to, the European Union), any subdivision, agency, commission or
authority thereof, or any quasi-governmental or private body exercising any
regulatory authority thereunder.
1.25 "Guarantee" shall mean that certain Guarantee from BAG to Lycos,
dated the date hereof, annexed hereto as Exhibit B.
---------
1.26 "Joint Entity" shall mean any entity, juridical or non-juridical,
which is established in the Territory, either at the time of execution of this
Agreement or thereafter, pursuant to this Agreement, and which is owned,
directly or indirectly, by the Parties in accordance with this Agreement.
1.27 "Launch" shall mean the date on which a Joint Entity has made
services available to potential customers via the Internet.
1.28 "Linear Media Product" shall have the meaning given to that term in
Section 1.41.
1.29 "Loan Facility" shall have the meaning given to that term in
Section 4.2(c).
1.30 "Lycos License" shall have the meaning given to that term in
Section 7.1.
1.31 "Lycos Searchservice" shall mean the Searchservice provided by Lycos
in the United States comprised of the Licensed Software and Lycos Catalog as
listed on Exhibit D, as the same may evolve in the future provided, however,
--------- -------- -------
that Lycos Searchservice shall not include any (i) technology, product, service
or content which is not an enhancement of or derivative to the Licensed Software
or Licensed Database unless the Joint Entities have specifically agreed to
License such technology, product, service or content from Lycos, or (ii)
Excluded Product or Excluded Service Content (as such terms are defined in the
Lycos License).
1.32 "Object Code" shall mean: (i) machine executable programming
instructions, substantially in binary form, which are intended to be directly
executable by an operating system
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after suitable processing and linking, but without the intervening steps of
compilation or assembly; or (ii) other executable code (e.g., programming
instructions written in procedural or interpretive languages).
1.33 "Person" shall mean an individual, sole proprietorship, corporation,
partnership, limited partnership, limited liability company, joint venture,
trust, unincorporated organization, mutual company, joint stock company, estate,
union, employee organization, bank, trust company, land trust, business trust or
other organization, or a Governmental Body, or their equivalent under the
applicable legal system.
1.34 "Prime Rate" shall mean with respect to any interest period, an
interest rate per annum (rounded upward, if necessary, to the nearest whole
multiple of one-sixteenth (1/16th) of one percent (1%)) of the offered rates for
Deutsche Mark deposits for comparable amounts as the amount in question and for
an interest period of three (3) months, as quoted on the DEMVIEW page of the
Reuters Monitor System (or any successor thereto) as of approximately 11:00
a.m., Frankfurt time, on the day for which the relevant determination is made.
1.35 "Scandinavia License Agreement" shall mean that certain license
agreement between Lycos and Posten Sverige, dated April 22, 1996, relating to
the countries in Scandinavia.
1.36 "Searchservice" shall mean the provision via a managed public network
of an advertiser supported search engine and navigational tools that take
information input by a user and searches, filters and indexes information on the
internet based on title, headings, a fixed amount of text and significant words
to provide worldwide Web addresses to the user that relate to the input
information.
1.37 "Significant Change in Control" as to a Party shall mean an
acquisition by a third person (other than an Affiliate of such Party), of [*]
within two (2) years after the date of this Agreement.
1.38 "Source Code" shall mean the human readable form of Object Code and
related system documentation, including comments, procedural language and
material useful for understanding, implementing and maintaining such
instructions (for example, logic manuals, flow charts and principles of
operation).
1.39 "Steering Committee" shall have the meaning given to that term in
Section 2.4.
1.40 "Territory" shall mean all of the countries listed on Exhibit C,
---------
provided that, subject to Section 2.9. [*]
- --------
1.41 "Traditional Media Service" shall mean the delivery or creation of
movies, television shows, sporting events and other forms of entertainment
products intended primarily to be viewed
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or experienced by consumers in uninterrupted fashion from beginning to end
("Linear Media Products") over ISDN, Cable, Satellite, fiber optics or other
form of broadband media now known or hereafter developed. Traditional Media
Service shall include, without limitation, delivery of Linear Media Products
through television, pay television, pay per view, video on demand and near video
on demand.
1.42 "Transfer" shall mean the direct or indirect sale, transfer, pledge,
assignment or other disposition of or mortgage, hypothecation, or other
encumbrance or permitting or suffering of any encumbrance of all or any part of
the equity interests in any Joint Entity; provided, however, that the term
"Transfer" shall not include the pledge of all or any part of the equity
interest in any Joint Entity held by a Party to secure indebtedness of such
Party owing to a lender so long as such lender agrees and acknowledges in
writing, as part of such pledge, that the interests of such lender are, and
shall at all times be, subject to the terms and conditions of this Agreement,
and that such pledge (and the rights of the lender) is at all times subordinate
to the rights of the other Party pursuant to this Agreement. No lender may
foreclose on a pledge without complying with the provisions of Section 9.4.
ARTICLE II
Purpose and Scope of Agreement
------------------------------
2.1 Purpose.
-------
(a) BIS and Lycos jointly undertake, within the Territory: (i) the
establishment of a Searchservice (including searching, navigating and
information providing) through one or more websites regardless whether such
services are delivered via cable, telephone, satellite or otherwise and
regardless whether the same is received or operated in conjunction with a
television on a national/country or regional level and localized versions within
each country or region in the Territory (the "Business") including, without
limitation, Searchservices substantially similar to the Lycos Searchservice
currently operating in the United States and as it may evolve in the future (but
adapted to the local markets), and (ii) the procurement of advertising for the
Searchservice. [*]
(b) In the event that the Business grows in a direction such that
television becomes intertwined in one or more aspects of the Business, and BIS
is restricted from approving expansion into such fields due to agreements
entered into by one or more of its Affiliates (at this time or in the future),
as confirmed in a certificate to such effect delivered by BIS to Lycos, then
Lycos shall be permitted to engage in such fields without the participation of
BIS after BIS has been given a reasonable period of time to obtain an
appropriate release from its (or its Affiliates') obligations.
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(c) Except as explicitly set forth in this Agreement or in the
License, neither BIS nor Lycos (or their respective Affiliates) shall have any
obligation to the other to conduct business exclusively with the other Party, to
offer business opportunities to the other party or to refrain from competition
in any manner whatsoever regardless whether the Parties are jointly engaged in
(or may also engage in) a particular activity at a particular time.
2.2 No Partnership.
--------------
Nothing in this Agreement shall be construed as creating between the
Parties a partnership, fiduciary or other similar relationship or a joint
venture except as expressly provided for herein. Nothing in this Agreement shall
create or imply any exclusive relationship or any obligation to inform the other
Party, offer to the other Party (or any Joint Entity) or to include the other
Party in any opportunity which may be available to one (1) of the Parties in the
future, regardless of the relationship between such opportunity and the
Business.
2.3 Overall Conduct of Business.
---------------------------
(a) The Business shall be conducted through joint participation by
the Parties in a series of independent entities to be established on a country
by country or territory by territory basis, as defined by the Parties, as
described in this Agreement and as the Parties may determine in the future.
(b) Each Party shall hold its interest in each Joint Entity either
directly or through one or more Affiliates in accordance with Section 9.2. Each
Party shall own fifty percent (50%) of the voting rights and economic interest
in each Joint Entity unless the Parties mutually agree to allow another Person
or Persons to participate in one or more Joint Entities.
(c) The Parties may, in the future, establish a joint holding or
management company or other structure or structures through which to hold or
manage their interests in the Joint Entities, subject to satisfaction of the tax
and corporate objectives of each Party. If such a holding or management company
is established, the functions of the Steering Committee (as defined below) shall
be transferred to the holding or management company.
(d) No Party shall have the right to represent the other Party in
negotiations with third parties. Subject to the prior explicit approval of the
represented Party, no Party shall have the right to enter into an agreement with
a third party for the account of the other Party or for their joint account,
except as expressly provided herein. The Party entering such unauthorized
agreement or causing such liability shall hold the other Party harmless for any
claims raised by a third party.
2.4 Steering Committee.
------------------
(a) For so long as the Parties do not establish a joint holding or
management company to manage and coordinate the Joint Entities, the activities
to be undertaken by the Parties
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as participants in the Joint Entities and as Parties to this Agreement shall be
coordinated by a steering committee (the "Steering Committee") consisting of
four (4) members ("Members").
[*]
(3) In addition to the other responsibilities delegated to the
Steering Committee by the Parties, the Steering Committee shall be
responsible for strategic planning with respect to the Business and
the creation and development of opportunities with respect to the
Business.
(b) Each Party may appoint, substitute or remove its Members, such
appointment, substitution or removal to be effective upon notice to the other
Party.
(c) The Chairman of the Steering Committee shall be selected from the
Members appointed by [*], and such Person shall hold office until his successor
is appointed. The Chairman shall convene and conduct meetings of the Steering
Committee held pursuant to Section 2.5.
2.5 Meetings of the Steering Committee.
----------------------------------
(a) The following provisions shall be applicable to the meetings of
the Steering Committee:
(1) The Steering Committee shall hold all meetings in English. Such
meetings shall be held at least quarterly.
(2) Any two (2) members of the Steering Committee may at any time call
for a special meeting of the Steering Committee upon five (5) Business
Days prior notice to the Members of the Steering Committee, specifying
the date and agenda of the meeting and requesting the other Party
immediately to specify the time and place of the meeting in accordance
with Section 2.5(a)(3). Such notice may be waived in writing before
or after such meeting or by attendance at such meeting. Either Party
may propose an agenda item for discussion at such meeting by written
notice to the other Party. In addition, any item which the Parties
agree to discuss at a Steering Committee meeting shall be considered
to be an agenda item at such meeting.
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(3) Regular meetings of the Steering Committee shall be alternated
between: (i) the principal offices of the European CEO, and (ii)
Framingham, Massachusetts, unless the Parties establish any other
place for meetings by mutual agreement. Special meetings shall be
held in the location and at the time specified (in accordance with
this subsection) by the Party which did not call the meeting.
(4) Members may participate in such meetings by means of a conference
telephone or similar means of communication if all persons
participating in the meeting are able to hear one another, and any
such Member shall be deemed to be present at such meeting. Any action
that may be taken at a meeting may also be taken by unanimous written
consent.
(5) At each meeting of the Steering Committee, one (1) Lycos Member
and one (1) BIS Member shall constitute a quorum.
(6) The Steering Committee shall act by the unanimous vote of: (i) the
Lycos Member(s) present at any meeting, which collectively shall cast
one (1) vote, and (ii) the BIS Member(s) present at any meeting, which
collectively shall cast one (1) vote.
(7) [*] [*]
(8) The Steering Committee shall have and may exercise such powers as
the Parties may delegate from time to time, and the authority of the
Steering Committee may be modified or terminated at any time by
agreement of the Parties.
(9) A representative of BIS shall keep minutes of meetings held in
Europe and a representative of Lycos shall keep minutes of meetings
held in the United States. Minutes shall be subject to written
approval by a representative of the Party who did not propose the
minutes. In the event the meeting is held neither in Europe nor the
United States, the Party whose turn it is to keep the minutes shall
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keep the minutes. All minutes shall be maintained in English and such
other language as may be required by local law.
(10) Meetings of the Steering Committee may be attended by guests
invited by the Members of the Steering Committee pursuant to the
unanimous approval of the Steering Committee. In the absence of
agreement, in addition to their respective Members, BIS and Lycos may
each invite individuals to attend Steering Committee meetings who are
either employees or professional advisors to either Lycos or BIS or
their respective Affiliates.
(b) Subject to Section 5.3 through 5.6 hereof, to the extent
permitted by applicable law, during the term (as defined in Section 8.1 of this
Agreement), the Parties shall delegate their voting rights as shareholders or
partners in each of the Joint Entities to the Steering Committee and/or appoint
the Steering Committee as their proxy in respect of all matters affecting each
Joint Entity, provided that if the foregoing delegation is not permitted by the
--------
law applicable to a particular Joint Entity, the Parties shall exercise their
voting or approval rights in each case in accordance with the agreement reached
in the Steering Committee. If any delegation granted pursuant to this Agreement
lapses due to applicable law, the Parties shall promptly renew such delegation
during the term of this Agreement. To the extent permissible under local law,
the Members shall have the right to be designated as board members in the Joint
Entities.
2.6 European CEO.
------------
(a) As soon as possible after the execution and delivery of this
Agreement, the Steering Committee shall appoint a European Chief Executive
Officer (the "European CEO") who shall have the following duties and
responsibilities:
(1) to prepare reports and recommendations for presentation to the
Steering Committee, including, without limitation, in respect of
decisions which require the approval of the shareholders or partners
of a Joint Entity;
(2) to prepare necessary Business Plans for each of the Joint
Entities for approval by the Steering Committee as well as such
overall strategic, marketing, advertising and other general plans
which require coordination by the Steering Committee;
(3) to prepare proposals for investment by the Steering Committee;
(4) to implement the resolutions of the Steering Committee;
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(5) to advise, supervise and coordinate the Joint Entities' business,
operations and management; and
(6) to oversee all day to day operating aspects of the Business,
which shall include all actions which are not described in Sections
5.3 and 5.4.
(b) All managers of the Joint Entities shall report directly to the
European CEO. The European CEO shall have the right to recommend to the Steering
Committee the employment and termination of the employment of the managing
directors, chief executive officers or chief operating officers of each of the
Joint Entities (the "Managers") and the other direct reportees to the European
CEO. The Steering Committee will have the authority to accept or reject such
recommendations. The constituent documents of each of the Joint Entities shall
make appropriate provision to allow the European CEO to exercise authority
consistent with the provisions of this Section 2.6(b), provided that, if the law
--------
applicable to a particular Joint Entity does not permit the exercise of such
authority, the Parties shall exercise their voting or approval rights in a
manner which will achieve the result intended by the European CEO (or, if
permitted by applicable law, the Parties shall direct the Board of Directors of
the Joint Entity to implement the recommendation of the European CEO).
(c) The European CEO shall report to the Steering Committee.
2.7 Designation of European CEO/Terms of Employment.
-----------------------------------------------
Notwithstanding anything to the contrary contained in this Agreement, [*]
shall have the exclusive right to designate an individual (in accordance with
the procedures described below) to be employed as the European CEO. [*] shall
have the right to reject such nominee for good and sufficient cause.
Unless rejected by [*] consistent with the foregoing, the nominee shall be
designated as the European CEO. The European CEO shall be an employee of the
Joint Entity established in Germany and his or her salary and benefits shall be
paid through such entity until such time as the Parties establish a joint
holding or management company to manage the business and affairs of the Joint
Entities. The European CEO shall enter into an agreement with the German Joint
Entity, represented by the shareholders thereof, consistent with the principles
of this Agreement (it being understood that a term of three (3) years subject to
termination for cause (as such term is generally understood) shall be deemed to
be consistent with the principles of this Agreement). Unless the Parties
otherwise agree, the European CEO shall have such compensation which is not in
excess of the amount set forth in the Business Plan for the Joint Entity
established in Germany and such benefits as are customary (provided that such
--------
amount shall be paid by the German Joint Entity with reimbursement from the
other Joint Entities as established by the Steering Committee). The Business
Plan for the Joint Entity to be established in Germany shall make provision for
payment of such amounts. The employment of the European CEO may be terminated:
(i) for cause in accordance with the termination provisions of his employment
contract, provided that [*]; and (ii) without cause, but only with the approval
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[*]. If the European CEO's employment is terminated, then the
Chairman of the Steering Committee shall assume the duties of the European CEO,
and the Parties shall take reasonable steps to designate a new European CEO in
accordance with the terms of this Section 2.7 as quickly as possible.
2.8 Designation of Senior Officer/Terms of Employment.
-------------------------------------------------
Notwithstanding anything to the contrary contained in this Agreement, [*]
shall have the exclusive right to designate an individual (in accordance with
the procedures described below) to be employed as the full time senior officer
(the "Officer"), who shall be the "second in command" to the European CEO. [*]
shall have the right to reject such nominee for good and sufficient cause.
Unless rejected by [*] consistent with the foregoing, the nominee shall be
designated as the Officer. The Officer shall be an employee of the Joint Entity
established in Germany and his or her salary and benefits shall be paid through
such entity until such time as the Parties establish a joint holding or
management company to manage the business and affairs of the Joint Entities.
The Officer shall enter into an agreement with the German Joint Entity,
represented by the shareholders thereof, consistent with the principles of this
Agreement (it being understood that a term of three (3) years subject to
termination for cause (as such term is generally understood) shall be deemed to
be consistent with the principles of this Agreement). Unless the Parties
otherwise agree, the Officer shall have such compensation which is not in
excess of the amount set forth in the Business Plan for the Joint Entity
established in Germany and such benefits as are customary (provided that such
--------
amount shall be paid by the German Joint Entity with reimbursement from the
other Joint Entities as established by the Steering Committee). The Business
Plan for the Joint Entity to be established in Germany shall make provision for
payment of such amounts. The employment of the Officer may be terminated: (i)
for cause in accordance with the termination provisions of his employment
contract, provided that the [*], and (ii) without cause, but only with the
--------
approval of [*].
2.9 Expansion of Territory.
----------------------
[*]
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[*]
ARTICLE III
Establishment of Joint Entities
-------------------------------
3.1 Initial Launch.
--------------
The parties agree to use reasonable efforts to Launch the Business as
follows:
(a) The Lycos Searchservice will be launched in [*] (the "Core
Countries") prior to [*] (subject to content restrictions and local law).
(b) As soon as technically feasible following the availability of
Lycos Searchservice in the Core Countries, the Parties will launch the Business
in each of such countries in the "local" language.
(c) The launch of the Business within other countries of the Territory
will be determined by the Steering Committee from time to time.
(d) Upon formation of the German Joint Entity, the existing license
agreement between Telemedia and Lycos shall be assigned automatically to the
German Joint Entity and the assets which Telemedia currently has on its balance
sheet which are related to the current operations of Lycos Germany shall be
contributed to the German Joint Entity subject to payment of all license fees,
royalties and expenses by Telemedia to Lycos in accordance with the terms of the
existing agreement. The existing license agreement shall be cancelled
immediately upon assignment thereof to the assignee, effective on the date
hereof, provided that all fees, royalties and expenses thereunder shall be paid
to Lycos by Telemedia. [*]
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[*]
3.2 Establishment of Local Joint Entities.
-------------------------------------
(a) Within thirty (30) days after the date of this Agreement, the
Parties will cause to be established in Germany an entity (the "German Joint
Entity") under the name "Lycos Bertelsmann GmbH & Co. KG. The principal office
of the German Joint Entity shall be located in Gutersloh.
(b) Within sixty (60) days after the date of execution of this
Agreement, the Parties will determine whether to establish in each Core Country,
an entity under a name which is mutually acceptable to the Parties (which shall
include the name "Lycos Bertelsmann") and which is consistent with the name
selected by the parties in Germany.
(c) In each other country within the Territory but outside of the Core
Countries, the Parties will, unless otherwise agreed, establish an entity to
engage in the Business in such country but only after the Steering Committee has
approved a Business Plan with respect to the entity to be established. The
Parties shall endeavor to provide Business Plans for each such country within
one year from the date hereof. Each such entity shall be established under a
name which is mutually acceptable to the Parties and consistent with the name
used by the other Joint Entities.
(d) Each Joint Entity which is established by the Parties shall have
constituent documents (articles of association, articles of incorporation, by-
laws and the like) as are consistent with local laws, as well as the rights,
obligations and remedies provided in this Agreement. The Joint Entities shall
be established in a manner which will allow tax losses of a Joint Entity to
offset the taxable income of Lycos and BIS or their Affiliates to the extent
available in a country and provide limited liability to the Parties, or as
otherwise agreed by the Parties.
(e) Each of the Joint Entities shall be established with such amount
of minimum capital as is legally feasible. The Parties shall pay such capital
to the Joint Entities in proportion to their respective percentage interest in
such entity.
(f) Lycos shall not be required to consent to the formation of a Joint
Entity in any country if the provision of a Searchservice to such proposed Joint
Entity would result in a violation of U.S. law regulating the export of
technical data, provided that Lycos shall apply for an exemption or a validated
--------
license which would permit such export upon the request of BIS.
(g) Upon formation of each of the Joint Entities, each of the Parties
shall be entitled to receive the shares (or such other evidence of ownership as
is recognized with respect to the entity) representing their respective
ownership interests in each of such Joint Entities.
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ARTICLE IV
Financial Matters
-----------------
4.1 Business Plan.
-------------
(a) Prior to the establishment of any Joint Entity (other than in the
Core Countries), the Steering Committee shall approve an initial Business Plan
for such entity for the first year of its operations. Subject to the approval
of the Board of Directors of the Joint Entity and the Steering Committee, the
Business Plan shall be revised periodically.
(b) After the first Business Plan, each Joint Entity shall endeavor to
prepare a Business Plan at least ninety (90) days prior to the commencement of
each fiscal year of a Joint Entity. A Business Plan shall be adopted by a Joint
Entity only upon approval thereof by the Steering Committee. In the event that
the Steering Committee fails to adopt a Business Plan, then, for a period of one
(1) year, the last Business Plan as in existence with respect to such Joint
Entity shall continue in effect, provided that all expenses in such Business
--------
Plan shall be adjusted by a fraction, the numerator of which shall be the actual
revenues of such Joint Entity for the measuring period constituting the last
Business Plan year and the denominator of which shall be the projected revenues
of such Joint Entity as reflected in the last Business Plan of such Joint
Entities.
(c) Each Business Plan shall include the projected cash funding
requirements of the Joint Entity on a quarterly basis subject to Section 4.3.
(d) The financial elements of each Business Plan for a Joint Entity
shall be stated in DM, which amount shall be converted into local currency at
the rate of exchange in effect as of the last day of the month preceding the
date of formation of the particular Joint Entity.
(e) Certain overhead expenses as determined by the Steering Committee
which are incurred by or allocated to a Joint Entity pursuant to a Business Plan
upon the execution and delivery of this Agreement shall be reasonably allocated
to all other Joint Entities then in existence or upon formation of such Joint
Entities.
4.2 Funding Obligation.
------------------
(a) This Section 4.2 establishes the funding obligations of BIS with
respect to the Joint Entities until such time as [*]. Subject to the foregoing
limitation, BIS shall fund the operations of the Joint Entities by way of
contributing capital to in accordance with and up to the aggregate amount of the
funding requirements established for Joint Entities in accordance with this
Agreement and the Business Plan, provided that: (i) the proportionate equity
--------
interests in the Joint Entities shall not be changed due to the funding of BIS,
and (ii) the funding obligation of BIS shall not in any case exceed [*] for all
Joint Entities (the "Aggregate Cap").
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(b) In the event that the funding limitation as to the Aggregate Cap
with respect to the Joint Entities is not reached [*], the funding limitation
in excess of the amount actually funded by BIS may be used for the establishment
of the Business in other countries within the Territory in accordance with the
Business Plan for such country or countries.
(c) In the event that the specific funding limitation as to the Joint
Entities (as set forth in Section 4.2(a)) is reached, BIS shall make available
to the Joint Entities an additional sum of [*] as a credit facility which the
Joint Entities shall be entitled to draw upon on a monthly basis based on the
cash requirements of the Joint Entities as defined in the Business Plan (the
funding provided under this provision is referred to as the "Loan Facility"),
but only upon approval by the Steering Committee to the extent that cash
requirements exceed the Business Plan. The maximum amount which BIS will be
required to lend to the Joint Entities as part of such Business Plan is [*]. In
the event that the funding limitation under the Loan Facility with respect to
the Joint Entities is not reached, then the portion of the funding limitation in
excess of the amount actually funded by BIS under this Section may be used for
the establishment of the Business in other countries within the Territory in
accordance with the Business Plan for such country or countries. The Loan
Facility shall be provided by BIS to the Joint Entities in accordance with the
terms of a Revolving Credit and Security Agreement and Note, together with
related documentation, to be prepared to the satisfaction of BIS's and Lycos'
counsel prior to the first drawdown of any amount under the Loan Facility. Lycos
will have no repayment obligation for the above amount should the Joint Entities
dissolve or terminate. [*]. Joint Entities shall have no right to borrow
additional funds under the Loan Facility after the third anniversary of the date
of this Agreement. Lycos may (at its sole discretion) cause the Joint Entities
to prepay all or any part of the Loan Facility without penalty, up to the amount
of Distributable Cash. Any subsequent funding obligation with respect to the
expenditures incurred by a Joint Entity in such country or countries shall be
raised from third parties or be paid in by the Parties in proportion to their
respective equity interest in the Joint Entity pursuant to Section 4.4. [*]
(d) From time to time, a Joint Entity may, with the unanimous approval
and consent of the Steering Committee, request BIS to guarantee certain
obligations or to give security on behalf of the Joint Entity in lieu of making
a funding request. In the event that BIS is requested to give a guarantee or to
give security on behalf of the Joint Entity before [*] and BIS complies with
such request, the amount guaranteed or the amount of security deposit, together
with all interest and other charges which at the time of determination may be
outstanding with respect to such guaranteed obligation or the security given
shall reduce the Aggregate Cap by the guaranteed amount until such time as BIS
is released from the guarantee obligation without payment, or the amount of
security is returned to BIS. Such amount as is guaranteed or the security given,
shall be
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redetermined from time to time, to take account of amounts payable under such
guarantee or security. If BIS makes payment under such guarantee or the
security is applied to the obligation of the Joint Entity by the obligee, the
funding obligations of BIS (both as to the Aggregate Cap and the specific
country or territory limitations, as the case may be) shall be adjusted to take
account of any differences between the original amount of the guarantee which
was applied to reduce the funding obligation of BIS (or in the case of security,
the amount of security deposited) and the amount of such Aggregate Cap which
should be outstanding based on the amount actually paid by BIS. At such time as
BIS is released from the guarantee obligation without payment, or the amount of
the security is returned to BIS, the amount of the guaranteed obligation (plus
all interest and other charges which were outstanding on the determination date)
which has been released or the amount of the security deposit returned to BIS
shall be deemed to have been repaid to BIS by the Joint Entity in an amount
equal to the amount of the obligation released or security returned and the
unfunded portion of the Aggregate Cap (as well as the limitation imposed on each
Joint Entity) shall be increased by such amount. After Breakeven, the Parties
may guarantee obligations requested by a Joint Entity, or grant security if so
requested, in accordance with their respective percentage interests, but only if
both Parties approve such action. Upon liquidation or dissolution of a Joint
Entity, any amounts guaranteed by BIS which were subtracted from the Aggregate
Cap and the specific country or territory limitation shall be paid or discharged
by BIS; Lycos shall have no obligation or liability with respect to such amounts
and BIS shall indemnify and hold harmless Lycos for the same.
(e) For purposes of applying the Aggregate Cap and the funding
limitations with respect to a country or a combination of countries, all amounts
which are actually disbursed by BIS in a currency other than Deutsche Marks (DM)
shall be converted to DM at the rate of exchange applied by BIS's bank for the
remittance. Such converted amounts shall be binding for all purposes of this
Agreement.
(f) The Aggregate Cap shall be increased by the book value of the
existing license agreement between Lycos and Telemedia and such amount shall be
contributed to the Joint Entities in cash and such amount shall, in turn, be
used to repay Telemedia (upon receipt by any of the Joint Entities) for its
investment in such license.
(g) By its execution and delivery of the Lycos License and the
trademark license described in this Agreement, Lycos shall be deemed to have
contributed an amount equivalent to the fair market value of the Lycos License
as determined by an independent third party, but not in excess of the Aggregate
Cap, provided however that any discrepancy in capital accounts shall not require
equivalent contributions by any Party or issuance of disproportionate interests
to any Party.
4.3 Drawdown of the Funding Obligation.
----------------------------------
(a) Upon the formation of a Joint Entity, BIS shall pay to such Joint
Entity an amount equal to the projected funding requirement, as set forth in
Section 4.3(b), of such Joint Entity's first thirty (30) days of operations.
17
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(b) At the beginning of each month of operations [*], upon the request
of the European CEO in each instance, BIS shall pay with respect to the Joint
Entities an amount determined by the European CEO as set forth in its then
current Business Plan (which will not exceed the year to date amount) or as
otherwise approved by the Steering Committee, subject to the rights under
Section 4.2(b). For the avoidance of doubt, the Parties acknowledge that by
unanimous vote the Steering Committee may (but is not obligated to) approve
funding in any month by BIS in an amount that exceeds the amount of funding
required by the Business Plan, provided that BIS shall not be required
--------
to contribute (as part of a Business Plan or otherwise) any amount in excess of
the Aggregate Cap. Lycos shall have no repayment obligation for the Aggregate
Cap if the Joint Entities shall dissolve or terminate. The approval or rejection
of a funding request by the European CEO shall be binding on the Joint Entity as
to which it is applicable and such Joint Entity shall not have an independent
right to make a drawdown request for the same period.
(c) BIS shall remit the funding disbursement in immediately available
funds to the account of the Joint Entity as specified by the European CEO.
(d) Neither Lycos nor a Joint Entity shall have any right to payment
or disbursement of any amount described in Section 4.3(b) which has not been
paid or is required to be paid at the time the Parties complete the closing of
the procedures set forth in Section 9.3(c) or at the time this Agreement is
terminated (i): in accordance with Section 9.3, or (ii) on or after June 30,
2002, in accordance with any of its terms.
4.4 Funding After Breakeven is Reached.
----------------------------------
(a) The following provisions shall be applicable with respect to a
Joint Entity as of the date that Breakeven is reached (the "Determination Date"
for such Joint Entity):
(1) [*]
(2) [*]
(b) After the Determination Date, a Joint Entity shall pay dividends
or make distributions to its equity participants in accordance with the
provisions of Section 4.7. Notwithstanding the foregoing in the event that one
or more Joint Entities have sufficient Cash Flow and one or more Joint Entities
are in need of funding, the Parties shall establish the most tax efficient
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filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted
portions.
<PAGE>
method of using such Cash Flow to fund Joint Entities which are in need of
funding before requiring either Party to make any loans to any other Joint
Entities provided that this provision shall not apply after Divorce Notice,
Failure Notice or Cancellation Notice is given.
4.5 Default in Satisfying Funding Obligation.
----------------------------------------
(a) In the event that a Party defaults (a "Defaulting Party") for a
period of more than fifteen (15) days after notice from a relevant Joint Entity
or the other Party (the "Non-Defaulting Party") in satisfying a funding
obligation imposed on the Defaulting Party under the terms of this Agreement
(regardless of when and how such a default or failure occurs) the Non-Defaulting
Party shall be entitled, in connection with such funding obligation, to take all
necessary and available remedies to enforce the obligation of the Defaulting
Party for and on behalf of itself or the Joint Entity involved. Such failure to
fund shall constitute a material breach of this Agreement.
(b) The Non-Defaulting Party may, but shall not be required to,
satisfy the funding obligation of the Defaulting Party, in which case neither
Party's percentage ownership interest in the Joint Entity shall change and the
Defaulting Party shall be obligated to reimburse the Non-Defaulting Party for
all amounts so funded together with interest thereon (at the rate provided for
herein) to the date of repayment.
(c) During the fifteen (15) day period described in Section 4.5(a) and
such longer period until the Defaulting Party cures said default or the Non-
Defaulting Party effectuates the remedies described in Section 4.5(a), as
applicable, the funding which is not made shall bear interest at five percent
(5%) over the Prime Rate and such interest shall be paid by the Defaulting Party
to the Joint Entity or the Non-Defaulting Party upon demand. In the event that
such interest rate is in excess of the legally permissible rate of interest in
the country in which the capital contribution was intended to be effectuated,
the rate of interest applicable under this Section 4.5(c) shall be the highest
rate allowed by applicable law.
(d) A Defaulting Party shall remain fully liable to the relevant Joint
Entity, in proportion to its interest in such Joint Entity, for further funding
obligations to be made by the Parties following such failure to fund pursuant to
this Agreement.
(e) This Section 4.5 provides a specific remedy only with respect to
funding obligations imposed pursuant to the terms and conditions of this
Agreement. A Party shall not be under any obligation to vote in favor of
modifying a Business Plan once it has been adopted by the Steering Committee, it
being agreed that such decision is within the sole discretion of each Party.
(f) In lieu of any of the foregoing remedies, provided that Lycos has
--------
given at least thirty (30) days' advance notice to BIS, Lycos may, upon second
notice, cancel the Lycos License whereupon the Lycos License shall terminate
(the "Cancellation Notice"), provided that no such Cancellation Notice may be
--------
given by Lycos if BIS has given the Failure Notice. In the event that
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Lycos shall deliver to BIS the Cancellation Notice, Lycos shall have the option
to acquire all of BIS's interest in the Joint Entities in the manner provided in
Section 9.5 hereof.
4.6 Financial Policies, Accounting, Fiscal Year.
-------------------------------------------
(a) The Steering Committee shall establish the financial and
accounting policies applicable to each Joint Entity prior to the formation of
such entity and specify the same in the constituent documents thereof. In so
far as is feasible, the Steering Committee shall endeavor to apply the same
financial and accounting policies to all Joint Entities on a consistent basis.
All financial statements prepared with respect to the Joint Entities shall be
prepared in the local currency and in accordance with the generally accepted
accounting principles in existence in the country of the Joint Entity and
consistently applied, provided that the Joint Entity shall provide such
--------
financial information to the Parties together with such other information as a
Party reasonably requests; all such information shall be provided in a format
reasonably requested by the Parties such that each Party may, at the expense of
the Joint Entity, also prepare financial statements for the Joint Entities in
accordance with generally accepted accounting principles in existence in Germany
and the U.S. Such information and financial statements shall be provided in a
time frame allowing the requesting Party to fulfill all of its financial
reporting obligations.
(b) The Steering Committee shall select an independent internationally
recognized accounting firm to provide accounting and auditing services for the
Joint Entities and each Joint Entity shall be subject to an annual audit.
(c) All Joint Entities shall adopt June 30 as the end of their fiscal
year.
(d) All Joint Entities shall furnish, on a regular basis and as may be
reasonably requested by a Party, such accounting and other information which a
Party reasonably requires to fulfill its reporting and financial planning
objectives and the annual audit report shall be furnished by each Joint Entity
to the Parties within forty-five (45) days after the end of its fiscal year and
an unaudited statement within thirty (30) days after the end of each fiscal
quarter.
4.7 Dividend Policy.
---------------
A Joint Entity shall distribute dividends or make other distributions
subject to unanimous approval of the Steering Committee.
4.8 Spending.
--------
Funds available to a Joint Entity shall only be spent by a Joint Entity in
accordance with the Business Plan, as the same may be modified from time to time
upon the unanimous approval of both the Board of Directors and the Steering
Committee.
20
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4.9 Failure Notice.
--------------
Upon giving Failure Notice, BIS shall have no further obligation to
contribute or lend funds or give any guarantees to the Joint Entities.
ARTICLE V
Management of the Joint Entities
--------------------------------
5.1 Equal Management Rights.
-----------------------
Subject to any alternative arrangements the Parties jointly establish with
third party participants in a Joint Entity, and except as specifically set forth
in this Agreement, each of Lycos and BIS shall exercise their respective voting
and other rights in a manner such that each of them shall have equal rights in
the direction of the business and affairs of each Joint Entity.
5.2 Board of Directors.
------------------
Except as specifically set forth in this Agreement, and subject to any
alternative arrangements the Parties jointly establish with third party
participants in a Joint Entity, the Parties shall be equally represented on the
Board of Directors of each Joint Entity. The Steering Committee shall
establish, in respect of each Joint Entity, the principles applicable with
respect to the Board of Directors of such Joint Entity, including, but not
limited to, rules as to the convocation of meetings, quorum and voting
requirements to the extent not determined in the Articles of Association (or
other constituent documents) of such Joint Entity.
5.3 Matters Requiring Joint Action.
------------------------------
Except as provided in Section 5.5, and subject to applicable law and to
any alternative arrangements the Parties jointly may establish with third party
participants in a Joint Entity, Lycos and BIS shall ensure that decisions in
respect of the following matters require the consent of each of Lycos and BIS,
or, if such a requirement is not possible, that the Parties adopt a joint
position in respect of any such decision:
(a) approval of any strategic plan, including the content strategy of
any Joint Entity;
(b) removal of the statutory auditor of any Joint Entity;
(c) the adoption, amendment or repeal of any provisions of the charter
documents of any Joint Entity;
21
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(d) the issuance, redemption, repurchase or retirement of any
securities of any Joint Entity (including any option, warrant or other right to
purchase an interest in any Joint Entity, or any securities convertible or
exchangeable into the same);
(e) the sale, transfer or disposal of assets of any Joint Entity in
excess of One Hundred Thousand Dollars ($100,000) per fiscal year;
(f) any merger or consolidation of any Joint Entity with or into
another entity;
(g) the organization of, or the acquisition or disposition of, any
interest in another entity by any Joint Entity other than for purposes of cash
management on a short term basis with a recognized money market institution;
(h) the borrowing of funds in excess of Two Hundred Thousand Dollars
($200,000) per fiscal year by any Joint Entity, except for borrowings made in
accordance with Section 4.2(c);
(i) the sale, sublicense, encumbrance or other transfer of any
intellectual property rights in a manner inconsistent with this Agreement;
(j) the filing of a petition for liquidation, dissolution or seeking
protection from creditors of any Joint Entity;
(k) approval of the annual operating and Business Plan of any Joint
Entity;
(l) any decision involving declaration of dividends;
(m) any decision involving the approval of a material agreement
between one of BIS, Lycos or their respective Affiliates and a Joint Entity
including but not limited to any guarantee given by BIS or its Affiliates on
behalf of a Joint Entity;
(n) any action outside the scope of the Business;
(o) subject to Section 4.2(c), any early repayment of indebtedness by
any Joint Entity;
(p) any Joint Entity's knowingly entering into any material
transaction [*];
(q) any action relating to, transfer of, change in or modification to
the Lycos brand or the Technology set forth on Exhibit D;
---------
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filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted
portions.
<PAGE>
(r) adoption of the initial marketing strategy and approval of any
substantial change in the marketing strategy of any Joint Entity including the
pricing of products and decisions regarding traffic distribution and licensing;
(s) knowingly entering into a transaction or arrangement between any
Joint Entity and a Competitor;
provided that, to the extent that any action requiring the approval of
--------
the Board of Directors is specifically set forth on a line item basis in any
Business Plan of such Joint Entity, such action shall be deemed to have been
approved except as to subparagraphs (p) and (s) above. Any of the amounts
stated above in this Section 5.3 shall be converted to local currency and shall
be rounded to the nearest Deutsche Mark equivalent of 1,000 in the local
currency at the time the Joint Entity is established.
5.4 Special Management Provisions.
-----------------------------
Notwithstanding Sections 5.3 and 5.5, the following actions shall at all
times be taken by the Party indicated below without the approval, consent or
authorization by the other Party (including in such Party's capacity as a
partner or shareholder in a Joint Entity) or its designees on the Board of
Directors or the Steering Committee:
(a) All action with respect to the execution, delivery, or termination
in accordance with the terms of any agreement between Lycos (or any of its
Affiliates) and a Joint Entity shall be taken solely pursuant to the direction
of BIS and Lycos shall cause its directors to take such action as is directed by
BIS.
(b) All action with respect to the execution, delivery, or termination
in accordance with the terms of any agreement between BIS (or any of its
Affiliates) and a Joint Entity shall be taken solely pursuant to the direction
of Lycos and BIS shall cause its directors to take such action as is directed by
Lycos.
(c) The appointment and dismissal of the European CEO shall be
governed by the provisions of Section 2.7.
(d) The appointment and dismissal of the Officer shall be governed by
the provisions of Section 2.8.
(e) All action with respect to matters relating to the enforcement or
waiver of any rights granted a Joint Entity under an agreement with BIS (or any
of its Affiliates) shall be taken solely pursuant to the direction of Lycos and
BIS shall cause its directors to take such action as is directed by Lycos.
23
<PAGE>
(f) All action with respect to matters relating to the enforcement or
waiver of any rights granted a Joint Entity under an agreement with Lycos (or
any of its Affiliates) shall be taken solely pursuant to the direction of BIS
and Lycos shall cause its directors to take such action as is directed by BIS.
5.5 Failure to Vote for Budgeted Capital Increases; Default in Making of
--------------------------------------------------------------------
Capital Contributions; Governance of Steering Committee and Joint
-----------------------------------------------------------------
Entities in Special Cases.
-------------------------
(a) In the event that a Party, having approved a budget for a Joint
Entity, or any variance of such a budget, subsequently fails to approve any
capital increase necessary to fund such budget or, having voted for a capital
increase, subsequently defaults for a period of more than fifteen (15) days
(after notice from the other Party) in satisfying a capital contribution to be
made by such Party in connection with such capital increase or fails to lend
funds as agreed by such Party for a period of more than fifteen (15) days after
notice from the other Party (regardless of when and how such a default occurs)
(any such Party, a "Defaulting Party"):
(i) [*]
(ii) [*]
(iii) the Non-Defaulting Party shall be released from any
obligation of exclusivity, non-competition or offer to the
Defaulting Party which is otherwise applicable to such Non-
Defaulting Party (but for this sentence) with respect to the
project for which the relevant capital increase was intended
or, if no such project is identifiable or if such project
cannot as a practical matter be distinguished from the other
activities of the Joint Entity, all of the activities of the
Joint Entity to which the capital contribution was to be
made; and
24
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
<PAGE>
(iv) in the event of default as to a loan, the Non-Defaulting
Party shall have the option of receiving interest at the
Prime Rate plus five percent (5%) (or the highest legal
rate if such specified rate is in excess of the legal
rate) or converting such loan to a capital contribution
and applying the remedies set forth above.
(b) During the fifteen (15) day period described in Section 5.5(a)
and such longer period until the Defaulting Party cures said default or the Non-
Defaulting Party effectuates the dilution described in Section 5.5(a), the
capital contribution which is not made shall bear interest at five percent (5%)
over the Prime Rate and such interest shall be taken into account in calculating
the capital contribution not made and the dilution to be effected or, at the
option of the Non-Defaulting Party, such interest shall be paid by the
Defaulting Party to the Non-Defaulting Party upon demand. In the event that such
interest rate is in excess of the legally permissible rate of interest in the
country in which the capital contribution was intended to be effectuated, the
rate of interest applicable under this Section 5.5 shall be the highest rate
allowed by law.
(c) Notwithstanding any failure to vote for a budgeted capital
increase, any default on a budgeted capital contribution, or the application of
the remedies provided for in Sections 5.5(a) or 5.5(b), any Party which is
diluted pursuant to Section 5.5(a) shall remain fully liable to the relevant
Joint Entity, in proportion to its adjusted interest in such Joint Entity, for
further capital contributions to be made by the Parties following such dilution,
provided that such capital contribution was either approved by the Defaulting
- --------
Party or the capital contribution was approved as part of a budget approved by
the Defaulting Party.
(d) This Section 5.5 provides a specific remedy only with respect to
capital increases approved by a Party or capital increases which are approved as
part of a budget specifically approved by the Parties. The remedies provided
under this Section 5.5 shall not apply with respect to any Business as to which
the Parties have established other remedies. A Party shall not be under any
obligation to increase the capital of any Joint Entity, to lend funds to any
Joint Entity or to vote in favor of a budget other than as specifically set
forth in this Agreement, it being agreed that such decisions are within the sole
discretion of a Party.
(e) The constituent documents of each of the Joint Entities shall have
such terms as are consistent with the provisions of Section 5.5.
5.6 Accounting.
----------
The fiscal years of the Joint Entities shall commence on July 1 and end on
June 30 of each year, with the exception of the first fiscal year of each Joint
Entity only, which shall commence on the date of its formation and end on June
30 of the year in which it is formed. [*]
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filed separately with the Commission. Confidential
treatment has been requested with respect to the
omitted portions.
<PAGE>
Upon the request of Lycos, the Joint Entities shall provide (at the cost of the
Joint Entities), financial reports which shall be restated as if the fiscal year
of the Joint Entities ended as of July 31 of each year in accordance with US
generally accepted accounting principles.
5.7 Constituent Documents of Joint Entities.
---------------------------------------
The articles of association, articles of incorporation, by-laws, or
constituent documents of each Joint Entity shall reflect the provisions set
forth in this Article V with such changes as shall be jointly agreed by the
Parties with any third party participants in such Joint Entity and such changes
as may be necessary to conform with applicable law.
ARTICLE VI
Joint Participation in Opportunities
------------------------------------
6.1 Exclusivity.
-----------
(a) Commencing on the date of this Agreement and continuing for so
long as each of BIS and Lycos shall have an equity interest in any Joint Entity,
[*].
(b) Except as set forth in Section 6.4, and subject to compliance with
such provision, commencing on the date hereof, [*]
26
* Certain information on this page has been omitted and
filed separately with the Commission. Confidential
treatment has been requested with respect to the
omitted portions.
<PAGE>
[*].
(g) The costs and expenses of the Independent Appraiser shall be paid
one-half (1/2) by Lycos and one-half (1/2) by BIS.
(h) Upon change in the percentage ownership of one of the Parties
under this Section 6.1, the number of members of the Steering Committee or
directors which may be elected by a Party shall not be adjusted, and such change
shall not result in any modification to the extent that unanimity is required
with respect to a Major Action [*]
27
* Certain information on this page has been omitted and
filed separately with the Commission. Confidential
treatment has been requested with respect to the
omitted portions.
<PAGE>
[*].
6.2 Other Activities of the Parties.
-------------------------------
During the term of this Agreement, Lycos agrees that, with respect to
conduct of the Business outside of the Territory in any country other than the
United States, Canada or Mexico, Lycos shall endeavor to notify BIS regarding
the joint participation of the Parties in the conduct of such Business, provided
--------
that Lycos shall not have any binding obligation to BIS with respect to the
conduct of the Business outside the Territory.
6.3 Application of Provisions to Affiliates.
---------------------------------------
The following provisions shall apply for a period of three (3) years
commencing on the date of this Agreement:
[*]
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filed separately with the Commission. Confidential
treatment has been requested with respect to the
omitted portions.
<PAGE>
[*].
(c) In the event that the restrictions and obligations set forth in
Section 6.3 are invalid for any reason under applicable law, neither BAG nor any
of its Affiliates shall be required to make an offer to Lycos or to any of the
Joint Entities. The invalidity of this Section 6.3 shall not affect the
remainder of this Agreement.
(d) Nothing in this Section 6.3 shall limit the obligations of BIS or
any Person in which BIS owns fifty percent (50%) or more of the voting rights
with respect to the application of Section 6.1(a).
6.4 Investment Opportunity.
----------------------
(a) To the extent that Lycos desires to enter into a license or
sublicense with respect to rights which are similar to the Licensed Property (as
defined in the Lycos License) with a third party that either has its principal
offices in the Territory or which is intended to procure sales primarily within
the Territory, with respect to any Searchservice and directory services via a
managed network, Lycos shall request BIS to agree to cause a Joint Entity to be
formed in such country or select an existing Joint Entity who shall act as the
sublicensor with respect to the rights intended to be conveyed to the third
party.
(b) All revenues which accrue after May 1, 1997, and which either
Telemedia or Lycos derive from sale of advertisements in the Territory in
connection with the localized Lycos catalog pertaining to such country, shall be
assigned to the relevant Joint Entity by each of BIS and Lycos and the Joint
Entity which receives such revenue shall pay the fully burdened costs of the
assignor which accrue after May 1, 1997.
ARTICLE VII
Technology/Software/Know-How/Patents/Copyrights/Trademarks
----------------------------------------------------------
7.1 Lycos License.
-------------
(a) Annexed hereto as Exhibit E is a license agreement (the "Lycos
---------
License") by which Lycos, in consideration of the performance by BIS of the
obligations and agreements of BIS under this Agreement, shall, or shall cause a
direct or indirect subsidiary of Lycos to, extend to each of the Joint Entities
the rights, benefits, privileges and obligations set forth therein. The Lycos
License shall be modified to the extent necessary to protect the rights of Lycos
in its property under local laws in the country or countries in which a
particular Joint Entity provides Searchservices, as determined by Lycos in its
reasonable discretion.
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filed separately with the Commission. Confidential
treatment has been requested with respect to the
omitted portions.
<PAGE>
(b) All software included within the Technology licensed under the
Lycos License (as defined therein) shall include the Source Code therefore
(except for software not owned by Lycos and for which Lycos does not have source
code distribution rights), which Source Code shall not be licensed or delivered
to the Joint Entities, but shall be held in escrow as provided below. The
Source Code will be updated by Lycos not less frequently than semi-annually,
including all changes to the software since the previous update. The Source
Code shall be held in escrow in the United States by an independent third party
for the benefit of the Joint Entities in accordance with the provisions of the
Escrow Agreement. The annual cost of the escrow agent to retain the Source Code
in escrow shall be paid by the German Joint Entity (or if there are none, then
by the next largest Joint Entity).
(c) Promptly upon formation and organization of a Joint Entity, Lycos
shall or shall cause a direct or indirect subsidiary of Lycos to execute and
deliver to each Joint Entity, and BIS and Lycos shall cause each Joint Entity to
execute and deliver to Lycos or such direct or indirect subsidiary of Lycos, the
Lycos License in accordance with this Agreement.
(d) In the event that Lycos causes a direct or indirect subsidiary to
enter into the Lycos License, Lycos shall execute and deliver its guarantee to
such Joint Entity with respect to the Lycos License.
7.2 Lycos Initial Technology Development.
------------------------------------
(a) Lycos shall use its best efforts to provide the same software
functionality under the Lycos License or its system in the U.S., subject to
localization.
(b) All localization costs shall be borne by the Joint Entities.
Lycos may charge the costs which it incurs in connection with localization at
the fully burdened cost of Lycos. Such expenses shall be promptly paid by the
Joint Entities. Lycos shall use its best efforts to complete all localization
requirements in a diligent manner.
(c) Lycos represents and warrants during the term of this Agreement
that the licensed products (as defined in the Lycos License) delivered pursuant
to the Lycos License, together with the products which are developed as part of
the localization and commercially available developer tools, are sufficient to
implement, operate and maintain a Searchservice equivalent to the existing Lycos
Searchservice.
7.3 Lycos Ongoing Development.
-------------------------
(a) Lycos acknowledges the importance to the Business of access by the
Joint Entities to ongoing development activities. Accordingly, Lycos agrees, at
BIS's oral or written request, to provide the European CEO regular access to the
following:
(i) plans for all current and future products used in the
Lycos Searchservices provided by Lycos or any Person in
which
30
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Lycos owns more than fifty percent (50%) of the voting
securities, on a quarterly basis.
(ii) functional descriptions, architecture descriptions,
specifications, development plans, schedules and
periodic status for products and enhancements thereto
under development, as soon as such materials exist.
(iii) data for products regarding design changes, problem
tracking, correction of errors or bugs and proposals for new
products.
(b) Lycos and BIS agree to make all reasonable efforts to assure the
technical continuity and compatibility of the Lycos Searchservice(s) and the
Business in the Territory whenever reasonably feasible. Accordingly, they agree
that technical changes in the Business of any Joint Entity which affect the
operation, functionality, performance, integrity, reliability, security,
availability or serviceability of any Lycos Searchservice must be agreed on by
the Steering Committee (with the participation and vote of the Lycos members),
and any technical changes in any Lycos Searchservice which adversely affect the
operation, functionality, performance, integrity, reliability, security,
availability or severability of the Business in the Territory shall be timely
discussed with the Steering Committee and that the implementation of any such
changes shall permit a reasonable transition period during which both sides
shall offer reasonable support. The European CEO shall provide to Lycos and BIS
information covering new developments available to the Joint Entities on a
regular basis.
(c) If the Steering Committee, with the participation and voting of
the Lycos members (who shall vote in the same manner as the BIS members),
requests in writing on behalf of one or more Joint Entities (the "Requesting
Entities") that Lycos perform a development project requiring access to the
Lycos Source Code (as defined in the Lycos License) to accommodate significant
technical, competitive or legal requirements specific to the Territory of such
Requesting Entities, including, without limitation, the development of client
products for operating systems accounting for five percent (5%) or more of the
operating systems (as determined on the basis of studies of any independent
marketing organization with expertise in the computer industry) in the Territory
of the Requesting Entities or the modification of client licensed products to
adapt to new releases of client operating systems or the modification of any
Licensed Properties to adapt to communications infrastructure developments in
the Territory of the Requesting Entities, then Lycos shall at its option:
(i) make the changes within a reasonable period subject to
the payment to Lycos of its fully burdened costs; or
(ii) decline to undertake the project but, as soon as
feasible, provide an Applications Programming Interface,
as defined in the Lycos License ("API"), so that the
Requesting Entity is
31
<PAGE>
able itself to perform the project or have the project
performed by a third party; or
(iii) make available, to such entity as the Steering Committee
(with the participation and vote of the Lycos members) may
select, those parts of the Source Code needed to make the
change.
Changes made pursuant to this Section 7.3 shall be based on specifications
reasonably approved by Lycos and shall be subject to quality assurance testing
by Lycos to its reasonable satisfaction prior to installation in order to
determine conformity to specifications. Any entity selected by the Steering
Committee to make such changes shall enter into a reasonable confidentiality
agreement with Lycos prior to delivery of any Source Code. To the full extent
permitted by law, Lycos shall retain full ownership of all changes in the Lycos
Source Code (but, to the extent that it does not contain Source Code, not the
product, if any, developed by or on behalf of a Requesting Entity using the
Source Code) and Lycos in any event shall have the full and exclusive
exploitation rights to such changed Source Code, subject to the terms of the
Lycos License to the Joint Entities. The Requesting Entity shall execute such
documents of assignment as may be required to give effect to this section.
(d) All proposed changes and improvements by Lycos shall constitute
confidential information of Lycos. BIS acknowledges that Lycos shall have the
right to make public announcements relating to current and future products and
all development plans.
(e) If the documentation (as defined in the Lycos License) required to
implement, operate, and maintain the Searchservice is insufficient for such
purposes (other than localization and customization), Lycos shall either
supplement the Documentation or provide sufficient training or consultation in
accordance with Exhibit E of the Lycos License without charge.
(f) For purposes of technology development and assistance, Lycos shall
dedicate such time and priority to the requests of the Joint Entities as is
proportional to the business traffic generated by the Joint Entities in relation
to the overall business of Lycos.
(g) The Joint Entities will be entitled to have a designee attend all
product development meetings held by Lycos and participate therein.
(h) BIS shall advise Lycos of all plans for all current and future
products and services to be provided by BIS as part of its business, which
information shall be provided on a quarterly basis.
7.4 Continuation of Licenses Upon Certain Events.
--------------------------------------------
In the event that Lycos and BIS no longer each own equity interests in a
Joint Entity (the "Cessation Date"), commencing upon such date and continuing
for a period [*]
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filed separately with the Commission. Confidential
treatment has been requested with respect to the
omitted portions.
<PAGE>
[*] Lycos and BIS agree to the following terms, with respect to each such
Joint Entity:
(a) To the extent that any Joint Entity operates a host computer
system providing searchservices in the Territory pursuant to the Lycos License,
BIS and Lycos shall cause such Joint Entity to provide the searchservices to the
other Joint Entities during the Time Frame at fair market value or such other
rate as mutually agreed.
(b) Nothing in the foregoing provisions shall limit the right of Lycos
or BIS to terminate a license granted to a Joint Entity in accordance with the
terms of its license agreement with such Joint Entity.
7.5 Technology Development by Joint Entities.
----------------------------------------
(a) Whether or not the Joint Entities reach agreement with either
Lycos or BIS regarding ongoing developments, the Joint Entities shall remain
free to design, develop, modify and distribute, without restriction, any
products and programs (not containing code proprietary to Lycos or BIS or
information contained in databases licensed under the Lycos License) within the
scope of their respective licenses and Business Plans.
(b) Except as provided in Sections 7.2 or 7.3, or the Lycos License,
each Joint Entity shall have sole ownership of any other technology developed by
or on behalf of such Joint Entity subject to the grant to both Lycos and BIS of
an irrevocable non-exclusive, royalty-free, worldwide right, with the right of
sublicense, to use, modify, and fully exploit any technology, including any
source code not containing code proprietary to Lycos or BIS, developed by such
Joint Entity in connection with the Lycos Service or any Searchservice.
(c) Technology licensed to Lycos and BIS pursuant to this subsection
7.5 shall be included in the technology licensed to all other Joint Entities by
Lycos and BIS.
7.6 Access to Agreements and Redirection of Traffic.
-----------------------------------------------
(a) To the extent that Lycos or any of the Joint Entities has the
right to extend to the other access rights under agreements which one of them
has entered into with third parties, the Party which has such rights will enter
into "extension agreements" with respect to all such agreements which it has
whereby the other Party will be granted access and retrieval rights in all
content services which are available to such Party. The cost for such access
and retrieval rights granted to the other Party will be the same out-of pocket
cost as is borne by the granting Party at the most favorable discount rate
realized by the granting Party during each use measurement period and without
any allocation thereto of overhead or other expenses. The foregoing shall not
apply to the costs and expenses associated with the localization and
customization requested by a Joint Entity.
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(b) In the event that any agreements to which a Party is a party
cannot be extended to the other Party due to territorial or other restrictions,
the granting Party will use its reasonable efforts to renegotiate such
agreements and obtain such clearances and consents as may be necessary to allow
the extension of such agreements to the other Party.
(c) Commencing on the date of this Agreement:
(i) Lycos will use its reasonable efforts in connection with
agreements entered into with third parties to obtain any
rights to access or retrieve data bases to cause the
licensing party to enter into an independent license
agreement with the Joint Entities on the same terms and
conditions as are made available to Lycos;
(ii) BIS will use its reasonable efforts in connection with
agreements entered into by BAG and its Affiliates with
third parties to obtain any rights to access or retrieve
data bases to cause the licensing party to enter into an
independent license agreement with the Joint Entities on
the same terms and conditions as are made available to
BAG or such Affiliate; and
(iii) [*]
(d) Lycos shall: [*]. The Joint Entities shall promptly pay to Lycos
for all development costs and ongoing maintenance and enhancements which the
Joint Entities may from time to time request from Lycos with respect to
localizing the catalogs, localizing the databases and localizing the spiders at
the fully burdened cost of Lycos.
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(e) In consideration of [*]. Such amounts shall be subject to
verification by the Joint Entities. Lycos understands that no amount of payment
is guaranteed hereunder. The provisions of this paragraph shall be renegotiated
on the first anniversary of this Agreement in good faith.
(f) At the option of the Joint Entities (which shall be exercised by
BIS only), Lycos shall assign to the Joint Entities the license agreement for
[*] provided the Joint Entities shall pay to Lycos the fully burdened cost
under the said license (as allocated to the respective territories of use)
incurred by Lycos in maintaining and supporting the [*] license after the
date of assignment. The Joint Entities shall have the right to verify such costs
as may be charged for [*].
(g) Nothing in this Section 7.6 shall be construed to require a Party
to provide access to databases which have been customized or localized by such
Party.
(h) Without in any manner limiting the obligations otherwise imposed
on Lycos, whether by this Agreement or the Lycos License, Lycos agrees that:
[*]
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7.7 Territorial Limitation.
----------------------
The term "Territory" as used with respect to the Lycos License, the rights
conveyed thereunder, technology and trademarks shall refer to and shall only
constitute a limitation on the geographical area where the Business is
physically situated or the geographical area where the services of the Joint
Entities conducting the Business are intended to be offered as determined on the
basis of solicitation, advertising and the location of operations, but shall not
constitute a limitation in terms of the access which is allowed or granted to
users of such services, it being understood that no access limitation is
intended by the use of such term.
7.8 Contributions to be provided by BIS; Technical Assistance by Lycos.
------------------------------------------------------------------
(a) BIS will endeavor to define and establish ways and means to assist
the Joint Entities with marketing, sales and distribution in such manner as will
be negotiated, in good faith, during the term of this Agreement.
(b) Each Joint Entity shall give notice to BIS if the Joint Entity
desires to procure any professional services (having a value of DM 10,000 or
more in one or a series of related transactions other than network services)
which may be provided by Affiliates of BIS such as BAG. If BAG or any of its
Affiliates desires to provide to the Joint Entities any professional services to
be procured by any of them in the Territory during the Term, the applicable
Joint Entity shall negotiate to procure such services from BIS or its Affiliates
for a reasonable period of time, taking into consideration the nature and value
of the services. If an acceptable agreement is not entered into, then the Joint
Entities may negotiate the provision of such service with third parties. Prior
to entering into an agreement with a third party to provide such services, the
Joint Entities shall give written notice (a "Last Refusal Notice") of such
intention to BIS (or the applicable Affiliate). The Last Refusal Notice shall
include the proposed price, quality and quantity and all other material matters
relating to such service or product. The Last Refusal Notice shall constitute a
binding offer by the Joint Entities to procure such service from BIS (or the
applicable Affiliate) on the terms set forth in the Last Refusal Notice. Not
later than five (5) days after receipt of the Last Refusal Notice, BIS (or the
applicable Affiliate) may elect to accept such offer by written notice to the
Joint Entities. If BAG (or the applicable Affiliate) fails to accept such offer
within the said time frame, the Joint Entities shall have no further obligation
under this Section 7.8.
(c) Each Joint Entity shall give notice to Lycos if the Joint Entity
desires to procure any products or services (other than professional services)
having a value of DM 10,000 or more in one or a series of related transactions.
If Lycos or any of its Affiliates desires to provide to the Joint Entities any
products or services to be procured by them in the Territory during the Term,
the applicable Joint Entity shall negotiate to procure such services from Lycos
or its Affiliates for a reasonable period of time, taking into consideration the
nature and value of the services and products. If an acceptable agreement is
not entered into, then the Joint Entities may negotiate the provision of such
service or product with third parties. Prior to entering into an agreement with
a third party to provide such services or products, the Joint Entities shall
give written notice (a "Last
36
<PAGE>
Refusal Notice") of such intention to Lycos (or the applicable Affiliate). The
Last Refusal Notice shall include the price, quality and quantity and all other
material matters relating to such service or product. The Last Refusal Notice
shall constitute a binding offer by the Joint Entities to procure such service
or product from Lycos (or the applicable Affiliate) on the terms set forth in
the Last Refusal Notice. Not later than five (5) days after receipt of the Last
Refusal Notice, Lycos (or the applicable Affiliate) may elect to accept such
offer by written notice to the Joint Entities. If Lycos (or the applicable
Affiliate) fails to accept such offer within the said time frame, the Joint
Entities shall have no further obligation under this Section 7.8 with respect to
the procurement of the products or services which were the subject of the Last
Refused Notice. Lycos and its Affiliates shall, at all times when procuring any
services or products on behalf of the Joint Entities within the Territory,
solicit the bid of BAG (or its Affiliates) by notice to BIS and award the
procurement to BAG (or its Affiliates) if the bid of BAG (or its Affiliates) is
equal to or less than any other bid for the same services or products. After
May 1, 2000, this Section 7.8(c) shall only apply to: (i) networking costs for
Searchservices; (ii) computer hardware in excess of $5,000 for Searchservices;
and (iii) marketing/advertising expenses in excess of $100,000 or more in one or
a series of related transactions. In the event of any dispute as to the meaning
of the phrase "professional services", the services shall be deemed to fall
within Section 7.8(c) and Lycos shall provide the service but BIS shall have the
same rights to obtain a Last Refusal Notice and accept the same in order to
provide the service to Lycos as if the services had been subject to Section
7.8(b) it being understood that otherwise this Section 7.8(c) shall prevail over
Section 7.8(b).
7.9 Trademarks.
----------
(a) CMU presently owns the trademark and trade name "Lycos" (the
"European Marks"). The European Marks have been licensed to Lycos on an
exclusive, perpetual basis (subject to limited termination rights). Lycos shall
grant to each of the Joint Entities, upon the request of either Party and in
accordance with the terms of the Lycos License, the nonexclusive, perpetual
right, without royalty, to use the European Marks to market the Business in the
Territory. [*].
(b) In connection with the European Marks, Lycos hereby represents and
warrants to each of BIS and the Joint Entities that:
(i) to Lycos' knowledge, CMU is the sole and exclusive owner
of the European Marks in the Territory, free and clear
of any claims, liens, charges or encumbrances, and CMU
has granted to Lycos the exclusive worldwide right to
use such trademarks, subject to CMU's right to use the
European Marks for non-commercial purposes and CMU's
right to use the URL "http://lycos.cs.cmu.edu" as a home
page;
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(ii) Lycos has filed an application to register the European
Marks with the European Union and Lycos has not received
notice that there is any impediment to registration;
(iii) Lycos has not (and to the best knowledge of Lycos, CMU has
not) licensed such European Marks to any other Person in the
Territory or in a manner which may interfere with the use
thereof by the Joint Entities (except for worldwide non-
exclusive licenses to Lycos' licensees) and the license in
favor of Focus Online;
(iv) to the best knowledge of Lycos, there are no
restrictions, whether by contract, operation of law, or
otherwise, on Lycos's ability to grant to the Joint
Entities the right to use the European Marks in the
Territory for the Term;
(v) to the best knowledge of Lycos, the European Marks do
not infringe the rights of any third parties in any
manner that would have a material adverse effect on the
Business, properties, financial position or results of
operations of the Joint Entities as contemplated by this
Agreement nor, to Lycos's knowledge, does any use by any
third party materially infringe upon any of the European
Marks, and there are no claims pending or threatened
with respect to any such infringement by or against the
European Marks; and
(vi) the right to use the European Marks is not dependent on
the rights of any third parties and that the Joint
Entities are not required to make any payments to any
third parties in respect of the European Marks, except
for royalties payable to CMU on revenues derived by
Lycos through the use of the European Marks in
conjunction with products or services which are not
based upon or utilize, wholly or in part, the
Technology.
(c) Lycos owns the trademarks and trade names "a2z" and "Point"
(collectively, the "Additional Marks"). Lycos shall grant to the Joint Entities
in connection with the terms of the Lycos License the nonexclusive, perpetual
right, without royalty, to use the Additional Marks to market the Business in
the Territory. [*].
(d) In connection with the Additional Marks, Lycos hereby represents
and warrants to each of BIS and the Joint Entities that:
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(i) to the knowledge of Lycos, Lycos is the sole and
exclusive owner of the Additional Marks in the
Territory, free and clear of any claims, liens, charges
or encumbrances;
(ii) Lycos has filed registrations for the Additional Marks
with the European Union, and there are no currently
pending oppositions thereto;
(iii) Lycos has not licensed such Additional Marks to any other
Person in the Territory or in a manner which may interfere
with the use thereof by the Joint Entities (except for
worldwide non-exclusive licenses to Lycos' licensees) and
the license in favor of Focus Online as in effect on the
date hereof;
(iv) to the best knowledge of Lycos, there are no
restrictions, whether by contract, operation of law, or
otherwise, on Lycos's ability to grant to the Joint
Entities the right to use the Additional Marks in the
Territory for the Term;
(v) to the best knowledge of Lycos, the Additional Marks do
not infringe the rights of any third parties in any
manner that would have a material adverse effect on the
Business, properties, financial position or results of
operations of the Joint Entities as contemplated by this
Agreement nor, to Lycos's knowledge, does any use by any
third party materially infringe upon any of the
Additional Marks, and there are no claims pending or
threatened with respect to any such infringement by or
against the Additional Marks; and
(vi) the right to use the Additional Marks is not dependent
on the rights of any third parties and that the Joint
Entities are not required to make any payments to any
third parties in respect of the Additional Marks.
(e) Lycos hereby covenants to take all actions reasonably requested by
the Joint Entities to secure protection for the European Marks and the
Additional Marks (collectively, the "Marks") provided that: [*].
--------
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<PAGE>
(f) Lycos agrees to indemnify, defend and hold harmless, any Joint
Entity, BIS or any Affiliate of BIS (the "Indemnified Parties") from and against
any and all damages, liabilities, costs, losses and expenses (including legal
costs and reasonable attorneys' fees) arising out of or connected with any
claim, demand or action by any Person (other than BIS or any BIS Affiliate)
which is inconsistent with any of the warranties, representations or covenants
made by Lycos in this Section 7.9 (a "Trademark Claim"). The Indemnified
Parties shall give Lycos prompt written notice of any Trademark Claim against
any Indemnified Party. Lycos shall give BIS prompt written notice of any
Trademark Claims against Lycos. The foregoing shall not apply to countries
outside of the European Community or Switzerland and Norway after assignment of
the Scandinavian License Agreement.
(g) Lycos shall have control over the defense of any Trademark Claim,
including appeals, negotiations and the right to effect a settlement or
compromise thereof, provided that: (i) Lycos may not partially settle any
--------
Trademark Claim without the written consent of BIS unless such settlement
releases BIS fully; (ii) Lycos shall promptly provide BIS with copies of all
pleadings or similar document relating to any Trademark Claim; (iii) Lycos shall
consult with the Indemnified Parties with respect to the defense and settlement
of any Trademark Claim; and (iv) in any litigation to which an Indemnified Party
is a party, such Indemnified Party shall be entitled to be separately
represented at its own expense by counsel of its own selection.
(h) Any amount payable under Section 7.9(f) shall be allocated
territorially as agreed between Lycos and BIS within sixty (60) days after the
determination thereof. Failing such agreement, the allocation shall be
determined by arbitration in accordance with Section 11.2.
(i) Each Joint Entity may adopt and register additional local
trademarks or service marks, provided that any mark used in combination with the
--------
European Mark or Additional Mark shall be subject to the prior approval of
Lycos.
(j) The use by any Joint Entity of names, trademarks or logos owned by
either Lycos or BIS shall be subject to the prior written approval of the owner
of such names, trademarks or logos. The ownership of any trademark or service
mark which refers to both "Lycos" and "Bertelsmann" or their respective
Affiliates shall be determined in accordance with the agreement of the Parties
before any such trademark or service mark is registered.
(k) Any trademark or service marks which refer to "Lycos" or any
Additional Mark shall be the property of Lycos. Any trademark or service marks
which refer to "Bertelsmann" or its Affiliates shall be the property of BAG or
its Affiliates. Any trademark or service mark which refers to both "Lycos" and
"Bertelsmann" or their respective Affiliates shall be determined before
registration.
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<PAGE>
7.10 Patent Indemnity.
----------------
(a) Lycos agrees to defend (or to cause the Licensor under the
applicable Lycos License to defend) any claims or suits brought against the
Indemnified Parties, and will indemnify and hold harmless (or cause any such
Licensor to indemnify and hold harmless) such Indemnified Party against any
award of damages and costs made against any such Indemnified Party by settlement
or a final judgment of a court of competent jurisdiction in any suit at law or
in equity insofar as, and only to the extent that, the same is based on a claim
by any Person (other than BIS or any BIS Affiliate) that the Licensed Software
(as defined in the Lycos License) owned and delivered by Lycos or any direct or
indirect Lycos subsidiary pursuant to the Lycos License infringes any patent
issued by any country within the Territory (a "Patent Infringement Claim"). The
Indemnified Parties shall give Lycos prompt written notice of any Patent
Infringement Claim against any Indemnified Party. Lycos shall give BIS prompt
written notice of any Patent Infringement Claims against Lycos.
(b) Lycos shall have control over the defense of any Patent
Infringement Claim, including appeals, negotiations and the right to effect a
settlement or compromise thereof, provided that: (i) Lycos may not partially
--------
settle any Patent Infringement Claim without the written consent of BIS unless
such settlement releases BIS fully; (ii) Lycos shall promptly provide BIS with
copies of all pleadings or similar document relating to any Patent Infringement
Claim; (iii) Lycos shall consult with the Indemnified Parties with respect to
the defense and settlement of any Patent Infringement Claim; and (iv) in any
litigation to which an Indemnified Party is a party, such Indemnified Party
shall be entitled to be separately represented at its own expense by counsel of
its own selection.
(c) Should any licensed product become or, in Lycos's opinion, be
likely to become, the subject of any Patent Infringement Claim, Lycos shall, at
its sole option and expense, and for purposes of eliminating or mitigating any
indemnification obligations hereunder: (a) procure the right (for each Joint
Entity which is an authorized licensee thereof) to continue using the licensed
product; or (b) replace or modify such Licensed Product so that it becomes non-
infringing (provided that the provisions of this Section 7.10 shall apply to any
--------
such modified Licensed Software).
(d) Lycos shall have no liability for any Patent Infringement Claim to
the extent: (i) such infringement is based upon adherence to specifications,
designs or instructions furnished by any Indemnified Party; (ii) such claim is
based upon the combination, operation or use of any Licensed Software with
products or content owned by any Person other than Lycos; (iii) such claim is
based upon the combination by the Indemnified Party of any licensed product or
modification of any products or content supplied by any Person other than Lycos;
or (iv) such claim is based upon an authorized Indemnified Party's use of a
Licensed Software in a manner which is inconsistent with the terms of the Lycos
License Agreement and if such infringement would not have occurred except for
such use.
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<PAGE>
(e) Any amount payable under Section 7.10(a) shall be allocated
territorially as agreed between Lycos and BIS within sixty (60) days of the
determination thereof. Failing such agreement, the allocation shall be
determined by arbitration in accordance with 11.2.
(f) Costs shall only be allocated to a job or recipient of a benefit
in accordance with the use thereof and shall not be allocated in its entirety to
multiple parties.
7.11 Inspection of Books and Records.
--------------------------------
(a) During the Term of this Agreement and thereafter, Lycos agrees to
keep all usual and proper records and books of account and make all usual and
proper entries therein relating to the costs and expenses (including, but not
limited to, the Lycos Engineering Costs) for developing, localizing, maintaining
and enhancing the licensed products under the Lycos License (including the
localized catalogs, database and spiders) and all other products.
(b) All statements and all other accounts rendered by Lycos to the
Joint Entities shall be binding upon the Joint Entities and not be the subject
of any objection by the Joint Entities for any reason, unless specific
objection, in writing, stating the basis thereof is given to Lycos within one
(1) year following the date Lycos mails such statement or account to the Joint
Entities. BIS, on behalf of the Joint Entities, shall have the right to appoint
a duly qualified independent chartered or certified public accountant, or its
equivalent, in each country of the Territory concerned to examine Lycos's books
and records in so far as the same pertain to the costs and expenses payable to
Lycos under this Agreement or the Lycos License. Such examination shall take
place at Lycos's offices in each country concerned, where such books and records
are normally maintained, during normal business hours, on reasonable advance
written notice, not more than twice in any calendar year (but only once with
respect to any statement rendered hereunder) and at the Joint Entities's sole
cost and expense. The Joint Entities shall be entitled to examine records
relating to all licensed products under the Lycos License. BIS acknowledges
that Lycos's books and records contain confidential trade information and
warrants that BIS will not communicate to any third parties, other than the
professional advisors of the Joint Entities, any information or facts obtained
as a result of such examination of the books and records of Lycos, except in
connection with an action, proceeding or claim brought against Lycos or as
otherwise provided by or at law. If the examination discloses an overpayment to
Lycos (the "overpayment"), Lycos shall pay the amount of such overpayment plus
interest from the day such amount was due until the day such amount is received
at a rate of interest per annum equal to five percent (5%) above the Prime Rate
for each such day.
(c) If the calculation of any costs or expenses hereunder is
determined by a computer-based system, the Joint Entities shall be permitted to
examine the machine-sensible data utilized by such system and the related
documentation describing such system. Lycos agrees to maintain all books and
records for a period of two (2) years after the date of the invoice relating to
such books and records.
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<PAGE>
(d) All amounts payable to BAG, BIS or Lycos by a Joint Entity under
this Agreement or the Lycos License shall be due and payable within thirty days
of the date of invoice. If any payment is not received within thirty days of the
date of invoice, interest will be imposed on such amount at a rate of interest
per annum equal to five percent (5%) above the Prime Rate from the day such
amount was due.
ARTICLE VIII
Term; Termination
-----------------
8.1 Term.
----
The term of this Agreement shall commence on the date of execution and
delivery of this Agreement (the "Effective Date"), subject only to approvals
required by the European Commission and/or administrative authorities in the
Core Countries. The Agreement shall expire when terminated by mutual agreement
or [*].
8.2 Termination.
-----------
The Party which is not in breach of this Agreement shall have the right to
terminate this Agreement upon the occurrence of the events set forth below:
(a) The other Party is in material breach of any material term,
condition or covenant of this Agreement and the breaching Party fails to cure
such breach within thirty (30) calendar days after the receipt of written notice
of such breach; or
(b) An event of bankruptcy occurs with respect to the other Party.
For purposes of the foregoing, event of bankruptcy with respect to a Party means
any of the following circumstances (or the substantial equivalent under
applicable law in any other country): (a) the commencement by the Party of a
voluntary case under the United States Bankruptcy Code or an equivalent law as
applicable to such Party in Europe, (b) the commencement against the Party of an
involuntary case under the United States Bankruptcy Code or an equivalent law as
applicable to such Party in Europe if the case is not vacated with a ninety
calendar days, (c) the entry of a final order by a court of competent
jurisdiction finding the Party to be bankrupt or insolvent, ordering or
approving its liquidation, reorganization or any modification or alteration of
the rights of its general creditors or assuming custody of or appointing a
receiver or other custodian for all or a substantial part of its property and
such order shall not be vacated or stayed upon appeal or otherwise stayed within
ninety calendar days or (d) the Party making an assignment for the benefit of,
or entering into a composition with, its creditors, or appointing or consenting
to the appointment of a receiver or other custodian for all or a substantial
part of its property.
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Termination under subsection (a) shall be effective upon delivery of notice
of the expiration of the cure period and termination under subsection (b) will
become effective immediately upon written notice of termination at any time
after the occurrence of the event of bankruptcy.
8.3 Effect of Termination.
---------------------
If, upon termination, the Parties continue to hold joint interests in any
Joint Entities, the provisions of Section 9.3 of this Agreement shall apply as
if Deadlock Notice had been given (other than with respect to a Cancellation
Notice in which case the sale provisions of Section 9.5 of this Agreement shall
apply), and the provisions of this Agreement shall remain in force until each of
the Joint Entities ceases to be jointly owned. As soon as the Parties cease to
hold joint interests in any Joint Entity, this Agreement, with the exception of
Sections 7.3, 7.4, 9.3, 9.8, 11.1 and 11.2, shall be terminated.
8.4 EU Notification/Governmental Approval.
-------------------------------------
Promptly upon the execution hereof, the Parties shall inform the Commission
of the European Union and/or such administrative authorities in the Territory as
may be required under national anti-trust laws, and notify this Agreement under
the applicable provisions of EU law and/or national laws and shall make such
notification as promptly as practicable following the Effective Date.
ARTICLE IX
Transfers
---------
9.1 Limitation on Transfer.
----------------------
(a) Except as expressly permitted in this Article IX, neither Lycos
nor BIS shall, without the prior written approval of the other Party (which may
be withheld in the sole discretion of such Party), Transfer its interest in any
Joint Entity or assign its rights or obligations under this Agreement in any
manner whatsoever and any purported Transfer or assignment in contravention of
this Section 9.1 shall be void.
(b) BAG shall provide to Lycos, as of the date hereof, the Guarantee
with respect to the financial obligations of BIS under this Agreement.
9.2 Permitted Transfers and Assignments.
-----------------------------------
(a) Notwithstanding Section 9.1, either Party may, at any time upon
compliance with Section 9.2(b), Transfer all or part of its interest in any
Joint Entity to an Affiliate of such Party or assign its rights and obligations
under this Agreement to an Affiliate, without the prior written approval of the
other Party. Notwithstanding anything to the contrary contained in this
Agreement,
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<PAGE>
the interest of BAG and its Affiliates in any Joint Entity shall be held within
an entity which is not the owner of, or a subsidiary of, any Competitor.
(b) Any Transfer by a Party of an interest in any Joint Entity or
assignment of the rights and obligations as permitted by Section 9.2(a) shall be
effective only upon the execution and delivery by the transferor of an
appropriate irrevocable and unconditional guarantee to continue to be bound by
the provisions of this Agreement and the constituent documents of each Joint
Entity together with instruments of assumption under which the Affiliate agrees
to be bound by this Agreement and the constituent document of each Joint Entity.
An assignment or Transfer shall not release the transferor of any of its
obligations hereunder or under any constituent document relating to a Joint
Entity.
(c) Either Party may Transfer this Agreement and all of its rights and
obligations hereunder to any Party acquiring all or substantially all of the
business of such Party whether by merger, sale of assets or otherwise.
9.3 Separation Rights.
-----------------
(a) Upon giving the Deadlock Notice, the interests in the Joint
Entities shall be transferred [*] as follows:
[*]
In the event that the Business with respect to a country is operated by a Joint
Entity in another country, the Parties agree that such business will be divested
by the Joint Entity and all rights and
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obligations relating to the Business in such country shall be assigned to a
newly formed Joint Entity for purposes of effecting the sale provisions
contained in this Section 9.3.
(b) All Joint Entities in which a Party sold an interest pursuant to
Section 9.3(a) above shall [*]. In the event that such Joint Entity cannot at
any time legally pay such amount, then it shall be the obligation of the
purchasing shareholder to make such payment. If BIS purchases the interest of
Lycos in a Joint Entity and thereafter such Joint Entity's business is
terminated, then Lycos may conduct business in that country and BIS shall not
have any rights with respect to such business. If Lycos purchases the interest
of BIS in a Joint Entity and thereafter such Joint Entity's business is
terminated, then BIS may conduct business in that country and Lycos shall not
have any rights with respect to such business provided that upon the request of
BIS, Lycos shall immediately grant a Lycos License with respect to such business
without charge or royalty except as otherwise provided in the Lycos License.
(c) The closing of the purchase and sale of the purchased interests
under Section 9.3(b) (the "Divorce Closing") shall take place at the principal
offices of the European CEO, at 10:00 A.M. (local time) on the Business Day that
is the later to occur of (A) the date that is forty-five (45) Business Days
after the date that the Deadlock Notice is delivered and (B) the date that is
five (5) Business Days after the date on which all necessary Governmental Bodies
shall have given their approval of the purchase and sale of the interests
following the Deadlock Notice (or the expiration of all applicable waiting
periods if such approval is not necessary), or at such other location, time and
date as may be actually agreed by the Parties. Each Party agrees to cooperate
with the other Party: (i) to provide such information (subject to any applicable
confidentially agreements) as is reasonably necessary to comply with any
governmental filing and notification procedures; and (ii) to otherwise assure
the closing of such purchase and sale. At the Divorce Closing, each Party shall
execute and deliver to the other Party such documents, records, and other
instruments of transfer, in form and substance reasonably satisfactory to such
Party and its counsel, necessary: (i) to evidence the selling Party's ownership
of the interests in such Joint Entities; (ii) to evidence all such necessary
approvals of Governmental Bodies (or such expiration of any applicable waiting
periods); and (iii) effectively to transfer the interests to the Party
purchasing such interests (or any designee or designees of such Party), free and
clear of any liens, charges or other encumbrances and the Parties shall deliver
the purchase price for each such interest, determined pursuant to Section 9.3,
in immediately available funds, to the Party entitled to receive such purchase
price, provided that the Parties shall net such purchase prices against one
--------
another. At the Divorce Closing, the purchasing Party shall cause the selling
Party to be released from all guarantees given in respect of the Joint Entity
being sold (or if such release is not possible, the purchasing Party shall
execute and deliver an indemnity agreement to the selling Party in customary
form with respect to such guarantees) and the Joint Entity shall pay and
discharge all indebtedness to the selling Party. In the event that any Party
fails to deliver or execute at the Divorce Closing any documents, records or
other instruments of transfer reasonably requested by the other Party and
necessary to evidence an
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treatment has been requested with respect to the
omitted portions.
<PAGE>
interest or effectively to transfer an interest, then such Party shall, upon the
Divorce Closing, immediately lose all voting rights and economic benefits
associated with such interest and the Party entitled to purchase such interest
shall thereafter be deemed to be the sole shareholder of such Joint Entity,
provided that the Party entitled to purchase such interest shall establish a
- --------
segregated account into which the purchase price for such interest shall be
placed, such account to be turned over to the defaulting Party upon delivery of
all such documents, records or other instruments of transfer necessary to
effectively transfer such interest.
(d) In the event that either Lycos or BIS suffers a Significant Change
in Control (such Party being referred to as the "Affected Party"), then: (i) the
Affected Party shall give immediate notice of such event to the other Party:
(ii) if Lycos is the Affected Party, BIS shall have the option (the "Put
Option"), exercisable by notice (the "Put Notice") given to Lycos within ninety
(90) days after such notice from Lycos to BIS (or the occurrence of the
specified event), to sell to Lycos all (but not less than all) of BIS's
interests (the "BIS Interests") in all Joint Entities existing on the date of
the Put Notice, subject to the terms and conditions set forth below in this
Section 9.3(d) and in Section 9.7; and (iii) if BIS is the Affected Party, Lycos
shall have the option (the "Call Option"), exercisable by notice (the "Call
Notice") given to BIS within ninety (90) days after such notice from BIS to
Lycos (or the occurrence of the specified event), to purchase from BIS all (but
not less than all) of BIS's interests in all Joint Entities existing as of the
date of the Call Notice, subject to the terms and conditions set forth below in
this Section 9.3(d) and in 9.7. The purchase price for the interests sold
hereunder shall be equal to the sum of the BIS Ownership Values for all Joint
Entities. The "BIS Ownership Value" of a Joint Entity shall be equal to the
[*]. The closing of the purchase and sale of the transactions under
this Section 9.3(d) (the "Closing") shall take place at the principal offices of
the European CEO, at 10:00 a.m. (local time) on the Business Day that is the
later to occur of (A) the date that is thirty (30) Business Days after the date
that the Appraisal Report is delivered to the Parties under Section 9.7 and (B)
the date that is five (5) Business Days after the date on which all necessary
Governmental Bodies shall have given their approval of the purchase and sale of
the interests under this Section (or the expiration of all applicable waiting
periods if such approval is not necessary), or at such other location, time and
date as may be actually agreed by the Parties. Each Party agrees to cooperate
with the other Party (1) to provide such information (subject to any applicable
confidentially agreements) as is reasonably necessary to comply with any
governmental filing and notification procedures and (2) to otherwise assure the
closing of such purchase and sale. At the Closing, the seller shall execute and
deliver to the purchaser such documents, records, and other instruments of
transfer, in form and substance reasonably satisfactory to the purchaser and its
counsel, necessary (x) to evidence the interests; (y) to evidence all such
necessary approvals of Governmental Bodies (or such expiration of any applicable
waiting periods); and (z) effectively to transfer the interests to the purchaser
(or any designee or designees of the purchaser), free and clear of any liens,
charges or other encumbrances, and the seller shall deliver to the purchaser the
price referred to above.
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treatment has been requested with respect to the
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<PAGE>
(e) In the event BIS purchases any Joint Entity from Lycos, BIS shall
have the continuing and perpetual right to require that Lycos develop, maintain
and enhance, on a prompt basis, the catalog of such Joint Entity in accordance
with the terms of the Lycos License with such Joint Entity, at a cost equal to
the fully burdened cost of Lycos.
9.4 Right of First Refusal.
----------------------
(a) If at any time after [*] (or at any prior date after
which a restraint on sale is no longer enforceable in the jurisdiction of
formation of a Joint Entity), either Party (the "Seller") intends to sell,
assign or transfer all, but not less than all, of such Party's equity ownership
interest in all of the Joint Entities for cash, the Seller shall, prior to any
such transfer, give written notice (the "Seller's Notice") of such intention to
the other Party (the "Offeree"). The Seller's Notice shall include the name of
the proposed transferee, the proposed purchase price for its equity ownership
interest in all Joint Entities (the "Offered Interest"), the terms of payment of
----------------
such purchase price and all other matters relating to such sale and shall be
accompanied by a copy of a binding written agreement of the proposed transferee
to purchase the Offered Interest from the Seller. The Seller's Notice shall
constitute a binding offer by the Seller to sell to the Offeree, or to any
Affiliate of the Offeree designated by the Offeree, the Offered Interest at the
monetary price designated in the Seller's Notice and as payable as provided in
Section 9.4(b). Not later than sixty (60) days after receipt of the Seller's
Notice, the Offeree may elect to purchase the Offered Interest by written notice
stating that the Offeree has accepted the offer contained in the Seller's
Notice, which notice shall fix a time, location and date for the closing of such
purchase, which date shall be not less than fifteen (15) nor more than sixty
(60) days after the delivery of such written notice or, if necessary, five (5)
Business Days after the date on which all necessary Governmental Bodies shall
have given their approval of the purchase and sale of the Offered Interest (or
the expiration of all applicable waiting periods if such approval is not
necessary), or on such other date as may be mutually agreed by the Parties.
(b) The place for the closing of any purchase and sale described in
Section 9.4(a) shall be the principal office of the European CEO or at such
other place as the Seller and the Offeree shall agree. At the closing, the
Seller shall accept payment on the terms offered by the proposed transferee
named in the Seller's Notice, provided that the Offeree shall not be required to
--------
meet any non-monetary terms of the proposed transfer, including, without
limitation, delivery of other securities in exchange for the Offered Interest
proposed to be sold. At the closing, the Seller shall execute and deliver to
the Offeree such documents, records, and other instruments of transfer, in form
and substance reasonably satisfactory to the Offeree and its counsel, necessary:
(i) to evidence the Seller's ownership of the Offered Interest in such Joint
Entity; (ii) to evidence all such necessary approvals of Governmental Bodies (or
such expiration of any applicable waiting periods); and (iii) effectively to
transfer the Offered Interests to the Offeree, free and clear of any liens,
charges or other encumbrances, and the Offeree shall deliver the purchase price
for each such Offered Interest, in immediately available funds. At the closing,
the Offeree shall cause the Seller to be released from all guarantees given in
respect of the Joint Entities (or if such release is not possible, the Offeree
shall execute and deliver an indemnity agreement to the Seller in customary form
with respect to
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separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
such guarantees) and the Joint Entities shall pay and discharge all indebtedness
to the Seller. In the event that the Seller fails to deliver or execute at the
closing any documents, records or other instruments of transfer reasonably
requested by the Offeree and necessary to evidence the Offered Interest or
effectively to transfer an Offered Interest, then the Seller shall, upon the
closing, immediately lose all voting rights and economic benefits associated
with such Offered Interest and the Offeree shall thereafter be deemed to be the
sole shareholder of all Joint Entities, provided that the Offeree shall
--------
establish a segregated account into which the purchase price for such Offered
Interest shall be placed, such account to be turned over to the Seller upon
delivery of all such documents, records or other instruments of transfer
necessary to effectively transfer such Offered Interest.
(c) If the Offeree fails to accept the offer contained in the Seller's
Notice, then the Seller shall be free to sell all, but not less than all, of the
Offered Interest to the designated transferee at a price and on terms no less
favorable to the Seller than described in the Seller's Notice, provided that
--------
such sale is consummated within ninety (90) days after the giving of the
Seller's Notice to the Offeree. As a condition precedent to the effectiveness
of a transfer pursuant to this Section 9.4(c), the proposed transferee(s) shall
agree in writing prior to such transfer to become a party to and bound by the
provisions of this Agreement, and shall thereafter be permitted to transfer such
Ownership Interest only in accordance with this Agreement.
(d) Notwithstanding anything to the contrary contained in this Section
9.4, in no event shall BIS or its Affiliates be permitted to transfer its
interest in any Joint Entity to any Competitor.
9.5 Failure Notice; Cancellation Notice.
-----------------------------------
(a) Notwithstanding Section 9.1, in the event that, (i) after [*], a
Failure Notice has been delivered or (ii) at any time a Cancellation Notice has
been delivered, Lycos shall have the option to acquire, within thirty (30) days
after receipt of the Failure Notice or the Cancellation Notice, as the case may
be, all of BIS's interest in the Joint Entities for a purchase price equal to
[*].
(b) The place for the closing of any purchase and sale described in
Section 9.5(a) shall be the principal office of the European CEO or at such
other place as Lycos and BIS shall agree. At the closing, BIS shall accept
payment on the terms offered in accordance with Section 9.5. At the closing, BIS
shall execute and deliver to Lycos such documents, records, and other
instruments of transfer, in form and substance reasonably satisfactory to Lycos
and its counsel, necessary: (i) to evidence BIS's ownership of BIS's interest in
each Joint Entity; (ii) to evidence all such necessary approvals of Governmental
Bodies (or such expiration of any applicable waiting periods); and (iii)
effectively to transfer such interests to Lycos, free and clear of any liens,
charges or other encumbrances, and Lycos shall deliver the purchase price for
each such interest, in immediately available funds. At the closing, Lycos shall
cause BIS to be released from all guarantees given in respect of the Joint
Entities (or if such release is not possible, Lycos shall
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filed separately with the Commission. Confidential
treatment has been requested with respect to the
omitted portions.
<PAGE>
execute and deliver an indemnity agreement to BIS in customary form with respect
to such guarantees) and the Joint Entities shall pay and discharge all
indebtedness (to the extent such amount has not been paid as part of the
purchase price under Section 9.5(a) above) to BIS, including interest thereon.
In the event that BIS fails to deliver or execute at the closing any documents,
records or other instruments of transfer reasonably requested by Lycos and
necessary to evidence BIS's interest in each Joint Entity or effectively to
transfer such interests, then BIS shall, upon the closing, immediately lose all
voting rights and economic benefits associated with such interests and Lycos
shall thereafter be deemed to be the sole shareholder of all Joint Entities,
provided that Lycos shall establish a segregated account into which the purchase
- --------
price for such interests shall be placed, such account to be turned over to BIS
upon delivery of all such documents, records or other instruments of transfer
necessary to effectively transfer such interests.
9.6 Effect on Constituent Documents.
-------------------------------
To the extent that any restriction contained in this Article IX is required
to be included in the constituent documents of a Joint Entity or separate
agreement as a condition to its enforceability against third parties, the
Parties shall cause the constituent documents, to the extent permitted by
applicable law, to reflect the intent and spirit of this Article IX. If the law
applicable to any Joint Entity does not permit the full scope of the limitations
imposed in this Article IX to be reflected in the constituent documents of a
Joint Entity or such separate agreement, the Parties shall, for the sole purpose
of reflection in the constituent documents of, or agreement in respect of, such
Joint Entity, conform the provisions of this Article IX to such applicable law
in the most practicable manner possible, and shall enter into one or more
separate agreements reflecting the full range of the provisions of this Article
IX.
9.7 Appraised Value.
---------------
(a) For purposes of this Agreement, the term "Appraised Value" for a
Joint Entity shall mean the fair market value established by an independent
appraiser pursuant to the following procedures:
(i) during the thirty (30) days following the delivery of a
notice requiring valuation, the Parties shall attempt to
select an independent appraiser to determine the fair market
value of the Joint Entities in existence on the date of such
notice. In the event that the Parties are unable to agree on
the selection of an independent appraiser, they shall give
notice to the International Chamber of Commerce in Paris,
France, and request the appointment of an independent
appraiser;
(ii) the independent appraiser appointed pursuant to this Section
9.7 shall, within sixty (60) days after its appointment,
deliver to both Parties a written appraisal report (the
"Appraisal
50
<PAGE>
Report") which sets forth the fair market value of
the Joint Entities;
(iii) the determination of the independent appraiser as set
forth in the Appraisal Report shall be final and shall
not be subject to appeal or redetermination;
(iv) for purposes of this Agreement, an independent
appraiser shall mean an international investment
banking firm which is not at that time rendering
services to one of the Parties or any Affiliate of
either Party and which has not rendered services to
one of the Parties for the preceding two (2) years
and which does not have a commitment to render
services in the future to one of such Parties or
any such Affiliates;
(v) the fees and expenses incurred by the independent
appraiser, as well as the fees and expenses payable
to the International Chamber of Commerce, if any,
shall be paid equally by the Parties; and
(vi) the Parties will cooperate with the independent
appraiser and provide all information reasonably
requested in order to allow such appraiser to
prepare the Appraisal Report.
(b) Except as otherwise set forth in this Agreement, each Party shall
remain liable for its existing obligations with respect to each relevant Joint
Entity (including, without limitation, any obligations to make funding
contributions) until the Divorce Closing, the Put Closing or the Call Closing,
as the case may be.
9.8 Post Closing Rights and Obligations.
-----------------------------------
(a) In the event that, as a result of the procedures set forth in this
Section 9.8, a Party does not own any interest in a Joint Entity: (i) the
funding obligations imposed on such Party pursuant to this Agreement or any
constituent document applicable to such Joint Entity (other than with respect to
obligations which have not been paid or are required to be paid) shall be
terminated as of the date on which the interest of such Party in the Joint
Entity is ended; and (ii) the Party that retains an interest in the Joint Entity
shall not be subject to the provisions of Article VI with respect to such
country.
(b) Promptly following the Closing, the Marks and all other
trademarks, trade names, service marks and logos (the "Operating Marks") of each
Joint Entity shall be treated as follows:
51
<PAGE>
(i) Lycos shall retain sole ownership of any mark
containing any trademark, trade name, service mark
or logo of Lycos or its Affiliates;
(ii) each Joint Entity which is acquired by Lycos shall
change its name and cease using Bertelsmann (or any
similar name) as part of its name and each Joint
Entity which is acquired by BIS shall change its
name and cease using Lycos (or any similar name) as
part of its name;
(iii) BIS shall retain sole ownership of any mark containing
any trademark, trade name, service mark or logo of BIS or
its Affiliates;
(iv) if BIS acquires the rights of Lycos in any of the
Joint Entities, in the event that any Joint Entity
uses any Operating Marks which are a combination of
any Operating Mark of Lycos together with another
Operating Mark which is not the property of Lycos
or its Affiliates (such non-Lycos Marks, the "Other
Marks"), the Joint Entities (or their successors)
shall have the right to continue to use, in
perpetuity (on the same basis as the Lycos
License), the Operating Marks and Logos as may be
necessary to operate the Joint Entities; and
(v) in the event that prior to the Closing a Joint
Entity is using a Mark which does not include a
Mark of Lycos, either Party may combine such Mark
of the Joint Entity in combination with its name or
a name of its Affiliate in perpetuity and each
Joint Entity and Party shall execute and deliver
such consents and authorizations as may be
necessary to implement the foregoing.
ARTICLE X
Representations and Warranties
------------------------------
10.1 Certain Representations and Warranties of BIS.
---------------------------------------------
BIS makes the following representations and warranties for the benefit of
Lycos and the Joint Entities, each of which shall survive the execution and
delivery of this Agreement:
(a) Organization and Standing. BIS is a duly organized and validly
-------------------------
existing corporation in good standing under the laws of Germany.
52
<PAGE>
(b) Corporate Action. BIS has all necessary corporate power and has
----------------
taken all corporate action required to authorize the execution and delivery of
this Agreement and does not require the consent of any third party which has not
been obtained.
10.2 Certain Representations and Warranties of Lycos.
-----------------------------------------------
Lycos makes the following representations and warranties for the benefit of
BIS and the Joint Entities, each of which shall survive the execution and
delivery of this Agreement:
(a) Organization and Standing. Lycos is a duly organized and
-------------------------
validly existing corporation in good standing under the laws of Delaware.
(b) Corporate Action. Lycos has all necessary corporate power and
----------------
has taken all corporate action required to authorize the execution and delivery
of this Agreement and does not require the consent of any third party which has
not been obtained.
ARTICLE XI
Miscellaneous
-------------
11.1 Confidential Information.
------------------------
(a) At all times following the date hereof, each Party shall keep
strictly confidential and not disclose, use, divulge, publish or otherwise
reveal, directly or through another Person, (A) any confidential, non-public
information of a subsidiary of the other Party which was disclosed pursuant to
the License Agreement, or (B) any confidential, non-public information: (i)
relating to the business of the other Party and obtained as a result of the
preparation and negotiation of this Agreement, the performance by the Parties of
their obligations hereunder, or the joint conduct by the Parties of activities
pursuant to this Agreement; or (ii) relating to the business of any Joint
Entity, in each case including, but not limited to, documents and/or information
regarding customers, costs, profits, markets, sales, products, product
development, key personnel, pricing policies, operational methods, technology,
know-how, technical processes, formulae, or plans for future development of or
concerning the other Party or a Joint Entity (collectively, "Confidential
Information"), except as may be necessary for the directors, employees or agents
of its and its Affiliates to perform their respective obligations under this
Agreement or in connection with filings with Governmental Bodies under Section
8.4 hereof or as otherwise required under applicable law, including, in the case
of Lycos, the rules and regulations promulgated under the Securities Exchange
Act of 1934 provided that neither Party shall make any disclosure required under
--------
applicable law before providing the other Party with a reasonable opportunity to
seek a protective order. Each Party shall cause any Persons receiving
information in accordance with the terms hereof to retain it in confidence.
Upon termination of this Agreement, each Party shall either destroy or return to
the other all memoranda, notes, records, reports and other documents (including
all copies thereof)
53
<PAGE>
relating to the Confidential Information of the other Party and the Joint
Entities which such Party may then possess or have under its control (except
information owned by a Joint Entity which such Party continues to own after such
termination). Notwithstanding the foregoing, the following shall not constitute
Confidential Information: (w) information which was already otherwise known to
the recipient at the time of its receipt in connection with this Agreement, (x)
information which is or becomes freely and generally available to the public
through no wrongful act of the recipient, (y) information which is rightfully
received by the recipient from a third party legally entitled to disclose such
information without breach by the recipient of this Agreement or (z) in
connection with legal action initiated by a Party to enforce rights under this
Agreement, provided that adequate safeguards (such as protective orders) are
--------
maintained.
(b) The Parties agree that each Party (including BAG and its
Affiliates, as well as Lycos and its Affiliates) shall retain all customer
rights throughout the world to the business conducted by such Party, with the
exception of common undertakings of BIS and Lycos which are expressly agreed to
in writing prior to such undertaking. Lycos agrees that BIS is not under any
obligation to abandon any of its business or to share any customer information
(or offer any corporate opportunity) which develops or arises in the course of
BIS's business. Except as set forth in this Agreement, BAG shall not be subject
to any limitation regarding any business which BAG may conduct and the
restrictions on competition applicable to BIS shall not apply to any entity
owned by BAG (other than BIS and subsidiaries owned by BIS).
11.2 Governing Law/Arbitration.
-------------------------
(a) This Agreement, and the rights and liabilities of the Parties
hereunder, shall be governed by the substantive laws of Switzerland, to the
exclusion of its rules of conflict of laws as laid down in the Federal Act on
International Private Law, provided, however, that the rules of Chapter 12 of
the Federal Act on International Private Law governing international arbitration
shall be applicable to any arbitration proceedings under this Agreement.
(b) Except as otherwise agreed in writing by the Parties, any
claims, disputes or disagreements arising under, in connection with or by reason
of the relationships contemplated under this Agreement and any subsequent
amendment thereof, including, without limitation, all controversies which may
arise between the Parties concerning any transaction pursuant to this Agreement,
the construction, performance or breach of this Agreement or any accounting
hereunder, as well as non-contractual claims, shall be referred to and finally
determined by arbitration in accordance with the then applicable ICC Rules, as
modified below, by the majority vote of a Tribunal of three (3) arbitrators
appointed in accordance with the said rules, all of whom shall be experienced
legal practitioners familiar with international joint ventures and licensing,
except that in the event of an arbitration involving BIS, Lycos and a Joint
Entity, the Parties agree that the Joint Entity shall have no right to appoint
an arbitrator. To the extent that such arbitration involves more than just BIS
and Lycos as litigants, all three (3) arbitrators shall be appointed by the ICC,
unless the Parties agree otherwise.
54
<PAGE>
(c) Any arbitration proceedings hereunder shall be held in Zurich,
Switzerland. All such proceedings and all communications (written or oral)
including, without limitation, any evidence submitted to the Arbitral Tribunal,
shall be in the English language or shall be accompanied by a certified English
translation.
(d) At the request of a Party, the Tribunal may issue any
provisional orders or take all the interim measures it deems necessary. The
Tribunal shall have the power to order that neither Party shall take any action
inconsistent with the Agreement and shall continue to perform under the
Agreement for the time the arbitration procedure is pending.
(e) The Parties further agree that the ruling and award of the
Arbitral Tribunal will be final and binding to the maximum extent allowed by the
laws applied to this Agreement and that no right or application or appeal or
action for annulment as provided in Article 192, paragraph 2 of the Swiss
Federal Act on International Private Law in connection with any question of law
arising in the course of the arbitration or otherwise, or with respect to any
ruling or award which is made by the Arbitral Tribunal, shall be made.
(f) This agreement to arbitrate shall be without prejudice to the
right of the Parties to seek preliminary injunctive, interim, provisional or any
form of provisional equitable relief in any court or any judicial authority
which had jurisdiction over the Parties and/or the subject matter of the
controversy. Any Party to this Agreement has the right to apply to the Zurich
courts for injunctive or other provisional relief and the opposing Party shall
not object to the jurisdiction of Zurich.
(g) The time limits applying to the various stages of the arbitral
proceedings according to the ICC Rules are shortened in order to allow an award
to be made, whenever reasonably possible, within ten (10) months of the request
for Arbitration to the secretariat of the International Court of Arbitration,
and within eight (8) months of the transmission of the file to the Chairman of
the Tribunal. In particular, any time limits set by the Rules or the
International Court of Arbitration respectively, the Secretariat, or the
Tribunal may only be extended for extraordinary reasons and only by fifteen (15)
days. Further extensions are subject to the mutual consent of the Parties to be
reached before the expiration of the time-limit. The file shall be transmitted
to the arbitrators as soon as the Secretariat has received claimant's share on
the advance on costs and the Defendant's answer to the request, at the latest
upon the expiry of the time-limit set to Defendant for the filing of the answer
to the request.
11.3 Press Release.
-------------
Except as may be required by law, the execution and content of this
Agreement shall be kept in confidence by the Parties until and subject to the
publication of a press release relating thereto, the content and timing of which
shall be jointly agreed upon.
55
<PAGE>
11.4 Entire Agreement.
----------------
Except for the agreements specifically referred to in this Agreement, this
Agreement constitutes the entire agreement among the Parties pertaining to the
subject matter hereof and supersedes all prior and contemporaneous agreements,
understandings, negotiations and discussions, whether oral or written, of the
Parties, including the agreement between BIS and Lycos, dated June 10, 1996. No
amendment, supplement, modification, waiver or termination of this Agreement
shall be implied or be binding unless executed in writing by the Party to be
bound thereby. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), nor shall waiver constitute a continuing waiver unless otherwise
expressly therein provided.
11.5 Assignment.
----------
All of the terms and provisions of this Agreement by or for the benefit of
the Parties shall be binding upon and inure to the benefit of their successors,
and permitted assigns. The rights and obligations provided by this Agreement
may not be assigned, except in accordance with Sections 9.2, 9.3 and 9.4.
Except as expressly provided herein, nothing herein is intended to confer upon
any Person, other than the Parties and their permitted successors, heirs and
permitted assigns as provided herein, any rights or remedies under or by reason
of this Agreement.
11.6 Notices.
-------
All notices, requests, demands and other communications hereunder shall be
in writing in English and shall be deemed to have been duly given (except as may
otherwise be specifically provided herein to the contrary): (i) if delivered by
hand to the Party to whom said notice or other communication shall have been
directed, upon such receipt; (ii) if mailed by certified or registered mail with
postage prepaid, return receipt requested, on the third business day after
mailing; or (iii) if transmitted by telefax, on the date of transmission, with
such transmittal followed by delivery of a confirmation copy via one of the
other methods set out herein. All notices shall be addressed as set forth below
or to any other address such Party shall notify to the other Party in accordance
with this Section:
(a) If to BIS to:
---------
Bertelsmann Internet Services GmbH
Carl-Bertelsmann Strasse 161E
33311 Gutersloh, Germany
Attention: Dr. Thomas Middelhoff
Telefax: 011 49 5241 80 60 60
56
<PAGE>
with a copy to:
Bertelsmann AG
Carl-Bertelsmann Strasse 270
33311 Gutersloh, Germany
Attention: Legal Department
Telefax: 011 49 5241 8066 700
and:
Walter, Conston, Alexander & Green, P.C.
90 Park Avenue
New York, New York 10016
Attention: Aydin S. Caginalp, Esq.
Telefax: 212-210-9444
(b) If to Lycos to:
-----------
Lycos, Inc.
500 Old Connecticut Path
Framingham, Massachusetts, U.S.A. 01701
Attention: President
Telefax: 508-820-4499
with a copy to:
Lycos, Inc.
500 Old Connecticut Path
Framingham, Massachusetts, U.S.A. 01701
Attention: Chief Financial Officer
Telefax: 508-820-4499
and:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, Massachusetts 02110
Attention: Michael J. Riccio, Jr., Esq.
Telefax: 617-951-1295
57
<PAGE>
11.7 Counterparts.
------------
This Agreement may be executed and delivered in one or more counterparts,
each of which shall be deemed to be an original, and all of which when taken
together shall constitute one and the same instrument and shall become effective
when copies hereof, bearing the signatures of each of the Parties, shall have
been received by BIS and Lycos.
11.8 Expenses.
--------
The Parties agree that, except as otherwise set forth in this Agreement,
each Joint Entity shall pay all of the legal and other fees and expenses
relating to its formation, including, without limitation, the filing of
certificates and registration fees. Each Party shall pay all of its own legal
and other fees and expenses incurred in connection with this Agreement, the
transactions contemplated hereby, and the negotiations leading to the same.
11.9 Further Assurances.
------------------
Each Party shall perform all other acts and execute and deliver all other
documents as may be necessary or appropriate to carry out the purposes and
intent of this Agreement, as reasonably requested by the other Party.
11.10 Construction; Captions; Exhibits.
--------------------------------
(a) The terms and provisions of this Agreement and the wording
used herein shall in all cases be interpreted and construed simply in accordance
with their fair meanings and not strictly for or against any Party hereto.
(b) The captions at the headings of each Article and Section of
this Agreement are for convenience of reference only, and are not intended or to
be used or applied to describe, interpret, construe, define or limit the scope,
extent, intent or operation of this Agreement or of any term or provision
hereof.
(c) All appendixes, exhibits and schedules are hereby
incorporated by reference and are part of this Agreement as if expressly set
forth at length herein.
11.11 Severability.
------------
If any provision of this Agreement shall be held to be incomplete,
illegal, invalid or unenforceable, or if it becomes necessary to amend the
Agreement in order to comply with an administrative or governmental order, the
remaining provisions of the Agreement shall stay in force and the unenforceable,
void or incomplete provision shall be replaced by a valid provision or
58
<PAGE>
amendment reflecting the economic and business objectives of the original
Agreement as best as possible, provided however, that if any replacement
provision or amendment would lead to a change in the fundamental economic and
business terms of this Agreement, each Party shall have the right to terminate
this Agreement in accordance with Section 8.1 of this Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
and year first above written.
BERTELSMANN INTERNET SERVICES GmbH
By:
-----------------------------
LYCOS, INC.
By:
-----------------------------
59
<PAGE>
EXHIBIT C
---------
TERRITORY
---------
Albania
Austria
Belgium
Byelorussia
Bulgaria
Cyprus
Czech Republic
Republic of Slovakia
Estonia
Former Yugoslavian Republics
France
Germany
Gibraltar
Greece
Hungary
Republic of Ireland
Italy
Latvia
Liechtenstein
Lithuania
Luxembourg
Malta
Moldavia
Monaco
Netherlands
Poland
Portugal
Principality of Andorra
Romania
Russia
San Marino
Spain
Switzerland
Turkey
Ukraine
United Kingdom
Vatican (The)
60
<PAGE>
Exhibit 10.3
------------
LICENSING AND SERVICES AGREEMENT
--------------------------------
This Licensing and Services Agreement (this "Agreement") dated as of
November 18, 1996, is by and between Lycos, Inc., a Delaware corporation
("Lycos"), having an office at 293 Boston Post Road West, Marlborough, MA 01752
and GTE New Media Services Incorporated, a Delaware corporation ("GTE"), having
an office at GTE Place, West Airfield Drive, D/FW Airport, TX 75261-9810.
RECITALS
WHEREAS, GTE is the owner or licensee of certain content and information
known as the SuperPages service, as described more fully on Exhibit A hereto,
which is stored in a searchable proprietary database accessible through the URL
superpages.gte.net (the "GTE Service");
WHEREAS, Lycos is the owner or licensee of certain Web services known as
the Lycos Catalog of the Internet, a2z Directory and Point Reviews, as described
more fully on Exhibit B hereto, which are accessible through the URL
---------
www.lycos.com (the "Lycos Services");
WHEREAS, GTE desires to provide a link from the GTE Service to the Lycos
Services so that users of the GTE Service will have access to the Lycos
Services;
WHEREAS, Lycos desires to provide a link from the Lycos Services to the GTE
Service so that users of the Lycos Services will have access to the GTE Service;
and
WHEREAS, GTE desires that Lycos create a Web business directory to be
served by Lycos or GTE and to enter into other arrangements as more particularly
described herein.
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, GTE and Lycos hereby agree as follows:
1. Certain Definitions.
-------------------
As used herein, the following terms shall have the meaning herein
ascribed:
(a) "Advertising Space" means that space within either the Lycos
provided Business Directory or the GTE Service available for sale to businesses
(i.e. banner advertisements), other than GTE's line of directory related
products such as Display Advertisements, Fact Files, and Web sites, all as more
particularly described in the attached Exhibit C.
---------
<PAGE>
(b) "Business Directory" means the business Web site directory
developed by Lycos to replace the existing GTE directory, which will include
selected business content from the Lycos Catalog of the Internet searchable by
company names, brand names and product type, all of which will be hosted by
Lycos on the Lycos Services.
(c) "GTE Service" means the searchable proprietary database
consisting of content and information known as the SuperPages service, and all
other content and information developed by GTE for inclusion on GTE's services
on the Web for which GTE is the owner or licensee, all as described more fully
in Exhibit A. "GTE Service" shall not include applications and content developed
in conjunction with third parties where GTE shares revenues generated from
advertising with such third parties, even though the Web pages containing such
information may be accessed by a user of the Lycos Services.
(d) "Lycos Services" means Lycos' Web catalog and search software,
Point Reviews and a2z Directory for which Lycos is the owner or licensee, all of
which are accessible through the URL www.lycos.com, all as described more fully
on Exhibit B.
---------
(e) "Web" means the World Wide Web, a system for accessing and
viewing text, graphics, sound and other media via the collection of computer
networks known as the Internet.
2. License Grant by GTE: Link to GTE Service.
-----------------------------------------
(a) Subject to the terms and conditions of this Agreement, GTE
hereby grants to Lycos the right to link to the GTE Service so as to provide
users of the Lycos Services access to the GTE Service. To the extent such access
is deemed to be a reproduction, transmission or distribution, Lycos is further
granted a worldwide, royalty-free license to use, reproduce, transmit,
distribute and publicly display the GTE Service so as to make the GTE Service
available to users of the Lycos Services via the Web.
(b) Subject to the terms and conditions of this Agreement, GTE
hereby grants Lycos the right to reproduce and display all logos, trademarks,
trade names and similar identifying material relating to the GTE Service (the
"GTE Marks") in connection with the promotion, marketing and distribution of the
GTE Service. Upon GTE's request, Lycos will make available samples of any uses
of the GTE Marks for approval by GTE, such approval to be in GTE's sole and
exclusive discretion.
(c) Lycos will provide the link to the GTE Service as the sole
yellow page service on the Lycos Services accessible through www.lycos.com. The
GTE Service will be premiered on the title bars within the Lycos Services as the
yellow page service for the Lycos Services. The GTE Service which is accessed
from the Lycos Services will be Lycos branded with the look and feel of the
Lycos.com site, with the appropriate "Powered by SuperPages" logo and copyright
information from GTE. The GTE Service shall operate at a performance level
comparable to the performance levels associated with similar applications (i.e.
the Lycos Catalog) in the Lycos Services.
2
<PAGE>
(d) Lycos will integrate links to the GTE Service content into
certain portions of the Lycos Services such as Personal Lycos, City Guide, Web
Search Results and other areas where such content can enhance the value of the
Lycos Services.
(e) Subject to the prior written consent of GTE, which consent
shall not be unreasonably withheld, Lycos shall be permitted to sublicense its
rights under Sections 2(a) and 2(b) above to its licensees, provided that (i)
the service provided by the licensee will be branded by the licensee displaying
the appropriate GTE Marks and GTE copyrights, (ii) Lycos shall include in each
sublicense appropriate provisions providing for copyright licenses with GTE
providers, if required, and (iii) licensee agrees to pay an appropriate license
fee, such fee to be reasonably set by GTE and Lycos.
3. Monthly Fees: Revenue Sharing from GTE Service.
----------------------------------------------
(a) In consideration of Lycos' obligations under this Section 2,
commencing on the date that the GTE Service becomes available through the Lycos
Services and until December 3 1, 1996, GTE will pay Lycos a monthly fee of
[*], which fee will be pro rated for any partial month. Commencing January
1, 1997, GTE will pay Lycos a monthly fee of [*]. The monthly fees shall be
payable in advance on the first day of each month, with the exception of
January, when such payment shall be due on the fifth day of the month. [*].
(b) In addition to the payment of the monthly fees, all revenue
derived by GTE from the sale of Advertising Space within the GTE Service that is
accessed by users of the Lycos Services through the link from the Lycos Services
to the GTE Service (after deducting any external sales commissions) will be
shared [*]. In no event will advertising revenues include revenues attributable
to banner advertisements sold on the Web pages within the Lycos Services which
may provide the link to the GTE Service or initiate GTE Service search features.
(c) Lycos' share of the advertising revenue described in Section 3
shall be calculated and reported in writing on a monthly basis, and shall be
payable within thirty (30) days after the end of the month in which it is
received by GTE. GTE shall permit Lycos to audit GTE's
3
* Certain information on this page has been omitted and
filed separately with the Commission. Confidential
treatment has been requested with respect to the
omitted portions.
<PAGE>
records with respect to such revenue (at Lycos' expense, upon at least ten
business days notice, during normal business hours and no more than once
quarterly) upon Lycos' reasonable request in order to ensure GTE's compliance
with Section 3. The cost of such audits shall be borne by Lycos unless such
audit reveals a deficiency by GTE of [*] or more, in which case the cost of the
audit shall be borne by GTE. In any event, GTE will pay the amount of any
deficiency within thirty (30) days after completion of such audit. If any
payment under this Section 3 is not received within thirty (30) days of the date
of invoice, interest will be imposed for each month or portion thereof that the
outstanding balance remains unpaid at the rate of [*] per month or the maximum
interest allowed by law, whichever is less, from the original due date.
(d) In the event Lycos exercises its right to sublicense in
accordance with Section 2(e), GTE and Lycos shall mutually agree on the revenue
share to be allocated to the Licensee, and the allocation between GTE and Lycos
of revenues derived by GTE from Advertising Space within the GTE Service that is
accessed by users of the licensee's services will be computed after deducting
the portion of such revenues payable to the licensee.
4. License Grant by Lycos. Link to Lycos.
--------------------------------------
(a) Subject to the terms and conditions of this Agreement, Lycos
hereby grants to GTE the right to link to the Business Directory so as to
provide users of the GTE's Web services access to the Business Directory. To the
extent such access is deemed to be reproduction, transmission or distribution,
GTE is further granted a worldwide, royalty-free license to use, transmit,
distribute and publicly display the Business Directory so as to make the
Business Directory available to users of the GTE Service via the Web.
(b) Subject to the terms and conditions of this Agreement, Lycos
hereby grants GTE the right to reproduce and display Lycos' logos, trademarks,
trade names and similar identifying material relating to the Lycos Services (the
"Lycos Marks") in connection with the marketing, distribution and promotion of
the Business Directory. Upon Lycos' request, GTE will make available samples of
any uses of the Lycos Marks for approval by Lycos, such approval to be in Lycos'
sole and exclusive discretion.
5. Revenue Share from Lycos Services.
---------------------------------
(a) In consideration of GTE providing a link to the Business
Directory under Section 4, all revenue derived by Lycos from the sale of
Advertising Space within the Business Directory Web pages that are accessed by
users of the GTE Service through the link from the GTE Service to the Business
Directory [*]. Lycos will be entitled to retain all revenues derived from the
sale of advertisements on the Lycos Services, other than Advertising Space
contained in the Business Directory, accessed by users of the GTE Service.
4
* Certain information on this page has been omitted and
filed separately with the Commission. Confidential
treatment has been requested with respect to the
omitted portions.
<PAGE>
(b) GTE's share of the advertising revenue described in Section
5(a) shall be calculated and reported in writing on a monthly basis, and shall
be payable within thirty (30) days after the end of the month in which it is
received by Lycos. Lycos shall permit GTE to audit Lycos' records with respect
to such revenue (at GTE's expense, upon at least ten business days notice,
during normal business hours and no more than once quarterly) upon GTE's
reasonable request in order to ensure Lycos' compliance with this Section 5. The
cost of such audits shall be borne by GTE unless such audit reveals a deficiency
by Lycos of [*] or more, in which case the cost of the audit shall
be borne by Lycos. In any event, Lycos will also pay the amount of such
deficiency within thirty (30) days after completion of such audit. If any
payment under this Section 5 is not received within thirty (30) days of the date
of invoice, interest will be imposed for each month or portion thereof that the
outstanding balance remains unpaid at the rate of [*] month or the maximum
interest allowed by law, whichever is less, from the original due date.
6. Premium Search Provider. Throughout the term of this Agreement,
-----------------------
Lycos will be designated as the "Premier Web Search Provider" to the GTE
Service, with the Lycos Services and Lycos Marks being the most prominently
featured search services on the GTE Service. As the Premier Web Search Provider
to the GTE Service, the Lycos Services will be accessed by pressing or
"clicking" on the Lycos Search Button on the GTE Service. In the event that GTE
Internet Solutions ("GIS") and Lycos enter into a license agreement pursuant to
which GIS licenses the Lycos Services, GTE may satisfy its obligations under
this Section 6 by designating the Lycos Services, as branded by GIS within the
GIS services, as the Premier Web Search Provider to the GTE Service in the same
manner as provided in this Section 6, so long as such license agreement
continues in effect.
7. Operations Review Committee.
---------------------------
The parties shall form an Operations Review Committee to oversee activities
contemplated by this Agreement, facilitate communications between the parties
and ensure coordination in operational matters. The Operations Review Committee
shall be comprised of a total of four members, with each party having the right
to appoint two members to represent the interests of the party. The Operations
Review Committee shall meet not less than every six months to review the
implementation and integration of the GTE and Lycos Services, and to pursue
mutually agreed upon initiatives.
8. Delivery of Business Directory and Service: Technical Assistance and
--------------------------------------------------------------------
Support.
-------
(a) Lycos will use its best efforts to make the Business Directory
available to GTE on or prior to January 1, 1997.
(b) Throughout the term of this Agreement, GTE will provide ongoing
assistance to Lycos with regard to technical and service-oriented issues
relating to the utilization and/or maintenance of the GTE Service.
5
* Certain information on this page has been omitted and
filed separately with the Commission. Confidential
treatment has been requested with respect to the
omitted portions.
<PAGE>
9. Term of Agreement.
-----------------
The term of this Agreement shall commence on the date hereof and will
continue to December 31, 1999 (the "Initial Term"), unless terminated earlier as
provided below or in Section 14 herein. [*].
10. Representations and Warranties of the Parties.
---------------------------------------------
In order to induce Lycos to enter into this Agreement, GTE hereby warrants
and represents as follows:
(a) Status. GTE is a corporation in good standing under the laws
------
of the state of its organization, and has the full right, power and authority to
enter into this Agreement and to grant the rights herein granted.
(b) No Conflicting Obligations. The performance by GTE pursuant to
--------------------------
this Agreement and/or the rights herein granted to Lycos will not conflict with
or result in a breach or violation of any of the terms or provisions, or
constitute a default under any organizational instruments of GTE or any
agreement to which GTE is a party or to which it is bound.
(c) Right to License. GTE possesses the full right and authority
----------------
to license the GTE Service and the GTE Marks. GTE is the sole owner and/or has
the right to license, and shall continue to own and/or have the right to
license, throughout the term of the Agreement, all right, title and interest,
including without limitation all rights under copyright in and to the GTE
Service and all materials created by employees of GTE and/or third parties, for
or in connection with the GTE Service, and each element thereof.
(d) Compliance with Laws and Regulations. GTE shall comply with
------------------------------------
all applicable laws, statutes, ordinances, rules and regulations of each
country, state, city or other political entity.
(e) Clearances. GTE shall clear all rights in the GTE Service and
----------
all elements thereof for use as provided herein. All fees of any nature,
including, without limitation, residuals, royalties, reuse, health and welfare
payments, and similar or dissimilar fees due to third parties (including
writers, composers and performers) for rights necessary to exploit the GTE
Service, as provided herein, shall be the sole responsibility of GTE.
6
* Certain information on this page has been omitted and
filed separately with the Commission. Confidential
treatment has been requested with respect to the
omitted portions.
<PAGE>
(f) No Infringement. GTE has the right to enter into this
---------------
Agreement and to grant to Lycos the license provided herein and neither the GTE
Service nor the GTE Marks nor any other materials or any elements or parts
thereof or other material delivered or to be delivered to Lycos hereunder, nor
the use of the GTE Service pursuant to the provisions hereof by Lycos of any of
its rights hereunder, shall violate or infringe upon the copyright, literary,
privacy, publicity, trademark, service mark or any other personal, moral or
property right of any person, nor shall same constitute a libel or defamation of
any person whatsoever.
(g) General. EXCEPT FOR THE FOREGOING REPRESENTATIONS AND
-------
WARRANTIES, GTE MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EITHER
EXPRESS OR IMPLIED, AS TO ANY MATTER INCLUDING, BUT NOT LIMITED TO, IMPLIED
WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY OR OTHERWISE
WHICH WOULD EXTEND BEYOND THE REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN.
11. Representations and Warranties of Lycos. In order to
---------------------------------------
induce GTE to enter into this Agreement, Lycos represents and warrants that:
(a) Corporate Status. Lycos is a corporation in good standing
----------------
under the laws of the State of Delaware, and has the full right, power and
authority to enter into this Agreement and to grant the rights herein granted.
(b) No Conflicting Obligations. The performance by Lycos pursuant
--------------------------
to this Agreement and/or the rights herein granted to GTE will not result in a
breach or violation of any of the terms or provisions, or constitute a default
under any organizational instruments of Lycos or any agreement to which Lycos is
a party or to which it is bound.
(c) Compliance with Laws and Regulations. Lycos shall comply with
------------------------------------
all applicable laws, statutes, ordinances, rules and regulations of each
country, state, city or other political entity.
(d) Clearances. Lycos shall clear all rights in the Lycos
----------
Services and all elements thereof for use as provided herein. All fees of any
nature, including, without limitation, residuals, royalties, reuse, health and
welfare payments, and similar or dissimilar fees due to third parties (including
writers, composers and performers) for rights necessary to exploit the Lycos
Services, as provided herein, shall be the sole responsibility of Lycos.
(e) No Infringement. Lycos has the right to enter into this
---------------
Agreement and to grant to GTE the license provided herein and neither the Lycos
Services nor the Lycos Marks nor any other materials or any elements or parts
thereof or other material delivered or to be delivered to GTE hereunder, nor the
use of the Lycos Services pursuant to the provisions hereof by GTE of any of its
rights hereunder, shall violate or infringe upon the copyright, literary,
privacy, publicity, trademark, service mark or any other personal, moral or
property right of any person, nor shall same constitute a libel or defamation of
any Person whatsoever.
7
<PAGE>
(f) General. EXCEPT FOR THE FOREGOING REPRESENTATIONS AND
-------
WARRANTIES, LYCOS MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EITHER
EXPRESS OR IMPLIED, AS TO ANY MATTER INCLUDING, BUT NOT LIMITED TO, IMPLIED
WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY OR OTHERWISE
WHICH WOULD EXTEND BEYOND THE REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN.
12. Indemnification: Insurance.
--------------------------
(a) GTE Indemnity. GTE will at all times indemnify and hold
-------------
harmless Lycos and its officers, directors, shareholders, successors and assigns
from and against any and all third party claims, damages, liabilities, costs and
expenses, including reasonable legal fees and expenses, arising out of or
relating to any breach of any warranty, representation, covenant or agreement
made by GTE in this Agreement or any violation or infringement of any copyright,
literary, privacy, publicity, trademark, service mark or any other personal or
property right of any person. Lycos shall give GTE prompt written notice of any
claim, action or demand for which indemnity is claimed. GTE shall have the
right, but not the obligation, to control the defense and/or settlement of any
claim in which it is named as a party. Lycos shall have the right to participate
in any defense of a claim by GTE with counsel of Lycos' choice at its own
expense. The foregoing indemnity is conditioned upon: prompt written notice by
Lycos to GTE of any claim, action or demand for which indemnity is claimed;
complete control of the defense and settlement thereof by GTE; and such
reasonable cooperation by Lycos in the defense as GTE may request.
(b) Lycos Indemnity. Lycos will at all times defend, indemnify and
---------------
hold harmless GTE and its officers, directors, shareholders, successors and
assigns from and against any and all third party claims, damages, liabilities,
costs and expenses, including reasonable legal fees and expenses, arising out of
or relating to any breach of any warranty, representation, covenant or agreement
made by Lycos in this Agreement or any violation or infringement of any
copyright, literary, privacy, publicity, trademark, service mark or any other
personal or property right of any person. GTE shall give Lycos prompt written
notice of any claim, action or demand for which indemnity is claimed. Lycos
shall have the right, but not the obligation, to control the defense and/or
settlement of any claim in which it is named as a party. GTE shall have the
right to participate in any defense of a claim by Lycos with counsel of GTE's
choice at its own expense. The foregoing indemnity is conditioned upon: prompt
written notice by GTE to Lycos of any claim, action or demand for which
indemnity is claimed; complete control of the defense and settlement thereof by
Lycos; and such reasonable cooperation by GTE in the defense as Lycos may
request.
13. Confidentiality: Press Releases.
-------------------------------
(a) Non-Disclosure Agreement. The parties agree and acknowledge
------------------------
that, as a result of negotiating, entering into and performing this Agreement,
each party has and will have access to certain of the other party's Confidential
Information (as defined below). Each party also understands and agrees that
misuse and/or disclosure of that information could adversely affect the other
party's
8
<PAGE>
business. Accordingly, the parties agree that, during the term of this
Agreement and thereafter, each party shall use and reproduce the other party's
Confidential Information only for purposes of this Agreement and only to the
extent necessary for such purpose and shall restrict disclosure of the other
party's Confidential Information to its employees, consultants or independent
contractors with a need to know and shall not disclose the other party's
Confidential Information to any third party without the prior written approval
of the other party. Notwithstanding the foregoing, it shall not be a breach of
this Agreement for either party to disclose Confidential Information of the
other party if required to do so under law or in a judicial or other
governmental investigation or proceeding, provided the other party has been
given prior notice and the disclosing party has sought all available safeguards
against widespread dissemination prior to such disclosure.
(b) Confidential Information Defined. As used in this Agreement,
--------------------------------
term "Confidential Information" refers to: (i) the terms and conditions of this
Agreement; (ii) each party's trade secrets, business plans, strategies, methods
and/or practices; and (iii) other information relating to either party that is
not generally known to the public, including information about either party's
personnel, products, customers, marketing strategies, services or future
business plans. Notwithstanding the foregoing, the term "Confidential
Information" specifically excludes (i) information that is now in the public
domain or subsequently enters the public domain by publication or otherwise
through no action or fault of the other party; (ii) information that is known to
either party without restriction, prior to receipt from the other party under
this Agreement, from its own independent sources as evidenced by such party's
written records, and which was not acquired, directly or indirectly, from the
other party; (iii) information that either party receives from any third party
having a legal right to transmit such information, and not under any obligation
to keep such information confidential; and (iv) information independently
developed by either party's employees or agents provided that either party can
show that those same employees or agents had no access to the Confidential
Information received hereunder.
(c) Press Releases. Lycos and GTE shall jointly prepare press
--------------
releases concerning the existence of this Agreement and the terms hereof
Otherwise, no public statements concerning the existence or terms of this
Agreement shall be made or released to any medium except with the prior approval
of Lycos and GTE or as required by law.
14. Termination. This Agreement may be terminated as follows:
-----------
(a) immediately by either party if the other party shall (i) admit
in writing an inability to pay its debts as they come due or fail to pay its
debts as they become due, or (ii) commence a case under any chapter of Title11
of the United States Code ("Bankruptcy Code"); or (iii) have commenced against
it an involuntary case under the Bankruptcy Code, which case is not dismissed
within thirty (30) days from the date of commencement; or (iv) consent to or
suffer the appointment of a custodian, receiver, or trustee for all or a major
part of its property; or (v) make an assignment for the benefit of its creditors
or consent to the entry of a court order under any law ordering the winding up
or liquidation of its affairs, or suffer the entry of such an order (such
termination shall not relieve the party in proceedings from liability for the
performance of its
9
<PAGE>
obligations arising prior to such termination and shall be in addition to all
other rights and remedies the terminating party may have available to it under
this Agreement or at law or in equity);
(b) by either party upon thirty (30) days written notice in the
event of material breach of this Agreement by the other party unless such breach
shall have been cured within such thirty (30) days; or
(c) by mutual written consent of the parties.
15. Relationship of Parties. GTE and Lycos are independent contractors
-----------------------
under this Agreement, and nothing herein shall be construed to create a
partnership, joint venture or agency relationship between GTE and Lycos. Neither
party has authority to enter into agreements of any kind on behalf of the other.
16. Assignment, Binding Effect. Neither Lycos nor GTE may assign this
--------------------------
Agreement or any of its rights or delegate any of its duties under this
Agreement without the prior written consent of the other; provided that either
party shall have the right to assign its rights and obligations hereunder to any
subsidiary or affiliate or to any entity acquiring such party's business upon
notice to the other party. Any purported assignment or delegation without such
required consent shall be null and void.
17. Choice of Law. This Agreement, its interpretation, performance
-------------
or any breach thereof, shall be construed in accordance with the laws of the
Commonwealth of Massachusetts applicable to contracts entered into and wholly to
be performed within said state.
18. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
19. Section Headings. Section headings are for convenience only and
----------------
are not a part of this Agreement.
20. Entire Agreement. This Agreement contains the entire understanding of
----------------
the parties hereto with respect to the transactions and matters contemplated
hereby, supersedes all previous agreements between Lycos and GTE concerning the
subject matter, and cannot be amended except by a writing signed by both
parties. No party hereto has relied on any statement, representation or promise
of any other party or with any other officer, agent, employee or attorney for
the other party in executing this Agreement except as expressly stated herein.
10
<PAGE>
21. Limitations of Liabilily.
------------------------
UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR
INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES (EVEN IF THAT
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES), ARISING FROM ANY
PROVISION OF THIS AGREEMENT (INCLUDING SUCH DAMAGES INCURRED BY THIRD PARTIES),
SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST
BUSINESS. [*].
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date set forth above.
GTE MEDIA SERVICES INCORPORATED LYCOS, INC.
By:_________________________________ By: ______________________________
Name: ______________________________ Name: ____________________________
Title: _____________________________ Title: ___________________________
Date: ______________________________ Date: ____________________________
11
* Certain information on this page has been omitted and
filed separately with the Commission. Confidential
treatment has been requested with respect to the
omitted portions.
<PAGE>
Exhibit A
Description of GTE Services
"GTE Services" include the on-line Yellow Pages and other consumer information
services distributed on the Internet via the World Wide Web (WWW) under the
service brand name "GTE SuperPages Interactive Services", located at
http://superpages.GTE.net (as well as http:Hwww.superpages.com.). These services
currently include:
. A nationwide (US) interactive Yellow Pages service
. A global business Web site directory
. Nationwide (US) classified advertising (via Classifieds 2000)*
[*].
12
* Certain information on this page has been omitted and
filed separately with the Commission. Confidential
treatment has been requested with respect to the
omitted portions.
<PAGE>
Exhibit B
Description of Lycos Services
The Lycos products include Lycos Catalog, Sites by Subject Directory, Top 5%
Reviews, Lycos Pictures & Sounds Catalog, CityGuide, PeopleFinder which are
located at lycos.com on the WWW.
The Lycos Catalog contains a database over 70 Million URLs that can be searched
by keywords. The Sites by Subject Directory has written descriptions of Web
sites by Lycos writers, and the Point Reviews are in depth reviews written by
Lycos writers. The Lycos Pictures & Sounds Catalog consists of databases of
Internet URLs that contain Graphical Objects and Audio Objects. CityGuide is a
collection of hot links to specific areas of interest in over 400 metropolitan
areas in North America. PeopleFinder is a service that provides addresses,
neighbors, roadmaps, emails, telephone numbers and local businesses relating to
an individual person or area.
13
<PAGE>
Exhibit C
GTE Services excluded from the definition of "Advertising Space"
The following GTE service items are not considered, under this agreement, to be
included in the definition of "Advertising Space", and the revenues associated
with these items are recognized as being solely GTE's revenues that are not
included in any revenue sharing arrangements described within this agreement:
1. Advertising items associated with and/or linked to individual business
listings within GTE directory services (e.g., the interactive Yellow Pages)
including, but not limited to; "FactFiles", Web site links, and "Display
Ads".
2. GTE Web site design and hosting services, including "Home Pages" and "Web
Sites".
3. GTE Internet access services.
4. Advertising space on other GTE sites not operated by GTE New Media Services
Incorporated, including but not limited to; the GTE corporate Web site
(www.gte.com) and the GTE Internet Solutions site (www.gte.net).
5. Advertising space and other revenue-producing items offered on services
developed and operated wholly or in part via third-party providers (e.g.,
Classifieds 2000).
14
<PAGE>
Exhibit 10.4
------------
SUBLEASE
BETWEEN
PRAXIS INTERNATIONAL, INC,
AND
LYCOS, INC.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
Demise and Term; Conditions of Sublease; Parking............................ 1
Subordinate to Main Lease; Quiet Enjoyment.................................. 1
Incorporation by Reference.................................................. 2
Performance by Sublessor; Signage Undertakings.............................. 2
No Breach of Main Lease..................................................... 3
No Privity of Estate........................................................ 3
Indemnity................................................................... 4
Releases.................................................................... 4
Rent........................................................................ 4
Late Charges................................................................ 5
Utilities and Other Charges................................................. 5
Security Deposit............................................................ 5
Use; Construction........................................................... 5
Condition of Subleased Premises............................................. 6
Consents and Approvals...................................................... 7
Termination of Main Lease................................................... 7
Assignment and Subletting................................................... 7
Alterations................................................................. 7
Brokerage................................................................... 8
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
Surrender................................................................... 8
No Waiver................................................................... 8
Successors and Assigns...................................................... 8
Liability of Sublessor...................................................... 8
Interpretation.............................................................. 8
Consent of Landlord Under Main Lease........................................ 9
Showers/Cafeteria........................................................... 9
Renewal Option.............................................................. 9
</TABLE>
-ii-
<PAGE>
SUBLEASE
--------
SUBLEASE dated as of the 4th day of December, 1996, between Praxis
International, Inc., a Massachusetts corporation having an office at 500 Old
Connecticut Path, Framingham, Massachusetts, 01701 ("Sublessor"), and Lycos,
Inc., a Massachusetts corporation having an office at 293 Boston Post Road West,
Marlborough, Massachusetts ("Sublessee").
1. Demise and Term; Conditions of Sublease; Parking. Sublessor hereby
------------------------------------------------
leases to Sublessee, and Sublessee hereby hires from Sublessor, that certain
real property containing approximately 16,775 square feet of space in the
premises located on the second floor of 500 Old Connecticut Path, Framingham,
Massachusetts, as more particularly described in Exhibit A annexed hereto and
made a part hereof (the "Subleased Premises"), together with all appurtenances,
rights, privileges and easements pertaining to the Subleased Premises. The
Subleased Premises are a portion of the premises leased to Sublessor under the
Main Lease (as hereinafter defined). The term of this Sublease shall commence on
the earlier of (i) the day which is forty-five (45) days after the Agreed
Approvals, as defined below, are obtained, or (ii) the Substantial Completion
Date, as defined in Section 3(B)(iii), below (the "Commencement Date") and shall
end on October 31, 1999 (the "Expiration Date").
As used herein, "Agreed Approvals" shall mean the following: (a) Sublessee
has received the consent of Landlord (as defined in Section 2) to building plans
for Sublessee Improvements, as defined in Section 14, and (b) Sublessee has
obtained all required building permits to construct the Sublessee Improvements.
The Sublessor shall provide sixty-five (65) unassigned parking spaces in
the parking lot for the Complex (as defined in the Main Lease), on the terms and
conditions set forth in Section 2.4 of the Lease.
2. Subordinate to Main Lease; Quiet Enjoyment. This Sublease is subject
------------------------------------------
and subordinate to (a) the lease (the "Lease") dated June 14, 1995, between 500
Old Connecticut Path Limited Partnership, as landlord, and Sublessor, as tenant,
as amended by that certain First Amendment to Lease (the "First Amendment")
dated October 26, 1995, and a Second Amendment to Lease dated as of April 24,
1996 (the "Second Amendment") (the Lease and First and Second Amendments are
together referred to herein as the "Main Lease"), and (b) the matters to which
the Main Lease is or shall be subject and subordinate. A true and complete copy
of the Main Lease is annexed hereto as Exhibit B and made a part hereof. Said
Main Lease has been assigned to OCP Limited Partnership, the current landlord
(said current landlord and any successor landlord are hereinafter referred to as
the "Landlord").
Subject to the matters set forth above, upon Sublessee's faithfully
performing the terms, conditions, and covenants hereof, Sublessee may quietly
and peacefully enjoy the Subleased Premised during the term hereof.
-1-
<PAGE>
3. Incorporation by Reference.
--------------------------
A. The terms, covenants and conditions of the Main Lease are
incorporated herein by reference so that, and except to the extent that such
incorporated provisions are inapplicable to or modified by the provisions of
this Sublease, all of the terms, covenants and conditions of the Main Lease
which bind or inure to the benefit of the landlord thereunder shall with respect
to the Subleased Premises hereunder, in respect of this Sublease, bind or inure
to the benefit of Sublessor, and all of the terms, covenants and conditions of
the Main Lease which bind or inure to the benefit of the tenant thereunder, in
respect of this Sublease, bind or insure to the benefit of Sublessee, with the
same force and effect as if such incorporated terms, covenants and conditions
were completely set forth in this Sublease, and as if the words "landlord" and
"tenant" or words of similar import, wherever the same appear in the Main Lease,
were construed to mean, respectively, "Sublessor" and "Sublessee" in this
Sublease, and as if the words "premises" and "demised premises" or words of
similar import, wherever the same appear in the Main Lease, were construed to
mean "Subleased Premises" in this Sublease, and as if the word "lease" or words
of similar import, wherever the same appear in the Main Lease, were construed to
mean this "Sublease". Notwithstanding the foregoing, any time limits not
specifically set forth in this sublease, and contained in the Main Lease for the
giving of notices, making of demands or performing of any act, condition or
covenant on the part of the tenant thereunder, or for the exercise by the tenant
thereunder of any right or remedy, are changed for the purposes of incorporation
therein by reference by shortening the same in each instance by five (5) days,
so that in each instance Sublessee shall have five days less time to observe or
perform hereunder than Sublessor has as the tenant under the Main Lease, but in
no event less than five (5) days.
B. The following provisions of the Main Lease shall not be
incorporated herein by reference and shall not apply to this Sublease:
(i) Sections 11.11, 11.13, 11.14 and 11.15 of the Lease in their
entirety, and Exhibit B, "Work Letter" and Schedule 1 referred to therein;
(ii) Notwithstanding any provision of the Main Lease, it is the
intention of the parties hereto that under no circumstances shall Sublessee have
any right to renew or extend the term of this Sublease or to sublet any portion
of the Subleased Premises or to assign this Sublease by operation of law or
otherwise, except as set forth herein.
4. Performance by Sublessor, Signage Undertakings. Any obligation of
----------------------------------------------
Sublessor which is contained in this Sublease by incorporating the provisions of
the Main Lease may be observed or performed by Sublessor using reasonable
efforts to cause the landlord under the Main Lease to observe and/or perform the
same, and Sublessor shall have a reasonable time to enforce its rights to cause
such observance or performance. In the event Landlord, after notice and efforts
by Sublessor hereunder, does not perform a material obligation and such failure
of Landlord hereunder has a material adverse effect on the use and enjoyment of
the Subleased Premises, Sublessor agrees at Sublessee's request, to commence
legal action (the "Landlord Litigation") against Landlord seeking to cause such
performance and obtain legal damages for Sublessee's benefit. Sublessee agrees
to pay
-2-
<PAGE>
all reasonable costs and expenses associated with such legal action to Sublessor
within ten (10) days of receipt of an invoice therefor. Sublessor shall not be
required to perform any obligation, and Sublessor shall have no liability to
Sublessee for the failure to perform any obligation, except for Sublessor's
obligation to use reasonable efforts, upon receipt of written request of
Sublessee, to cause the landlord under the Main Lease to observe and/or perform
its obligations under the Main Lease and to commence and pursue the Landlord
Litigation, as set forth above. Sublessee shall not in any event have any
rights in respect of the Subleased Premises greater than Sublessor's rights
under the Main Lease. Sublessor shall not be responsible for any failure or
interruption, for any reason whatsoever (other than solely by reason of
Sublessor's negligence), of the services or facilities that are appurtenant to,
or supplied at or to, the Subleased Premises, including, without limitation,
electricity, heat, air conditioning, water, elevator service and cleaning
service, if any; and no failure to furnish, or interruption of, any such
services or facilities shall give rise to any (a) abatement or reduction of
Sublessee's obligations under this Sublease, (b) constructive eviction, whether
in whole or in part, or (c) liability on the part of Sublessor, unless such
failure or interruption is caused solely by Sublessor's negligence. Sublessor
shall offer Sublessee a right of first refusal on space adjacent to the
Subleased Premises which becomes available for sublease on the same terms as any
offer made for such space by a third party by giving Sublessee written notice
thereof, and Sublessee shall respond to such offer indicating its acceptance or
rejection thereof within ten (10) days of such written notification.
Sublessor represents that to its knowledge, without specific investigation
or inquiry, the heating, ventilating, and air-conditioning system serving the
Subleased Premises ("HVAC System") is in good working order. As used herein, "to
its knowledge" shall mean to the knowledge of the following officers of
Sublessor: Richard P. Ryan and Russell Lavoie. Sublessor agrees upon written
notice from Sublessee to promptly bring to the attention of the Landlord any
defect, interruption in service, or other failure of the HVAC System and to use
diligent efforts to cause Landlord to honor its obligations as to such HVAC
System under the Main Lease.
Sublessor agrees to use all diligent efforts to cause Landlord to provide
graphics and signage for Sublessee, on both the first and second floor lobbies,
and on the "tombstone" sign in front of the building, subject to Landlord's
approval and existing building standards for such signage.
5. No Breach of Main Lease. Sublessee and Sublessor shall not do or
-----------------------
permit to be done any act or thing which will constitute a breach or violation
of any term, covenant or condition of the Main Lease by the tenant thereunder,
whether or not such act or thing is permitted under the provisions of this
Sublease.
6. No Privity of Estate. Nothing contained in this Sublease shall be
--------------------
construed to create privity of estate or of contract between Sublessee and the
landlord under the Main Lease.
7. Indemnity. Sublessee and Sublessor shall each indemnify and hold
---------
the other harmless from and against all claims, actions, losses, costs, damages,
expenses and liabilities, which the other may incur by reason of (a) any
accidents, damages or injuries to persons or property occurring in, on or about
the Subleased Premises due to the other party's operations, (b) any breach or
default
-3-
<PAGE>
hereunder, (c) any work done in or to the Subleased Premises, or (d) any act,
omission or negligence the other.
8. Releases. Sublessee hereby releases the landlord under the Main
--------
Lease or anyone claiming through or under the landlord under the Main Lease by
way of subrogation or otherwise, to the extent that Sublessor released the
landlord under the Main Lease and/or the landlord under the Main Lease was
relieved of liability or responsibility pursuant to the provisions of the Main
Lease.
9. Rent.
----
A. Sublessee shall pay to Sublessor rent ("Fixed Rent") in the
amount fisted on Exhibit A attached hereto. Fixed Rent shall be paid monthly in
advance on the first day of each month during the term of this Sublease. Fixed
Rent, the Operating Expense Escalation Charge, as defined in Section 3.3 of the
Main Lease, and all other amounts ("Additional Charges") payable by Sublessee to
Sublessor under the provisions of this Sublease or the provisions of the Main
Lease shall be paid promptly when due, without notice or demand therefor (unless
Sublessor receives notice or demand therefor from the landlord under the Main
Lease), and without deduction, abatement, counterclaim or set off of any amount
for any reason whatsoever. Fixed Rent and Additional Charges shall be paid to
Sublessor in lawful money of the United States at the address of Sublessor set
forth at the beginning of this Sublease, or to such other person and/or at such
other address as Sublessor may from time to time designate by .written notice to
Sublessee. Sublessee's share of all Additional Charges due under the Main Lease
shall be thirty-eight and eighty-nine hundredths percent (38.89 %) of the amount
for which Sublessor is responsible under the Main Lease. No payment by Sublessee
or receipt by Sublessor of any lesser amount than the amount stipulated to be
paid hereunder shall be deemed other than on account of the earliest stipulated
Fixed Rent or Additional Charges; nor shall any endorsement or statement on any
check or letter be deemed an accord and satisfaction, and Sublessor may accept
any check or payment without prejudice to Sublessor's right to recover the
balance due or to pursue any other remedy available to Sublessor. Without
limiting the foregoing, the parties acknowledge that in addition to Fixed Rent
Sublessee is responsible for an electricity charge, presently set at $0.75 per
rentable square foot, which shall be paid in equal monthly installments, as set
forth in the Main Lease.
B. In addition to Fixed Rent, Sublessee agrees to pay to
Sublessor thirty-eight and eighty-nine hundredths percent (38.89 %) of the
amount of Sublessor's liability for the Tax Escalation Charge, appropriately
prorated to reflect the term of this Sublease, pursuant to and as defined in
Section 3.2 of the Lease. The proportionate liability of Subtenant for the Tax
Escalation Charge and all Additional Charges is determined by dividing the
16,775 square feet subleased by Sublessee by the total of 43,135 square feet
leased by Sublessor. Sublessor agrees to furnish to Sublessee a copy of any
applicable information to verify Sublessee's responsibility for the Tax
Escalation Charges. Sublessee shall pay the Tax Escalation Charge to Sublessor
on the same terms as required of Sublessor under the Main Lease.
C. Sublessor represents that Landlord has informed it that the
actual tax charges and Operating Expenses for the whole 500 Old Connecticut Path
building are as follows:
-4-
<PAGE>
1995 Operating Expenses: $515,510.10 (37.77 % to Sublessor,
Fiscal 1996 Real Estate Taxes: $89,363.93 (included in Sublessor's rent
10. Late Charges. If Sublessee fails to pay any Fixed Rent or Additional
------------
Charges (including the Tax Escalation Charge) within three (3) days of the date
due, Sublessee shall pay interest on such amount at the Default Interest Rate,
as that term is defined in Section 9.6 of the Main Lease, from the date on which
such amount was due, and shall also pay a late charge of 3 % of the amount
overdue, as provided in Section 9.6 of the Main Lease. Such interest shall be
payable on the first day of the following month, and in default of payment of
any such interest, Sublessor shall have (in addition to all other rights and
remedies) the same rights and remedies as Sublessor has for the nonpayment of
Fixed Rent. Nothing contained herein shall be deemed to extend the date on which
Fixed Rent and Additional Charges are due.
11. Utilities and Other Charges.
---------------------------
A. At the present time Landlord supplies utilities to the
Subleased Premises. Sublessee shall be responsible for the prompt payment when
due for electricity and such other utility service required by Sublessee which
are in addition to utilities now serving the Subleased Premises and not
separately metered.
B. Other charges payable by Sublessor under any provision of the
Main Lease which is incorporated by reference in this Sublease shall be paid
pro-rata by Sublessee in accordance with the provisions of the Main Lease. The
parties agree that Sublessee's pro-rata share of such charges is thirty-eight
and eighty-nine hundredths percent (38.89 %).
12. Security Deposit. The Sublessee has paid to the Sublessor herewith a
----------------
security deposit, by check subject to collection, in the amount stated on
Exhibit C. The Sublessor may commingle such deposit with its other funds and may
apply such deposit upon default of the Sublessee hereunder. Provided the
Sublessee, is not then in default hereunder, the Landlord shall return the then
remaining portion of the security deposit to the Sublessee within thirty (30)
days after the expiration of this Lease. In the event the Sublessor applies such
funds, the Sublessee shall pay to the Sublessor as additional rent within ten
(10) days after invoice therefor, the amount of the security deposit applied by
the Sublessor, such that the balance of the security deposit shall be restored
to its original amount.
13. Use; Construction. Sublessee shall use and occupy the Subleased
-----------------
Premises only for the purposes that are expressly set forth in the Main Lease.
Sublessee shall comply with (a) the Main Lease, (b) any certificate of occupancy
relating to the Subleased Premises, (c) all present and future laws, statutes,
ordinances, orders, rules, regulations and requirements of all Federal, state
and municipal governments asserting jurisdiction over the Subleased Premises and
(d) all requirements applicable to the Subleased Premises of the board of fire
underwriters and/or the fire insurance rating or similar organization performing
the same or similar functions, except as provided herein.
-5-
<PAGE>
14. Condition of Subleased Premises. Sublessor shall have no obligation
-------------------------------
to furnish, render or supply any work, labor, services, fixtures, equipment,
decorations or other items to make the Subleased Premises ready or suitable for
Sublessee's occupancy, except that it shall be responsible for construction of
demising walls. In making and executing this Sublease, Sublessee has relied
solely on such investigations, examinations and inspections as Sublessee has
chosen to make or have made. Sublessee acknowledges that Sublessor has afforded
Sublessee the opportunity for full and complete investigations, examinations and
inspections.
Sublessee accepts the Subleased Premises in an "AS IS" condition.
Sublessee intends to perform certain constriction in the Subleased Premises (the
"Sublessee Improvements"). Sublessee shall be responsible for any costs
associated with such construction of Sublessee Improvements, including, without
limitation, architectural fees, and the cost of entrance doors to the reception
area, except that Sublessor agrees to be responsible for the cost of
construction of demising walls. Sublessor shall be responsible for demising the
Subleased Premises in such a way as to give Sublessee elevator identity. AU
construction undertaken shall be subject to the terms of, and in accordance with
the provisions of, the Main Lease, as well as of this Sublease. Without
limiting the foregoing, Sublessee agrees to obtain approval of final plans for
construction from (i) the Landlord, OCP Limited Partnership, notwithstanding
that certain construction may not require such approval under the Main Lease if
performed by Sublessor, and (H) Sublessor, which approval by Sublessor will not
be unreasonably withheld or delayed.
Sublessee agrees to make diligent efforts to cause such construction
to be completed as soon as is reasonably possible. Such construction shall be
deemed to be substantially completed on the date (the "Substantial Completion
Date") that all such construction has been completed except for items of work
and adjustment of equipment and fixtures which can be completed after occupancy
has been taken by Sublessee without causing substantial interference with
Sublessee's use of the Subleased Premises (i.e. so-called "punch list" items).
In the event that Sublessor and Sublessee disagree as to whether the Substantial
Completion Date has occurred, Design Sciences of Concord, Massachusetts shall
reasonably make such determination in good faith, which determination shall be
conclusive.
Sublessee may enter the Subleased Premises upon receipt of Landlord's
approval of this Sublease for the purpose of installing Tenant's systems,
wiring, furnishings, and trade fixtures, provided, however, that upon any such
entry Tenant shall be subject to all of the provisions of this Sublease, except
the obligation to pay Fixed Rent, Taxes, and Additional Charges.
15. Consents and Approvals. In any instance when Sublessor's consent or
----------------------
approval is required under this Sublease, Sublessor's refusal to consent to or
approve any matter or thing shall be deemed reasonable if such consent or
approval has not been obtained from the landlord under the Main Lease. If
Sublessee shall seek the approval or consent of Sublessor and Sublessor shall
fail or refuse to give such consent or approval, Sublessee shall not be entitled
to any damages for any withholding or delay of such approval or consent by
Sublessor, it being intended that Sublessee's sole remedy shall be an action for
injunction or specific performance and that such remedy shall be
-6-
<PAGE>
available only in those instances where Sublessor shall have expressly agreed in
writing not to withhold or delay its consent unreasonably.
16. Termination of Main Lease. If for a reason specified in the Main
-------------------------
Lease (including, without limitation, the exercise by Sublessor of its right to
terminate the Main Lease pursuant to any provision of the Main Lease), the term
of the Main Lease shall terminate prior to the expiration of this Sublease, this
Sublease shall thereupon be terminated and Sublessor shall not be liable to
Sublessee by reason thereof. Provided Sublessee is not then in default,
Sublessor shall refund to Sublessee any prepaid rent prorated to the date of
termination, and any security held by Sublessor due to Sublessee.
Notwithstanding the foregoing, Sublessor agrees not to voluntarily terminate the
Main Lease during the term of this Sublease.
17. Assignment and Subletting. Sublessee shall not, by the sale of all
-------------------------
or substantially all of its assets, operation of law or otherwise, assign,
sell, mortgage, pledge or in any other manner transfer or encumber this Sublease
or any interest therein, or sublet the Subleased Premises or any pail or parts
thereof, or grant any concession or license or otherwise permit occupancy of all
or any part of the Subleased Premises by any person, without the prior written
consent of Sublessor, which will not be unreasonably withheld or delayed.
Neither the consent of transfer, concession, license or use, nor any references
in this Sublease to assignees, Sublessees, mortgagees, pledgees, transferees,
concessionaires, licensees, or users, shall in any way be construed to relieve
Sublessee of the requirement of obtaining the prior written consent of Sublessor
to any further assignment, subletting or use or to the making of any assignment,
subletting, mortgage, pledge, transfer, concession or license with respect to
this Sublease or all or any part of the Subleased Premises. If Sublessor
consents to any assignment of this Sublease, the assignee shall execute and
deliver to Sublessor an agreement in form and substance satisfactory to
Sublessor whereby the assignee shall assume all of Sublessee's obligations under
this Sublease. Notwithstanding any assignment, subletting or transfer,
including, without limitation, any assignment, subletting, transfer or use
permitted or consented to by Sublessor, the original Sublessee named herein and
any other person who at any time was Sublessee and any guarantor of Sublessee's
obligations shall remain fully liable under this Sublease.
18. Alterations. Notwithstanding any provision of this Sublease or the
-----------
Main Lease to the contrary, Sublessee shall not make, cause, suffer or permit
the making of any alteration, change, replacement, installation or addition in
or to the Subleased Premises without obtaining the prior written consent of
Sublessor in each instance.
19. Brokerage. Sublessor is represented by Fallon, Hines & O'Connor
---------
and shall pay all brokerage fees due to that firm. Sublessee is represented by
Lynch Murphy Walsh & Partners and Parsons Commercial Group, and shall pay all
brokerage fees due those firms.
20. Surrender. Sublessee shall, on the expiration or earlier termination
---------
of this Sublease, comply with all the provisions of the Main Lease relating to
the surrender of the Subleased Premises at the expiration of the term of the
Main Lease. Sublessee agrees to reirnburse Sublessor for all costs and expenses
incurred in removing and storing Sublessee's property, or repairing any damage
to the
-7-
<PAGE>
Subleased Premises caused by or resulting from Sublessee's failure to comply
with the provisions of this Section 20. The provisions of this Section 20 shall
survive the expiration of this Sublease.
21. No Waiver. Sublessor's receipt and acceptance of Fixed Rent or
---------
Additional Charges, or Sublessor's acceptance of performance of any other
obligation by Sublessee, with knowledge of Sublessee's breach of any provision
of this Sublease, shall not be deemed a waiver of such breach. No waiver by
Sublessor of any term, covenant or condition of this Sublease shall be deemed to
have been made unless expressed in writing and signed by Sublessor.
22. Successors and Assigns. The provisions of this Sublease, except
----------------------
as herein otherwise specifically provided, shall extend to, bind and inure to
the benefit of the parties hereto and their respective legal representatives,
heirs, successors and permitted assigns. In the event of any assignment or
transfer of the leasehold estate under the Main Lease, the transferor or
assignor, as the case may be, shall be and hereby is entirely relieved and freed
of all obligations under this Sublease from the date of the transfer forward.
23. Liability of Sublessor. Sublessor, its officers, directors
----------------------
and shareholders, disclosed and undisclosed, shall have no personal liability
under this Sublease.
24. Interpretation. Irrespective of the place of execution or
--------------
performance, this Sublease shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts applicable to agreements made and
to be performed within the Commonwealth of Massachusetts. The captions,
headings and titles, if any, in this Sublease are solely for convenience of
reference and shall not affect its interpretation. This Sublease shall be
construed without regard to any presumption or other rule requiring construction
against the party causing this Sublease to be drafted. Each covenant,
agreement, obligation or other provision of this Sublease binding upon Sublessee
shall be deemed and construed as a separate and independent covenant of
Sublessee, not dependent on any other provision of this Sublease unless
otherwise expressly provided. AU terms and words used in this Sublease,
regardless of the number or gender in which they are used, shall be deemed to
include any other number and any other gender as the context may require. The
word "person" as used in this Sublease shall mean a natural person or persons,
as partnership, a corporation or any other form of business or legal association
or entity.
25. Consent of Landlord Under Main Lease. This Sublease shall have
-------------------------------------
no effect until (i) the landlord under the Main Lease shall have given its
written consent (if required) hereto in accordance with the terms of the Main
Lease and (ii) Sublessee shall have received a letter from Landlord, in form
reasonably satisfactory to it, that Landlord will accept back the Subleased
Premises with the Sublessee Improvements and also will allow Sublessee to remain
in the Subleased Premises under this Sublease, notwithstanding a default of
Sublessor. If the Landlord under the Main Lease does not give its consent to
this Sublease and provide such a letter to Sublessee within fifteen (15) days
after the date hereof, (a) Sublessor shall not be obligated to take any action
to obtain such consent, (b) this Sublease shall be deemed null and void and of
no effect, and (c) if Sublessee is then in possession of all or any part of the
Subleased Premises, Sublessee shall immediately quit and surrender to Sublessor
the
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Subleased Premises, shall remove all of its property and repair all damage
caused by such removal and restore the Subleased Premises to the condition in
which it was prior to such occupancy. Sublessor agrees to use its reasonable
efforts to obtain the consent of the Landlord to this sublease.
26. Showers/Cafeteria. Sublessor agrees that Sublessee shall have the
-----------------
ability and right, subject to the terms and provisions of the Lease, to utilize
the showers and cafeteria now existing in the building located at 500 Old
Connecticut Path, Framingham, Massachusetts.
27. Renewal Option. In the event that Sublessor determines that it will
--------------
exercise the option to extend set forth in Section 11.13 of the Lease,
Sublessor shall so advise Sublessee in writing (the "Extension Notice") on or
before August 1, 1998, and Sublessee shall advise Sublessor whether or not it
wishes to renew this Sublease for the period of extension of the Main Lease by
giving written notice to Sublessor on or before September 1, 1998 (the "Response
Notice"). A failure to respond by Sublessee shall be deemed to be notice that
Sublessee does not wish to extend the term of this Sublease. Prior to giving
such Extension Notice, Sublessor shall contact Landlord and use reasonable
efforts to attempt to agree with Landlord as to the Fair Rental Value, as
defined in the Lease, for the extension term. If the Fair Rental Value has been
so agreed, Sublessor shall advise Sublessee in the Extension Notice of such
agreement and, if it has not been agreed, Sublessor shall indicate, without
having any liability for such information to Sublessee, what rental levels, if
any, have been suggested by Landlord and, based solely on inquiry of at least
one commercial real estate broker, what it has been advised is a fair market
rent. If Sublessee gives Sublessor an affirmative Response Notice, Sublessor
shall have by the giving of such notice extended the term of this Sublessee
(subject to Sublessor's ability to consummate the extension of the Main Lease)
upon the financial terms on which the Main Lease is extended. Nothing herein
shall be deemed to preclude Sublessor from negotiating a new lease with Landlord
subject to the provisions of the next succeeding sentence, below.
Whether or not Sublessor undertakes to extend the Lease, or to terminate,
or to negotiate a new lease, Sublessor shall not rent or otherwise occupy the
Subleased Premises if Sublessee indicates to Sublessor in writing on or before
September 1, 1998 that it wishes to remain in such premises after the term
hereof; except, however, that if Sublessee has given or been deemed to give a
negative Response Notice, and Sublessor nevertheless extends the Lease pursuant
to Section 11.13 thereof, Sublessor may rent, occupy, sublet, or otherwise lease
and control the Subleased Premises.
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<PAGE>
IN WITNESS WHEREOF, Sublessor and Sublessee have executed this Sublease as
of the day and year first above written.
WITNESS: PRAXIS INTERNATIONAL, INC.
By:
- ---------------------------------- -------------------------------------
Authorized Officer:
----------------
Print Name and
Title:
-----------------------------
WITNESS: LYCOS, INC.
By:
- ---------------------------------- -------------------------------------
Authorized Officer:
----------------
Print Name and
Title:
-----------------------------
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EXHIBIT B
WORK LETTER - Praxis International, Inc.
----------------------------------------
500 Old Connecticut Path
Framingham, Massachusetts
This work letter (this "Work Letter") forms a part of the Lease between 500
Old Connecticut Path Limited Partnership and Praxis International, Inc. (the
"Lease") to which it is attached as Exhibit B. Nothing in this Work Letter is
intended to limit the application of Section 4 of the Lease to the work to be
performed by or on behalf of the Tenant hereunder. Capitalized terms defined in
the Lease shall have the same meaning where used herein.
1. Plans and Specifications. The Tenant agrees to prepare, at the
------------------------
Tenant's sole cost and expense, preliminary plans for the construction and
layout of the improvements which the Tenant desires to have performed in the
Premises. Notwithstanding the foregoing, the Landlord shall pay the
Architectural Improvement Allowance to the Tenant within thirty (30) days of
presentation of an invoice for the engineered mechanical and electrical
architectural drawings in an amount at least equal to the amount of the
Architectural Improvement Allowance to the Landlord, provided however, that the
Architectural Improvement Allowance shall not be paid prior to the Landlord's
approval of Tenant's Plans (as hereinafter defined). The Tenant shall submit
the Tenant's preliminary plans to the Landlord for Landlord's approval no later
than June 30, 1995 (the "Preliminary Plans Submission Date"), and the Landlord
shall either approve or disapprove Tenant's preliminary plans within three (3)
business days following the date of submission. At the Tenant's sole cost and
expense, the Tenant shall cause Tenant's preliminary plans to be revised in a
manner sufficient to remedy the Landlord's objections and/or respond to the
Landlord's concerns and for such plans, including engineered mechanical and
electrical drawings ('Tenant's Plans') to be redelivered to the Landlord in no
event later than July 7, 1995 ("Final Plans Submission Date") and the Landlord
shall either approve or disapprove Tenant's revised plans within three (3)
business days following the date of submission. Time is of the essence with
respect to the preparation and submission of Tenant's Plans. Tenant's Plans
shall be stamped by a Massachusetts registered architect and engineer, such
architect and engineer being subject to the Landlord's approval, and shall
comply with all applicable laws, ordinances and regulations (including, without
limitation, the applicable requirements of the Americans with Disabilities Act
of 1990, and the regulations promulgated thereunder) and shall be in a form
satisfactory to appropriate governmental authorities responsible for issuing
permits, approvals and licenses required for construction. The Landlord has
heretofore been furnished early drafts of Tenant's preliminary plans and,
provided Tenant's preliminary plans furnished under this Exhibit B are
consistent therewith, the Landlord shall not unreasonably withhold its consent
thereto. If Tenant's Plans shall not be approved by the Landlord by July 12,
1995 (the "Final Plans Date"), the Landlord shall have the right, without
limitation of other rights or remedies, to terminate this Lease by giving notice
thereof to the Tenant at any time after the Final Plans Date, provided, however,
and subject, nevertheless, to the provisions set forth in Section 5 hereof, that
the Tenant may elect to defer the
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effective termination date by notice given to the Landlord within five (5) days
of Landlord's notice of termination, provided, further, that such notice by
the Tenant shall contain an indication of the reasonable likelihood of the
Tenant's Plans being approved by the Landlord prior to the effective termination
date, as deferred. Upon such termination, this Lease shall cease and come to
an end in accordance with the terms of such notice and without further
obligation or liability on the part of either party, except as follows: The
Tenant shall pay to the Landlord the damages suffered by the Landlord by reason
of such termination including, without limitation, an amount equal to the
Landlord's out-of-pocket expenses incurred in connection with this Lease,
including, without limitation, brokerage and legal fees, together with any
amount required to be paid pursuant to Section 4 below, through the effective
termination date.
2. Construction of Premises and Disbursement of Improvement Allowance.
------------------------------------------------------------------
The Landlord shall use all reasonable efforts to substantially complete the work
described as items 1, 2, 3, 6, 7, 8 and 9 on Schedule 1 hereto ("Landlord's
Premises Work") on or prior to June 30, 1995 or such later date upon which the
Tenant's Plans shall have been approved by the Landlord (the "Anticipated
Delivery Date"). Landlord's Premises Work, collectively with items 4, 5 and 10
on Schedule I hereto, shall be deemed "Landlord's Work". The Landlord shall use
all reasonable efforts to coordinate the performance of the work described as
item 5 of Landlord's Work ("Landlord's HVAC Work") with Moriarty & Associates
and to substantially complete Landlord's HVAC Work on or prior to August 15,
1995. In addition, the Landlord shall solicit a bid for Landlord's HVAC Work
from the subcontractor performing HVAC work for the Tenant in the Premises but
the Landlord shall be under no obligation to accept such bid. The Tenant shall
use all reasonable efforts to prepare the Premises in accordance with Tenant's
Plans ("Tenant's Work"), and Landlord shall use all reasonable efforts to
substantially complete the work described in item 4 of Landlord's Work on or
before the Rent Commencement Date. Upon receipt of notice that a government
official considers work of the type described in item 10 of Landlord's Work to
be required for occupancy approval of the Premises, and the Landlord's
satisfaction that such work is indeed necessary, the Landlord shall diligently
arrange to perform such work in a timely manner. With respect to the work
described as item 10 of Landlord's Work, the Landlord shall share with Moriarty
& Associates such information as the Landlord deems necessary, including
information regarding the general scope of such work and anticipated schedule
for completion of such work; provided, however, that such information may change
from time to time. The Landlord shall reimburse the Tenant for the costs
incurred by the Tenant with respect to the performance of Tenant's Work
("Tenant's Work Costs") up to the Basic Improvement Allowance, less the cost of
performing items 7 and 8 of Landlord's Work, which the Landlord and the Tenant
agree shall not exceed Seven Thousand Dollars ($7,000.00) ("Available Basic
Improvement Allowance"). However, if the Tenant incurs Tenant's Work Costs which
exceed the Available Basic Improvement Allowance, the Landlord shall reimburse
the Tenant for such excess Tenant's Work Costs up to but not exceeding an
additional Four Dollars ($4.00) per square foot of Rentable Floor Area of the
Premises ("Excess Improvement Allowance"), and Annual Fixed Rent under this
Lease shall be adjusted as contemplated in the Lease. If Tenant's Work Costs
exceed the aggregate of the Available Basic Improvement Allowance and the Excess
Improvement Allowance (collectively, the "Total Improvement Allowance"), the
Tenant shall be entirely responsible for such excess. The
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Total Improvement Allowance shall be payable by the Landlord to the Tenant (or,
at Landlord's election, directly to Tenant's contractor) upon written
requisition to the Landlord in installments according to reasonable construction
disbursement procedures, as Tenant's Work progresses. In any case, prior to
payment of any such installment the Tenant shall deliver to the Landlord a
written request, which request shall be given no more frequently than once every
thirty (30) days, for such disbursement, which shall be accompanied by: (i)
invoices for Tenant's Work covered by any previous requisition; and (ii) a
certificate signed by the Tenant's architect and an officer of the Tenant
certifying that Tenant's Work represented by the aforementioned invoices has
been completed substantially in accordance with Tenant's Plans and that the
remaining portion of the Total Improvement Allowance is sufficient to pay in
full for the completion of Tenant's Work. If at any time, the amount of the
Total Improvement Allowance is insufficient to pay for the remaining amount of
Tenant's Work, the Tenant shall pay from its own funds all further sums
necessary to enable the Tenant and the Tenant's architect to again make the
certification required under (ii) above.
3. Substantial Completion of Landlord's Work. The Landlord's Work shall
-----------------------------------------
be deemed to be substantially completed notwithstanding that there remain to be
completed minor items of construction, mechanical and electrical adjustment or
other work which the Landlord is able to complete after the Tenant has occupied
the Premises without unduly interfering with the Tenant's use thereof.
Additionally, the Landlord's Work shall be deemed substantially completed
notwithstanding any condition (i) due to the Tenant's failure, direct or
indirect, in whole or in part in submitting plans or other construction
information to the Landlord as necessary or in executing approvals and work
letters when required by the Landlord; (ii) caused in whole or in part by any
other delay and/or default of the Tenant or Tenant's contractors, including,
without limitation, delay in the installation or furnishing of communications,
data processing or other service and/or equipment by public utility companies or
other entities; or (iii) due to special work or materials (e.g., long lead-time
for delivery of specified materials).
4. Tenant's Delay.
--------------
(a) Any delay that shall occur in Landlord's performance of Landlord's
Work as the result of any of the following matters shall be deemed a 'Tenant's
Delay':
(i) any request by the Tenant that the Landlord delay in the
commencement or completion of Landlord's Work for any
reason;
(ii) any change by the Tenant in any of Tenant's Plans which in
Landlord's reasonable and absolute judgment will delay the
substantial completion of Landlord's Work;
(iii) failure to submit preliminary plans by the Preliminary Plans
Submission Date, or failure to submit Tenant's Plans by the
Final Plans Submission Date, or to obtain Landlord's
approval thereof by
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the Final Plans Date, or to execute a work letter if
reasonably requested by the Landlord;
(iv) any special requirements of Tenant's Plans not in conformity
with Landlord's plan submission standards;
(v) any other act or omission of the Tenant or its officers,
agents, servants or contractors;
(vi) any other act or omission of the Tenant or its officers,
agents, servants or contractors;
(vii) any required coordination with the Tenant's contractors,
vendors or other suppliers which in Landlord's reasonable
judgment causes a Tenant Delay; or
(viii) any reasonably necessary rescheduling of the sequence of any
of Landlord's Work due to, without limitation, any of the
causes for delay referred to in clauses (i), (ii), (iii),
(iv), (v), (vi) and (vii) of this Section 4(a).
A Tenant's Delay shall not render the Lease invalid, nor be construed in any way
so as to extend the term of the Lease, nor in any way modify the Tenant's
obligation hereunder to pay Annual Fixed Rent, Additional Rent, the Tax
Escalation Charge, the Operating Expense Escalation Charge and other charges
commencing on the Commencement Date. The Tenant shall pay additional costs to
the Landlord if such additional costs are in whole or in part, directly or
indirectly the result of such delay, failure or omission of the Tenant. As used
in this paragraph, the phrase 'additional costs to the Landlord' shall mean the
excess over what would have been Landlord's total costs of completing Landlord's
Work in preparation of the Premises for Tenant's occupancy had there not
occurred such delay, failure or omission on the part of the Tenant.
(b) If any delay in the substantial completion of Landlord's Work is the
result of External Causes, and such delay would not have occurred but for one or
more Tenant's Delay described in paragraph (a) of this Section 4, such delay
shall be deemed added to Tenant's Delay described in that paragraph.
(c) Subject to Landlord's other rights and remedies under prevailing
circumstances, the Commencement Date shall occur notwithstanding the Landlord's
failure to complete the Landlord's Work, if such failure is due to delays caused
by Tenant's Delay or External Causes.
5. Landlord's Delay. Any delay that shall occur in Tenant's performance
----------------
of Tenant's Work as the result of any of the following matters shall be deemed
a "Landlord's Delay":
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(a) the Landlord's failure to substantially complete (x) the
performance of Landlord's Premises Work prior to the
Anticipated Delivery Date or (y) item 5 of Landlord's Work
prior to August 15, 1995;
(b) any required coordination with the Landlord's contractors,
vendors or other suppliers in the performance by Landlord of
the work described as item 5 on Schedule I hereto, which is
necessary due to the Landlord's negligence or wilful
misconduct; or
(c) failure to approve or disapprove, as appropriate, Tenant's
preliminary plans or final plans within the time frames
specified in Section 1 hereof.
If Landlord's Delay causes the completion of Tenant's Work to be delayed
beyond October 1, 1995, then the Rent Commencement Date shall be postponed for
the period of any such delay.
6. Conclusiveness of Landlord's Performance. The Tenant shall have no
----------------------------------------
claim that the Landlord has failed to perform any of Landlord's Work, unless the
Tenant shall have given the Landlord notice, not later than thirty (30) days
following the Commencement Date, of respects in which Landlord has not performed
Landlord's Work. Except for Landlord's Work, the Premises are being leased in
their condition "as is", "where is" without representation or warranty by the
Landlord.
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SCHEDULE 1
DESCRIPTION OF LANDLORD'S WORK
1. Removal of certain interior walls located within the Premises as specified
by the Tenant in Tenant's Plans.
2. Removal of existing carpet located within the Premises.
3. Removal of buss ducting from the Premises.
4. Installation of showers in a location within the common area of the
Building to be selected by the Landlord, which showers shall be available
for use by all tenants of the Building.
5. Work on the Building's HVAC system as described below:
a. Removal of existing supplemental HVAC unit from rooftop of the
Building and associated ductwork throughout the Building.
b. Repair or replacement, as necessary in the Landlord's discretion,
of all perimeter fan power boxes to allow the temperature in the
Premises to be maintained at a range of 68 to 72 degrees
Fahrenheit during the winter months.
c. Installation of new controls on existing interior "cooling-only"
VAV boxes.
d. Inspection and testing of all existing base building HVAC
equipment to ensure that such equipment is in proper working
condition, as determined in the Landlord's reasonable discretion.
e. Modification of the secondary electrical distribution system to
the extent that such modification is required for operation of the
fan power boxes.
6. Installation of demising walls in the portion of the Premises located on
the third floor of the Building, including walls in entry area.
7. Demolition and removal of ceiling tiles and grids.
8. Removal of sheet rock from columns and of lighting from the ceiling.
9. Installation of fire-rated material which complies with applicable building
codes on the demising walls of the electrical room located on the second
floor of the Building.
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10. Performance of such work on the Building Common Areas and the bathrooms on
the second floor as may be reasonably necessary to obtain necessary
occupancy approval for the Premises.
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EXHIBIT C
STANDARD SERVICES
-----------------
The building standard services shall be defined by the Landlord and its
Management Agent and elaborated upon from time to time by the Landlord in a
Tenant Handbook.
PROPERTY COMMON AREA SERVICES
-----------------------------
A. Regular maintenance of the parking lot and landscaping.
B. Regular maintenance, sweeping and snow removal of building exterior
areas such as roadways, driveways, sidewalks, parking areas and
courtyard paving.
C. Lighting of Parking Areas and utilities therefor.
D. Security services as may be employed by the Landlord.
BUILDING SPECIFIC SERVICES PROVIDED TO THE BUILDING
---------------------------------------------------
A. Complete interior and exterior cleaning of all windows two to
three times per year, or as needed.
B. Daily, weekday maintenance of hallways, passenger elevators, common
area bathrooms, lobby areas and vestibules.
C. Periodic cleaning of stairwells, freight elevators, and building
service areas.
D. Daily, weekday rubbish removal of all the Tenant trash receptacles
and ash trays.
E. Daily, weekday cleaning of the Tenant space to building standard
specifications.
F. Maintenance and repair of base building surveillance and alarm
equipment, mechanical, electrical, plumbing and life safety systems.
G. Building surveillance and alarm system operation and live monitoring
service to building standard specifications, as may be employed by
Landlord from time to time.
H. HVAC services shall be provided to the premises from central mechanical
equipment during the appropriate seasons between the hours of 7:00 AM
to 6:00 PM on all Business Days. After hours HVAC services will be made
available at building standard rates, which substantially reflect all of
the Landlord's costs of providing such service, will be provided to the
Tenant.
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I. Utilities for all interior common areas and exterior building and
parking lighting.
J. Water service to the Premises at temperatures provided by the Landlord's
utility service for drinking and for any lavatory and/or kitchenette in
the Premises; provided, however, that the Landlord reserves the right to
arrange for such service to be separately metered to the Premises.
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EXHIBIT D
RULES AND REGULATIONS
DEFINITIONS
- -----------
Wherever in these Rules and Regulations the word 'Tenant' is used, it shall be
taken to apply to and include the Tenant and its agents, employees, invitees,
licensees, contractors, any subtenants and is to be deemed of such number and
gender as the circumstances require. The word 'Premises' is to be taken to
include the space covered by the Lease. The word "Landlord" shall be taken to
include the employees and agents of the Landlord. Other capitalized terms used
but not defined herein shall have the meanings set forth in the Lease.
GENERAL USE OF BUILDING
- -----------------------
A. Space for admitting natural light into any public area or tenanted
space of the Building shall not be covered or obstructed by the Tenant
except in a manner approved by the Landlord.
B. Toilets, showers and other like apparatus shall be used only for the
purpose for which they were constructed. No sweepings, rubbish, acids
or like substances shall be deposited therein, and any and all damage
from such misuse shall be borne by the Tenant.
C. The Landlord reserves the right to determine the number of letters
allowed the Tenant on any monument sign or exterior signage installed
by the Landlord and on any directory the Landlord maintains in the
Building.
D. Unless expressly permitted by the Landlord in writing:
(1) Any additional locks or similar devices which the Tenant may
attach to any door or window and any keys other than those
provided by the Landlord shall be part of the Building master
system. Upon termination of this lease or of the Tenant's
possession, the Lessee shall surrender all keys to the Premises
and shall explain to the Landlord all combination locks on safes,
cabinets and vaults.
(2) The Tenant shall be responsible for the locking of doors and the
closing of any transoms and windows in and to the Premises. Any
damage or loss resulting from failure to so lock or close shall
be paid for by the Tenant.
(3) If the Tenant shall install or operate any steam or internal
combustion engine, boiler, machinery in or about the Premises, or
carry on any
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mechanical business therein the Tenant shall obtain all permits
necessary for the legal operation of such machinery or mechanical
business.
E. The Landlord shall designate the time when and the method whereby
freight, small office equipment, furniture, safes and other like
articles may be brought into, moved or removed from a portion of the
Premises located in the Building, and to designate the location for
temporary disposition of such items. For convenience of the tenants,
elevators may not be used for major deliveries during peak travel
hours. Management should be notified in advance of major deliveries.
The Landlord may install elevator pads and/or issue independent
elevator service keys to protect the elevators from potential damage.
All carts and dollies brought into elevators must be equipped with
rubber bumpers. Pallets and pallet jacks will not be allowed in
passenger elevators. Under no circumstances should the elevator doors
be propped open such that they are prevented from closing.
F. For the general welfare of all tenants and the security of the
Building, the Landlord may require all persons entering and/or leaving
the Building on weekends and holidays and between the hours of 6:00 PM
and 8:00 AM to register with the Building attendant or custodian by
signing his name and writing his destination in the Building, and the
time of entry and actual or anticipated departure, or other procedures
deemed necessary by the Landlord. The Landlord may deny entry during
such hours to any person who fails to provide satisfactory
identification.
G. No animals, birds or pets of any kind shall be brought into or kept in
or about said Premises or the lobby or halls of the Building.
H. Unless specifically authorized by the Landlord, employees or agents of
the Landlord shall not perform for nor be asked by the Tenant to
perform work other than their regularly assigned duties.
I. The Landlord shall have the right to prohibit any advertising by the
Tenant which, in Landlord's opinion tends to impair the reputation of
the Building or its desirability as an office, manufacturing and R&D
building and, upon written notice from the Landlord, the Tenant shall
promptly discontinue such advertising.
J. Canvassing, soliciting and peddling in the Building is prohibited and
the Tenant shall cooperate to prevent the same from occurring.
K. The Tenant shall not use any heating device such as space heaters other
than those approved by the Landlord, such approval not to be
unreasonably withheld.
L. The Landlord shall have the right to make such other and further
reasonable rules and regulations as in the judgment of the Landlord,
may from time to time be needful for
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the safety, appearance, care and cleanliness of the Building and for
the preservation of good order therein.
M. The access road, parking areas and sidewalks, and, the loading areas,
entrances, lobbies, halls, walkways, elevators, stairways and other
common area provided by the Landlord shall not be unreasonably
obstructed by the Tenant or used by it for any other purpose than for
ingress and egress.
N. In order to insure proper use and care of the Premises, the Tenant
shall not prepare or dispense for sales any food, beverages, tobacco,
flowers or other commodities or articles without the written consent of
Landlord.
O. In order to insure use and care of the Premises, the Tenant shall not
enter any janitors' closets, mechanical or electrical areas, telephone
closets, loading areas or Building storage areas in the Building, or
the roof of the Building without the written consent of Landlord except
in the event of an emergency or for the completion of Tenant's Work.
P. In order to insure proper use and care of the Premises, the Tenant
shall not place door mats in public corridors of the Building without
consent of the Landlord.
Q. No smoking will be permitted in the Building Common Areas or Floor
Common Areas.
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EXHIBIT E
ARBITRATION
-----------
The party demanding arbitration of Fair Rental Value or an item or items
relating to the Tenant's Operating Expenses Allocable to the Premises (the
"Disputed Issue") shall give notice thereof to the other party and shall in
such notice appoint an arbitrator ("Notice of Arbitration"). Such Notice of
Arbitration shall be given not less than forty-five (45) days after the date
on which the Tenant provides the Landlord with notice disputing Landlord's
statement of expenses. Within 15 days after the Notice of Arbitration is
received, the other party shall by notice to the original party appoint an
arbitrator. If the second arbitrator shall not have been appointed as
aforesaid, the position taken by the party demanding arbitration shall be
deemed to be the correct resolution of the Disputed Issue.
Within three business days after the designation of the second arbitrator,
the two parties shall submit their respective position with respect to the
Disputed Issue to the two arbitrators; thereafter, the two arbitrators shall
conduct such hearings and investigations as they may deem appropriate and
shall, within 15 days after the designation of the second arbitrator,
determine the correct resolution of the Disputed Issue. The arbitrators or
either of them shall give notice thereof (or notice of their inability to
reach agreement, as the case may be) to the parties hereto within said 15-
day period and the agreement, if any, of the two arbitrators shall be
binding upon the parties hereto.
In the event the two arbitrators are unable to reach agreement within said
15-day period as aforesaid, the two arbitrators shall, within 30 days after
the designation of the second arbitrator, designate a third arbitrator. If
the two arbitrators shall fail to agree upon the designation of such third
arbitrator within the 30-day period described above, then they or either or
them shall give notice of such failure to agree to the parties hereto within
such 30-day period and, if the parties hereto fail to agree upon the
selection of such third arbitrator within 5 days after the arbitrators
appointed by the parties give notice as aforesaid, then either party on
behalf of both may apply to the president of the Greater Boston Real Estate
Board, or on his or her failure, refusal or inability to act, to a court of
competent jurisdiction, for the designation of such third arbitrator.
Within three business days after the designation of the third arbitrator,
the two parties shall submit their respective position with respect to the
Disputed Issue to the third arbitrator; thereafter, the third arbitrator
shall conduct such hearings and investigations as he or she may deem
appropriate and shall, within 15 days after the date of the designation of
the third arbitrator, determine the correct resolution of the Disputed
Issue. Within such 15-day period, the third arbitrator shall give notice
thereof to the parties hereto and the third arbitrator's determination shall
be binding upon the parties hereto.
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All arbitrators with respect to Fair Rental Value shall be appraisers or
other qualified real estate professionals who shall have had at least ten
years continuous commercial real estate experience in the greater Boston
area. All arbitrators with respect to Tenant's Operating Expenses Allocable
to the Premises shall be qualified real estate professionals who shall have
had at least ten years continuous experience managing first-class office
buildings substantially similar to the Property in the greater Boston area.
The parties shall be entitled to present evidence to the arbitrators in
support of their respective positions. The arbitrators may not make any
determination inconsistent with any of the terms of this Lease. The
arbitrators shall not have the power to add to, modify or change any of the
provisions of this Lease. The determination of the arbitrator(s), as
provided above, shall be conclusive upon the parties and shall have the same
force and effect as a judgment made in a court of competent jurisdiction.
Judgment on the determination made by the arbitrator(s) under the foregoing
provisions may be entered in any court of competent jurisdiction pursuant to
the provisions of Section 14 of Chapter 251 of the General Laws of
Massachusetts. Each party shall pay the fees, costs and expenses of the
arbitrator appointed by such party and of the attorneys and expert witnesses
of such party, and one-half of the other fees, costs and expenses of the
arbitration properly incurred hereunder.
-52-
<PAGE>
LEASE COMMENCEMENT DATE AGREEMENT
Praxis International, Inc., a Massachusetts corporation
-------------------------------------------------------
TENANT
This document serves to confirm that the lease dated between
Praxis International, Inc.
-------------------------
TENANT
and
500 Old Connecticut Path Limited Partnership
--------------------------------------------
PROPERTY OWNER
commenced on September 5, 1995 for space occupied in
-----------------
DATE
500 Old Connecticut Path, Framingham, MA
-----------------------------------------
ADDRESS
The foregoing is acknowledged and agreed to by:
------------------------------------ ------------
NAME DATE
-53-
<PAGE>
FIRST AMENDMENT TO LEASE
This First Amendment to Lease (this "Amendment") dated as of the 25th day of
----
October, 1995 is made by and between 500 Old Connecticut Path Limited
-------
Partnership, a Delaware limited partnership (the "Landlord"), and Praxis
International, Inc., a Massachusetts corporation (the "Tenant").
Reference is made to a certain lease dated as of June 14, 1995 by and
between the Landlord and the Tenant (the "Lease"), demising certain premises
(the "Premises") located on the second and third floors of a building commonly
known as Building C located at 500 Old Connecticut Path, Framingham,
Massachusetts (the "Building").
The Landlord and the Tenant hereby agree that the Tenant shall accept an
increase in the Premises of approximately 208 square feet of Rentable Floor
Area on the third floor of the Building (the "Additional Space") in "as is"
condition for Tenant's use effective on the Commencement Date of the Lease. On
the Commencement Date, the Annual Fixed Rent shall be adjusted by multiplying
the Rentable Floor Area of the Additional Premises by the rental rate set forth
in Exhibit A to the Lease and adding such amount to the Annual Fixed Rent and
the Escalation Factor shall increase to 37.77% to reflect that the Additional
Space has been incorporated in the Premises.
Notwithstanding anything to the contrary in the Lease, the Tenant
acknowledges that no Landlord Improvement Allowance shall be due from the
Landlord to the Tenant in connection with this Amendment or the Additional
Premises.
All capitalized terms not defined herein shall have the meanings assigned to
them in the Lease.
Except as hereby amended, the Lease shall remain in full force and effect
and is hereby ratified and confirmed.
-54-
<PAGE>
IN WITNESS WHEREOF, the Landlord and the Tenant have executed this
Amendment as of the day and year first written above.
LANDLORD: 500 OLD CONNECTICUT PATH
LIMITED PARTNERSHIP
BY: Leggat McCall Properties, Inc., Its
General Partner
By:
------------------------------------
Name:
Its:
TENANT: PRAXIS INTERNATIONAL, INC.
By:
------------------------------------
Name:
Its:
-55-
<PAGE>
SECOND AMENDMENT TO LEASE
-------------------------
This Second Amendment to Lease (this "Amendment") dated as of the 24th day
of April, 1996, is made by and between 500 Old Connecticut Path Limited
Partnership, a Delaware limited partnership (the "Landlord") and Praxis
International, Inc., a Massachusetts corporation (the "Tenant").
Reference is made to a certain lease dated as of June 14, 1995, by and
between the Landlord and the Tenant, as amended by a First Amendment to Lease
dated as of October 26, 1995 (the "Lease") demising certain premises (the
"Premises") located in a building commonly known as Building C located at 500
Old Connecticut Path, Framingham, Massachusetts. The Commencement Date for the
Lease is September 5, 1995. All capitalized terms not defined herein shall have
the meanings assigned to them in the Lease.
The Landlord and the Tenant hereby acknowledge that the Landlord has
expended at least Four Dollars ($4.00) per square foot of Rentable Floor Area of
Excess Improvement Allowance in connection with Improving the Premises to the
Tenant's specifications. Pursuant to Section 11.14 of the Lease, the Annual
Fixed Rent shall be increased by Thirty Cents ($.30) per square foot of Rentable
Floor Area of the Premises for each One Dollar ($1.00) of Excess Improvement
Allowance provided by the Landlord.
Therefore, the phrase "Sixteen Dollars and 25/100 ($16.25)" is hereby
deleted from the Annual Fixed Rent provision in Exhibit A to the Lease and the
phrase "Seventeen Dollars and 45/100 ($17.45)" is inserted in its place.
Except as hereby amended, the Lease shall remain in full force and effect
and is hereby ratified and confirmed.
LANDLORD: 500 OLD CONNECTICUT PATH
LIMITED PARTNERSHIP
By: Leggat McCall Properties, Inc., its
General Partner
By:
------------------------------------
Name:
Its:
TENANT: PRAXIS INTERNATIONAL, INC.
By:
------------------------------------
Name:
Its:
-56-
<PAGE>
EXHIBIT C
---------
Fixed Rent: $17.45 per rentable square foot of the Subleased Premises,
or $292,723.75 annually, based on 16,775 rentable square
feet, which shall be paid in equal monthly installments
(installments rounded to nearest cent) of $24,393.65.
Sublessee has paid the first month's rent to Sublessor on
the execution hereof.
Security Deposit: The security deposit is one month's Fixed Rent, which equals
$24,393.65.
-57-
<PAGE>
EXHIBIT 11
LYCOS, INC.
COMPUTATION OF NET LOSS PER SHARE (1)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Common stock, beginning of period 13,792,896 10,526,316 13,792,896 10,000,000
Weighted average common shares issued
during the period 3,724 977,454 1,214 332,559
Shares relating to SAB No. 83(2) 560,640 1,086,956
Treasury stock buyback (2) (91,313) (91,313)
------------- ------------- ------------- -------------
13,796,620 11,973,097 13,794,110 11,328,202
============= ============= ============= =============
Net loss $ (1,272,782) $ (1,588,374) $ (6,043,839) $ (2,881,840)
Primary net loss per share $ (0.09) $ (0.13) $ (0.44) $ (0.25)
============= ============= ============= =============
</TABLE>
(1) Fully diluted net loss per share has not been separately presented, as the
amounts would not be materially different from primary net loss per share.
(2) In accordance with Securities and Exchange Commission Staff Accounting
Bulletin No. 83 ("SAB No. 83"), issuances of Common Stock equivalents
(common stock and stock options) during the twelve months immediately
preceeding the initial filing of the registration statement relating to the
Company's initial public offering have been included in the calculation of
weighted average shares, using the treasury stock method and the initial
public offering price, as if these shares were outstanding for all periods
prior to the initial public offering.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> JUL-31-1997 JUL-31-1996
<PERIOD-START> AUG-01-1996 AUG-01-1995
<PERIOD-END> APR-30-1997 APR-30-1996
<CASH> 37,010,072 44,142,187
<SECURITIES> 0 0
<RECEIVABLES> 6,483,811 3,493,925
<ALLOWANCES> 389,000 200,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 53,204,470 49,450,228
<PP&E> 3,266,955 1,711,105
<DEPRECIATION> 878,344 305,337
<TOTAL-ASSETS> 58,997,058 53,660,575
<CURRENT-LIABILITIES> 19,233,215 9,476,418
<BONDS> 0 0
0 0
0 0
<COMMON> 137,966 137,929
<OTHER-SE> 38,064,210 43,968,228
<TOTAL-LIABILITY-AND-EQUITY> 58,997,058 53,660,575
<SALES> 14,520,221 2,593,745
<TOTAL-REVENUES> 14,520,221 2,593,745
<CGS> 6,618,845 2,139,094
<TOTAL-COSTS> 22,167,137 5,597,468
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (6,043,839) (2,881,840)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (6,043,839) (2,881,840)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (6,043,839) (2,881,840)
<EPS-PRIMARY> (.44) (.25)
<EPS-DILUTED> (.44) (.25)
</TABLE>
